Posts Tagged ‘debt’
“To tie [the debt ceiling] to something about whether you break the promises of the United States government to people all over the world as well as its own citizens, just makes no sense. So it ought to banned as a weapon, it should be like nuclear bombs, basically too horrible to use”*…
As the battle over the debt ceiling continues, Treasury Secretary Janet Yellin warns that the U.S. could run out of (available) money by early June– and that this could have dire consequences.
The estimable economist, investor, government official, and scholar Richard Vague argues that objections to raising the ceiling are rooted in a fundamental misunderstanding of the impact of government debt…
With the pending battle over the debt ceiling, we are once again hearing concerns about the magnitude of our national budget deficit and the seemingly overwhelming size of our national debt. Given those concerns, it is important to have a clear understanding of how deficits and debt impact the U.S. economy. For that, we need to look at the overall financial status of not just the U.S. government, but of U.S. households too.
In 2020, during the darkest hours of the global coronavirus pandemic, the U.S. government spent $3 trillion to help rescue the country’s—and, to some extent, the world’s—economy. This infusion of cash increased government debt and thus reduced government wealth by almost the entirety of that frighteningly large amount—the largest drop in nominal U.S. government wealth since the nation’s founding. Surely something this unfavorable to the government’s financial condition would have broad, adverse financial consequences.
So what happened to household wealth during that same year? It rose. And it grew by not just the $3 trillion injected into the economy by the government, but by a whopping $14.5 trillion—the largest recorded increase in household wealth in history.
Given the pending debate on the debt ceiling, and the perennial debates on spending that dominate the halls of Congress, it is crucial to understand the relationship between government debt and household wealth. Conventional wisdom states that the government is incurring debt that will burden our children and grandchildren, yet the data shows that households already have the funds generated by this debt as part of their current wealth. In 2022, the prestigious Peter G. Peterson Foundation argued: “Federal borrowing…crowd[s] out new investment,” yet household wealth has increased dramatically in the very period that this debt has grown most rapidly. The policy decisions we make on spending should be informed by the data on debt and wealth…
The effects of government debt on households– and industry and inflation– aren’t the catastrophe that many would have us believe; in fact, the opposite: “The Truth About Government Debt,” from @delanceyplace in @DemJournal.
See also: Brad DeLong: “Print the Perpetual (Consol) Bond” and “The US Inflation Reduction Act is already brightening the outlook for energy and industrial firms.”
* Warren Buffett
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As we get our facts straight, we might note that today is Twilight Zone Day, a celebration of Rod Serling’s masterful series, The Twilight Zone (See also here and here).
“If you prick us, do we not bleed?”*…
An estimated 77 million Americans have a debt that has been turned over to a private collection agency. Thousands of these debtors are arrested and jailed each year because they owe money. Millions more are threatened with jail. The debts owed can be as small as a few dollars, and they can involve every kind of consumer debt, from car payments to utility bills to student loans to medical fees. These trends devastate communities across the country as unmanageable debt and household financial crisis become ubiquitous, and they impact Black and Latino communities most harshly due to longstanding racial and ethnic gaps in poverty and wealth.
Debtors’ prisons were abolished by Congress in 1833 and are thought to be a relic of the Dickensian past. In reality, private debt collectors — empowered by the courts and prosecutors’ offices — are using the criminal justice system to punish debtors and terrorize them into paying, even when a debt is in dispute or when the debtor has no ability to pay.
The criminalization of private debt happens when judges, at the request of collection agencies, issue arrest warrants for people who failed to appear in court to deal with unpaid civil debt judgments. In many cases, the debtors were unaware they were sued or had not received notice to show up in court…
Read this deeply-troubling story in toto at “The Criminalization of Private Debt“; then read the full ACLU report at “A Pound of Flesh.”
* Shakespeare, The Merchant of Venice, Act 3, Scene 1
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As we dust off the adjective “Dickensian,” we might recall that it was on this date in 1811, five days after the birth of the movement in Nottingham, that Luddites smashed over 100 machines intended to eliminate their textile industry jobs in Sutton-in-Ashfield, Kirby, Woodborough, Lambley, Bulwell, & Ilkeston in Derbyshire.
an 1812 illustration of “Ned Ludd,” a fictional apprentice who (per his legend) destroyed two weaving frames in 1779.
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