Budget Deficit Quotes

Someone once said that nothing costs more and yields less benefit than revenge,” Aomame said. “Winston Churchill. As I recall it, though, he was making excuses for the British Empire’s budget deficits. It has no moral significance.

As many frustrated Americans who have joined the Tea Party realize, we cannot stand against big government at home while supporting it abroad. We cannot talk about fiscal responsibility while spending trillions on occupying and bullying the rest of the world. We cannot talk about the budget deficit and spiraling domestic spending without looking at the costs of maintaining an American empire of more than 700 military bases in more than 120 foreign countries. We cannot pat ourselves on the back for cutting a few thousand dollars from a nature preserve or an inner-city swimming pool at home while turning a blind eye to a Pentagon budget that nearly equals those of the rest of the world combined.

The last time such a loss occurred was during the 1930s, and what makes it such a concern this time is that the dismal job creation statistic has been accompanied by huge and rising budget deficits, large and persistent trade deficits, enormous indebtedness, a low saving rate, a worsening state of indispensable modern infrastructure, poor achievements in education for the masses, worrisome public health (marked by a historically unprecedented incidence of obesity)—and a grossly dysfunctional government to run it all. When seen from this perspective, the state of US manufacturing is a clear cause for concern.

A false alarm is sounded that government budget deficits will increase consumer prices — with no discussion of how private-sector credit deflates economies. The problem is that credit is debt — and paying debt service to bankers and bondholders (and various grades of loan sharks) leaves less income available to spend on goods and services. So debt deflation is today’s major problem, not inflation.

I don't think we'll solve the problem of the deficit until three things happen: We need more discipline on spending in Congress. We need a constitutional amendment requiring Congress to balance the budget. And we need to give our presidents a line-item veto.

These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas. Wait—Texas? Wasn't Texas supposed to be thriving even as the rest of America suffered? Didn't its governor declare, during his re-election campaign, that 'we have billions in surplus'? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years. And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting—the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending—has been implemented most completely. If the theory can't make it there, it can't make it anywhere.

But if Donald Trump is the Republican nominee in 2024, we must do everything we can to defeat him. If Trump is on the ballot, the 2024 presidential election will not just be about inflation, or budget deficits, or national security, or any of the many critical issues we Americans normally face. We will be voting on whether to preserve our republic. As a nation, we can endure damaging policies for a four-year term. But we cannot survive a president willing to terminate our Constitution.

Guess what? None of these guys said anything when the Trump administration added $1 trillion to the federal budget deficit by the end of 2019—before a single dime was spent on COVID-19 relief. They were rubber stamps for it in Congress. Many of them who raised huge stinks about TARP were only too happy to let Trump bail out farmers hurt by his trade war with China. These are the same people who were willing to destroy our economy to make their point but went on to suddenly abandon this core principle.

The budget deficit for 1932, expected to be around twenty million pounds, would in fact be nearer one hundred seventy million pounds.

Buffett chimed in that running a budget deficit of 10% of GDP is not sustainable.

Greece, whose prior government had hired Goldman Sachs to help it massage its national accounts and conceal its budget deficits from the European Union, could no longer pay its $300 billion in government debt.

I don’t think we’ll solve the problem of the deficit until three things happen: We need more discipline on spending in Congress. We need a constitutional amendment requiring Congress to balance the budget. And we need to give our presidents a line-item veto.

...small government gives you big freedoms--and Big Government leaves you with very little freedom. The opposite of Big Government is not small government, but Big Liberty. The bailout and the stimulus and the budget and the trillion-dollar deficits are not merely massive transfers from the most dynamic and productive sector to the least dynamic and productive. When governments annex a huge chunk of the economy, they also annex a huge chunk of individual liberty. You fundamentally change the relationship between the citizen and the state into something closer to that of junkie and pusher--and you make it very difficult ever to change back.

When foreign military spending [bombing Korea and Vietnam] forced the U.S. balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in U.S. Treasury bonds, as if these still were “as good as gold.” Central banks have been holding some $4 trillion of these bonds in their international reserves for the past few years — and these loans have financed most of the U.S. Government’s domestic budget deficits for over three decades. Given the fact that about half of U.S. Government discretionary spending is for military operations — including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries — the international financial system is organized in a way that finances the Pentagon, along with U.S. buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

avarice is only the exaggeration of a virtue, and the virtues must be like budgets: a surplus is better than a deficit.

Barrett said that when we’re dehydrated, we don’t necessarily feel thirsty—we feel exhausted. When we have something odd happening in our stomach, our body doesn’t quite know if we have a menstrual cramp or a stomachache or if we need to poop. We might not even be aware for a long period of time that our stomach hurts. And this isn’t unique to people with PTSD. It’s normal, everyday bodily dissociation that we all suffer from. If we find ourselves in a shitty mood, we might not necessarily be mad about a certain trigger. We could just be running at a metabolic deficit. Our body might be screaming “I NEED FUNYUNS” while we project our hangriness onto, say, this poor sweaty schmuck who’s breathing too loud in the elevator. But Barrett said that PTSD does make these inclinations worse. It affects a variety of systems in the body, throwing them all out of whack. Our hearts might beat faster. Our lungs might pump harder. Our body budget can get tipped off-balance more easily. And when it does, our reactions to these deficits can feel outsized. “Make sure that you get enough sleep, make sure you exercise, make sure that you eat in a healthful way,” she told me when I asked her what I could do to be a better person. When I countered that that didn’t seem like enough, she kindly offered, “You know, all you can do is take as much responsibility as you can. And sometimes it’s the attempt that matters, you know, more than the success.” Then she chuckled at herself. “That’s a very Jewish mother response!” So, first step of hacking my brain: sustaining it with enough oxygen and nutrients

At one point in the journey, we’re approaching the Arc de Triomphe. “That’s awesome,” states Paul. “My guidebook says that it’s the resting place of the ‘unknown soldier’ and the flame never goes out,” I announce proudly. The taxi driver says something to Elizabeth, who is sitting in the front. “Franz here, suggests that if the budget deficit gets any worse, they intend to turn the gas off except on Public Holidays.” “Still practically every day then!

Education is one of the Grand Christianson Obsessions. They’ve been whole years my mother’s kept us home for intensive private study. As a result of that, Paul will perform the first brain transplant, James will someday build a bridge across the Atlantic Ocean, Charlie – who is an actual musical genius – will probably end up writing the Great American Symphony, and I – I know a little bit about a lot of things. I can tell you the chemical composition of the stuff your stick in your hair; how long it would take you, at just under the speed of light, to get to Alpha Centauri – and how old your body would be when you finally got there; the middle name of the third president of the United States; the amount of the present budget deficit; the author of the Brothers Karamazov, and how many feet there are in a line of trochaic heptameter. The Little Girl Who Had to Know Why, Paul used to call me. But even my mother couldn’t reconcile me and math.

The complexities of national deficits, trade failures, budget gaps, negotiations to end the nuclear arms race, the crises of the Middle East, all these cannot be understood by giving the facts alone. The public needs appropriate historical background and clarification. People who are not taught much geography, history, economics, and physics simply cannot reach reasonable conclusions without help from specialists. This is not elitism, it is something far more important; it is called education.

The irony was that it was the failure of neo-liberalism itself during the crisis that had caused its principal exponents to cut and run to the social democratic state, both domestically and internationally, to save neo-liberalism from itself. And then, having done so, to later blame social democrats for the cost and consequences of the resulting intervention, which had taken the form of budget deficits and higher public debt arising from a classic Keynesian response to the crisis. This took a breathtaking level of political and ideological hypocrisy from the right.

