badgenome said:
It's a bit strange how fretful people are about this sort of far-fetched scenario when we're flying down the tracks at breakneck speed in the exact opposite direction. At this rate, if Social Security and Medicare do die, it won't be because some cabal of Ayn Rand enthusiasts yanked the rug out from under us. It will be because a spendthrift government blew all the money we have, and will ever have. As Paul Ryan was a big TARP supporter, I can only wish he was half as extreme as he's made out to be. |
Blew all our money?
I'll start by copying a portion of a response I made in another thread:
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Japan does have the highest debt-to-GDP ratio in the first world at 208%. But guess what, it doesn't matter. They're showing no signs of default, and they've been dealing with deflation more than inflation over the past several years. Japan is the perfect example of why total public debt is a non-issue for a nation that prints its own currency. The primary thing that matters is how much total currency (total spending power) effects inflation/deflation. When it comes to our own spending, we technically don't even have to issue debt to spend more than we take in in tax, and $1.6 trillion (42%) of the government's debt is owed to itself. "Going broke" is not something we have to worry about. |
We can't "[blow] all the money we have". What we can do is spend so much money that we eventually cause significant inflation, but that's not happening right now, and given our still relatively high unemployement, we shouldn't fear inflation as a result of deficit spending. The axiom "too much money chasing too few goods" will not be an issue anytime in the near future, unless we start handing out $10000 checks to everybody or something. When the economy really starts to hit its stride, that's when we should be worried about inflation, and it can then be prevented by a mix of tax hikes and decreased spending.
Also, I find it amusing that people worry about Medicare and Social Security going broke, as opposed to any other area of government, and it all falls back to the Congress' silly decision to tie SS to the payroll tax, instead of just increasing income taxes. Even with the program's current design, elected officials could easily continue funding SS even if "the money has run out", either by deficit spending or taking the money from elsewhere.
And it seems Paul Ryan was on board TARP at first. That's a side of him I hadn't known until now.
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Under Modern Monetary Theory, the general idea is that taxes aren't used to directly fund spending. Taxes are destroying currency, while spending is creating currency. A government determines what services and projects it wishes to fund (defense, social security, infrastructure projects, maybe healthcare, etc.), and it does so regardless of revenue. Taxes are then used to control inflation/deflation (as well as related factors like income inequality), with tax cuts taking place in times of low aggregate demand to spur economic activity, and tax hikes when aggregate demand gets too high in order to prevent significant inflation. The amount of money taken out of the economy through taxation never has to equal the amount put into the economy through spending. It's a meaningless equivalency that doesn't actually effect anything. All that matters is that we're removing enough currency from the economy via taxes to prevent too much inflation.
A fiat currency gives us an incredible ability to maximize economic growth, we just have to start utilizing it to its fullest potential and stop pretending like our currency is still tied to some other, limited metric.
