TheLateHarambe wrote:Trump’s Budget A First Step Toward De-Politicizing Science
The GOP talent for Orwellian nomenclature is striking. De-politicizing, indeed. But let's ignore that and look at that 800 lb gorilla. You know the one I'm talking about, right? The purple polka-dot invisible gorilla that scares the bejesus out of the rubes:
"The budget also ignores America’s web of entitlement programs, the larger driver of the nation’s fiscal woes."
The 'fiscal woes' of the US are entirely imaginary and a self-inflicted response to a non-existent problem. Let's examine some of the salient features of a sovereign non-pegged currency that issues debt denominated in that currency:
1) The budget 'deficit' is an artificial construct. The government spends money into existence ex nihilo. There are no unfunded mandates, deficits, or anything of the sort. Taxes do not go into a kitty, from which the government spends - this is not how monetary operations are handled.
2) The taxing and spending functions of government are operationally independent, and the second does not depend on the first. When you pay your taxes, that money is simply annihilated (it is literally burned if you pay in cash). Your taxes contribute to decimals in an accounting function, but there is no actual fund in which they are placed.
3) Taxes do serve a number of functions, but funding of government spending is not one of them.
4) Likewise, 'deficits' do not exist. You cannot subtract apples from oranges. By tradition and current legal arrangements, the US issues debt to "offset" spending in excess of it tax revenues. This is a totally artificial arrangement. There is no operational requirement to issue this debt.
So at this point, somebody will say "I suppose you can just spend all you want, then?" Well, actually, no you can't. There are constraints on spending; they are just not the constraints you believe them to be.
Here's how it would work, if both Republicans and Democrats had a rational understanding of the money system.
Keep spending without limit, as long as there is unemployment and industrial overcapacity. As soon as employment picks up, people will start buying. Inventories will shrink. The pool of unemployed will shrink. Businesses will have to raise wages, and eventually prices.
When price inflation reaches x percent, reduce spending and/or raise taxes. The Fed will raise the cost of money. Economic activity slows down.
The key is balance, but budgets are not what needs to be balanced. You are balancing flows: flows of money.
The debt 'problem' is absurdly simple to solve. We need to issue only the amount of debt required to satisfy private demand for saving and investment, irrespective of imaginary measures of budget deficit. Government spending is then rationally balanced with economic requirements, not artificial budget constraints.
There are questions about what you spend money on, as well. Certain types of spending are more effective than others in circulating into the economy quickly. But that's another question.
EDIT: The persistence of the budget deficit hysteria is a phenomenon that should be examined. There are 2 components of this. The first are people who are genuinely (if mistakenly) concerned about the economics effects of too much debt. The second group are deliberately using deficit hype to achieve unrelated goals.
The people who are so damned insistent about the necessity to cut Medicare and Social Security are not pursuing an economic agenda. They are pursuing a social and political agenda. These cuts are their actual desired ends, not the unfortunate byproduct of economic necessity. They would not be proposing a $45B increase in defense spending if that were truly the case.