Friday, May 21, 2021

Does debt no longer matter? Why collect taxes at all? Remember when Jim Cooper was a budget hawk?

by Rod Williams - Many Republicans forgot all about the concern with cutting spending when it was not a priority with Donald Trump.  They did not say, "Hold on, what about the deficit," when Trump proposed new spending or a major tax cut that would not pay for itself. Republicans lost the moral authority to be outraged at Biden's reckless spending because they supported reckless spending under Trump.  Not that Trump's ballooning of the deficit was anywhere near as great as Biden's, but Republican outrage now seems selective. I guess that is why we are not hearing a lot of outgaged Republicans.

Remember that Donald Trump wanted the Federal Government to send every American $2000, in pandemic stimulus money, no questions asked?  This makes it more difficult for Republicans now to argue for austerity and balanced budgets.

And Democrats?  They have been big spenders forever.  However, there were, at one time a few Dems who cared about the deficit.  It is hard to believe it now, but at one time our own congressman, Jim Cooper, was a budget hawk.  He even kept a national debt clock in his office.  In 2009 he opposed the Obama stimulus package.  

As recent as 2009 Cooper wanted us to know that the President’s budget, and the subsequent Congressional budget, is based on "cash accounting" which ignores future commitments to retirees, the sick and the disabled. The path we’re on, said Cooper is “unsustainable,” and could even threaten our national security. He warned that the large federal debt forces our government to borrow large amounts of money from other nations to continue functioning. “We are the richest nation on earth, yet we have to borrow $1 billion every day from foreigners just to get by,” he said.

Well, what happened to that Jim Cooper?  Cooper now has endorsed Medicare for all and the Green New Deal.  This amounts to trillions in new spending with no means to pay for it.  Cooper no longer talks about the danger of deficit spending and the need for balanced budgets.  The National Debt Clock is no longer in his office.  Maybe Cooper has become a convert to Modern Monetarty Theory.  Or, maybe his desire to withstand a challenge from his left flank causes him to abandon his values. 

Democrats now have an intellectual fig leaf to cover their desire to spend whatever it takes to achieve their goals and the deficit be damned. That is Modern Monetary Theory.

MMT argues that government can spend all it wants because it can always create more money to pay off the debts. The theory suggests government spending can grow the economy to its full capacity, enrich the private sector, eliminate unemployment, and finance major programs such as universal healthcare, free college tuition, and green energy. If the spending generates a government deficit, this isn't a problem. The government's deficit is by definition the private sector's surplus. Increased government spending will not generate inflation as long as there is unused economic capacity or unemployed labor. 

This magic thinking with a sprinkle of fairy dust can justify unlimited government growth and spending.  I am not sure why we need to collect taxes at all if there is no downside to just creating all the money the government needs.  I can only assume the reason for taxes is redistribution to equalize wealth. 

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