1. Financial Wealth loses its significance when valuable and expensive services like pensions, health care, and education are provided through collective institutions. Federal pension systems, state colleges, and government health insurance greatly reduce the exposure of ordinary people to financial risks. Costs that are overly burdensome and unpredictable for an individual or family, like those associated with raising a child, treating chronic illness, or outliving one’s savings, are instead dispersed across the population.
2. Health care fails on numerous counts: a. Patients lack pertinent information about appropriate medical care b. Patients can not opt out of their health care policy when then interest are not being served. c. Patients cannot afford health care. Many middle class workers go broke paying large deductibles and expensive coverage policies. d. The health care business does not face competition for the market share. Foreign companies cannot setup business and compete for patients. The diversity and numbers of health care production is not stepping up as health care prices climb. There are a limited number of medical schools and not enough medical personnel and schools limit enrollment; as a result, the pool of licensed providers is constrained; medical personnel wages rise, resulting from increasing demand and specialization. As a result, health care has become excessively expensive, the quality poor, and the variety of provides minimal. “Health care in the United States was long provided by independent physicians, bound by professional code of ethics, and by public or not-for-profit hospitals and insurers. For profit chains began buying into the health care system in the 1990s, but suspicions about their motives fueled intense public dissatisfaction with the US health system and recent studies confirm that they offer inferior care.” 77 percent of Americans believe the government should spend more on health care; 88 percent want medicare to pay for prescription drugs; and two in three want more money spent on mental health.
3. http://zfacts.com/p/461.html, National Debt clocks, $9.3 trillion, 2008. “Debts of the federal government differ entirely from personal debts; they do not need to be repaid, are not claims on the incomes of ordinary families, and will not plague future generations.” When the government runs a deficit in its annual budget, spending more than it collects in tax revenues- it closes the gap by selling T-Bond to banks, insurance companies, pension funds, and mutual funds (this group also controls 70 percent of the wealth in the stock market). The group invests it’s cash and buys government debt in exchange for regular interest income, $9.3 trillion dollars worth. $600 billion in notes is held by the fed to back the US money supply; the Treasury extends a loan to the Fed for $600 billion; the fed uses the loan money to create more money; the fed money is sold to banks and they use the new money like a collateral asset that can be leverage to create new loans; the loans charge a premium for usage and the banks profit from the interest; consumers feel safe because their bank monies are protected by Fed insurance; Banks appreciate savings because they are loaned for interest payments returning a minimal payment back to the saver. How does the fed pay the interest payments on the notes? “The treasury roles them over an selling freshly issued notes to new buyers and using the cash to repay the maturing debt.”
4. Repaying federal debt is unpalatable. Bondholders are not clamoring for debt repayment. “If fact, without US Treasury bonds to invest in, banks, insurance firms, pension fund trustees, and other financial managers would lose their safest and most negotiable financial asset.” “The fed would lose its ability to introduce money cheaply into the banking system.” “Retirees would lose their best alternative to putting savings in the unpredictable stock market.” Repayment of debt would probably make the stock market more volatile. The Treasury would need to collect additional taxes and transfer more money to the richest 1 percent that hold 50 percent of the bonds. Debt repayment might trigger an economic depression, as individuals and companies curb spending. Depression was characterized as loses in savings, asset price plunge, defaults on loans, credit drought, rising unemployment, 50 percent mortgage foreclosure, and reduced spending.
5. The rich dislike Keynesian economics with a passion. Keynesian economics leads to high taxes for the rich, excessive government spending (10 fold during the Great Depression), and government work projects. “Putting people to work required governments to run deficits and pile up debts.” The debts were a loan to the public. The public loan did not exceed $4 billion. Instead, it set a precedent that public debt did not have to be paid for immediately by taxation. Taxation was a barrier to curb spending, reduce debt, and return the system back into balance with budgets. The ten fold spending moved the US economy from deep depression to boom, swelling the deficit to $47 billion by 1944, a six-fold increase in debt. Before the 1930, the US government had faithfully matched spending to tax receipts each year unless the nation was at war. “After the New Deal, fiscal deficits became a fixture of federal budgeting. The treasuring ran deficits from 1934, until WWII, accumulating a 1946, public debt of 120 percent of GDP.
6. Social Security, Medicaid, Medicare, food stamps, child nutrition programs, and plethora of welfare programs create entitlements and commit government to increased spending during economic downturns, regardless of the impact on the deficit. “The government entitlements provide a bedrock level of federal spending in lean years as well as a minimal guarantee income to prevent wages from plummeting into recession.” Keynesians warned that deficits promote growth and surplus promotes recession.
7. Statistical studies find a weak or no correlation between deficit spending and interest rates. If crowding out for national savings were a problem, it would happen with or without a deficit. The US Government borrows all the time and under any interest rate condition. In the 1990s when Clinton cut the US deficit, the Fed doubles the short interest rate and “any notion of any link between deficit cutting and interest rate reduction was decisively nullified.”
8. Concerns that deficits cause inflation are a myth. If workers are unemployed and factories idle, public programs can only benefit the economy.
9. A serious objection to deficit spending is that debt raises interest rate obligations to lenders; interest payments becoming an ever rising share of the federal budget. “Interest rate commitments will not crowd out federal programs except for the fact antigovernment conservative attempt to set artificial caps on the level of federal spending.” Rising interest payment distribute more money to the rich; risk reward for holding so much of the national debt.
10. Reagan urged Congress to pass three tax cuts for the highest earners: 70 percent in 1980 to 28 percent by 1986. The deficit swelled from $74 billion to $221 billion. Bush raised the rate to 31 percent. By 1992, the government was borrowing $290 billion per year. “Deficits would never have happened without tax cuts, that if Congress was unwilling to tax the well-heeled, there was nothing to prevent it from borrowing their money, that deficit hysteria always centered, ultimately, on programs that redistributed the nations income and ameliorated income disparities was labeled fiscally irresponsible.”
11. 1990s economic surplus was caused by Japanese foreign investment see “Dollar demise”. In 2008, the economy remains robust due to Chinese products and services, see “Real Cost of War” and “The Price of Democracy”. And “Wealth and Democracy”. “Clinton attributed the strong economy and roaring stock market to tough spending caps and fiscal restraint and pledged further fiscal austerity.”