We, the undersigned economics and financial professionals,
seeking to foster world prosperity,
send the following urgent message to President Obama and the US Congress:
Taxes Function to Regulate Aggregate Demand (total spending),
Not to Raise Revenue per se
Federal spending is NOT inherently dependent on revenues from taxing or borrowing.
ANY constraints, including debt ceilings and budgeting rules, are necessarily self imposed by Congress.
The US can’t EVER have a funding crisis like Greece- there is no such thing for ANY issuer of its own currency.
The correct analogy is between Greece and the US states.
A US state can indeed become unable to fund itself, and look to the US Federal Reserve Bank for funding, much like Greece is getting assistance from the European Central Bank. But as issuers of their own currencies, the notion of a funding crisis for the US Federal Reserve Bank or the European Central Bank is entirely inapplicable.
Furthermore, federal borrowing is nothing more than a matter of the Federal Reserve debiting reserve accounts and crediting securities accounts. And paying off the Federal debt, as done continuously as US Treasury securities mature, is nothing more than a matter of the Federal Reserve debiting securities accounts and crediting reserve accounts.
THERE ARE NO GRANDCHILDREN INVOLVED IN THIS PROCESS!!!
Nor is there any inherent financial risk posed by foreigners or anyone else buying or not buying US Treasury securities.
Additionally, the risk of federal overspending relative to taxation, as available labor and materials become fully employed,
is higher prices, and not insolvency or any kind of funding crisis.
Therefore, with our currently recognized and highly problematic shortage of aggregate demand,
as evidenced by unemployment and economic slack in general, you’ve all got it backwards.
Given the current depressed state of the US economy, an informed Congress would be in heated debate
over whether to increase federal spending, or decrease taxes.
And with the current risk of inflation largely from crude oil prices and food prices,
which are now closely linked, for all practical purposes price stability is also currently in your hands.
President, Valance Co.
Roger Erickson, PhD; Chairman
Joseph M. Firestone, Ph.D.
Managing Director, CEO
Knowledge Management Consortium International
A Division of Executive Information Systems, Inc.
Stephanie Kelton, Ph.d
University of Missouri, Kansas City
Thomas E. Nugent
Chief Investment Officer, Victoria Capital Management, Inc.
Owner/Broker Farchette & Hanley Real Estate, US Virgin Islands
President, Symmetry Capital Management, LLC
Franklin College Switzerland
Bernard J. Weis
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April 15 (Reuters) — President Barack Obama said Thursday a Republican debt-reduction plan would create “a nation of potholes” as he used the first events of his 2012 re-election bid to strike a sharp contrast with his opponents.
Seeking to reignite the energy of supporters that propelled his candidacy in 2008, Obama said “extraordinary progress” has been made during his two years in the White House but much work remains.
He called on supporters to help him finish the job.
The president, who offered a 12-year plan Wednesday to reduce the U.S. deficit by $4 trillion, skewered a proposal by Republican Representative Paul Ryan.
Ryan would trim about the same amount without raising taxes and by making cuts in spending, such as on medical and social programs for the poor and elderly. Republicans have attacked Obama’s plan for raising taxes on wealthy Americans.
“Under their vision, we can’t invest in roads and bridges and broadband and high-speed rail,” Obama said.
“We would be a nation of potholes.”
The Republican approach, he said, is that “we can’t afford to do big things anymore” and says to the underprivileged, “tough luck, they’re on their own.”
Obama, who reluctantly agreed to extend Bush-era tax cuts late last year even for the richest Americans, said if the wealthy were to “pay a little more in taxes,” it would help solve America’s fiscal challenge without forsaking its responsibility to its people.
“If we apply some practical common sense to this, we can solve our fiscal challenges and still have the America that we believe in. That’s what this budget debate is about and that’s what the presidential campaign is going to be about.”
Obama has tried to straddle a middle ground and sought compromise with his political adversaries since Republicans took command of the House of Representatives and picked up strength in the Senate in elections last November.
He said he recognized that some of his liberal supporters have been frustrated “because we’ve had to compromise with the Republicans a couple of times,” and that he felt the same way sometimes.
“We knew this wasn’t going to be easy.”