We had a massive budget shortfall with a structural budget deficit and seemingly no way to close it; the city had been spending at levels way beyond its recurring revenue for years, and the nonrecurring revenue streams were drying up as we entered office, leaving us with no good options. The structural deficit was about $180 million on a roughly $600 million general fund—which meant that if we were to eliminate our debt, we would have to develop or attract new housing and businesses that could generate tax income, identify other sources of revenue, or cut our government by one-third.

In 1962, President John F. Kennedy said, “Our true choice is not between tax reduction on the one hand and avoidance of large federal deficits on the other; it is increasingly clear that no matter what party is in power, as long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance the budget—just as it will never produce enough jobs or enough profits. In short, the paradoxical truth is that the tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now.

What is the actual link between material consumption and objective and subjective quality of life once the basic needs for food, clothes, shelter, and mobility are well satisfied? Going from material misery to modest material comfort will make many things in life better but, obviously, the link is not an endless escalator. But if so, where is the saturation point? Can such a level actually be quantified in a meaningful way? These questions must be asked even if there are no easy answers, mainly because of the situation that is the very opposite of the material poverty outlined at the beginning of this section: too many people live in the condition of material excess and this does not endow them with a higher physical quality of life than that enjoyed by moderate consumers and it does not make them exceptionally happy. At the most fundamental level, the question is about the very nature of modern economies. All but a tiny minority of economists (those of ecological persuasion) see the constant expansion of output as the fundamental goal. And not just any expansion: economies should preferably grow at annual rates in excess of 2%, better yet 3%. This is the only model, the only paradigm, and the only precept, as the economists in command of modern societies cannot envisage a system that would deliberately grow at a minimum rate, even less so one that would experience zero growth, and the idea of a carefully managed decline appears to them to be outright unimaginable. The pursuit of endless growth is, obviously, an unsustainable strategy (Binswanger, 2009), and the post-2008 experience has shown how dysfunctional modern economies become as soon as the growth becomes negligible, ceases temporarily or when there is even a slight decline: rising unemployment, falling labor participation, growing income inequality, and soaring budget deficits.

Instead of wasting his time in Frankfurt and Tokyo, the finance minster should focus on Indian housewives and help them balance their budgets by reducing inflation and the fiscal deficit. Unfortunately, our housewives do not have access to the Nashik note printing press like our FM. The solution to India’s problems lie inside, not in wooing FII and FDI inflows.

Ideally, a fair and equitable society would regulate debt in line with the ability to be paid without pushing economies into depression. But when shrinking markets deepen fiscal deficits, creditors demand that governments balance their budgets by selling public monopolies. Once the land, water and mineral rights are privatized, along with transportation, communications, lotteries and other monopolies, the next aim is to block governments from regulating their prices or taxing financial and rentier wealth. The neo-rentier objective is threefold: to reduce economies to debt dependency, to transfer public utilities into creditor hands, and then to create a rent-extracting tollbooth economy. The financial objective is to block governments from writing down debts when bankers and bondholders over-lend. Taken together, these policies create a one-sided freedom for rentiers to create a travesty of the classical “Adam Smith” view of free markets. It is a freedom to reduce the indebted majority to a state of deepening dependency, and to gain wealth by stripping public assets built up over the centuries.

Greece’s economic problems weren’t new. For decades, the country had been plagued by low productivity, a bloated and inefficient public sector, massive tax avoidance, and unsustainable pension obligations. Despite that, throughout the 2000s, international capital markets had been happy to finance Greece’s steadily escalating deficits, much the same way that they’d been happy to finance a heap of subprime mortgages across the United States. In the wake of the Wall Street crisis, the mood grew less generous. When a new Greek government announced that its latest budget deficit far exceeded previous estimates, European bank stocks plunged and international lenders balked at lending Greece more money. The country suddenly teetered on the brink of default.

I am a congenital optimist about America, but I worry that American democracy is exhibiting fatal symptoms. DC has become an acronym for Dysfunctional Capital: a swamp in which partisanship has grown poisonous, relations between the White House and Congress have paralyzed basic functions like budgets and foreign agreements, and public trust in government has all but disappeared. These symptoms are rooted in the decline of a public ethic, legalized and institutionalized corruption, a poorly educated and attention-deficit-driven electorate, and a 'gotcha' press - all exacerbated by digital devices and platforms that reward sensationalism and degrade deliberation. Without stronger and more determined leadership from the president and a recovery of a sense of civic responsibility among the governing class, the United States may follow Europe down the road of decline.

They had forced Obama to play their budget game. Instead of talking about jobs and spending, he was talking about the deficit and bargaining with them over how many trillions to cut. “We led. They reacted to us,” exulted Kevin McCarthy, the House Republican whip. The donors were excited, too. Just the fact that Obama had been thrown on the defensive convinced those whose fortunes had helped pay for the Ryan plan that their investment was worth it.

was not an economist. So, in thinking about how to solve the problem, I decided to start with the big picture. The root cause of inflation in Brazil was really very simple: The government spent more than it earned. When the budget turned up a big deficit every year, as it inevitably did, the government printed more money to cover the difference. Any grade-school student knows, however, that you can’t just print endless amounts of cash without having something tangible to back it up.

The historical record is clear. Each and every time the government substantially reduced the national debt, the economy fell into depression. Could it have been a remarkable coincidence? Thayer didn’t think so. He blamed the “economic myths” that drove politicians to wrestle their budgets into surplus on the flawed belief that paying down debt was both morally and fiscally responsible.45 As we see from the insights of MMT, government surpluses shift deficits onto the nongovernment sector.

WHY PARADIGMS MATTER Ideas drive results. People's beliefs drive their actions. Actions that stem from a simple, complete and accurate paradigm result in personal fulfillment, harmonious relationships, and economic prosperity. Actions based on false, incomplete and inaccurate paradigms, however well intended or passionately defended, are the cause of widespread misery, suffering and deprivation. As detailed in Rethinking Survival: Getting to the Positive Paradigm of Change, a fatal information deficit explains the worldwide leadership deficit and related budget deficits. In a dangerous world where psychological and economic warfare compete with religious extremism and terrorism to undo thousands of years of incremental human progress, a healing balance is urgently needed. Restoring a simple, complete and accurate paradigm of leadership and relationships now could make the difference between human survival on the one hand, and the extinction of the human race (or the end of civilization as we know it), on the other. p. 7.

it’s easy for businesses to increase supply in response to more spending. But as an economy moves closer to its full employment limit, real resources become increasingly scarce. Rising demand can begin to put pressure on prices, and bottlenecks can develop in industries that are experiencing the greatest strain on capacity. Inflation can heat up. Once the economy hits this full employment wall, any additional spending (not just government spending) will be inflationary. That’s overspending, and it can even happen if the government’s budget is balanced or in surplus.

Theoretical models encompass a wide range of assumptions about domestic public debt. The overwhelming majority of models simply assume that debt is always honored. These include models in which deficit policy is irrelevant due to Ricardian equivalence.7 (Ricardian equivalence is basically the proposition that when a government cuts taxes by issuing debt, the public does not spend any of its higher after-tax income because it realizes it will need to save to pay taxes later.) Models in which debt is always honored include those in which domestic public debt is a key input in price level determination through the government’s budget constraint and models in which generations overlap

It was not always the case, of course, that navies paid for themselves. In wartime, costs often exceeded revenues, and those deficits grew over time as fleets and armies got bigger. But this was hardly an insurmountable obstacle for the most dynamic economies in the world. The United Provinces and England were able to borrow all they needed to underwrite their defense budgets. The pressures of war gave a powerful impetus to the growth of stocks, bonds, loans, and paper currencies during the late seventeenth and early eighteenth centuries and helped to turn Amsterdam and then London into international financial centers. To take one example, the Bank of England was established in 1694 to raise funds to allow England to wage war against France.

