Via Twitter buddy and MIT colleague/Technology Review publisher/editor Jason Pontin, I got myself steered to this brutal, elegantly clear account of the core theft at the heart of the “crisis” implied by the federal debt.
Writing at the website of the literary mag n+1, Stephen Squibb lays it out:
Letting one dollar equal a trillion, the total debt of the US Government is roughly $14.27. This divides into $8.32 of public debt, which is held by other nations, individuals, and institutions, and $5.95 of intragovernmental debt, which is owed to programs like Social Security and Medicare, and to the Federal Reserve.
Of the $8.32 of public debt, $4.47 is owed to other countries: $1.15 to China, $0.91 to Japan, $0.36 to the UK, roughly $0.20 each to oil exporters and Brazil, and $1.70 to the rest of the world. $0.63 is due to mutual funds, $0.61 to private pension plans, and $0.31 to depositors like commercial banks, credit institutions, and credit unions. Insurance companies hold $0.25 and savings bonds and state pensions $.018 each, while individuals, brokers and dealers, bank personal trusts and estates, corporate and non-corporate businesses, and other investors are due $1.21.
Intra-governmental debt is something of a misnomer: $4.53 of it is really money owed by the government to the American people. The biggest single number in sight, $2.40, represents what Americans have collectively set aside for retirement, or Social Security. This $2.40 is a surplus, collected over decades, as the total revenues from Social Security payroll taxes have exceeded the total amount being paid to beneficiaries. This surplus has been invested in the government, where it counts towards the total debt. The psychological impact of this language game should be clear. What ought to be celebrated as sound financial planning appears instead as further evidence of reckless profligacy. The more money we save, the poorer we are told we are. There is also $1.68 in savings for health care and $0.40 dedicated to needs such as highways, housing, the disposal of nuclear waste, and unemployment insurance.
The remaining $1.42, the second-largest amount, is owed to the Federal Reserve, a public-private institution born of a compromise a century ago between a familiar set of bankers and a less familiar set of populists. The Fed has bought government debt over the last three years in increasing quantity as part of its quantitative easing programs. Unlike other money owed by the government, this debt has no destination, and in many ways is fictitious. If the money were to be repaid, it would simply cease to exist.
He also makes clear where the debt comes from:
The three primary causes for the rapid expansion of the federal debt from $5.77 in 2000 to over $14.00 today are well known. The first is the Bush tax cuts, which with interest cost $2.39 ($1.30 went to the top 20 percent of earners); the second is $1.47 the wars in Iraq and Afghanistan; and the third is about $1.20 in lost tax revenues due to the recession and a dollar for TARP and other stimulus programs. The Medicare prescription drug benefit cost $0.22 and the health care bill $0.15. Because the federal budget was balanced at the turn of the century, these added costs really do correspond to the size of the current problem, an expansion financed almost entirely by issuing new public debt.
This is essentially the same story discussed on my last post (with a material error now corrected): the McArdles of the world may not like to confront the sources of our debt, nor the implied policy responses, but the facts, sadly, remain stubbornly factual.
__
The quotes above form Squibb’s set-up; the rest of the piece is an analysis of what the “resolution” to the debt crisis actually means. Two money quotes:
The fact that John Boehner walked away shouldn’t obscure the facts: A Democratic president offered to pay for the Bush tax cuts by handing over the health care, education, safety, and savings of the American people.
And:
It is worth remembering what drove us to the edge of the cliff: the right’s absolute commitment to the further robbery of the American people for the benefit of unproductive wealth.
Read the whole thing. Despite the author’s occasional use of DFH words like “hegemony,” it’s sharp and depressing as hell. Squibb offers some truly gloomy last thoughts, but here’s mine:
The response to this whole episode is not usefully despair. Rather, there is a specific pair of tasks we need to drive our representatives to accomplish: the first is to come up — fast — with a tax expenditure reform package that includes as much as possible, to begin the tax reform vs. cuts argument of the new Catfood Commission Super Congress with as much revenue on the table as possible. Wonkish — I know, but haven’t we learned by now that it is the first statement of policy that drives the rest of the discussion?
