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In the shadow of the election campaign, receiving comparatively little attention from the media is another accelerating effort to prepare the way for a “grand bargain” that will legislate a long-term deficit reduction plan embodying “shared sacrifice,” including entitlement cuts that will weigh heavily on the vulnerable including, the young, the elderly, the old, the disabled and other disadvantaged groups; and that will also further exacerbate the rapidly growing inequality problem and increase the threat to our increasingly fragile democracy.

The battle cries of the austerians supporting this effort talk a bit less about “fiscal sustainability” and “fiscal responsibility” these days and much more about “debating the debt” and “fixing the debt” than they did 2 years ago. Their view is well-reflected in the “Summary of Fix the Debt” which opens:

The Campaign to Fix the Debt is a non-partisan movement to put America on a better fiscal and economic path. We come together from a variety of social, economic and political perspectives, around the common belief that America’s growing federal debt threatens our future and that we must address it. The Campaign will mobilize key communities—including leaders from business, government, and policy—and people all across America who want to see elected officials step up to solve our nation’s fiscal challenges. Recognizing that the time for action is now, the Campaign will work in Washington, DC and around the country to build support for a comprehensive plan to fix our long-term debt and deficits. In our history, America has always been able to tackle its greatest challenges – we are confident we can again rise to the occasion.

“The campaign is built around the following core principles:

“-- Policymakers should acknowledge that our growing debt is a serious threat to the economic well-being and security of the United States.”

Let's stop right there! I don't think policymakers should acknowledge that our growing debt is any kind of threat at all. The level of Federal Government debt is a very different matter from the level of State Government debt, or private sector debt. These last are a very serious problem for the US economy. But Federal Government debt is no threat at all, because it in no way affects the solvency of the United States Government, or its ability to deficit spend currently or in the future, as I've explained here, and in other posts.

-- It is urgent and essential that we put in place a plan to fix America’s debt. An effective plan must stabilize the debt as a share of the economy, and put it on a downward path.

Even though the Federal debt isn't a threat to the United States let's accept, for the sake of argument, the notion that we do need to fix the debt. Then we have to ask how we ought to fix it? “Fix the Debt” answers this question by outlining a number of points which all assume that the Government's financial resources are limited, and that limiting the growth of the debt in order to reduce it as a percent of GDP, will require cuts in spending programs and increases in taxes amounting to many Trillions of Dollars in reduced Government deficit spending over the next decade. The “Fix the Debt” summary mentions the Bowles-Simpson $4 Trillion in deficit spending cuts; but austerians often talk about “going big” and much higher numbers such as $7 Trillion over the next decade.

“Fix the Debt” says that the deficit reduction plan should protect the fragile economic recovery and be conducive to long-term economic growth. But it's hard to see how they can arrive at such a plan, since even assuming reductions of $4 Trillion in deficit spending over a decade one is looking at an average of $400 Billion in deficit spending reductions per year.

Keeping in mind that the $800 Billion fiscal stimulus deficit spending program was implemented over two years, $400 Billion in deficit spending reductions per year translates to subtracting what amounts to the impact of 5 stimulus bills from the economy over the next decade. How austerians expect that to protect the fragile economy, and provide for long-term economic growth isn't something they bother to explain, but I think they're calling for a mission impossible for the US economy. They have no serious detailed and credible explanations of how continued growth will be possible with private debt at such historically high levels, State governments contributing nothing but fiscal drag to the economy, and the Federal Government also retrenching by an average of $400 Billion per year in deficit spending.

At this point, I could talk about the empirical evidence from the Eurozone and the UK, showing that Government cuts in deficit spending are producing nothing but misery in nation after nation; but I hope this passing reference to what we all see in the headlines is enough to remind readers that the austerians behind “Fix the Debt” are either not living in the real world, or are deliberately misleading the public about having a deficit reduction plan that will both reduce the debt-to-GDP ratio, and also protect the economy from a crash now, while being conducive to growth in the future, and “leaving our grandchildren better off.”