Trump wanted to know what the new individual income tax rates would be. “I like these big round numbers,” he said. “Ten percent, 20 percent, 25 percent.” Good, solid numbers that would be easy to sell. Mnuchin, Cohn and Office of Management and Budget Director Mick Mulvaney said there needed to be analysis, study and discussion on the impact on revenue, the deficit and the relation to expected federal spending. “I want to know what the numbers are going to be,” Trump said, throwing out numbers again. “I think they ought to be 10, 20 and 25.” He dismissed any effort to crunch the numbers. A small change in rates could have a surprising impact on taxes collected by the U.S. Treasury. “I don’t care about any of that,” Trump said. Solid, round numbers were key. “That’s what people can understand,” he said. “That’s how I’m going to sell it.

The US was forced to withdraw troops from Iraq after an extremely costly decade-long military occupation, leaving in place a regime more closely allied to Iran, the US’ regional adversary. The Iraq war depleted the economy, deprived American corporations of oil wealth, greatly enlarged Washington’s budget and trade deficits, and reduced the living standards of US citizens. The Afghanistan war had a similar outcome, with high external costs, military retreat, fragile clients, domestic disaffection, and no short or medium term transfers of wealth (imperial pillage) to the US Treasury or private corporations. The Libyan war led to the total destruction of a modern, oil-rich economy in North Africa, the total dissolution of state and civil society, and the emergence of armed tribal, fundamentalist militias opposed to US and EU client regimes in North and sub-Sahara Africa and beyond. Instead

Pointsman is the only one here maintaining his calm. He appears unruffled and strong. His lab coats have even begun lately to take on a Savile Row serenity, suppressed waist, flaring vents, finer material, rather rakishly notched lapels. In this parched and fallow time, he gushes affluence. After the baying has quieted down at last, he speaks, soothing: “There’s no danger.” “No danger?” screams Aaron Throwster, and the lot of them are off again muttering and growling. “Slothrop’s knocked out Dodson-Truck and the girl in one day!” “The whole thing’s falling apart, Pointsman!” “Since Sir Stephen came back, Fitzmaurice House has dropped out of our scheme, and there’ve been embarrassing inquires down from Duncan Sandys—“ “That’s the P.M.’s son-in-law, Pointsman, not good, not good!” “We’ve already begun to run into a deficit—“ “Funding,” IF you can keep your head, “is available, and will be coming in before long… certainly before we run into any serious trouble. Sir Stephen, far from being ‘knocked out,’ is quite happily at work at Fitzmaurice House, and is At Home there should any of you wish to confirm. Miss Borgesius is still active in the program, and Mr. Duncan Sandys is having all his questions answered. But best of all, we are budgeted well into fiscal ’46 before anything like a deficit begins to rear its head.” “Your Interested Parties again?” sez Rollo Groast. “Ah, I noticed Clive Mossmoon from Imperial Chemicals closeted with you day before yesterday,” Edwin Treacle mentions now. “Clive Mossmoon and I took an organic chemistry course or two together back at Manchester. Is ICI one of our, ah, sponsors, Pointsman?” “No,” smoothly, “Mossmoon, actually, is working out of Malet Street these days. I’m afraid we were up to nothing more sinister than a bit of routine coordination over the Schwarzkommando business.” “The hell you were. I happen to know Clive’s at ICI, managing some sort of polymer research.” They stare at each other. One is lying, or bluffing, or both are, or all of the above. But whatever it is Pointsman has a slight advantage. By facing squarely the extinction of his program, he has gained a great of bit of Wisdom: that if there is a life force operating in Nature, still there is nothing so analogous in a bureaucracy. Nothing so mystical. It all comes down, as it must, to the desires of men. Oh, and women too of course, bless their empty little heads. But survival depends on having strong enough desires—on knowing the System better than the other chap, and how to use it. It’s work, that’s all it is, and there’s no room for any extrahuman anxieties—they only weaken, effeminize the will: a man either indulges them, or fights to win, und so weiter. “I do wish ICI would finance part of this,” Pointsman smiles. “Lame, lame,” mutters the younger Dr. Groast. “What’s it matter?” cries Aaron Throwster. “If the old man gets moody at the wrong time this whole show can prang.” “Brigadier Pudding will not go back on any of his commitments,” Pointsman very steady, calm, “we have made arrangements with him. The details aren’t important.” They never are, in these meetings of his.

Besides increasing or decreasing the stimulation level of the environment, you can also achieve an optimal level of arousal by drinking beverages that have a direct impact on neocortical arousal.38 Alcohol, at least initially, has the effect of lowering arousal. After a couple of glasses of wine the extraverts are more likely to dip below the optimal arousal level, whereas their introverted friends, nudged closer to optimal arousal, may appear unexpectedly garrulous. Coffee, being a stimulant, has the opposite effect. After ingesting about two cups of coffee, extraverts carry out tasks more efficiently, whereas introverts perform less well. This deficit is magnified if the task they are engaged in is quantitative and if it is done under time pressure. For an introvert, an innocent couple of cups of coffee before a meeting may prove challenging, particularly if the purpose of the meeting is a rapid-fire discussion of budget projections, data analysis, or similar quantitative concerns. In the same meeting an extraverted colleague is likely to benefit from a caffeine kick that creates, in the eyes of the introverts, the illusion of competency.

These senators and representatives call themselves “leaders.” One of the primary principles of leadership is that a leader never asks or orders any follower to do what he or she would not do themselves. Such action requires the demonstration of the acknowledged traits of a leader among which are integrity, honesty, and courage, both physical and moral courage. They don’t have those traits nor are they willing to do what they ask and order. Just this proves we elect people who shouldn’t be leading the nation. When the great calamity and pain comes, it will have been earned and deserved. The piper always has to be paid at the end of the party. The party is about over. The bill is not far from coming due. Everybody always wants the guilty identified. The culprits are we the people, primarily the baby boom generation, which allowed their vote to be bought with entitlements at the expense of their children, who are now stuck with the national debt bill that grows by the second and cannot be paid off. These follow-on citizens—I call them the screwed generation—are doomed to lifelong grief and crushing debt unless they take the only other course available to them, which is to repudiate that debt by simply printing up $20 trillion, calling in all federal bills, bonds, and notes for payoff, and then changing from the green dollar to say a red dollar, making the exchange rate 100 or 1000 green dollars for 1 red dollar or even more to get to zero debt. Certainly this will create a great international crisis. But that crisis is coming anyhow. In fact it is here already. The U.S. has no choice but to eventually default on that debt. This at least will be a controlled default rather than an uncontrolled collapse. At present it is out of control. Congress hasn’t come up with a budget in 3 years. That’s because there is no way at this point to create a viable budget that will balance and not just be a written document verifying that we cannot legitimately pay our bills and that we are on an ever-descending course into greater and greater debt. A true, honest budget would but verify that we are a bankrupt nation. We are repeating history, the history we failed to learn from. The history of Rome. Our TV and video games are the equivalent distractions of the Coliseums and circus of Rome. Our printing and borrowing of money to cover our deficit spending is the same as the mixing and devaluation of the gold Roman sisteri with copper. Our dysfunctional and ineffectual Congress is as was the Roman Senate. Our Presidential executive orders the same as the dictatorial edicts of Caesar. Our open borders and multi-millions of illegal alien non-citizens the same as the influx of the Germanic and Gallic tribes. It is as if we were intentionally following the course written in The History of the Decline and Fall of the Roman Empire. The military actions, now 11 years in length, of Iraq and Afghanistan are repeats of the Vietnam fiasco and the RussianAfghan incursion. Our creep toward socialism is no different and will bring the same implosion as socialism did in the U.S.S.R. One should recognize that the repeated application of failed solutions to the same problem is one of the clinical definitions of insanity. * * * I am old, ill, physically used up now. I can’t have much time left in this life. I accept that. All born eventually die and with the life I’ve lived, I probably should have been dead decades ago. Fate has allowed me to screw the world out of a lot of years. I do have one regret: the future holds great challenge. I would like to see that challenge met and overcome and this nation restored to what our founding fathers envisioned. I’d like to be a part of that. Yeah. “I’d like to do it again.” THE END PHOTOS Daniel Hill 1954 – 15