And second: begin the pressure now and now-er on Obama to keep the extension of the Bush tax cuts at risk unless a genuinely acceptable package comes out of the new Big Daddy committee and the Congress. No ten cents on the dollar nonsense. It is not just fairness, but the actual long-term economic and social future of the country that depends on getting revenue up to its historic fraction of GDP. Again, wonkish, a bit — but necessary, IMHO. So call and write your folks — and the White House — as often as you can.
Image: Francisco de Goya, Robbery, c. 1794
Villago Delenda Est
Something has to be done about the parasite overclass. It can be done peacefully. But I don’t think the greedy maggots will allow for that. They want it all. Every fucking dime, they want it all.
BGinCHI
Great post, Tom.
What is the model for the nation the rich want to drive us toward?
Post-Soviet Russia? Guatemala?
There is absolutely nothing they want to conserve or return us to, unless you believe their nostalgia for an America that never was.
I think the phrase “class war” is going to need to be dusted off and used with greater alacrity.
Carl Nyberg
The Democrats should embrace the Progressive Caucus plan to balance the budget and challenge the Republicans to craft an alternative.
Austerity is bad macro-economics. But if we’ve already decided to do bad macro-economics…
Villago Delenda Est
@BGinCHI:
Honduras.
A tiny privileged group at the top, the other 99.8% living in desperate economic straits at all times.
BGinCHI
VDE, gotcha, next country over.
A boon to construction…..of walled compounds at least.
I guess we’ll have to take our stimulus where we can get it. Oh, and Rottweilers. Lots of work for them.
Lee
I just read the entire article. It really is an excellent piece. A tough read compared to most daily reading, but a very good article.
comrade scott's agenda of rage
Too bad this cogent analysis will be completely ignored by the Villagers, 90% of Democrats in office and anybody outside the Tea Party with half a brain.
The teatards won’t ignore it, they’ll simply say it’s wrong and move on to another talking point.
Regarding the parasitic overclass, they simply look at brown skinned people and toothless pwt as welfare parasites who need to be eliminated. Funny how the cost of things like disbilty (as it’s called here in Misery), Aid to Dependent Children, etc., costs a helluva lot less than upper class welfare, ie the Bush Tax Cuts.
rickstersherpa
It is sad that one will never see such a clear eludication of the facts debt issue in the NY Times, WaPo, WSJ, or any of the cable news stations. Instead, one finds it on an obscure literary web site. (Angry Bear and CEPR give plenty of wonkish articles on the subject, but his puts in a way any literate person can understand. I know it helped me. Instead, the WaPo puts out front page editorials masquarading as news stories about how this debate is “about the size and role of Government.” Talk about obfuscation. http://www.cepr.net/index.php/blogs/beat-the-press/the-post-tells-us-its-about-qthe-size-and-role-of-governmentq
And we wonder why people vote Republican? Because they live in a media noise machine that fills them full of BS.
Mike Goetz
BOO HOO HOO HOO HOO HOO HOO HOO HOO HOO HOO!
There, I’m a true liberal now.
kdaug
If anything goads, it should be the systemic deliberateness of this. Does the Congress really believe that someday they will be part of the top 2%?
What’s the matter with Kansas? What’s the matter with Congress.
Villago Delenda Est
@BGinCHI:
I said Honduras (it’s interchangeable with Guatemala in most ways) only because I have up close and personal experience seeing what an absolutely wretched place it is. What little natural resource wealth there is is ruthlessly controlled by the top .2%, and that’s just a SWAG…it’s probably even smaller. It’s basically a feudal state in many ways, with a veneer of republicanism and democracy as a fig leaf.
So many times I ran into situations that are just appalling…such as Honduran peasants eager to take the job of disposing of the bodily waste of American troops because it paid so much better than anything else available to them.
A Mom Anon
@Mike Goetz:
Bullshit. I’m not crying,I’m trying to figure out how to beat a deeply entrenched conservative gov’t in a really red state. Sometimes I think the internet doesn’t do us a big service because people jump to conclusions and go into full freakout mode before anyone’s even SEEN what’s on paper. Even when it’s on paper people intrepret things the way they want to. We went through this with the healthcare madness. Sadness and depression are contagious,especially online.