In any event, I'm glad that the goal of Fix the Debt is the compound one of both reducing deficits and protecting and growing the economy; because I'm willing to accept that compound goal as a basis for debating what to do about the debt; and I think I have a plan for not just reducing the Federal Government debt, but also for paying it off and removing the need to issue debt again. My plan will not hurt recovery efforts or harm long-term growth. In fact, it's consistent with much heavier Government “deficit” spending to enable a much stronger recovery than we have now and much more rapid growth as well.

The Plan

I've been at pains to point out in many, many posts in the past, for example, here, here, and here, that there is no solvency problem for a Government like the US with a non-convertible fiat currency, a floating exchange rate, and no debts payable in currencies it doesn't issue, because such Governments can always issue the money they need to pay any obligations, or to buy anything for sale in their own domestic economy. Here's how the Executive branch could use its legal power to coin money to end the deficit/debt problem in a way that would not tank the economy now, or interfere with its future growth.

First, the President should use the authority provided by a 1996 law to mint a $60 Trillion coin and deposit it at the Federal Reserve. The deposit will eventually result in nearly $60 Trillion in Proof Platinum Coin Seigniorage (PPCS) profits being credited to the Treasury General Account (TGA).

Second, the Treasury should use that money to pay off all the intragovernmental and Federal Reserve-held portion of the current $15.9 Trillion debt subject to the limit. That portion is roughly $6.7 Trillion, or about 42% of the 15.9 Trillion. That action would immediately reduce the debt-to-GDP ratio to 58% of GDP or so.

Third, 10% or so of the remaining debt is short-term debt with a term of one-year or less. The Treasury should pay that off as it comes due. So within one year the Treasury will have paid off  52% of the debt. However, another $5.9 Trillion will come due over a ten year period. So by 2022, assuming robust GDP growth the debt-to-GDP ratio would be less than 5%, composed of debt with a maturity of up to 30 years from 2012, assuming that the Fed doesn't buy up long-term debt and let the Treasury buy the debt back back early. Eventually, after 30 years the debt subject to the limit would fall to zero.

Fourth, the above assumes that Treasury would issue no new debt instruments, but would pay for all future deficit spending appropriated by Congress with coin seigniorage profits.

That's it! The debt is “fixed” without tanking the economy; either now or in the future.

What About Inflation?

You know the first thing the austerians will whine about when people start pushing this PPCS stuff is “what about inflation?”

Well, we know that the first $6.7 Trillion of pay-off isn't going to cause inflation because about $1.9 T is going to the Fed and will just sit there until they decide to do QE or something. But they can do the same QE or not whether they have these reserves or not, because they can always create new reserves out of this air anyway. So, transferring reserves to them can have inflationary impact. The remaining 4.8 T of the $6.7 T just goes into Government accounts and isn't spent until needed anyway, so it won't cause any additional inflation.

Next, the $1.6 T in Treasury Bills that would be paid off the first year basically come under the heading of QE done by the Treasury, since it's a swap of the T-bills for reserves. We know from the Fed's experience, however, that QE over a year's time of that volume has little inflationary impact in an economy like the one we have now. The reason is that even though it adds reserves to the banking system, it adds very little to the net financial assets of the T-bill holders, which is also why the impact of the Fed's QE on recovery has been so miniscule.

Now, how about the $5.8 T in debt that would be paid back over a 10 year period? The volume paid back each year would still amount to relatively small amounts of QE and would still add very little to net financial assets (only interest payments); so there's no reason to believe this would be inflationary either. The final $1.2 T in bond debt would be gradually paid over a 20 year period and would hardly create a ripple in the money supply of our much expanded economy, so here too using coin seigniorage rather than debt to enable deficit spending make no inflationary impact.