Politicians are the only people in the world who create problems and then campaign against them. Have you ever wondered why, if both the Democrats and Republicans are against deficits, we have deficits? Have you ever wondered why if all politicians are against inflation and high taxes, we have inflation and high taxes? You and I don’t propose a federal budget. The president does. You and I don’t have Constitutional authority to vote on appropriations. The House of Representatives does. You and I don’t write the tax code. Congress does. You and I don’t set fiscal policy. Congress does. You and I don’t control monetary policy. The Federal Reserve Bank does. One hundred senators, 435 congressmen, one president and nine Supreme Court justices — 545 human beings out of 235 million — are directly, legally, morally and individually responsible for the domestic problems that plague this country. I excused the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered by private central bank. I exclude all of the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman or a president to do one cotton-picking thing. I don’t care if they offer a politician $1 million in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislators’ responsibility to determine how he votes. Don’t you see the con game that is played on the people by the politicians? Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party. What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of Tip O’Neill, who stood up and criticized Ronald Reagan for creating deficits. The president can only propose a budget. He cannot force the Congress to accept it. The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating appropriations and taxes. Those 545 people and they alone are responsible. They and they alone should be held accountable by the people who are their bosses — provided they have the gumption to manage their own employees.

But Buenos Aires also had poor outlying slums, called villa miserias, where hundreds of thousands of people lived in tin or cardboard shacks, a single tap providing water for fifty families. Their plight was made worse by an economy that funneled most of the country’s riches to a few hundred families and suffered from rampant unemployment, an exploding budget deficit, and a vigorous black market.

The promise was kept in 1927 – Ottawa would meet half the cost of a meagre, means-tested pension for those over seventy. Compelled to pay the other half, most provinces hesitated. Nova Scotia found a novel way to raise its share: it legalized liquor sold in government-run stores, and used the profits to help its elderly. Other provinces followed suit. By ending prohibition, Ontario Tories, elected in 1923, bounced from deficit to surplus budgets.

At a meeting in the Oval Office, Trump wanted to know what the new individual income tax rates would be. “I like these big round numbers,” he said. “Ten percent, 20 percent, 25 percent.” Good, solid numbers that would be easy to sell. Mnuchin, Cohn and Office of Management and Budget Director Mick Mulvaney said there needed to be analysis, study and discussion on the impact on revenue, the deficit and the relation to expected federal spending. “I want to know what the numbers are going to be,” Trump said, throwing out numbers again. “I think they ought to be 10, 20 and 25.” He dismissed any effort to crunch the numbers. A small change in rates could have a surprising impact on taxes collected by the U.S. Treasury. “I don’t care about any of that,” Trump said. Solid, round numbers were key. “That’s what people can understand,” he said. “That’s how I’m going to sell it.

As growth collapsed and economies went into recession, budget surpluses would disappear as taxation revenues fell and social security outlays rose to support the unemployed. This meant that government borrowing and public debt would increase.6 Budget deficits were now inevitable.7 But who would pay for these deficits in the long term? It wouldn’t be the financial institutions. No, it would once again be the little guy, the long-suffering taxpayer who, once economies eventually returned to growth, would see their taxes increase through ‘bracket creep’ until the debt was gradually retired.

Two scholars who served on the staff of President Reagan’s 1982 National Commission on Social Security Reform explain that Social Security does more to reduce income inequality and prevent poverty among the old in the United States than any other program, public or private, while providing crucial protection for orphans and the disabled. And, contrary to widely circulated claims, they show it does not add one dollar to the federal government’s budget deficits and can remain financially sound as long as our government exists.

Trade liberalization has created other problems, too. It has increased the pressures on government budgets, as it reduced tariff revenues. This has been a particularly serious problem for the poorer countries. Because they lack tax collection capabilities and because tariffs are the easiest tax to collect, they rely heavily on tariffs (which sometimes account for over 50% of total government revenue).7 As a result, the fiscal adjustment that has had to be made following large-scale trade liberalization has been huge in many developing countries – even a recent IMF study shows that, in low-income countries that have limited abilities to collect other taxes, less than 30% of the revenue lost due to trade liberalization over the last 25 years has been made up by other taxes.8 Moreover, lower levels of business activity and higher unemployment resulting from trade liberalization have also reduced income tax revenue.When countries were already under considerable pressure from the IMF to reduce their budget deficits, falling revenue meant severe cuts in spending, often eating into vital areas like education, health and physical infrastructure, damaging long-term growth. It

Schmidt agreed at the Bonn summit of world industrial leaders, in July 1978, to increase Germany’s budget deficit. The Bonn summit was a classic example of international economic ‘coordination’: one country agrees to do something that is bad for it on condition that another country does something equally bad for it. The world economy suffers, a diplomatic triumph is proclaimed, and the bureaucratic policy-making establishment on all sides comes away with a mandate for increased misdirected interference in economic life.

Look, we’ve seen this over and over again—three times since 1980. Republicans rail against budget deficits when they’re out of power, then drop all their concerns and send the deficit soaring once they are in a position to cut taxes. Then when it’s the Democrats’ turn, they’re expected to clean up the Republicans’ red ink rather than address their own priorities. Enough already.

Whether people realize it or not, “classic” American conservatism—with its emphasis on small government, balanced budgets, free trade, and the innovative firepower of the free enterprise system—has become an anachronism since the rise of Donald Trump as a political force. As he emerged as the leader of the “conservative” party, he advocated enormous increases in government spending, producing huge budget deficits; promised trade protectionism; and worked to close borders to immigrants. What conservatism means today has, in a sense, gone back to the future. William Jennings Bryan—a turn-of-the-twentieth-century Democrat—would be happier than either Barry Goldwater or Ronald Reagan with the sort of agenda now put forward by the Republican Party.

O.K., Lerner: His argument was that countries that (a) rely on fiat money they control and (b) don’t borrow in someone else’s currency don’t face any debt constraints, because they can always print money to service their debt. What they face, instead, is an inflation constraint: too much fiscal stimulus will cause an overheating economy. So their budget policies should be entirely focused on getting the level of aggregate demand right: the budget deficit should be big enough to produce full employment, but not so big as to produce inflationary overheating.