Now,if anyone can help me figure out how to challenge Tom Price and Phil Gingrey here in GA I’m all ears. They’ve run unchallenged forever and they’re pretty much useless. And as an aside,what’s with all the former doctors in Congress?
zmulls
“unproductive wealth” — there’s a phrase that should be on the lips of every Democrat on television….that’s a, pardon the expression, money phrase…..
danimal
@rickstersherpa: The Republicans have a handy set of effective talking points, a superficial economic theory that sounds good, a tremedously efficient public relations messaging machine and a leadership that is willing to turn on a dime without shame as political needs change.
What they don’t have is an economic policy that works or a set of popular proposals to address today’s economy. As long as their bs trumps our wonkiness, they will win. The only answer I can see is to boil down our proposals to slogan size and find some way, any way, to enforce discipline on our public messengers. Right now, our public messengers, whether intentionally or not, support the right-wing overarching messages even as they promote liberal policies.
becca
There’s a Goya plate with the caption When Reason Sleeps, Nightmares Become Possible.
Apt, no?
TreeBeard
This is the only way. If enough people communicated to Obama (and their reps and senators) that they would sit out of the next election if the cuts were extended, it could be a start.
You may say, I’m a dreamer…
Mike Goetz
@A Mom Anon:
No shit. The Internet is one giant sob-sister pity party.
And if you want to beat Price and Gingrey, the Internet is full of superb suggestions: bully pulpitry, Third Party-ism, not voting, and circular firesquadding. All of these strategies cannot fail.
cyntax
@Villago Delenda Est:
I wonder about that. I vaguely recall a poll over at the GOS, in which they had surveyed people making over $250K(?) a year, and a majority of them said they should pay more in taxes. Some of the overclass certainly is greedy, but I’m wondering if it isn’t even more dysfunctional than we think. The Repubs are always for tax-cuts, even when the beneficiaries don’t want them: it’s the only “policy” they know. The Repubs are that incurious and uninformed.
Juicetard (FKA Liberty60)
@zmulls:
Add “Tax Reform”. As in, we need to reform the tax code to make it more fair to the middle class.
The wingnut welfare think tanks have done a good job of convincing Americans the tax code is a labrynthine mess, and it wouldn’t be too hard to push that meme to its conclusion that it is a mess precisely to reward those who write it, namely ALEC and the 1%.
ifthethunderdontgetya™³²®©
Treebeard, you’ve got it exactly correct.
As your reward, I expect you will quickly be castigated as an intellectual purist and for being responsible for the election of President Michele Bachmann.
~
wrb
I strongly disagree, although a few months ago I would have agreed.
The reason is that I’ve concluded it is time to panic about the economy, and nothing else really matters right now. Dealing with the debt and the rich can and should be deferred.
The numbers from the Spring were horrible. Those for the third quarter are going to be gruesome. The floods and heat shut down much activity in whole regions and the Tea Party mess has killed new investment. No one wants to invest when we face a possible global meltdown. Loan commitments aren’t being made, those that were in place have been yanked , projects are being killed all over. Durable goods and construction numbers are going to be very bad.
People don’t see evidence that things have bottomed, and property markets face collapse. Most middle class wealth is in real estate. They will be wiped out. The slow recovery may well have started the plunge into depression and if so will only be halted by radical and swift action.
What matters is stimulus, either from spending- which is likely only to be achieved in exchange for extending the upper-class cuts- or from middle and lower class tax cuts that put immediate money into the hands of people who will spend it.
My suggestion would be to seize the tax-cutting initiative, and propose, now, before the Bush cuts expire, a lower and middle-class tax holiday, that does not include the upper class cut. Put the Republicans in the role of opposing tax cuts and the very type of (Keynesian) stimulus that they say creates jobs.
Then either don’t extend the upper class cuts of extend them for a limited time in exchange for stimulus spending.
This is not a proposal I would have supported a short time ago, I only support it now because I think the danger is extreme.
NonyNony
@A Mom Anon:
Honestly when you’ve got entrenched pols like that the answer is really “start smaller”. Find a group of people who are politically minded and with similar goals and start targeting local school board, city council or mayor positions. Liberals need to build up – conservatives run crazy-ass people in every single fucking race in the country while liberals have historically tended to shoot right for Federal office except in those places that are already liberal. The reverse is how agendas get pushed – win the races for the city/county/state government offices and you get the Federal offices almost for free.
