Tuesday, August 19, 2008


(Week 4 - Tuesday Aug. 19)

There is an area of critical public concern that John McCain, Barack Obama, and the entire lot of candidates for Federal office (Congress, Senate, Presidency) will no doubt hold forth on endlessly, but it is also true that virtually none of them have a clue as to how to resolve it. "It's the economy, S#*/@d!" The form this issue most commonly takes is an obsession with how to deal with the yearly Federal "deficit" and mounting Federal "debt." The range of other economic issues will be derivatives, more-or-less, of the alarm over the rising national tide of red ink.

We will be admonished by each candidate that the government is taking in too little revenue and/or spending too much money. With virtually a single voice they will tell us that when we come to our senses and start running the Federal government more "like a business," then we will get our economic house in order. Typically, each will claim to have discerned the taxing and spending priorities that will allow us to "grow the economy" so we can "turn the corner" and "start paying down the debt" so "our children won't have to."

This is truly a laudable intent, but an utter mischaracterization of the problem. There is no combination of taxing and spending priorities that will remedy the so-called "debt" problem. The "debt" does not come from "taxing-&-spending," and no variation thereof will fix it.

Our unquestioning attachment to this framing of the "national debt" issue, and the whole array of ideologies, notions and interests that have grown up around it, is the great rock upon which the political process, ship of state, and best intentions of we the people are foundering. If that were not so, why has no generation of elected public servants virtually in the last century succeeded in "turning the corner on debt"? Is the answer as simple as saying that the category of human beings we call "politicians" (and whom we elect and re-elect) is uniquely corrupt beyond any capability of answering their calling, or does blaming politicians too often excuse us from having to think more deeply on the matter?

We the electorate are frequently admonished as to how we can't pay down the "debt" because we have not achieved enough "economic growth." In the century-almost since the establishment of the Federal Reserve System, the U.S. economy has in real terms experienced an ongoing explosion of economic production that quantitatively dwarfs the increase of any nation (perhaps all nations combined) before it, and now threatens to overwhelm the capacities of the earth on which we depend. Why, then, has not this "growth" enabled us to "grow" out of the "debt." Why does the "debt" evidently increase in lockstep with the "growth." Is more "growth" the answer?

The United States is a sovereign nation with the right to issue its own money supply. There is no cost in doing so, regardless of the amount issued (except for the incidental material cost of handling whatever medium of currency is deemed to be most convenient).

To say that the overall economy of a nation that has the power to issue its own money supply, can also be in "debt" within the circle of its own domestic production-&-consumption cycle is a contradiction in terms. People within an economy can be in debt to each other, but how can an economy be in "debt" to itself? How can a free people who are conscious of what they are doing hold themselves in "debt" bondage? Stranger still, why, supposedly, is it necessary to sell bonds to foreigners so that we can get enough money to circulate as purchasing power in our own domestic marketplace to cover the cost of the products we ourselves make? Stated more succinctly, why are we not richer for all our wealth, instead of poorer by all this "debt"?

These are the questions that McCain and Obama need to be able to answer. I will offer my own suggested answers in very succinct terms as these columns unfold.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites.