Tuesday, September 1, 2015

The Journal gets it wrong

Today, I submitted this to the Albuquerque Journal. My wife says they will cancel our subscription. I can only hope...

At the top of your Op-Ed page on August 28, you had a Ramirez cartoon that was so wrong it needs to be called out. The cartoon depicted poor old Uncle Sam supporting a huge burden of national debt on his back while disparaging the irresponsible debtor countries Greece and Puerto Rico. The cartoon implied that our national debt is a burden and that it is similar to and just as irresponsible as the debts of those two unfortunate countries. It just ain’t so! The implications are wrong and misleading.

This neoliberal cartoon appeared atop the Albuquerque Journal Op-Ed page.

First, our national debt is nothing like the debts of Greece and Puerto Rico. Neither country controls the currency in which its debt is denominated. The only way Greece can obtain euros and Puerto Rico dollars to pay their debts is to export more than they import. Failing that, as they do, the governments must tax their private sectors more than they spend into them. Over time, as we have seen, the private sector becomes impoverished. 

A country, like ours, that issues its own currency can always service its debt, because it issues its own currency. If needed, we can devalue our currency, but that is not an option for currency users like Greece or Puerto Rico and, we might add, our own states and households.

Second, when loans go bad both creditors and debtors share the blame. It takes two to tango. Debtors can overestimate their ability to pay, and creditors can underestimate the risks. Always, it seems, the creditors gain the advantage over the debtors. We have seen it play out in old-time melodramas where the despicable landlord threatens to have his way with the poor and lovely damsel. Then the villain retreats under a chorus of boos and a hail peanuts. The Greeks and Puerto Ricans are not so easily saved.

In the eurozone we have seen the plot again as the rich creditors drain the Greek economy, impoverish its people, demand sale of state real assets at fire-sale prices, and nullify democratically passed legislation. 

Puerto Rico is a colony of the US. In previous decades it was normal to exploit colonies for wealth extraction. Now, in this supposedly civilized global economy Puerto Rican citizens are left with reduced Medicare, poor bankruptcy protections, and adverse action taken by our Congress. Instead of protecting our colony in troubled times, we have made it vulnerable to predatory Wall Street vultures.

Finally, you still don’t understand the national debt and the deficits that contribute to it. Yet, it is very simple. When the government spends a dollar to buy something from the private sector, someone gets that dollar. Economists will verify there are only three things that one can do with the dollar: 1) Spend it, 2) Pay taxes, or 3) Save it. If spent, someone else gets the dollar and has the same three choices and so on. Ultimately, the dollar goes to pay taxes or is saved.

If the dollar pays taxes, it balances the budget. If the dollar is saved, it is a government deficit. Government deficits are private savings. We don’t pay off government debts; that would take away private savings. Government debt, unlike household debt, is not a burden but a boon. 

Get with it, or you will continue to bolster the neoliberal paradigm that is favored by despicable landlords and undermines our economy.

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