So, finally, we come to the possible inflationary impact of using coin seigniorage profits for deficit spending. Here we do have the Treasury adding real financial assets to the economy in the form of bank reserves. And this can be inflationary if deficit spending exceeds the productive capacity of our economy. However, I want to emphasize very strongly that there's no reason to believe that deficit spending accompanied by debt issuance is any less inflationary than is deficit spending using coin seigniorage profits. To believe that it is you have to believe that reserves are more inflationary than Treasuries. But the theory supporting that view, the quantity theory of money, was shown to be false by Keynes in the 1930s, and, the empirical evidence available since  suggests, if anything, that Treasuries are more inflationary than reserves since they pay higher interest rates.

So, there's nothing to the inflation argument the austerians are likely to make against PPCS, and the way is clear for progressives to use it in the coming debate over how to fix the debt.

The Progressives and the Plan

The austerians aren't the only ones mobilizing for an upcoming political fight over deficit reduction plans. Progressive organizations are also gearing up for a serious fight over competing plans. Here's Brian Sonenstein at FireDogLake from a Post announcing an FDL webinar to inform people about the accelerating effort to cut entitlements:

“The deficit scolds have set up a seemingly never-ending system of triggers and deadlines to force ‘solutions’ to Social Security, Medicare and Medicaid budgets that would reduce benefits and do irrevocable harm to these critical programs. From the debt ceiling debacle to the upcoming fiscal cliff, our country has been led into a vicious cycle of fear mongering and misinformation on the deficit that only becomes more entrenched with time.

“Now that secret committee meetings have failed twice to impose unpopular austerity programs on the public, corporate heavyweights and their friends on Capitol Hill are forming groups like Fix the Debt, raising millions of dollars to lobby Congress into passing harmful reforms that throw society’s most vulnerable under the bus in the name of so-called ‘fiscal responsibility.’

“By making our voices heard once more in opposition to benefit cuts, we can continue to fight back attempts to destroy some of the most successful programs in our country’s history.”

The problem with the progressive position in statements like the above is that 1) it doesn't actually deny that there is a deficit/problem and 2) it doesn't really say how the progressive groups would solve the problem whose existence they're tacitly acknowledging. Instead, progressives rely on arguments against austerity emphasizing its negative economic impacts, fairness concerns, obligations to the vulnerable, and claims that the rich can afford and should be willing to experience increased taxation since this country has given them so much.

Those arguments are good ones; but they are mainly defensive ones aimed at conserving a social safety net under attack. How much more compelling would the progressive case be, if it both used those arguments and proposed a plan to fix the debt which required no austerity, but even provided plenty of scope for deficit spending investing in economic recovery, an expanded safety net, full employment, enhanced Medicare for All, and “green” economic growth?

Well, the plan I've outlined here is just such a plan. I urge progressive writers and organizations to pick up on it and urge this Administration to mint that $60 T coin, shut down all the deficit terrorist organizations, along with their sanctimonious holier than thou propaganda, and, most importantly, shift the debate to discussion of the real issues this nation faces. These issues are difficult enough to deal with, even when we are free of the false issue of measuring all Federal spending and tax policy against the standard of whether it is deficit neutral or deficit reducing over some arbitrary time period, according to nonsense long-term CBO, OMB, or private economic projections over that period.

(Cross-posted from

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Comment Preferences

  •  I'd rather go with Bernie.... (1+ / 0-)
    Recommended by:

    The Progressive Alterative

    That is why I have outlined a number of ways that Congress and the President can tackle deficit reduction in a way that protects the needs of working people and the most vulnerable, while at the same time calling for shared sacrifice from the wealthy and large corporations. I hope you will study these proposals and demand that Congress act on them.

    "When you're wounded and left on Afghanistan's plains, And the women come out to cut up what remains, Jest roll to your rifle and blow out your brains An' go to your Gawd like a soldier." Rudyard Kipling

    by EdMass on Sat Aug 25, 2012 at 09:14:48 AM PDT

    •  Could you explain (0+ / 0-)

      your thinking a little further?

