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Moment of Lies: Galbraith Attacks Lack of Evidence for Frantic Deficit Fear Mongering

The sky is falling, but not enough to tax the rich apparently.
 
 
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The report of the National Commission on Fiscal Responsibility and Reform, issued on December 1, 2010 by Chairmen Erskine Bowles and Alan Simpson, is entitled “The Moment of Truth.” The words appear in block caps on the second page, weighty and portentous. They reappear in the first paragraph of the preamble:

“Throughout our nation’s history, Americans have found the courage to do right by our children’s future. Deep down, every American knows that we face a moment of truth once again.”

These sentences set the tone. The first is a bald-faced lie, as a Westerner like Senator Simpson knows perfectly well. To the contrary, we have often fallen under the sway of robber barons, water barons, oil barons, bison-killers, clear-cutters and strip-miners, hell-bent on maximum pillage in the shortest time. Only occasionally have a few heroes like Teddy and Franklin Roosevelt, Gifford Pinchot and Harold Ickes Sr. emerged to battle for the most precious physical elements of our heritage — and then only with limited success.

In the next paragraph, the Commission states the threat:

“Our challenge is clear and inescapable. America cannot be great if we go broke.”

Exactly what it might mean for America to “go broke” is not explained. Nor is it anywhere in the report. But the paragraph continues:

“Our businesses will not be able to grow and create jobs, and our workers will not be able to compete successfully for the jobs of the future without a plan to get this crushing debt burden off our backs.”

Apparently “going broke” means becoming unable to pay interest on the national debt. That being so, let’s ask the question: under what circumstances might the United States Treasury Department become unable to pay interest on the federal debt?

Unlike Argentina or Ireland, the United States owes its debts in a currency it controls. When our Treasury wishes to make a payment, it sends a signal, by computer, to the payee’s bank. The bank posts the payment by changing a number in the bank account of the payee. The payee, on checking his or her account, now realizes that she or he has a larger balance, and so larger spending power. That’s all there is to it.

There is no way that this process can be disrupted by any economic force. Yes, Congress could forbid payments — but the payments are ordered in the Constitution, so Treasury would just head to court. A nuclear bomb might disrupt the computers. But otherwise, nothing ever can, or ever will, stop the United States Treasury from paying interest when due. The notion that “America” might “go broke” is meaningless. To say that it might in a White House document is disturbing.

In the third paragraph of the preamble, the Commission tugs on a few familiar heart-strings:

“Ever since the economic downturn, families across the country have huddled around kitchen tables, making tough choices about what they hold most dear and what they can learn to do without. They expect and deserve their leaders to do the same.”

Who would not be moved by this image of a family, “huddled” against the cold, working on the family budget, waiting for “their leaders” to work on theirs?

If this family is a typical American household, chances are it has some experience with the federal presence in the economy. A retired parent gets Social Security and Medicare, and the others expect to do so later on. An indigent aunt receives Medicaid. An older brother is veteran, perhaps with some injuries or trauma picked up in Afghanistan or Iraq. The mortgage interest is deducted from taxable income. Quite a few such workers may be postal workers, or TSA inspectors, or other public servants. Or perhaps the working parents have their wages supplemented with the Earned Income Tax Credit.

 
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