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We are ignorant because we enjoy being lied to. Today we look at lies about the US debt.

8 August 2011

Summary:  Much of public policy debate today consists of lies by the Right and rebuttals using simple facts, which have no effect.  It’s a losing game, as an emotionally appealing Big Lie usually wins if repeated frequently to a weak and foolish people.

Today’s example, from that engine of misinformation the Zero Hedge website:

While we reserve judgment for S&P’s effectiveness at being accurate in anything they do (they are, after all a rating agency and as such they goal seek results to comply with what their paying groupthink seeking customers demand), we would like to redirect to the modest topic of CBO predictive efficiency (the organization that is at the basis of the current credibility spat between Treasury and S&P, and which, incidentally has created the baseline forecast against which the debt ceiling compromise plan is supposed to cut $2.1 trillion over the next decade), by pointing out according to the same CBO back in 2001, net US indebtedness in 2011 would be negative $2.436 trillion, the ratio of debt held by the public to GDP would be 4.8%, total budget surplus would be $889 billion, and GDP would be $16.9 trillion.

Here is the graph they show, from page 16 of “The Budget and Economic Outlook: Fiscal Years 2002-2011“, Congressional Budget Office, January 2001

The Zero Hedge propagandists omit the core of the CBO’s analysis:

“Although there are signs that economic growth is moderating from recent robust levels, substantial budget surpluses remain on the horizon for the next decade in the absence of large changes in policy.  Over the longer term, however, budgetary pressures linked to the aging and retirement of the baby boom generation threaten to produce record deficits and unsustainable levels of Federal debt.”

Rather than foolishly wrong, this was prophetic.  The CBO analysts correctly anticipated the 2001 recession, which despite the effect of 9-11 was the lightest of the post-WWII era.  They put these events properly in context against the larger story of the age wave.  Most important are the words “in the absence of large changes in policy.”  They could not know about the insanity to come.

Such as the policy changes made by President Bush Jr., which have put the US on the road to financial ruin.

  • Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
  • Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)
  • Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (a fast trillion-dollar addition to Federal liabilities)
  • The long war to reshape the political fabric of the world, starting with the invasion and occupation of Iraq and Afghanistan (far larger than retaliatory strikes at al Qaeda and their allies)

These were, like the Reagan tax cuts, devastating strikes at the financial foundation of the US government — which the CBO could not foresee.  That Republicans now pretend concern about the debt is no surprise; that their claims are taken serious shows mental dysfunction by the American people.   That conservatives use this forecast to disparage CBO shows their mastery of the big lie through long practice.

For other posts on this topic

For the full list see the FM Reference Page Information & disinformation, the new media & the old.  Here are some of special interest.

  1. Successful propaganda as a characteristic of 21st century America, 1 February 2010
  2. More propaganda: the eco-fable of Easter Island, 4 February 2010
  3. The hidden history of the global warming crusade, 19 February 2010
  4. Forensic analysis of propaganda: “Michelle Obama Keeps Socialist Books in the White House”, 19 February 2010
  5. About the political significance of the conservatives’ health care propaganda, 23 March 2010
  6. A note about practical propaganda, 22 March 2010
  7. The similar delusions of America’s Left and Right show our common culture – and weakness, 26 March 2010
  8. Programs to reshape the American mind, run by the left and right, 2 August 2010
  9. The easy way to rule: leading a weak people by feeding them disinformation, 13 April 2011
  10. Why Conservatives are winning: they use the WMD of political debate, 28 April 2011
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4 Comments leave one →
  1. 8 August 2011 11:30 am

    This is all true and I thank you for stating it clearly but it sure isn’t a recipe for happy reading. Is there any light at the end of the tunnel other than the oncoming train?
    .
    .
    FM reply: It depends on the time horizon. This morning’s post, This might be the turning point in the global financial crisis, when bold action puts us on the road to recovery sketches our an optimistic scenario. I have little confidence in it, but it’s possible.

    Looking over the longer-term horizons will be a major focus of this site. The Second Republic of today looks worn-out. The Third Republic might easily be worse, or much worse. Per the annual Gallup poll, the only institutions in which we have much confidence are the military (78%) and police (56%). What does that suggest will become the foundation for our next political regime?