But what’s happening in the Senate right now really does deserve Trumpian superlatives. The bill Republican leaders are trying to ram through this week without hearings, without time for even a basic analysis of its likely economic impact, is the biggest tax scam in history. It’s such a big scam that it’s not even clear who’s being scammed—middle-class taxpayers, people who care about budget deficits, or both. One thing is clear, however: one way or another, the bill would hurt most Americans. The only big winners would be the wealthy—especially those who mainly collect income from their assets rather than working for a living—plus tax lawyers and accountants who would have a field day exploiting the many loopholes the legislation creates.

stomach hurts. And this isn’t unique to people with PTSD. It’s normal, everyday bodily dissociation that we all suffer from. If we find ourselves in a shitty mood, we might not necessarily be mad about a certain trigger. We could just be running at a metabolic deficit. Our body might be screaming “I NEED FUNYUNS” while we project our hangriness onto, say, this poor sweaty schmuck who’s breathing too loud in the elevator. But Barrett said that PTSD does make these inclinations worse. It affects a variety of systems in the body, throwing them all out of whack. Our hearts might beat faster. Our lungs might pump harder. Our body budget can get tipped off-balance more easily. And when it does, our reactions to these deficits can feel outsized. “Make sure that you get enough sleep, make sure you exercise, make sure that you eat in a healthful way,” she told me when I asked her what I could do to be a better person. When I countered that that didn’t seem like enough, she kindly offered, “You know, all you can do is take as much responsibility as you can. And sometimes it’s the attempt that matters, you know, more than the success.” Then she chuckled at herself. “That’s a very Jewish mother response!” So, first step of hacking my brain: sustaining it with enough oxygen and nutrients

England exerted much the same influence over American economic policy as Japan would nearly a century later, when it financed much of the U.S. budget deficit in the 1980s.

Arbitrary limits on deficits and debt hinder a nation’s development. Austerity for the sake of balanced budgets or for the sake of preserving fiscal space for the future is counterproductive.

A 2010 Los Angeles Opera production of Wagner’s Ring Cycle cost $31 million to produce.24 Broadway shows don’t usually cost that much, unless you’re talking about the recent Spider-Man debacle. U2’s last concert-tour budget might be in that range, but those were stadium shows attracting huge numbers of people. And in those latter two instances, the people who wrote the music are still alive, and presumably they get paid a piece out of every ticket sold, which is part of what keeps those production costs up. Wagner has been dead for a long time, so one assumes it’s not his agent who is charging the moon and driving up the cost of these Ring productions. (Granted, it is a four-part epic.) The Los Angeles Opera ended up with a $6 million deficit due to “slack demand for expensive tickets.

It was an extraordinarily attractive theory, but when the computers at the Office of Management and Budget projected that rather than balancing the budget, Reagan’s proposed cuts would create budget deficits of up to $116 billion by 1984, Reagan’s budget director, David Stockman, simply reprogrammed the computers.

There’s a phrase that critics of economic forecasting like to use: Give an economist a result you want, and he’ll find the numbers to justify it. This entire city is filled with number crunchers who look at the exact same data and interpret it in widely disparate ways on everything from the federal budget deficit to the Social Security surplus.” “Meaning that data can be manipulated.” “Of course it can, depending on who’s paying the meter and whose political agenda is being furthered,

On August 5, the Standard & Poor’s rating agency—citing, among other factors, the prospect of future budget brinkmanship—downgraded U.S. government debt to one notch below the top AAA rating. The rating agency had made an egregious error that caused it to overstate the estimated ten-year deficit by $2 trillion, which the Treasury quickly pointed out. S&P acknowledged the error but asserted that the mistake did not affect its judgment of the government’s creditworthiness. I had the feeling that S&P wanted to show it was not intimidated. The episode highlighted the odd relationship between governments and rating agencies: Governments regulate the rating agencies, but the rating agencies have the power to downgrade governments’ debt.

The fact that costs rise faster for arts organizations than for other industries is often misread as “artists don’t handle money well” or “artists are wasteful.” Many board members believe that if an arts organization were managed carefully, it would turn a profit. They cannot understand why an organization that makes something people like should run at a perpetual deficit. This corporate prejudice can affect the way they govern their arts organization, encouraging them to try to cut budgets or to avoid addressing annual fund-raising requirements. Such board members start from the belief that arts managers are doing something wrong. They think that if corporate managers could run the arts organization, then it would become profitable, that if arts managers were smarter, fund-raising targets could be lower. They are simply wrong.

Reagan kept saying the deficit was Public Enemy Number One. But then he sent up a budget that would have pumped red ink up over the window sills.

a sovereign government can increase its spending—even if that results in a budget deficit—without increasing risk of insolvency and default. In contrast, if private spending leads the way, it will tend to outpace income of households and firms, meaning that private indebtedness will grow. That is risky and ultimately unsustainable.

America cut back on “welfare” from the 1970s onward. Family income support fell from 0.4 percent of GDP in 1970 to under 0.2 percent in 2010.16 Welfare still looms large in the public’s imagination, but it plays little role in the budget and the deficit. It’s been a long time since America was generous to its poor families with children! The

Adding three trillion dollars to the deficit actually served a moral purpose for Ronald Reagan. It meant that, sooner or later, the deficit would force an elimination of social programs. He knew perfectly well that the military budget would never be seriously cut, and that a major increase in tax revenues to eliminate the deficit would never be agreed upon. In the long run, the staggering deficit would actually serve Strict Father morality—conservative morality—by forcing Congress to cut social programs. From the perspective of Strict Father morality, Ronald Reagan looks moral and smart, not immoral and dumb as many liberals believe. The

Despite claims that these radical policy changes were driven by fiscal conservatism—i.e., the desire to end big government and slash budget deficits—the reality is that government was not reducing the amount of money devoted to the management of the urban poor. It was radically altering what the funds would be used for. The dramatic shift toward punitiveness resulted in a massive reallocation of public resources. By 1996, the penal budget doubled the amount that had been allocated to AFDC or food stamps.100 Similarly, funding that had once been used for public housing was being redirected to prison construction. During Clinton’s tenure, Washington slashed funding for public housing by $17 billion (a reduction of 61 percent) and boosted corrections by $19 billion (an increase of 171 percent), “effectively making the construction of prisons the nation’s main housing program for the urban poor.”101 Clinton

The supposition that there is massive waste to be cut in the civilian budget is simply a myth. To recapitulate: ending all earmarks and foreign aid and achieving all of the specific cuts on civilian programs proposed by the deficit commission, even if such choices were meritorious, would amount to less than 1 percent of GDP. True

the United States will need substantially more revenues to close the budget deficit, especially recognizing the need to increase federal spending in certain critical areas. I

As the US presidential changeover from Clinton to Bush Jr demonstrated, budget surpluses can serve as a pretext for tax cuts that generate new deficits, which then require further spending cuts to restore the surpluses. The interplay between tax and spending cuts shows that the balancing of budgets in the consolidation state is not pursued for its own sake but, as part of a programme of privatization and liberalization, is intended to bring about a general rollback of the state and its intervention in the market.

twenty-to-sixty-four-year-olds) will rise from 28 percent to 58 percent—and that is assuming that the EU lets in more than a million young immigrants a year.9 Across the Atlantic, America continues to tax itself like a small-government country and spend like a big-government one while hiding its true liabilities by using tactics that would have made Bernie Madoff blush. With the baby boomers aging, the Congressional Budget Office reckons the bill for medical benefits alone will rise by 60 percent over the next decade—its deficit may be manageable now, but the United States faces a choice: Rein in those entitlements, raise taxes to extraordinary levels, or stagger from crisis to crisis. Every

Wednesday, 16 November 2011: United States (US) senator Bernie Sanders gives a remarkable speech, which is worth quoting at some length: There is a war going on in this country.… I am talking about a war being waged by some of the wealthiest and most powerful people in this country against the working families of the United States of America, against the disappearing and shrinking middle class of our country. The reality is that many of the nation’s billionaires are on the war-path, they want more, more, more. Their greed has no end.… The reality is that many of these folks [the wealthy] want to bring the United States back to where we were in the 1920s. And they want to do their best to eliminate all traces of social legislation, which working families fought tooth and nail to develop to bring a modicum of stability and security to their lives.… While we struggle with a record breaking deficit and a large national debt, caused by the wars in Iraq and Afghanistan, caused by tax breaks for the wealthy … caused by the Wall Street bailout, driving up the deficit, driving up the national debt, so that people can say oh my goodness, we have got all of those expenses and then we got to give tax breaks to millionaires and billionaires, but we want to balance the budget. Gee, how are we going to do that? Well, obviously, we know how they are going to do that. We are going to cut back on health care … education … childcare … food stamps, … we surely are not going to expand unemployment compensation, … we got a higher priority, … we have got to, got to, got to give tax breaks to billionaires.

loose, with a primary budget deficit (that is, excluding interest payments on debt) of 6.6% of GDP.

