Deficits Matter?

Posted on 12/14/2010. Filed under: Uncategorized |

The PushBack story portrays deficits as the culprit behind the collapse of the United States Government.

Vice President Chenny has been quoted as saying “Deficits don’t matter,” when deficits soared as a result of tax cuts and two wars.

When going to college I took an economics class as one of my recommended elective non-engineering courses. A young professor with a lot of energy and enthusiasm taught the class and I enjoyed the experience. I do remember one thing he said in one of his lectures with regards to federal deficits. Deficits weren’t anything like they are now, but they were a concern to many people. The young professor stated that the deficits don’t matter, but with a caveat. He said “Deficits don’t matter if they are owned by the nation’s citizens, in which case the government becomes a storage facility for the nation’s savings.” During World War II the United States government consumed a big portion of the entire GNP and paid for it by borrowing money from its citizens. Everybody was working overtime and they had money but there  were very few opportunities to spend it. People were encouraged to buy war bonds and they did. Even school children were given stamp books, which when filled could buy a $25 war bond. When the war ended, all these citizen investors cashed in their bonds and it became a stimulus that helped drive the nation’s prosperity after World War II. I cashed mine in and bought the first new car I ever owned,  a 1953 Plymouth.

Deficits do matter when owned by foreigners. A government loses control of its finances if it borrows money from foreigners to pay its bills and exposes its citizens to unpredictable risks and dangers.

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One Response to “Deficits Matter?”

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Both political parties came away from the 2010 elections declaring that deficit spending had to be and would be reigned in. The next thing they did was extend the Bush tax cuts for two years, extend unemployment benefits, suspend FICA payments for a year and cut taxes on money spent for capital equipment, adding many billions to the federal deficit.
This is the kind of thing that makes the PushBack story seem possible.


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