Conservatives have been at this game for a century. You aren’t going to unseat long-entrenched power structures without building up a base beforehand.
I’d also suggest reading some Machiavelli. You don’t have to follow the advice but you should recognize when other folks are using it.
Very Reverend Crimson Fire of Compassion
Perhaps slightly OT, but I wondered if anyone else has read Krugman’s latest on the rise of right-wing violence in Greece. Black-shirted young fascist thugs are beating immigrants in the streets. Cheers.
Samara Morgan
and all the emocutters that whining about how Obama sold us out are fools and retards.
its a swell stealth deal for the dems. all the dems have to do is nothing and the retardicans will be forced to raise revenues. Obama magically transformed triggered defense cuts into revenue negotiations.
Douthat and the conservative elite smelled the trap too late— its already sprung.
i think i shall dance naow.
:)
ramadan kareem Dr. Levenson!
im really enjoying your Newton book.
Davis X. Machina
Anything political based on class solidarity in this country is bound to fail, at least in this country, and for the foreseeable future.
What are the two best predictors of how someone’s going to vote? How often they go to church, and their race.
Yutsano
Those in the overclass who are willing to pay higher taxes are self-aware enough to know they get their wealth because of what is done in the commons. Not all of the are evil parasites. Just enough to make life miserable for the rest of us. And ther CEO who takes a paycut so he can keep more staff will get hailed as a hero. Hey it could happen…
Cris (without an H)
Never going to happen. They don’t want to be accused of waging “class warfare.” It’s so unseemly.
singfoom
That was an excellent, if depressing article. The only hope I have at this point is that demographic shifts that are coming in the American electorate will remove the power that the extremists have.
It’s only a shred of hope since the Money party backs both horses and will fight tooth & claw to preserve their control of the majority of the resources in this nation.
Emma
@danimal: The only answer I can see is to boil down our proposals to slogan size and find some way, any way, to enforce discipline on our public messengers
And good luck with that. To paraphrase, “we don’t belong to an organized party, we’re Democrats.”
(edited to beat my obnoxious drum) The Republicans have spent two decade indoctrinating the citizenship with their message; we need to steal a page from their book and create a similar network of message carriers. And we need to beat the press over their head repeatedly every time they carry Republican water. Biggest win we could have is to force the press to be honest.
Samara Morgan
@Very Reverend Crimson Fire of Compassion: they arent fascists per se….they are white (NHC) christian nativists. Like Anders Breivik, the EDL and the Tea Party.
this is world trend i think, a demographic response to immigration and differential reproductive rates of minorities.
Davis X. Machina
People will stop listening after the first word, because that’s as far in as you go before your existing map of the world, and its understanding of how it works, is prepared to go. We know what ‘unproductive’ means.
Welcome to a country where ‘Unproductive wealth’ is the sum of all welfare checks given to strapping black bucks to buy t-bones and malt liquor with.
Poopyman
@Very Reverend Crimson Fire of Compassion: Also too, Italy under fire in widening euro debt crisis
And
is excellent advice.
ETA: Bad Poopy! Bad paste job fixed.
Cris (without an H)
Let us remember Ben & Jerry’s, who in the 1980s wrote a salary ratio cap into their corporate charter. (It was a surprisingly low ratio by corporate standards – the CEO was allowed to make no more than 7 times the salary of the lowest-paid worker.) They eventually removed the clause because they weren’t able to attract qualified executive candidates with the restriction in place.
In my opinion, they should have just raised the ratio — make it 25x, or 50x. But the corporate wisdom was “drop it.”
Not really that relevant. I guess the point is that corporate boards don’t even think they’re being greedy with their compensation packages, they’re just being practical. They’re responding to market forces beyond their control. You know, they’re innocent.
Cris (without an H)
Exactly. The Objectivists have succeeded in at least this: the public at large really believes that capital, rather than labor, is the primary source of productivity.
NonyNony
@Cris (without an H):
This is exactly why a 90% top-end tax bracket is needed.
Not to raise revenue – a 90% top bracket would do shit to raise revenue – but to control wealth disparity. The market sucks at keeping wealth disparity in check, but a 90% top bracket on all income earned over, say, 10x the poverty level would put a hard clamp on the difference between the janitor and the CEO.