In 1993, the year Clinton became President, median household income in the United States was $48,884. Six years later, it was $56,080, and the federal government ran a $125.6-billion surplus. There was an even bigger surplus in 2000, and ever since 2001 the federal government has been in the red. In 2013, median household income was $51,939, and the budget deficit was $680 billion (which was small by post-Clinton standards). The stock market began the nineteen-nineties with the Dow at 2,753. At the end of trading in 1999, the Dow was at 11,497.

Interest groups exercise influence way out of proportion to their place in society, distort both taxes and spending, and raise overall deficit levels through their ability to manipulate the budget in their favor. They also undermine the quality of public administration as a result of the multiple and often contradictory mandates they induce Congress to support. All of this has led to a crisis of representation, in which ordinary people feel their supposedly democratic government no longer truly reflects their interests but is under the control of a variety of shadowy elites. What is ironic and peculiar is that this crisis in representativeness has occurred in part because of reforms designed to make the system more democratic.

In April, 1926, France and the United States finally negotiated a war debt settlement at forty cents on the dollar. The [French] budget was at last fully balanced. Still the franc kept falling. By May, the exchange rate stood at over thirty to the dollar. With a currency in free-fall, prices now rising at 2% a month - over 25% a year - and the Government apparently impotent, everyone made the obvious comparison with the situation in Germany four years earlier. In fact, there was no real parallel. Germany in 1922 had lost all control of its budget deficit and in that single year expanded the money supply ten fold. By contrast, the French had largely solved their fiscal problems and its money supply was under control. The main trouble was the fear that the deep divisions between the right and left had made France ungovernable. The specter of chronic political chaos associated with revolving door governments and finance ministers was exacerbated by the uncertainty over the governments ability to fund itself given the overhang of more than $10 billion in short term debt. It was this psychology of fear, a generalized loss of nerve, that seemed to have gripped French investors and was driving the downward spiral of the franc. The risk was that international speculators, those traditional bugaboos of the Left, would create a self-fulfilling meltdown as they shorted the currency in the hope of repurchasing it later at a lower price thereby compounding the very downward trend that they were trying to exploit. It was the obverse of a bubble where excessive optimism translates into rising prices which then induces even more buying. Now excessive pessimism was translating into falling prices which were inducing even more selling. In the face of this all embracing miasma of gloom neither the politicians nor the financial establishment seemed to have any clue what to do.

The 9/11 Commission warned that Al Qaeda "could... scheme to wield weapons of unprecedented destructive power in the largest cities of the United States." Future attacks could impose enormous costs on the entire economy. Having used up the surplus that the country enjoyed as part of the Cold War peace dividend, the U.S. government is in a weakened financial position to respond to another major terrorist attack, and its position will be damaged further by the large budget gaps and growing dependence on foreign capital projected for the future. As the historian Paul Kennedy wrote in his book The Rise and Fall of Great Powers, too many decisions made in Washington today "bring merely short-term advantage but long-term disadvantage." The absence of a sound, long-term financial strategy could bring about a deterioration that, in his words, "leads to the downward spiral of slower growth, heavier taxes, deepening domestic splits over spending priorities and a weakening capacity to bear the burdens of defense." Decades of success in mobilizing enormous sums of money to fight large wars and meet other government needs have led Americans to believe that ample funds will be readily available in the event of a future war, terrorist attack, or other emergency. But that can no longer be assumed. Budget constraints could limit the availability or raise the cost of resources to deal with new emergencies. If government debt continues to pile up, deficits rise to stratospheric levels, and heave dependence on foreign capital grows, borrowing the money needed will be very costly. [Alexander] Hamilton understood the risks of such a precarious situation. After suffering through financial shortages, lack of adequate food and weapons, desertions, and collapsing morale during the Revolution, he considered the risk that the government would have difficulty in assembling funds to defend itself all too real. If America remains on its dangerous financial course, Hamilton's gift to the nation - the blessing of sound finances - will be squandered. The U.S. government had no higher obligation that to protect the security of its citizens. Doing so becomes increasingly difficult if its finances are unsound. While the nature of this new brand of warfare, the war on terrorism, remains uncharted, there is much to be gained if our leaders look to the experiences of the past for guidance in responding to the challenges of the future. The willingness of the American people and their leaders to ensure that the nation's finances remain sound in the face of these new challenges - sacrificing parochial interests for the common good - is the price we must pay to preserve the nation's security and thus the liberties that Hamilton and his generation bequeathed us.

Getting U.S. public debt on a sustainable path will require more sacrifice from the American public. Just to slow debt growth to the rate of GDP growth (or a steady debt-to-GDP ratio) from today through 2040, changes to current policy would have to be dramatic: cut entitlements by 10 percent or cut discretionary spending by 24 percent or increase tax revenue by 6 percent, or some combination of the three.27 Adjustments to actually lower the debt-to-GDP ratio would be even more painful. Ideally, the debt-reduction burden would be shared by all Americans. But one thing is certain—less generous entitlement programs and tax increases will need to be part of any balanced solution. PUBLIC OPINION: FOR A BALANCED BUDGET, BUT AGAINST SACRIFICES TO BALANCE THE BUDGET Changes in entitlement programs and tax increases, however, collide with an American public that largely wants neither. Almost as a rule, Americans support a balanced federal budget. But public opinion moves decisively in the other direction when Americans are asked about the specific actions necessary to balance the budget.28 Entitlement programs are broadly popular. Although most Americans understand that entitlements have a financing problem, they oppose making them less generous. When given the choice between preserving entitlements and reducing the deficit, Americans prefer the status quo. A solid majority, or 69 percent, would rather keep entitlements as they are and incur the debt consequences, whereas only 23 percent say the country should take steps to reduce the budget deficit that would include entitlement cuts.29 It is understandable that older Americans are more inclined than their younger counterparts to want to preserve entitlements. But even so, most Americans age eighteen to twenty-nine, who will foot the future debt interest bill, still favor entitlement preservation over debt reduction. Perspectives differ depending on party affiliation: Republicans are more likely than Democrats to favor making deficit reduction a priority. There may be a “tax more” option. Americans do appear to favor increasing taxes on the rich, though Democrats more so than Republicans.30 It is unclear, however, whether Americans would favor raising their own taxes to cover their entitlement expenses. This suggests a fundamental disconnect between the services Americans want and what they are willing to pay in taxes to fund them.

I would listen with growing outrage as hypocritical and obtuse American senators made all these demands of Iraqi legislators and yet themselves could not even pass budgets or appropriations bills, not to mention deal with tough challenges like the budget deficit, Social Security, and entitlement reforms. So many times I wanted to come right out of my chair at the witness table and scream, You guys have been in business for over two hundred years and can't pass routine legislation. How can you be so impatient with a bunch of parliamentarians who've been at it a year after four thousand years of dictatorship?

