I'm very sick of hearing these phrases, especially on this forum, where I've been utterly spoiled for most of my adult life by outstanding thinkers writing eloquently. Since I haven't really seen anybody else explode in a frothing internet rage at the use of the phrases in this thread's title, I'm going to.
The government is broke because that's really how it ought to be.
(A - The USA uses a fiat currency. This means that the USD is worth only what we're willing, as a culture, to exchange for it. It is not backed by any substance of value, aside from the idea that much of what we do should be compensated. My writing benefits society by offering distraction and information, and that's worth $x of milk, bread, and bandwidth, as determined by me and my boss.
(B - The Fed directly controls how much of our fiat currency is in circulation and how much is not. To control this, the Fed changes certain interest rates for the banks that borrow from them. The amount of money in circulation is constantly increasing. This isn't really a bad thing, barring a complete destabilization of people's faith in the currency and in society. Neither seems likely. Inflation has problems, sure, but so does having a "strong" dollar. When we could buy a carton of milk for 25 cents, it meant that our exports were outrageously expensive, and this was hellish for anyone who made a product to sell overseas (trouble finding buyers), or on markets outside of the US that wanted to buy American-made products (because, holy shit, if the beer is 25 cents USD a bottle, and the equivalent beer in France costs a E2.50 because of the difference in the strength of the currency, no one is going to import US beer.) and thus give us money.
(C - If the US government ran at a surplus right now, it would mean that we still had a bad economy, and that the government wasn't spending money to try to offset it.
(D - Most economists, people trained to think abstractly about the huge amounts of money needed to make our society function, don't say that running at a deficit is bad. They might say the deficit spending is stupid because it's being spent on X instead of Y, but they don't say that the government needs to stop spending.
(Dd Why? For the same reason that, when people start hoarding their money en masse, it plays hell on the economy. A stimulated economy is the result of people trusting the fiat currency enough to spend a fair portion of their income. If the government were to just take a machete and start slashing the budget, as people on this forum occasionally suggest, there would be social disorder on a scale that the US has not seen in centuries.
Twenty-somethings who can't go to college because they can't afford it, and the government won't help them, don't grow up to love the system. They grow up thinking about how nice it would be if the system rolled over and died in a fire. Thirty-somethings who can't get a loan to start their own business may very well hunker down, pull themselves up by the bootstraps, and eventually be able to afford their own company outright - but then when if their business fails, they didn't default on a loan, they defaulted on a life's worth of saving money. That doesn't make a happy citizen.
Government deficit spending is why there are not people with pitchforks and torches when our economy rolls into a recession.
(E - The problem with deficit spending isn't the debt. Debt makes the world go 'round when you have a fiat currency. The idea that we are socially obligated to pay back money we barrow is part of what makes it not all fall apart.
(Ee - When the government owes people money, it's OK. They can print more. (They can also collect taxes, but no one likes taxes, so our politicians tend to avoid imposing new ones.) The Fed deliberately increases or decreases the amount of money in circulation all the time. This isn't bad. The government represents the people, and the idea behind We the People. Since a fiat currency is only powered by the idea that the work of one specialist (say, a Fry Cook) is worth the work of another specialist (say, a famous musician), it doesn't really matter too much (because inflation can be a problem, just like having a strong currency can be a problem) if the government makes sure there's enough money in the system for everyone to safely raise and lower prices.
(F - The problem with deficit spending isn't that the government is spending money it doesn't have. It's the government. It's the source of money, because we told it to be. (That China, Japan, and other nations who might not have our best interests at heart own a portion of our debt is a problem, but that's beyond the scope of my rant.)
Think about the phrase, "spending money it doesn't have." Doesn't make any sense. Because that's not really what's going on. The government being in the red, and a restaurant being in the red are completely different animals. The government does not operate so that it can turn a profit. This is meaningless to an entity that can print money. The government operates (in part) so that turning a profit is meaningful to its citizens.
The problem is that deficit spending in an attempt to fix a bad economy needs to be focused on, well, the economy. People need to be able to borrow money. We've already covered why. The problem is that money needs to be spent in very specific ways to fix a bad economy. Economists have many, many opinions about where this money should go. That said, politicians control this, not economists. So wherever the money should go, it tends to go to companies that supported our representatives, senators, and governors in the last election. This is sometimes called “Pork.” A real attempt at fixing our economy would involve forcing politicians to attend an hour’s worth of lecture about how economy works every few days. (Side note: at the very least, economy majors would have a secure job.)
The issue of the national budget and national debt is significantly more complicated than “We’re out of money!” or “cut spending lol.” The government is not running out of money. It has not run out of money. Deficit isn’t the best gosh-darned thing on earth, but it isn’t innately horrible the way it is for individuals and businesses. Huge government debt is not an indicator of social horrors to come, unless our officials actually slashed the budget in the manner people often suggest. It’s an artifact of how our system works.
