Progressives will never win the political battle over Republicans as long as we play the game under their paradigm. Here is the relevant quote from Rand Paul:
"If you don't raise your debt ceiling, all you're saying is, 'We're going to be balancing our budget.' So if you put it in those terms, all these scary terms of, 'Oh my goodness, the world's going to end' — if we balance the budget, the world's going to end? Why don't we spend what comes in?" "If you propose it that way," he said of not raising the debt limit, "the American public will say that sounds like a pretty reasonable idea."
Bingo!!!
Because of decades of flat out lying to the American public by both Democrats and Republicans, the vast majority of Americans think that the deficit is bad. That we are in debt as a nation and that our children will suffer because of said debt. If all you ever hear is the comparison between your personal budget and the Federal Govt's budget, you would be absolutely right to think that too much debt was bad. And that there really is no way to spend more than your income year after year. So it should be no surprise that one recent poll (I have seen more than just this one before, but its not necessary to post them since this one is indicative of all the rest), showed that Americans favor shrinking the deficit in tandem with raising the "debt" limit by a margin of 38 points, 61% to only 28%.
http://www.bloomberg.com/...
This is a mind rending level of ignorance. But I maintain that given how many times the media and politicians have lied about this subject, its a perfectly rational view to hold. I mean, the nightmare of misinformation is all around us. It can't be avoided. Here is the President just yesterday lying to the American people, something by the way that many on the left cheered because he was finally "getting tough" on Republicans:
Q: Mr. President, you talked about the political dynamic that leaves House Republicans feeling that they don't want to negotiate with you, they don't want to come together. I wanted to ask you two things about that. Looking back at the 2011 default discussions and the budget drama, is there anything that you wish that you had done differently in 2011? And after this -- what you call this nonsense has ended, what do you expect the political dynamics might -- how will they have changed to move forward?
PRESIDENT OBAMA: Well, I think it's an interesting question. In 2011, I entered into good faith negotiations with John Boehner.
He had just won the speakership. It was at a time when because we were still responding to the recession, deficits were high, people were concerned about it and I thought it was my obligation to meet him halfway, and so we had a whole series of talks. And at that point, at least, nobody had any belief that people would come close to potential default. I don't regret having entered into those negotiations, and we came fairly close. And whenever I see John Boehner to this day, I still say, you should have taken the deal that I offered you back then, which would have dealt with our long-term deficit problems, would not have impeded growth as much, would have really boosted confidence.
How can you win the political battle when you are basing your entire economic program off of something that is completely inapplicable? The mere phrase "long-term deficit problem" automatically guarantees that you are acceding to the Republican logic. Namely, that because the Govt must either tax or borrow in order to get ITS OWN FREAKING FIAT MONEY, just like you or I; we must do something about this bad deficit. Nothing could be further from the truth. Where do people think the US dollar comes from anyway? Why can't people ever ask this simple question? Surely, people most assume that there are more US Dollars in circulation today with 330 million people than there were back when we had only 100 million citizens. The US dollar is a creation of the US Congress. It doesn't exist in nature, its a man-made invention. And as such, its literally impossible to ever run out of our own national currency. This is so obvious to the few of us that actually understand fiat monetary operations in the Modern Monetary Theory community that its like a bad dream. Listening to regular people vote to either cut their own pay through tax increases or reduce their own incomes through Govt spending cuts for what? To save some more fiat money? As if that were even possible for the issuer. Does the NY subway system need to save its transit tokens in fear of them running out of the thing that only they can legally create? Its completely illogical.
An actual tough response by the President would be to tell the American people the truth, that the Govt's deficit is nothing more than the difference between the amount of new money that Govt creates and adds to the economy through spending and the amount of existing US dollars it extracts from the economy through taxation. This is the only way to win the political argument in the long term. That the deficit is an unequivocally good thing for the private economy. And in fact, if i weren't for the $800 billion in free dollars that the Govt gave us this year, the economy would have contracted by more than 5% ($15 trillion * 1%) x 5. If he framed the argument in this accurate way, the entire rationale for the Republican obsession would fall apart. Then they would have to justify their desire to hurt middle and working class Americans by cutting helpful Govt programs not by a mythical debt monster, but because they simply don't think the Govt should help people. In other words, without the deficit hysteria, the entire logic of cutting SS or medicare would disappear. This is the only way to defeat Republican and conservative doctrine once and for all. As for President Obama and Congress always opining about how much they want to help the economy and create jobs consider this.
GDP is Govt spending + Non-Govt spending +Net Exports
There is no way to grow the economy without growing spending. And if the Non-Govt can't spend enough to get us to full employment the only fiscally responsible thing for the Govt to do is to spend enough of its own free fiat money through the deficit (either FICA tax cuts or spending increases), to get the economy back to full employment. And this is the true danger of not raising the debt ceiling, we would be cutting 5% of our economy cold turkey. And that would bring on a recession equal to 2008. People are worried about T-bonds, sure the markets would be unhappy, but T-bonds are functionally nothing more than savings accounts at the Federal Reserve Bank. Its not like people would lose their savings. Those accounting notations on the Federal Reserve's spreadsheet would never go anywhere. The real problem would be the balanced budget for not just us but the entire world. The economy needs the free money that the deficit provides, we'd drown without it. And that is what everyone gets wrong about the US T-bond limit.
MMT = Reality