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Posts Tagged ‘United States public debt’

The members and the congress people of the Tea Party were quite happy to destroy the Bill Clinton surpluses by creating the George W. Bush federal deficits, but nowadays they’re mad at President Obama for presiding over the federal deficit they created. Perhaps the Koch Brothers, creators of the Tea Party, are angry because the money the government borrows to cover the deficit isn’t going to the corporate welfare that goes into their pockets. Who knows?

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Much of the federal government has shut down and unlike the 1996 version, it may drag on and become a protracted affair. Then, in two and a half weeks, the government will hit the debt ceiling, and the GOP’s tea party faction is preparing to make…
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Back in 2009 and 2010, we were told the yearly US debt was too high, that if the total US debt went over 90 percent of yearly GNP, it would inhibit economic growth, increase interest rates, and lower GNP and job growth by 2 percent. All of these claims were the opposite of what history shows us. These claims ignored decades of Economic 101 teaching and practice. The people mass producing these lies knew this.

A new study by University of Michigan economists Mile Kimball and Yichuan Wang shows that sequestration, (the term used for automatic cuts to the yearly deficit via a deal reached between Republicans and our dumb-dumb president who apparently didn’t realize the Republicans were trying to use deficit cutting as a weapon to reduce job growth and sabotage the economy so that Mitt Romney could win the presidency in 2012), has reduced GNP growth by 2 percent per year.

If the debt had been run up, the economy would be stronger, albeit still historically weak. As far as interest rates, they’re still at or near historic lows. In fact, the US spends about the same amount of its tax dollars on paying the national interest (as a percentage of GNP) as it did under President Ronald Reagan, about 3.25 percent. That’s because interest rates are so low.

Interest rates and not the debt is the real issue, a fact conveniently ignored by the corporate propaganda machines, erroneously called the corporate media. That’s because the US debt is a revolving debt. The US Treasury Department sells bonds to cover the yearly deficit. Whenever the bonds come due, the government sells more bonds to pay up, but it uses tax dollars to pay the interest due on the bonds.

Sequestration has inhibited job growth for the 99 percent, reduced demand, weakened the economy, created mass suffering, and all for political gains on behalf of the 1 percent and Wall Street.

During this Sequestration period, real interest rates have been negative at times. In other words, the governmennt has been paying 1 percent interest or less on its debt, but the inflation rate has been 1 to 3 percent, and the real effect has been negative percent interest. That means heavy deficit spending could have accomplished massive works projects on roads, bridges and rails on the cheap, all to the benefit of the 99 percent. 

So why would President Obama agree to this stupidity?

According to a recent story in Mother Jones, Wall Street and the 1 percent benefit from Sequestration by keeping unemployment high and wages down. Goldman Sachs has been Obama’s biggest campaign contributor over the last two election cycles. The rest of Wall Street and many big corporations whose stocks and bonds trade on various financial markets benefit from this in the same way.

In other words, Sequestion is another way of rigging the game to ensure income and wealth is transferred from the 99 to the 1 percent.

 

 

 

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