Sunday, December 5, 2010

Inadvertent Insights from the Wall Street Journal

Hook, Janet 2010. "Tax-Cut Vote Shows Democratic Divide: House Passes Extension Excluding Higher Incomes, a Largely Symbolic Effort Reflecting Unhappiness With White House." Wall Street Journal (3 December): p. A 5

Are we to believe that giving tax breaks to the super-rich will do wonders for the economy or that the people are clamoring to give aid to those worthies.

What about this Democratic divide? That only a few right-wing Democrats remain in the House; that the remaining Democrats generally oppose Obama and yet get elected. Their vote was largely symbolic because most of them know that Obama will cave and they can get credit for supporting the little guys who make less than a quarter million dollars a year. Then they can go about cutting benefits for the real little guys.

Question of the day: What is the most courageous decision that any politician today has been willing to take?


Martin Langeland said...

To cash the check from "K" street ?

Unknown said...

you could probably select from a long list of statements made by Bernie Sanders. But the most courageous position ever taken will be the full support of QE2 and the acknowledgement that the US government can never go broke in the traditional sense of that term. QE2 is an absolute reality that tells us that borrowing in not necessary and that the national debt is not the sum of the yearly deficits since the beginning of the nation. All the politicians are going to have to suck up a huge dose of reality and honesty.

The Fed will be "paying off" six hundred billion of the national debt using US money authorized by the US government. This does not really change the quantity of US money in the world. It merely changes the balance between the impounded interest bearing money and non interest bearing, highly liquid federal reserve notes. The only way to diminish the amount of money is to tax it out of the economy and destroy it. US money is created by government spending and destroyed by taxation.

It will be interesting to see how this QE2 transaction is accounted regarding the current year's deficit and the impact on the national debt. It occurs to me that the debt ceiling may not need to be increased. The Republicans may be creating yet another straw man. They may find themselves embarrassed. They will claim that government spending in the course of fiscal 2011 will have reached the point at which the debt ceiling will need to be raised. But that does not take into account, the repurchase of debt by the FED.