      For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

      by psyched on Sat Aug 25, 2012 at 09:52:45 AM PDT

      [ Parent ]

    •  OK, EdMass, sorry... (1+ / 0-)
      Recommended by:
      clonal antibody

      that I overlooked your link.

      Granted that Bernie Sanders is a progressive Dem, but we need more than progressive Dem thinking at this point in time. We need a paradigm change regarding economics, and Modern Monetary Theory (MMT) is our best bet.

      Our Congresspeople are caught up in a system that they do not fully understand. The Federal Budget is the monster in the room looming over everything they do. They have to rely upon economic experts for their cues on budgetary matters, and the econ experts are stuck in outmoded and unworkable and just plain wrong models.

      MMT guru Prof. Stephanie Kelton among others has explained that MMT  concepts are not really new. They are overlooked and suppressed by entrenched conservative economists unable or unwilling to think outside the econ box.

      Here is Prof. Kelton quoting of all people that mainstream economist Alan Greenspan admitting that our government cannot run out of money:

      Can the government run out of money? No. There is no solvency issue when you are the issuer of the currency. OK, this is a quote from Alan Greenspan saying largely the same thing. "A government cannot become insolvent with respect to obligations in its own currency. A fiat money system like the ones we have today can produce such claims without limit."

      Kelton goes on to say:

      I don’t know of a single example of a currency crisis or a debt default by a sovereign government that has issued obligations in its own currency when it has flexible exchange rates in a non-convertible currency. I don’t know of one. The U.S. can control its currency and therefore, by implication, its economic destiny.
      Does that mean that we should spend without limit? No. No. Emphatically no. As the economy recovers, spending will need to be regulated to prevent inflation. But I would argue, and I think what we’re all here to argue today is that it’s time to stop allowing the monetary system to limit our range of policy options. It is causing unnecessary human suffering and it’s time for us to begin to recognize the advantages of a Modern Monetary System.
      What do you want our economic destiny to be: Making poor and rich alike suffer from cutbacks in necessary services and benefits because of mistaken and misguided economic ideas perpetuated by those who personally profit from them? "Shared sacrifice" when the poor among us have nothing left to sacrifice and the rich will not really be harmed? To fulfill the biblical declaration that "those with little, what little they have will be taken from them"?

      The path we are on is insane. We are caught up in mass insanity.

      For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

      by psyched on Sat Aug 25, 2012 at 10:46:08 AM PDT

      [ Parent ]

      •  Bernie is a Socialist... (0+ / 0-)

        not a "progressive Dem".  Ergo your cognitive dissonance on the issue, imho.

        "When you're wounded and left on Afghanistan's plains, And the women come out to cut up what remains, Jest roll to your rifle and blow out your brains An' go to your Gawd like a soldier." Rudyard Kipling

        by EdMass on Sat Aug 25, 2012 at 10:54:08 AM PDT

        [ Parent ]

    •  I respect Bernie a lot (2+ / 0-)
      Recommended by:
      psyched, Ian S

      But he is wrong on this one. Not that I do not think that inequality is to be cherished, and that the wealth accumulating at the upper echelons should not be controlled. But rather his notion that the budget should be balanced, and that Federal Government deficits are "bad."

      The best characterization of what the National Debt is, was in my opinion stated by Hon. Rep. Pete Stark of CA-13 in an interview with right wing journalist Jan Helfeld. Where he almost (literally) threw Helfeld out of his (Pete's) office.

      Stark correctly states that the National Debt "measures the wealth of a Nation" - The National Debt is the sum total of the Net financial savings of the Nation (to the penny) - it reflects the desire on parts of individuals to save. Save for a rainy day - save for a happy retirement - save something as a nest egg to give to the grand kids - something that each one of us aspires to do.

      This comes about because the Federal Government creates money by spending, and destroys money by taxation. Since it is by the US constitution, the sole originator of money, there can be no other way.

      Banks also create money - but their money has to be paid back and with interest - and is therefore almost always a drag on the common person. Federal spending comes with no such drag. It is spending and not a loan to be paid back.

