*July 7, 2011, Washington Post, Lori Montgomery: " . . . defuse the biggest budgetary time bombs that are set to explode as the cost of health care rises and the nation's population ages.
There is no predictable relationship between federal deficits vs. inflation and or interest rates. None.
If the debt is a time bomb, it surely has the slowest fuse in history. The pundits (CBO, Congress, Administration experts) have been wrong, wrong, wrong, all these years. We should understand federal deficits, even large federal deficits, have not caused inflation or any other negative economic effect, and the debt is not a ticking time bomb? It's an economic necessity. Let us turn away from faith and start to rely on facts. The faith healers* are killing our economy by restricting money growth.
*Faith is belief without evidence. Science is a belief from evidence.
Source: https://goo.gl/I8CxH0
MacGuineas' fundamental ignorance of post-gold standard fiscal and monetary policy implications renders her entire discussion on debt and deficits laughable.
Nonetheless, to further prove that point in her second assertion, (2) above, MacGuineas decries growth in deficit spending revealing an astounding lack of familiarity with simple accounting identities. To wit, wherever there's a deficit there's a surplus. In any economy when the currency sovereign (the public sector) deficit-spends, that spending is equal to the penny to net savings/surplus in the private sector. This is indisputable. In the absence of deficit spending net private sector savings dry up, and private sector commercial debt increases to its limits, after that, the economy falls into stagnation and eventually a recession. See the graph below and when recessions occur.
MacGuineas only needs to read a bit about sectoral financial balances to disabuse herself of her long held wrongheaded notions about deficit spending.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
3
2
2
