Debt, loans, debt limits, bonds, -
Face it, folks, you have had your brains washed, rinsed, dried, and rewashed. At least, that is, on the topic of economics, debt, and debt limits. The resulting "conventional wisdumb" is not just factually wrong, but dangerous to the health, security and future of the nation.
Let's sum up this diary in one easy term:
DEBT IS GOOD.
I understand. You have been programed, repeatedly told, warned, and even threatened by "debt." Personal debt, such as credit cards, school loans, mortgages, car loans - these are very personal to people, and can cause a great deal of stress. It is an easy step to apply the fears of potential catastrophe from personal debt and take the illogical leap that the same fears apply to national or governmental debt. Taking that leap would be very, very wrong.
First, from the Church of Ineffable Stupidity, let's see what America's first National Banker had to say about Debt. Alexander Hamilton wrote:
Persuaded as the Secretary is, that the proper funding of the present debt, will render it a national blessing: Yet he is so far from acceding to the position, in the latitude in which it is sometimes laid down, that “public debts are public benefits,” a position inviting to prodigality, and liable to dangerous abuse,—that he ardently wishes to see it incorporated, as a fundamental maxim, in the system of public credit of the United States, that the creation of debt should always be accompanied with the means of extinguishment. This he regards as the true secret for rendering public credit immortal. And he presumes, that it is difficult to conceive a situation, in which there may not be an adherence to the maxim. At least he feels an unfeigned solicitude, that this may be attempted by the United States, and that they may commence their measures for the establishment of credit, with the observance of it.
Personal Debt
First, let's toss the idea that personal debt is always bad. To the contrary, it is not.
Scenario A: Sonny Boy wants to go to trade school, college, or university. But Mommy and Daddy don't have the resources or savings to pay for it. So he works and saves for a higher education. It might take years, if not decades, for him to save enough. If he ever does.
Scenario B: Daughter Dearest wants to go to trade school, college, or university. But Mums and Daddums don't have the resources, so Daughter Dearest takes out a loan, and completes her education, earning significantly more than Sonny Boy in the process.
Under the most conservative thinking (Koch Bros., Club For Growth, American Crossroads, FreedomWorks) Debt is always bad. Even if much of the riches stolen by Kochs, Romney and other financial thieves used debt as a weapon and a tool, we have been programmed to believe that debt is bad. For us, at least. But, used properly, debt allows you to
a. Buy a car.
b. Educate yourself
c. Buy a home.
Using credit, debt, and concentrating resources allows us to live our modern life. More importantly, debt and credit serve another important purpose. It increases employment, its increases our nation's stability, and it increases demand for goods and services. Going into debt actually makes your life easier, and improves the lives of those who deliver goods and services to you.
Under Scenario A, chances are that Sonny Boy will never get any higher education, limiting his prospects forever. That is a loss to society as much as it is a loss to his future financial, social, and mental stability and growth.
Under Scenario B, Daughter Dearest may have debt coming out of college, but her income will be higher, her chances for future advancement will be far less limited, and she will be a more productive part of society.
Perhaps student debt is not the best example. Maybe the Germans have the right idea. We should nationalize the current debt, and provide free higher education for all who want to attend school. For a small investment, the lives of millions would be improved, and the general level of education will be improved, meaning our nation can advance faster and further in these modern, muddled, mind-boggling times. So, let's turn to:
National Debt
Bonds, governmental debt, especially national debt are like magnifying glasses, concentrating assets for immediate use, and providing countless benefits in the process.
Some examples - Roads, Bridges, Schools, Hospitals, Airports.
Let's take bridges.
Sonny boy found a blue collar job, paying him minimum wage. But, he has to drive a clunker to and from home. In his path, there is a deep, wide river. The closest bridge is 15 miles away, and the traffic jams are huge. That means he drives an extra 150 miles a week, wasting gas, time, and wearing out his clunker ever faster.
If the local government were to save up money to build a new bridge once they have enough funds, it might be years, even decades before enough money is saved. Given the realities of local politics, it is also likely that the funds would be accessed "For an emergency" meaning that the bridge would never get built. Sonny Boy gets to waste gas, time, and increase his stress and wear and tear forever.
If we concentrate funds by issuing debt, say with a bond sale, the local state or municipality will go into debt in the amount of the bond. But, the bridge is built immediately, not years or decades later. As a result, we have
a. architects and engineers employed full time, designing the most suitable equipment and infrastructure for the foreseeable time.
b. construction workers are employed full time, being able to feed their families, while paying taxes back to the community. They also buy food, gas, housing, clothes, and other sundries, helping every local business out.
c. The bridge is built, shortening the drive for Sonny Boy and others, easing their lives, cutting costs, and helping the surrounding area get rid of bottlenecks. (Think of a hospital on the other side of the river, that is now accessible in 5 minutes, instead of 25)
d. The bond is paid timely, providing financial stability and allowing the creditors issue other bonds for similar projects.
The same logic applies to all governmental debt, especially when it is used for research, development, infrastructure, and maintenance.
If you accept the Conservative approach to debt, all debt is bad, and the bridge (and all of the related employment) never happens. Basically, their position is full of shit.
Debt Limits
Another major mistake that Conservatives make, especially today's Teabuggerers, is how they view our Debt Limit. This is money already spent. This is money that is or already has built roads, fixed bridges, made building more earthquake secure, increased capacity at airports, and made transportation and transit, food, drugs, far more safer and effective.
Because we have already spent this money, refusing to to increase debt limits is tantamount to declaring economic war on our economy. It would destroy our banking system, our creditworthiness around the globe, and eventually (actually, quite quickly) it would destroy our economy. It is a bad economic theory, based on the blatherings of Ayn Rand, an economic and social idiot whose tales should be read by freshmen in high school, then promptly forgotten. Much like Playboy Magazine. Except that Playboy actually does have good articles, and is far better written than anything she ever spewed onto paper.
- - -
I realize that some of this has been over-simplified, but it is impossible to get into the meat of the subject without graphs, economic facts, and numbing details. However, when you think about the economic impact of a Scott Walker, or a Chris Christie, and how they fucked over infrastructure growth in their states, you can see that they have no business being in office. Ever. Certainly not as president.
Every time you hear a politician claim that government should be operated like a business, run. Run very quickly. Because they are dangerous fools with no understanding of debt or government.
National debt is a very different thing than personal debt. National debts brings nations closer together, because they have a distinct interest in the economic welfare of the nations with whom they have a debtor relationship. Debt provides our country with credit-worthiness, and allows us to finance large, expensive projects.
Imagine the economic boost we would have if our federal government decided to nationalize and take over all educational debt. It would free people to invest in their future, not in banks. It would free from worry millions of kids just starting out in the world. It would boost our economy something fierce.
When Al Hamilton nationalized all colonial debt, and turned it into a national obligation, one that we paid and honored, our country suddenly became a rational, economically sound, world player. The same would apply with student loans, if you think it through. But, alas, Democrats in office have a spine of drowned worm. Republicans are beholden to idiotic TeaBuggerers and the Kochs, which means it will never happen. Instead, you will hear the GOP railing against DEBT! as though it was a swear word, or holding our Debt Limit hostage, which is a far better attack on our national security than anything ISIS, Al Qaida, or Belgium could ever accomplish.