Marco Rubio wrote an opinion piece for the Wall Street journal so full of stupid that it would take almost an entire book to explain everything wrong with it. He makes a lot of probably false claims such as that corporate tax rates being the highest in the world(they are among the lowest in the world -AFTER deductions) and claiming the economy isn't growing(it is growing!). But that's not what this diary is going to be about. Nor is it about the absurdity of worrying about our debt in one paragraph and then wanting to lower taxes in another(making him a deficit peacock). Instead, this is about the dangers of worrying about the budget numbers at any point in time. Marco Rubio is perpetuating several myths in an effort to fear monger us all back to pre-new deal social spending. I'll have to let someone else go into all of his other stupid statements.
Here is the paragraph that has the highest concentration of deficit fear-mongering from the article.
On top of all this, we have an unsustainable national debt. Leaders of both parties have grown our government for decades by spending money we didn't have. To pay for it, they borrowed $4 billion a day, leaving us with today's $14 trillion debt. Half of that debt is held by foreign investors, mostly China. And there is no plan to stop. In fact, President Obama's latest budget request spends more than $46 trillion over the next decade. Under this plan, public debt will equal 87% of our economy in less than 10 years. This will scare away job creators and lead to higher taxes, higher interest rates and greater inflation.
The first sentence starts off the stupid. There is no such thing as an unsustainable national debt(total debt owed). A nation sovereign in it's own currency is never in danger of involuntary default. There might be unsustainable deficits, but those only occur once we are at or near full employment and start hitting supply constraints and cause inflation. Then we should start worrying about the deficit. The federal budget is constrained by inflation, not revenue. As long as federal spending is only activating otherwise idle resources, it will not exert the inflationary pressures that so many people are worried about.
The next claim is that we borrowed $4 billion a day to get "money we didn't have". Somebody needs to tell the Senator that the United States is no longer on a gold standard. The U.S. federal government is the only entity that can create dollars. To say that the U.S. doesn't have dollars is like saying a referee doesn't have points to give to a football team that scores a touchdown. The fact that we even "borrow" money is a leftover of the gold-standard paradigm.
His next point of fear-mongering is that "Half of that debt is held by foreign investors, mostly China." While this statement is true, I don't think he fully understands how or why that is. Foreign markets accumulate dollars because of a trade imbalance. When we buy something from a Japanese company we give them dollars. That company takes those dollars to their central bank and exchanges it for yen. The Japanese central bank is then stuck with those dollars until a company wants to buy that dollar with yen so that it can buy an American product. If there is a trade imbalance, then at the end of the year the Japanese central bank has extra dollars. Instead of letting inflation deteriorate their dollar hoards into nothingness, they instead buy U.S. treasuries to get back some interest. Note that none of this has anything to do with the federal budget per se, but has everything to do with trade imbalances. If Rubio was really frightened of "foreigners" holding U.S. treasury securities he would be talking tariffs and trade barriers so that they can't get dollars to buy treasuries. However, he is conspicuously for continuing and expanding "free trade".
His next claim about the debt is going to be "87% of our economy in less than 10 years" is pure fear-mongering. Once on a fiat(or as I like to say Sovereign) money system e.g. no gold standard, debt-to-gdp ratios are meaningless. They become an accounting issue, not a real problem. The only real problem is inflation and actual resource constraints.
Finally, he claims that: "This will scare away job creators and lead to higher taxes, higher interest rates and greater inflation." He makes this blanket statement as if "everyone knows" it so he never really explains how it's going to cause those three things. Businesses don't give a rats ass what the debt is as long as they can make money.
High deficits won't necessarily cause higher taxes. Taxes only need to increase if "demand-pull" inflation is a problem and there isn't any desirable federal spending programs to cut. This situation almost never happens because, thanks to "automatic stabilizers" federal spending drops as the economy improves. Taxes need to be understood as, not as revenue raising, but as regulating inflation.
His third claim that it's going to cause inflation might(MIGHT) be factual, but when we are more likely to have deflation and low inflation is not something to be scared of. It's like telling a starving person to leave the mayo off their sandwich because it'll make 'em fat. That's not a problem we need to worry about right now!
People like Senator Rubio think that it's so important to have a balanced federal budget that they are willing to cut school lunch programs, education, and medical services to do it. Liberals usually respond to these arguments with something like "I know it's a problem, but other things are more important." What we, as progressives, need to realize is that a budget deficit is not a problem per se, inflation is the only problem. That way we can respond with "no, it's not a problem. We CAN afford these things that everybody wants."
I want to end this with how Rubio begins his op-ed, "If we fail to confront this, our children will be the first Americans ever to inherit a country worse off than the one their parents were given." If our country is worse off, Senator, it's because people like you are more worried about meaningless numbers in a computer than if our people our healthy, educated, and working.
This diary is from the Money and Public Purpose group blog on Daily Kos. The diary, like others in the group, is influenced by a concept called "Modern Monetary Theory" or MMT for short. If you'd like to know more please follow us as we discuss MMT and the solutions it's understanding presents for a properly functioning economy.