      This "National  Saving" should be more evenly distributed than it is today. But that does not come by balancing the Federal Budget. It can come about by taxing the rich. But not by balancing the budget or running budget surpluses.

      One has to be very clear on what the goals are. Income and wealth redistribution can come about by means other than taxation as well - by strong regulations that prevent the obscene accumulations in the first place - regulations that were attacked and abandoned by ALL administrations and Congresses (Republican or Democrat) starting with Jimmy Carter (that is when FIRE deregulation first started!)

      A person's life time savings should be taxed at the time of his/her death, allowing for a reasonable sum to give to the heirs.

  •  the sudden panic over debt and deficit is nothing (2+ / 0-)
    Recommended by:
    psyched, TheSpectator

    more than cover for bipartisan 'solutions', aka cuts on all social safety nets with a few pennies clipped from the rich, for which they will be more than compensated in the small print of the deal.

    This deficit hysteria is nothing more than a method to ground that 'third rail' of politics, Social Security ,and ONLY a Democrat can do it without opposition. It's hard to believe Bush wouldn't have tried it had he felt he could, but Dems rallied in defense of SS when it's been under attack by a Repub President (not a peep on Obama's offer of 300 Million in SS cuts) and as Clinton has shown everyone , a Dem President can go where no Repub dares tread.

    without the ants the rainforest dies

    by aliasalias on Sat Aug 25, 2012 at 11:48:19 AM PDT

  •  The Central point is that (2+ / 0-)
    Recommended by:
    clonal antibody, psyched

    the "Debt" is people's savings. Here's an essay from thee Levy Institute at Bard College:

    Balanced budgets and depressions
    American Journal of Economics and Sociology, The,  April, 1996  by Frederick C. Thayer

    Since 1791, the earliest data available, the national debt has been increased in 112 years, decreased in 93 years. 57 of those balanced-budget, debt-reduction years have been concentrated in six sustained periods of varying length. Also since 1791, there have been six significant economic depressions among the innumerable "business cycles." Each sustained period of budget-balancing was immediately followed by a significant depression. There are as yet no exceptions to this historical pattern.

    This is the record of six depressions:

    1. 1817-21: in five years, the national debt was reduced by 29 percent, to $90 million. A depression began in 1819.

    2. 1823-36: in 14 years, the debt was reduced by 99.7 percent, to $38,000. A depression began in 1837.

    3. 1852-57: in six years, the debt was reduced by 59 percent, to $28.7 million. A depression began in 1857.

    4. 1867-73: in seven years, the debt was reduced by 27 percent, to $2.2 billion. A depression began in 1873.

    5. 1880-93: in 14 years, the debt was reduced by 57 percent, to $1 billion. A depression began in 1893.

    6. 1920-30: in 11 years, the debt was reduced by 36 percent, to $16.2 billion. A depression began in 1929.

    There has been no sustained period of budget-balancing since 1920-30, and no new depression, the longest such period in our history.

    The question is whether this consistent pattern of balance the budget-reduce the national debt-have a big depression is anything other than a set of coincidences. According to economic myths, none of these sequences should have occurred at all. How on earth, for example, could we virtually wipe out the national debt in the mid-1830s, then fall immediately into one of the six recognized collapses in our history? Those who write about the desirability of reducing the national debt frequently praise Andrew Jackson for his vigorous pursuit of such a goal, but do not mention "depression" in the same breath. It is helpful to the maintenance of economic myth to say little about depressions in textbooks, thus making it easy to avoid looking at connections considered impossible anyway.

    The mutual finger-pointing now underway is aimed at the 1996 elections, Democrats and Republicans each blaming the other for the agreed disaster of high deficits and debt. Yet the deficits of the 1930s and recent years were trivial, relative to GNP, when compared with the wartime deficits of the 1940s that ended the Great Depression. Federal deficits in World War II ranged from 20 to 31 percent of Gross National Product. For a few years, the national debt was greater than GNP, the only such period in U.S. history.