We Do Not Have a Trade Deficit. We have a capital surplus. ... Trade deficits are partly a question of consumer preference — American consumers really do like Hondas more than Japanese consumers like Buicks — but they are not mainly a question of consumer preference. They are mainly a question of investor preference — and investors prefer the United States, which is why there is almost twice as much foreign direct investment in the United States as in China, even though China’s economy has grown at a much faster rate over the past 20 years. ... Trade deficits don’t happen because the wily Japanese juke us on trade policy. They happen because intelligent people holding a fistful of dollars very often decide to forgo the consumption of American consumer goods in order to invest in American assets. In economics terms, what this means is that the trade deficit is a mirror image of the capital surplus. ... The trade deficit might remain unchanged, but there would be a large cost attached: Without that foreign investment capital flowing into the United States, money gets more expensive. That means entrepreneurs have a harder time raising capital. ... One of the problems, I suspect, is that people hear the word “deficit” and they think of the trade deficit as being like the budget deficit, i.e. a mounting debt that one day will have to be paid. It is something closer to the opposite: We get more stuff in return for the stuff we sell, and we get cheap investment capital on top of that. Foreigners get access to a dynamic economy with a stable government (miraculously stable, considering the jackasses in charge of it) and a stable currency. Everybody benefits.

At the root of the problems of Greece and Italy is the fact that both countries have used public employment as a source of political patronage, leading to bloated and inefficient public services and ballooning budget deficits. Germany, as we saw in chapter 4, inherited an autonomous, merit-based, modern bureaucracy from absolutist times. Modernization of the state occurred prior to the arrival of full democratic participation. Political parties when they appeared were based on ideology and programmatic agendas; clientelism was never a source of political power. Greece and Italy, by contrast, did not develop modern bureaucracies before they became electoral democracies, and for much of their recent history used public employment as a means of mobilizing voters. The result has been a chronic inability to control public-sector employment and hence the wage bill up until the present day. Greece and Italy followed a sequence closer to that of the United States in the nineteenth century than to their Northern European counterparts: democracy arrived before the modern state, making the latter subservient to the interests of party politicians.

Extending the Bush tax cuts will add $1.2 trillion to the nation’s budget deficit in just two years.

If the interest rate the country pays on its debt is higher than the growth of nominal GDP (that’s real GDP plus inflation) that debt ratio automatically goes up—unless the government runs a surplus in the budget excluding interest. Conversely, when the interest rate a country pays on its debt is below its growth rate, the ratio automatically drops, unless there’s a deficit in the budget, excluding interest. The latter scenario—having interest rates below the growth rate—is like having the wind at your back. And that’s the situation Spain, Ireland and Portugal should all be in this year. Italy is close.

One area that would truly test my patience was the senators’ focus on benchmarks, and their demands that the Iraqi Council of Representatives enact, by specific deadlines, legislation in key areas such as de-Baathification, the sharing of oil revenues, and provincial elections. This was an approach I also had recommended to Baker and Hamilton, but I had not fully understood then just how tough these actions would be for the Iraqis, precisely because they would fundamentally set the country’s political and economic course for the future. Remember, they had no experience with compromise in thousands of years of history. Indeed, politics in Iraq from time immemorial had been a kill-or-be-killed activity. I would listen with growing outrage as hypocritical and obtuse American senators made all these demands of Iraqi legislators and yet themselves could not even pass budgets or appropriations bills, not to mention deal with tough challenges like the budget deficit, Social Security, and entitlement reform. So many times I wanted to come right out of my chair at the witness table and scream, You guys have been in business for over two hundred years and can’t pass routine legislation. How can you be so impatient with a bunch of parliamentarians who’ve been at it a year after four thousand years of dictatorship? The discipline required to keep my mouth shut left me exhausted at the end of every hearing.

The two major political parties in Australia are engaged in a furious debate about the federal budget. Neither of them finds it convenient to point out the obvious. This is that to resolve the fiscal deficit and to support spending at roughly the same share of GDP it has been for the last forty years, Australians will certainly pay more tax.

The European Commission granted France an extra two years to meet its mandated budget deficit target of 3% of GDP. The deadline had already been extended by two years in 2013. It gave little explanation for the latest extension, which disappointed fiscal hawks.

Fighting unemployment by methods far more costly than the opening of bread lines and soup kitchens would not have been given serious consideration, regardless of which party might have been in office. Since 1932 all that is reversed. The Democrats may or may not be less concerned with a balanced federal budget than the Republicans. However, from President Eisenhower on down, with the possible exception of former Secretary of the Treasury Humphrey, the responsible Republican leadership has said again and again that if business should really turn down they would not hesitate to lower taxes or make whatever other deficit-producing moves were necessary to restore prosperity and eliminate unemployment. This is a far cry from the doctrines that prevailed prior to the big depression.

So the government ended up with extremely liberal and conservative politicians more interested in ideological purity than getting anything accomplished. All around them Rome was burning, yet the politicians spent all their time fighting each other, constantly jockeying for political position for the next election, all the while problem after problem, whether it was health care, Social Security, Medicare, the tax code, the environment, infrastructure, the budget deficit or the national debt, went unaddressed.

If Trump is on the ballot, the 2024 Presidential election will not just be about inflation or budget deficits or national security, or any of the many critical issues we Americans normally face. We will be voting on whether to preserve our republic. As a nation we can endure damaging policies for a 4-year term, but we cannot survive a president willing to terminate our constitution.

but not in the way it is intended to be.3 For an example of a chain of unintended uses, let us start with Phase One, the computer. The mathematical discipline of combinatorics, here basic science, derived from propositional knowledge, led to the building of computers, or so the story goes. (And, of course, to remind the reader of cherry-picking, we need to take into account the body of theoretical knowledge that went nowhere.) But at first, nobody had an idea what to do with these enormous boxes full of circuits as they were cumbersome, expensive, and their applications were not too widespread, outside of database management, only good to process quantities of data. It is as if one needed to invent an application for the thrill of technology. Baby boomers will remember those mysterious punch cards. Then someone introduced the console to input with the aid of a screen monitor, using a keyboard. This led, of course, to word processing, and the computer took off because of its fitness to word processing, particularly with the microcomputer in the early 1980s. It was convenient, but not much more than that until some other unintended consequence came to be mixed into it. Now Phase Two, the Internet. It had been set up as a resilient military communication network device, developed by a research unit of the Department of Defense called DARPA and got a boost in the days when Ronald Reagan was obsessed with the Soviets. It was meant to allow the United States to survive a generalized military attack. Great idea, but add the personal computer plus Internet and we get social networks, broken marriages, a rise in nerdiness, the ability for a post-Soviet person with social difficulties to find a matching spouse. All that thanks to initial U.S. tax dollars (or rather budget deficit) during Reagan’s anti-Soviet crusade.

Yet the gap between revenues and expenditures had to be filled, even if by printing rubles. If the budget could not be balanced immediately, the only other solution was to tolerate deficits today with the hope that a pick-up in growth would reduce the relative cost of the deficit in the medium term. Gorbachev thus embraced a strategy of market reform without a balanced budget. He hoped this would spark higher growth.

There was a reason, I told Valerie, why Republicans tended to do the opposite—why Ronald Reagan could preside over huge increases in the federal budget, federal deficit, and federal workforce and still be lionized by the GOP faithful as the guy who successfully shrank the federal government. They understood that in politics, the stories told were often as important as the substance achieved.

