Balanced budget

Picture of Rudy Giuliani

Picture of Rudy Giuliani (Photo credit: Wikipedia)

Yesterday on FOX, Rudy Giuliani stated the standard GOP policy line that families, cities and states must balance their budgets and thus the Federal government must balance its budget too. That is a false analogy. Cities and states must balance their budgets by law, and they cannot issue their own currency. Sovereign nations outside the European Union can and do issue their own currencies and thus need not balance their budgets annually. Rudy was being deliberately obtuse or he is economically illiterate. Perhaps as a former mayor of New York City, he is not familiar with budgeting at the Federal level.

It is true that families and the Federal government must balance their budgets or generate a surplus to pay down debt over the intermediate to long-term, but it is not true that both families and the Federal government must balance their budgets annually. Families and the Federal government can and should go into debt when circumstances so require. Families are prohibited from issuing their own currency (counterfeiting), but the Federal government can and should act to counter recessions by stimulating the economy. In the past, the Federal government has helped cities and states maintain employment during recessions. In the current Great Recession, the GOP in Congress have opposed stimulating the economy sufficiently and they have opposed helping cities and states to maintain local employment. In my opinion, the GOP wants a sluggish economy for political reasons.

Please see I accuse

Debt and deficits

The red "GOP" logo used by the party...

The red “GOP” logo used by the party for its website (Photo credit: Wikipedia)

What do debt, as in national debt, and deficits have in common, besides both beginning with the letters “DE?” I think that many Americans are confused about the difference and the media and the GOP are doing nothing to clarify the difference. If the Federal government spends more than it takes in in revenue, the difference is a deficit and that adds to the national debt, which we owe mostly to ourselves. The only way to reduce the national debt is to take in more revenue than we spend as a nation, run a surplus in other words.

The best way to reduce deficits and thereby reduce the national debt is to stimulate the economy to produce more jobs and thereby more tax revenue. Austerity does not work, just ask the European nations who have tried it since the crash of 2007, England, Ireland, Portugal, Spain, Italy and Greece. The nations of the Common Market, European Union, that embraced austerity as a solution did so at the urging of German bankers who wanted their loans repaid in full. Now Germany is finding that austerity by its customers reduces its ability to sell German products and that hurts Germany itself.

Here in the US, the GOP are selling austerity because some of the most conservative among them believe that it is morally the correct solution. In other words, don’t help the less fortunate among us because their misfortune is their own fault. They chose to be born to poor parents or they decided to be poor in New Orleans or they decided to live along the New Jersey shore and should have been better prepared for a hurricane. They are the true believers.

Those members of the GOP who are not true believers, but are more politically motivated, are selling austerity as a solution to the nation’s problems because it will only hurt the 99%, not themselves or the 1%. They believe that another 2 or 4 years of economic pain will cause American voters to turn to the GOP for relief. In other words, they expect voters to reward them for all the grief that they have caused or will continue to cause if we let them. And the corporate media are shirking their responsibility under the Constitution to inform the electorate. Shame on them.

Nightmare

Mitt Romney, former governor of Massachusetts,...

Mitt Romney, former governor of Massachusetts, 2008 US presidential candidate. (Photo credit: Wikipedia)

Last night I dreamed that Mitt Romney was President.

As President, Mitt really has no domestic agenda. I believe that he will sign into law anything that a Republican Congress may pass. Of course, that will include the repeal of Romneycare. Whoops, I mean Obamacare. All of us, except the 1% can look forward to austerity leading to the Great Depression 2.

I am more concerned with Romney as commander-in-chief. Some of his advisers are the same people who gave us Iraq and are now advocating military action against Iran. Iran will not be the pushover, militarily, that Iraq was. If Iran closes the Strait of Hormuz, the world economy will grind to a halt. The only button I want Mitt’s finger on is the buttons on a TV remote in one of his many homes.

Really scared myself with that dream. I hope that it never becomes reality because a Romney presidency would be a true nightmare.

Please see Strait of Hormuz |  Strait of Hormuz part 2 |  Strait of Hormuz part 3

 

Greece

English: (Green) Greece. (Light-green) The Eur...

English: (Green) Greece. (Light-green) The European Union (EU). (Grey) Europe. (Light-grey) The surrounding region. See also: Category:SVG locator maps of countries of Europe (Photo credit: Wikipedia)

Greece will be voting again on Sunday June 17, 2012. Depending upon the outcome, it is possible that Greece will abandon the Euro and enforced austerity. It may be bad for the rest of Europe and the US, but it may be good for the people of Greece. Iceland let its banks go bust and now Iceland is recovering nicely. Greece got into trouble by borrowing more than it could repay from big, Wall Street banks. Greeks also have a history of tax avoidance which is not unique to Greece, but probably more endemic there. I will await Sunday’s results with bated breath. I wish the Greek people well.

Please see Excellent article | Paul Krugman

Boomerang

The logo of Boomerang in Latin America.

Image via Wikipedia

Boomerang, Travels in the New Third World by Michael Lewis, the author of Liar’s Poker and Moneyball, recently made into a film starring Brad Pitt. This slender volume is an eminently readable tale of how the Great Recession is affecting five different countries: Iceland, Greece, Ireland, Germany and the US. His  thesis  is that different cultures react differently to the shock of economic disaster.

If people are given the opportunity to live beyond their means, most people will do so. Almost everyone in Greece is corrupt; no one pays their lawful taxes. All 300 members of the Greek Parliament cheat on their taxes. To expect Greece to change its customs now when facing national default is too optimistic. And a Greek default could bring down the Euro affecting the US adversely.

Germans live by the rules, and it will be up to Germany, the financially strongest country in the European Union to bail out the rest of the members of the European Union who may need help. Iceland went bankrupt because it thought that its banks could outsmart the big banks of London and New York who had both more assets and more experience. Ireland went mad with construction of commercial and residential structures for which there was no foreseeable demand.

Here in the US, our ties to one another have become frayed. Instead of looking out for one another, it has become a game of grab all you can while you can before someone else does. We need to watch out for each other and cooperate in this time of need if we are going to survive the Great Recession, which shows no sign of ending and is likely to worsen.

On the steps of a fire-bombed bank in Athens, Lewis saw a sign quoting an ancient Greek orator named Isocrates who lived from 436 BCE to 338 BCE: “Democracy destroys itself because it abuses its right to freedom and equality. Because it teaches its citizens to consider audacity as a right, lawlessness as a freedom, abrasive speech as equality, and anarchy as progress.” True then–true today.

Please see Great Depression 2