The government is broke because that's really how it ought to be.
(A - The USA uses a fiat currency. This means that the USD is worth only what we're willing, as a culture, to exchange for it. It is not backed by any substance of value, aside from the idea that much of what we do should be compensated. My writing benefits society by offering distraction and information, and that's worth $x of milk, bread, and bandwidth, as determined by me and my boss.
(B - The Fed directly controls how much of our fiat currency is in circulation and how much is not. To control this, the Fed changes certain interest rates for the banks that borrow from them. The amount of money in circulation is constantly increasing. This isn't really a bad thing, barring a complete destabilization of people's faith in the currency and in society. Neither seems likely. Inflation has problems, sure, but so does having a "strong" dollar. When we could buy a carton of milk for 25 cents, it meant that our exports were outrageously expensive, and this was hellish for anyone who made a product to sell overseas (trouble finding buyers), or on markets outside of the US that wanted to buy American-made products (because, holy shit, if the beer is 25 cents USD a bottle, and the equivalent beer in France costs a E2.50 because of the difference in the strength of the currency, no one is going to import US beer.) and thus give us money.
(C - If the US government ran at a surplus right now, it would mean that we still had a bad economy, and that the government wasn't spending money to try to offset it.
(D - Most economists, people trained to think abstractly about the huge amounts of money needed to make our society function, don't say that running at a deficit is bad. They might say the deficit spending is stupid because it's being spent on X instead of Y, but they don't say that the government needs to stop spending.
(Dd Why? For the same reason that, when people start hoarding their money en masse, it plays hell on the economy. A stimulated economy is the result of people trusting the fiat currency enough to spend a fair portion of their income. If the government were to just take a machete and start slashing the budget, as people on this forum occasionally suggest, there would be social disorder on a scale that the US has not seen in centuries.
Twenty-somethings who can't go to college because they can't afford it, and the government won't help them, don't grow up to love the system. They grow up thinking about how nice it would be if the system rolled over and died in a fire. Thirty-somethings who can't get a loan to start their own business may very well hunker down, pull themselves up by the bootstraps, and eventually be able to afford their own company outright - but then when if their business fails, they didn't default on a loan, they defaulted on a life's worth of saving money. That doesn't make a happy citizen.
Government deficit spending is why there are not people with pitchforks and torches when our economy rolls into a recession.
(E - The problem with deficit spending isn't the debt. Debt makes the world go 'round when you have a fiat currency. The idea that we are socially obligated to pay back money we barrow is part of what makes it not all fall apart.
(Ee - When the government owes people money, it's OK. They can print more. (They can also collect taxes, but no one likes taxes, so our politicians tend to avoid imposing new ones.) The Fed deliberately increases or decreases the amount of money in circulation all the time. This isn't bad. The government represents the people, and the idea behind We the People. Since a fiat currency is only powered by the idea that the work of one specialist (say, a Fry Cook) is worth the work of another specialist (say, a famous musician), it doesn't really matter too much (because inflation can be a problem, just like having a strong currency can be a problem) if the government makes sure there's enough money in the system for everyone to safely raise and lower prices.
(F - The problem with deficit spending isn't that the government is spending money it doesn't have. It's the government. It's the source of money, because we told it to be. (That China, Japan, and other nations who might not have our best interests at heart own a portion of our debt is a problem, but that's beyond the scope of my rant.)
Think about the phrase, "spending money it doesn't have." Doesn't make any sense. Because that's not really what's going on. The government being in the red, and a restaurant being in the red are completely different animals. The government does not operate so that it can turn a profit. This is meaningless to an entity that can print money. The government operates (in part) so that turning a profit is meaningful to its citizens.
The problem is that deficit spending in an attempt to fix a bad economy needs to be focused on, well, the economy. People need to be able to borrow money. We've already covered why. The problem is that money needs to be spent in very specific ways to fix a bad economy. Economists have many, many opinions about where this money should go. That said, politicians control this, not economists. So wherever the money should go, it tends to go to companies that supported our representatives, senators, and governors in the last election. This is sometimes called “Pork.” A real attempt at fixing our economy would involve forcing politicians to attend an hour’s worth of lecture about how economy works every few days. (Side note: at the very least, economy majors would have a secure job.)
The issue of the national budget and national debt is significantly more complicated than “We’re out of money!” or “cut spending lol.” The government is not running out of money. It has not run out of money. Deficit isn’t the best gosh-darned thing on earth, but it isn’t innately horrible the way it is for individuals and businesses. Huge government debt is not an indicator of social horrors to come, unless our officials actually slashed the budget in the manner people often suggest. It’s an artifact of how our system works.
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So am I.