As the 2019 elections were approaching, the Modi government felt the need to appear less pro-rich and more pro-poor again. But the union budget passed in February was somewhat a missed opportunity so far as the peasants were concerned. No loan waivers were announced in their favor, simply an enhanced interest subvention on loans and an annual income support of Rs 6,000 (80 USD)—6 percent of a small farmer’s yearly income—to all farmers’ households owning two hectares or fewer.131 In fact, the union budget was once again more geared to pleasing the middle class. The income tax exemption limit jumped from Rs 200,000 (2,667 USD) to 250,000 (3,333 USD), and the income tax rate up to Rs 5 lakh (6,667 USD) was reduced from 10 to 5 percent. The income tax on an income of Rs 10 lakh (13,333 USD) dropped from Rs 110,210 (1,470 USD) to Rs 75,000 (1,000 USD).132 The poor were doubly affected by the fiscal policy of the Modi government in 2014–2019: not only did the tax cuts in favor of the middle class, the abolition of the wealth tax, and, more importantly, the reduction of the corporate tax rates have to be offset by increased indirect taxes, but the stagnation of fiscal resources did not allow the government of India to spend more on public education and public health—all the more so as Narendra Modi wanted to reduce the fiscal deficit. First of all, tax collection diminished. The exchequer “lost” Rs 1.45 lakh crore (1.933 billion USD) in the reduction of the corporate tax, for instance. That was the main reason why gross direct tax collection dipped 4.92 percent133 in 2019–2020, a fiscal year during which gross tax collections were less than those in 2018–2019. Tax collections had never declined on a year-on-year basis since 1961–1962.134 Second, government expenditures diminished. The central government reduced its spending on education from 0.63 percent of GDP in 2013–2014 to 0.47 percent in 2017–2018. The trend was marginally better on the public health front, where the Center’s spending declined from 0.37 percent of GDP in 2013–2014 to 0.34 percent in 2015–2016, before rising again to reach 0.38 percent in 2016–2017.

But the government’s college debt was priceless on paper—because Congress could use the make-believe future repayments to balance the budget. To the Congressional Budget Office, the phantom revenue of skyrocketing loans that could never possibly be repaid became an asset and thus a form of “deficit control.

And just as in the George W. Bush years, war spending plus huge tax cuts conspired to produce gargantuan budget deficits.

1935 tax bill, then popularly called the “Soak the Rich Tax,” the top marginal income tax rate for individuals rose to 75 percent (versus as low as 25 percent in 1930). By 1941, the top personal tax rate was 81 percent, and the top corporate tax rate was 31 percent, having started at 12 percent in 1930. Roosevelt also imposed a number of other taxes. Despite all of these taxes and the pickup in the economy that helped raise tax revenue, budget deficits increased from around 1 percent of GDP to about 4 percent of GDP because the spending increases were so large.5 From 1933 until the end of 1936 the stock market returned over 200 percent, and the economy grew at a blistering average real rate of about 9 percent. In 1936, the Federal Reserve tightened money and credit to fight inflation and slow an overheating economy, which caused the fragile US economy to fall back into recession and the other major economies to weaken with it, further raising tensions within and between countries.

also trying to act in good faith and also becoming useful idiots for big business and the rich. Another of them was Martin Feldstein, the conservative Harvard superstar who became the new president’s chief economic adviser—but only nominally, because Reagan ignored him. Feldstein actually hated deficits, as true conservatives did, and called his supply-side colleagues “extremists.” Stockman’s chief economist at the Office of Management and Budget—who left in 1983 to earn a fortune on Wall Street, then become a cocaine addict and TV pundit—said that Feldstein “has failed at making the transition from academic economist to political economist.” That was thirty-six-year-old Larry Kudlow, defining political economist to mean not an expert on political economics but an economist willing and eager to dissemble and lie to suit his political masters, thirty-five years before he returned to government work as Trump’s director of the National Economic Council.

In order to ensure that only states which had achieved monetary stability should participate in the euro, five ‘convergence criteria’ were established regarding rates of inflation and of interest; ceilings for budget deficits and for total public debt; and stability of exchange rates. Budget deficits, for example, were not to exceed 3 per cent of GDP and public debt was to be limited to 60 per cent of GDP, unless it was ‘sufficiently diminishing’ and approaching the limit ‘at a satisfactory pace’. Only states that had satisfied the criteria were to be allowed to participate; and once again, stages and a timetable were fixed, in order to give at least a minimum number of states the time to do so. Others

In 1956, Ike would end up signing the Colorado River Storage Project Act against his better judgment, and the budgets of both the Bureau and the Corps of Engineers would increase dramatically during his administration. In the lower Colorado Basin, however, Eisenhower had an excuse to do nothing. Until the Central Arizona Project was given final shape—and that couldn’t happen until the legal battle had ended and it was determined who had rights to what water—the river’s looming deficit would remain an inconsequential fact. Once

The variables which were apt for management by central authorities were interest rates and taxation, which he proposed that governments should adjust in order to stimulate investment and to seek full employment. However, he said little of emergency public works, and nothing about fiscal methods of demand management. He did not recommend increasing the government’s current expenditure by running a budget deficit to meet a deficiency of demand. He gave no encouragement to profligate finance ministers. He urged that additional government expenditure should be on capital account and financed from a separate capital budget while so far as possible the regular budget should be kept in balance. He suggested that full employment might be maintained by redistribution of income. If wealth was more equitably dispersed in the population, effective demand would be stimulated and would thus help capital growth. As the scarcity of capital diminished, investors would be rewarded less. He never believed that state planning would eliminate economic instability. He saw national economies as inherently wobbling: they were susceptible to rational management, but with irrational elements.73

So how do we take advantage of the potential benefits that a sovereign currency affords the people of our nation while at the same time guarding against the risk of overspending? You might be tempted to argue that we already have safeguards in place. The debt ceiling limit, the Byrd rule, and PAYGO might look like effective checks on overspending. They aren’t. And it’s not because it’s easy for Congress to get around the rules. It’s because under current budgeting procedures, Congress doesn’t have to consider inflation risk when it wants to spend more. Remember, it put the Federal Reserve in charge of price stability. So, members of Congress only ask whether new spending will increase the deficit, not inflation. That’s the wrong question.

Sticking with the $2 trillion infrastructure proposal, MMT would have us begin by asking if it would be safe for Congress to authorize $2 trillion in new spending without offsets. A careful analysis of the economy’s existing (and anticipated) slack would guide lawmakers in making that determination. If the CBO and other independent analysts concluded it would risk pushing inflation above some desired inflation rate, then lawmakers could begin to assemble a menu of options to identify the most effective ways to mitigate that risk. Perhaps one-third, one-half, or three-fourths of the spending would need to be offset. It’s also possible that none would require offsets. Or perhaps the economy is so close to its full employment potential that PAYGO is the right policy. The point is, Congress should work backward to arrive at the answer rather than beginning with the presumption that every new dollar of spending needs to be fully offset. That helps to protect us from unwarranted tax increases and undesired inflation. It also ensures that there is always a check on any new spending. The best way to fight inflation is before it happens. In one sense, we have gotten lucky. Congress routinely makes large fiscal commitments without pausing to evaluate inflation risks. It can add hundreds of billions of dollars to the defense budget or pass tax cuts that add trillions to the fiscal deficit over time, and for the most part, we come out unscathed—at least in terms of inflation. That’s because there’s normally enough slack to absorb bigger deficits. Although excess capacity has served as a sort of insurance policy against a Congress that ignores inflation risk, maintaining idle resources comes at a price. It depresses our collective well-being by depriving us of the array of things we could have enjoyed if we had put our resources to good use. MMT aims to change that. MMT is about harnessing the power of the public purse to build an economy that lives up to its full potential while maintaining appropriate checks on that power. No one would think of Spider-Man as a superhero if he refused to use his powers to protect and serve. With great power comes great responsibility. The power of the purse belongs to all of us. It is wielded by democratically elected members of Congress, but we should think of it as a power that exists to serve us all. Overspending is an abuse of power, but so is refusing to act when more can be done to elevate the human condition without risking inflation.

Second, the government’s budget isn’t supposed to balance. Our economy is.