    Like

  2. Pluto permalink
    8 August 2011 11:34 am

    Perhaps Seydlitz89 is onto something in his post “Narratives . . . Or the Lack There of

    Like

  3. 1 December 2011 9:45 am

    Fabius Maximus !
    As much as i in between enjoy what You write .. as much I am also aware that You are BLINDED
    by Your USA Citicenship as well as Your basic Patriotism ! .That last is a POSITIVE QUALITY ..in my book .. but does NOT ensure that impartial information is neither PERCIEVED or DISSEMINATED. …THAT is how we HUMANS are ! ( Myself included )
    The USA has for many Decenniums borrowed approximately 75 % of all available Capital for borrowing ..in the WORLD .. .( They cannot have a competitor on that sceene ! ) It runs EXORBITANT Currency and Trade imbalances … in spite of a MASSIVE DEVALUATION of the DOLLAR .. because it cannot COMPETE .. thereby CHEATING ..both its own saving Public as well as the external world which has provided their SAVINGS as Lending Capital to the US …and also the people whos LABOUR lies behind the PRODUCTS they send to the US … for CONSUMPTION .. by the US citicens
    The US has almost NO FOREIGN CURRENCY RESERVES … due to its RESERVE CURRENCY STATUS ( contributing to approx 1-2 % of US GDP ) and have come into the habit to PAY with DOLLARS it just PRINTS .( And here it is where in reality the interest of the 1% Financial Sharks and the 99% of the US Citicens flow together … unspokenly .. … and all .even the most uneducated .. are aware of that Fact .. YOU too .. I am sure .. as i consider You an intelligent person … BUT … You cant admit that .. not even to Yourself ! ) ) As it is the US desperately needs to o continue to BORROW ( im not sure .. about the exact amount … something like 4 BILLION USD / DAY ! ) Charles dGaulle unmasked the US FRAUD . He was in my Youth in media portayed as almost a communist or something similar sinsiter ,, in the Anglosaxon dominated World media … I remember that clearly ! I am not per se ..anti American .. BUT I RESENT ..the RIP OFF which has been perpetraded by the US towards the World including EUROPE .. under the typical anglosaxon mask of HYPOCRACY …
    What is going on right now ..FINANCIALLY … is a US ( ANGLOSAXONIA ) which wants to be the sole consumer of all available Capital .. which wants at the same time to have an almost ZERO interest rate on its debt .. to maintain a constantly debasing of its currency as to improve its competitiveness on markets .. but deny that tool ..to others . Being Massively INDEBTED , running ENOURMOUS ACCOUNT DEFICITS .. DEBASING ITS CURRENCY , PAYING ALMOST NOTHING FOR BORROWED CAPITAL .. THE US WANTS TO BE THE WORLDS RESERVE CURRENCY .. because if it isnt .. it will be BANCRUPT ON THE SPOT !

    COME ON … HOW MUCH DO YOU THINK THE US WITH IMPUNITY CAN SHOWEL DOWN THE THROAT OF THE REMAING WORLD ?

    Like

    • 1 December 2011 2:29 pm

      I have written extensively about all of these things. The debt supercyle, the US dollar, the US debt, the deficits in the US trade and current accounts.

      This post focuses on one specific: the US Federal government debt. Before the current downturn — that is, looking at it on a long-term basis — the debt was largely a result of our wars, the Bush tax cuts, and the crazy-expensive US health care system. During the Clinton years the budget was balanced. The Bush tax cuts were deliberately designed to end the surpluses, creating deficits that would build pressure to “starve the government beast.” Like so many of the GOP’s brutal strategies, it worked!

      Looking ahead, the government’s future liabilities are mostly health-care.

      But we need not be so guillible. Despite the lies, all of these problems are easily fixable — compared to, for example, Europe. Their structural and demographic problems have no obvious solutions.

      As for the other issues you mention, see the posts discussing them at the FM Reference Page End of the post-WWII geopolitical regime.

      About the US dollar:

      I often see wild claims about the US dollar, as a favorite subject of conservative faux economics. This is off-topic, but there are two important facts to know.

      The trade-weighted value of the US dollar (ie, the value of most importance) is measured by the Fed (see here). It is 100.13 as of Nov 23. It fluctuates, like most economic values (interest rates, commodity prices, etc). It was 100 in January 1997, at the start of the recession in November 2007, September 2008, November 2009, and January 2010.

      No sign of the “debasing” conservatives mutter about. It was 116 at Bush Jr’s inauguration, and 109 at Obama’s inauguration.

      More importantly, the value of the US dollar is too high — sapping competitiveness of US goods and services, making imports too cheap. The British demonstrated the damage this causes. In 1924 Churchill restored the British pound to its pre-war parity of $4.86, thereby re-establishing the gold standard in Britain, paving the way for a general restoration of the international gold standard after WWI. This trashed their exports, initiating a cycle of economic weakness — and a weak pound — that lasted until balance was finally restored in the late 1970s

      Like

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