    The national debt is now less than 70 percent of Gross National Product (GNP), much below the 130 percent debt of the late 1940s, and a debt that remained higher than today's debt until the mid-1950s. According to economic myths, that wartime spending should have made things worse, not better.

    Those who look closely, therefore, will see some obvious intellectual dishonesty at work. It is dishonest to avoid looking at depressions and wars when discussing the evils of deficits and debt, and to propagandize by using absolute levels of deficits and debt when only relative comparisons are valid. It is dishonest to write textbooks in which there is no mention of what Herbert Hoover, Franklin Roosevelt, and noted financier, Bernard Baruch, had to say in the early 1930s about causes of the Great Depression. The belief at that time, even if rejected by economists, was that "overproduction," "excessive" and "destructive" competition were to blame. To be sure, nobody has suggested that government underspending can massively contribute to big depressions, even though this is only the flip side of overproduction. Put another way, if the market for consumer goods cannot do the job, there is every reason to turn to the production of public goods, always in short supply anyway.

    The tragicomedy of economics is easily displayed. If someone borrows money to build a brewery, the money is officially listed as "investment" in national income accounts. If government borrows money to build a bridge that is needed by the brewery, these funds are not listed as "investment" because the bridge is considered "waste." To think that this sort of logic undergirds public policy is to experience pure fright. Economics, of course, is not the only "discipline" that fills the world with unsupportable myth, but it is among the leaders.

    [Frederick C. Thayer is a Visiting Professor of Public Administration, George Washington University, Washington, DC 20036 and Professor Emeritus, Public and International Affairs, University of Pittsburgh.]

    COPYRIGHT 1996 American Journal of Economics and Sociology, Inc.
    COPYRIGHT 2004 Gale Group

    Bill Clinton balanced the budget the year Professor Thayer wrote that and paid down debt for the next three years, then we had a recession.

    "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

    by johnmorris on Sat Aug 25, 2012 at 04:31:47 PM PDT

    •  johnmorris, (0+ / 0-)

      that is a really great essay. Thanks for quoting it here!


      For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

      by psyched on Sat Aug 25, 2012 at 05:05:48 PM PDT

      [ Parent ]

  •  Not to sound too conspiracy-minded, (1+ / 0-)
    Recommended by:

    but has it occurred to anyone that the proposals to cut and gut Federal programs that directly impact the less affluent may be a deliberate attempt to create a reaction that might well express itself in acts of social unrest?

    If the misery index becomes high enough, folks might very well take to the streets, which could easily lead to the loss of even more civil liberties in the name of preserving Homeland Security.

    We've already had a foretaste of government reaction to what were really fairly small numbers of people engaged in the Occupy protests.  Many urban police departments have been effectively militarized, with weapons and tactics previously confined to the armed forces.

    Our present form of government of the rich, by the rich and for the rich is quite capable of creating hysteria about a non-existent debt problem and using it to reduce the federal government to little more than a bloated military whose task is expanded to include domestic peacekeeping.

    •  Sure (2+ / 0-)
      Recommended by:
      psyched, Calgacus

      It's occurred to us all. But what does that have to do with this diary?

      •  If 'fix the debt' is a phony battlecry (2+ / 0-)
        Recommended by:
        clonal antibody, Calgacus

        as you seem to suggest:

        Even though the Federal debt isn't a threat to the United States let's accept, for the sake of argument, the notion that we do need to fix the debt.
        Then I was simply trying to explain a possible motive for the move to cut spending, reduce the deficit and over time shrink the debt.  Seems like it's quite relevant to the diary.

        The whole "we're broke and getting broker' crowd is not versed in economic theory, and, as you've said, the issue is a political problem rather than an economic one.