And as an upside it would force companies to reinvest money in their company instead of letting it fly out the door with overinflated salaries for corporate mercenaries. You know – like companies did back in the 50s and 60s…
Michael
“Intra-governmental debt is something of a misnomer: $4.53 of it is really money owed by the government to the American people. The biggest single number in sight, $2.40, represents what Americans have collectively set aside for retirement, or Social Security. This $2.40 is a surplus, collected over decades, as the total revenues from Social Security payroll taxes have exceeded the total amount being paid to beneficiaries. This surplus has been invested in the government, where it counts towards the total debt. The psychological impact of this language game should be clear. What ought to be celebrated as sound financial planning appears instead as further evidence of reckless profligacy.”
That is inaccurate. The money wasn’t invested in the government. It was spent as part of the regular budget, and the trust fund was given a Treasury Bond in place of cash. Those have no value whatsoever. It is the equivalent of writing a check to yourself.
The intragovernmental debt really is debt. Are you contending that the government can 1) spend money 2) issue itself a bond for that amount and then 3) spend it again? If so, why not do this all the time?
burnspbesq
@TreeBeard:
“You may say, I’m a dreamer”
I’m more likely to say you’re an idiot. You presumably understand that the plain-English translation of your threat is “do what I want or I will act against my own self-interest.” Explain how that’s a credible threat, if you don’t mind.
danimal
@Emma: This is one area where the blogosphere appears to have done some good, and has the potential to really change the dynamics as the triangulator (think Clinton and the DLC) Dems are replaced by netroots (think Dean and MoveOn) Dems.
FWIW–Obama is simply a transitional figure in this process, with one foot firmly in each (triangulator and netroots)camp.
zmulls
I’d also like to corral the argument that the Wars in Iraq and Afghanistan need to be paid for. Less popular notion now, to be sure.
But We (the country) agreed to go to war, and didn’t raise a war tax to pay for the effort, for the first time in history. That was a mistake. We have to assess the cost and prorate it over several years, and pay that bill.
It’s a question of Personal Responsibility — a GOP favorite — we have to pay our bills.
A ten-year war surtax? Yeah, I know, I’m dreaming…
Dennis SGMM
@A Mom Anon:
Hell’s bells, try getting rid of the execrable David Dreier in CA-26. The demographic shifts that many seem to feel will save the Democrats have already occurred in the district and yet the party fails to spend a fricking dime on supporting a Democratic opponent to Dreier.
It looks to me that the party leadership has for years overlooked an opportunity to take another seat in the House. It’s time for a district by district strategy – at least in California and maybe nationwide.
singfoom
@zmulls:
I didn’t agree to go to war. I supported our initial action in Afghanistan, but I protested the Iraq war more than I’ve ever protested anything. You’re right though, we do need to pay for those wars.
Perhaps there needs to be a constitutional amendment to require new taxes levied upon any military engagement lasting over a year.
Nutella
@Cris (without an H):
They also never considered raising the lowest person’s wages to accommodate their formula. The big guys always worry about the other big guys (How will poor Joe pay his kids’ prep school tuition? How will poor Joe afford the payments on his boat?) and just don’t see the receptionist or the janitor and their problems just making their rent.
ifthethunderdontgetya™³²®©
@burnspbesq:
The Republicans, a wholly-owned subsidiary of our plutocracy, just successfully carried out the threat of “Do what we want, or we’ll blow up the bond market”.
The Democratic party has moved steadily rightward over the last two decades thanks to its adoption of the attitude you just shared.
“Republicans fear their base, while Democrats despise theirs.”
This isn’t going to change by slavishly licking corporate Democratic shoe-leather.
~
Nutella
@Dennis SGMM:
The party leadership hasn’t overlooked anything. The primary purpose of party leadership and fundraising is to protect incumbents. They have a gentlemen’s agreement that they won’t go after the other party’s incumbents. Maintaining themselves as a permanent political class is the #1 priority of both parties.