        The austerians aren't the only ones mobilizing for an upcoming political fight over deficit reduction plans. Progressive organizations are also gearing up for a serious fight over competing plans.
        In order to have a debate, discussion, negotiation, political fight, call it what you will, there has to be a basic agreement on the facts.  And the parties to any discussion have to be consistent in their approach to the facts.

        For example, what is one to do with this factoid?

        O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections)
        Now, please don't take umbrage, I mean no disrespect, but aren't you saying, albeit a lot more elegantly, the same thing as Cheney?

        To answer my own question, the answer is "no".  Cheney was expostulating what he believed was a truth in politics:  if the deficits had mattered to the voters the midterms might have gone the other way.

        The diary, on the other hand, is a well-thought, well-written economic argument.

        With no agreement even on the nature of the problem, or even if the debt is a problem, let alone how to 'fix' it, there doesn't seem to be much hope that anything will be done anytime soon.

        •  Fix the debt (2+ / 0-)
          Recommended by:
          Calgacus, psyched

          is a phony battle cry for some; but not for others. Some people really believe there's a problem. Other's may know better and are trying to re-order the social structure here in the US.

          Also, I'm not saying the same thing as Cheney. Even if one is talking about economics, there can be a problem with deficit spending. Too much of it can produce demand-pull inflation; but roughly speaking we can run a deficit of 1% of GDP without running into that kind of inflation.

          On whether anything will be done anytime soon, I'm afraid the wrong thing will be done, a long-term program of deficit reductions based on huge spending and tax cuts which will exacerbate inequality and make our political democracy even weaker than it is.

          •  During WWII (2+ / 0-)
            Recommended by:
            Calgacus, psyched

            The Federal Deficit was running at 10% of GDP, with very little inflation see The American Economy during World War II

            Between April 1942 and June 1946, the period of the most stringent federal controls on inflation, the annual rate of inflation was just 3.5 percent; the annual rate had been 10.3 percent in the six months before April 1942 and it soared to 28.0 percent in the six months after June 1946 (Rockoff, "Price and Wage Controls in Four Wartime Periods," 382).With wages rising about 65 percent over the course of the war, this limited success in cutting the rate of inflation meant that many American civilians enjoyed a stable or even improving quality of life during the war (Kennedy, 641).
            At the end of this effort, the US was running as close to full employment as is possible.

            Today's economy deserves almost as much of an effort to get out of the current doldrums, and meet the daunting challenges (global warming, peak oil,peak uranium etc.) ahead.

            •  A good reminder (2+ / 0-)
              Recommended by:
              psyched, Calgacus

              Clonal for those who may not know much about WWII, and the successful role of wage and price controls in containing inflation.

              •  Not so successful in 1971 (0+ / 0-)

                when Nixon tried the wage/price freeze remedy.

                While there were skeptics in August, 1971, there were a great many who thought "temporary" wage and price controls could cure inflation.  By 1974, this notion was thoroughly discredited, and attention gradually turned toward a monetary approach to inflation.  In a complete reversal, the policy to curb inflation in now thought to be an increase in interest rates rather than an attempt to hold them down

                I worked for a union at the time, negotiating collective bargaining agreements.  Not a very happy time unless you had money to put into CDs which were then paying double digit interest.

                One side effect of "Nixon's Folly" was that it convinced a young obstetrician named Ron Paul to enter politics.

                •  I lived through that too (0+ / 0-)

                  The administration of the controls in the 1970s was much less effective than the administration of the program during the War. Not surprisingly a Republican Administration didn't do very much to control prices; but they were right there when it came to wages.

            •  Peak uranium? (0+ / 0-)

              I hadn't really heard about this before.

              For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

              by psyched on Mon Aug 27, 2012 at 04:44:44 PM PDT

              [ Parent ]

              •  There are plenty of good discussions (1+ / 0-)
                Recommended by:

                on Peak Uranium. The problems are associated, as with Peak Oil with the best ore grades being mined first, and then it becomes increasingly complex to get at the final purity of Uranium. Similar problems will at some time occur with some other mined resources.

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