Bender
In England, France, Germany, Italy, etc., leftist parties are taking a beating as their baby-boomers’ bills come due. Are you Johnny One-Notes going to blame the Tea Partiers over there? These countries have discovered that statism can’t work, and now they are fighting to be the first to eject from that plane before it smashes into the mountainside. Of course, their “Tory-type” parties are about on par with centrist American Democrats, but all in good time…
PanAmerican
@Davis X. Machina:
A Great piece from Yglesias that the blogsphere ignored:
From the n+1 piece:
Gosh darn it, Jim Crow was just one of those things that happened. You know, as opposed to the ruthless exploitation of black labor for the benefit of white America.
The Trueleft™ needs to come to terms with that historical bullshit or they can fuck off.
Dennis SGMM
@Nutella:
Oh shit. I’m a certified, long haired, Berkeley Sixties alum and I have formerly relegated what you laid out to my paranoid side.
I do Dem GOTV work, knock on doors, work the phones, and ferry voters to the polls in every election here. I’ve done so for a bit more than four decades. I am a clean fucking hippy and an unabashed liberal.
You can imagine the frustration of doing voter outreach and hearing “Who?” when I ask if the person would consider voting for the Democrat.
Cris (without an H)
Sure, why not? They may not go by the same name, but people the world over are happy to go all reactionary and vote against their interests when the shit hits the fan.
burnspbesq
@ifthethunderdontgetya™³²®©:
Yaddayaddayadda. You still haven’t addressed the fundamental point I made, which is that implicitly supporting the Republicans is against your economic self-interest. Feel free to try again.
ifthethunderdontgetya™³²®©
@burnspbesq: Oh, you thought you made a fundamental point?
Here: voting for the Democratic candidate as the lesser of two evils, even as they openly flaunt their disrespect for me and what I believe in, hasn’t worked out for me. Never more so than in the last few years with this President.
So I won’t do it again 2012, and I let them know why.
~
Bill Murray
Intragovernmental debt is money owed by one part of the government to another part. Paying this off is like moving money from one pocket to another pocket. Further since intragovernmental debt is primarily the SS and Medicare trustfunds, you can’t both say that these trust funds are worthless and that the debt is real. Well you can but not without being a raging hypocrite
John Puma
What do you mean: “begin the pressure now and now-er on Obama to keep the extension of the Bush tax cuts at risk … ”
Moments after capitulating to the congressional terrorists in December (the hostage was unemployment benefits), and ordering his two majority caucuses in congress to extend those tax cuts, President Barack Hoover Obama was insisting he was going to “fight” to finally let them expire in 2012.
Surely we can believe everything he says!
numbskull
@Bender: Bender, your statement ignores the fact that we, as a nation, agreed to increase our contribution to our collective retirement program, Social Security, for the exact reason you cite: The Baby Boomer issue.
Left alone, this solved the boomer issue in terms of SS solvency. Forever. Are you arguing otherwise?
burnspbesq
@ifthethunderdontgetya™³²®©:
Not only are you voting against your own economic self-interest, you’re voting against mine. So go fuck yourself.
IrishGirl
It’s not just knowing violence, it’s reckless and negligent as well. It’s Stooooopercongress to the Rescue! Heaven or FSM save us.
Samara Morgan
@PanAmerican: and libertarians like Yglesias have to also.
In America, libertarians support “liberty-as-means-libertariansm” also known as Distributed Jesusland™, localized mobrule, and/or Hayekian economics….this works out to supporting the American overclass, who are their
paymasterswhoremasters.Outside of America, libertarians support Americans en toto as the overclass of the world.
See how simple that is? I just solved the paradox of libertarianism for you.
Everything libertarians, civil libertarians, liberaltarians, neo-liberals, classic liberals and bleeding heart libertarians do can be explained by one of those two principles.
Samara Morgan
That is the Unified Field Theory of Libertarianism™
Samara Morgan
@Bender: actually the rise of conservative christian nativist movements like the Tea Party and the EDL are a direct response to immigration and differential reproductive rates in the electorate.
Its like Daniel Larison’s League of the South gone global.
;)
michael
How so? The bonds carry no actual value to the government, but legally bind congress to appropriate the funds. They will have be paid by taxpayers. They are worthless, and a debt.
Sir Nose'D
This was a great article! This really resonated for me, though:
In my travels, I have seen viable leftist movements, but not in nations you would consider world power brokers. However, this quote certainly rings true in the U.S.