Tom Friedman is Seeking a Second Party

Friedman shifts from calling for a third party, to calling on the GOP to get serious.

To use a phrase that I thought I had retired, Tom Friedman has a point (several, in fact) in his column today:  We Need a Second Party.

His thesis:

I’ve argued that maybe we need a third party to break open our political system. But that’s a long shot. What we definitely and urgently need is a second party — a coherent Republican opposition that is offering constructive conservative proposals on the key issues and is ready for strategic compromises to advance its interests and those of the country.

This is, I think, a reasonable request as at the moment it does not seem that the Republican, as a coherent political collective, it especially interested in governing.  This is problematic because the nature of our system, one of separated powers and checks and balance, requires some degree of cooperation if governing is to take place.  This fact is further emphasized by the nature of the rules of the Senate.

Friedman focuses on three areas: globalization, debt and entitlements, and energy.

On globalization he is partially doing his Friedman thing, which is make bold assertions that ultimately sound interesting but at ultimately are more glittering phrases than useful analysis, i.e., “This is a world in which there will be no more “developed” and “developing countries,” but only HIEs (high-imagination-enabling countries) and LIEs (low-imagination-enabling countries).”  This leads to a similarly good-sounding but largely void formulation:  “We need strong government, but limited government, which enables our companies and individuals to compete globally.”

However, on debt and entitlements he hits the nail on the head:

The second of our great long-term challenges are our huge debt and entitlement obligations. They can’t be fixed without raising and reforming taxes and trimming entitlements and defense. We absolutely cannot just cut entitlements and defense. That would imperil the personal security and national security of every American. We must also reform taxes to raise more revenues.

But when all the Republican candidates last year said they would not accept a deal with Democrats that involved even $1 in tax increases in return for $10 in spending cuts, the G.O.P. cut itself off from reality. It became a radical party, not a conservative one. And for the candidates to wrap themselves in a cartoon version of Ronald Reagan — a real conservative who raised taxes, including the gasoline tax, when he discovered his own cuts had gone too far — is fraudulent.

This is simply true:  serious efforts are needed and pretending like cuts alone will fix the problem is simply wishful thinking (at best).  Likewise, “cartoon” Reagan is about right.

On energy he is likewise right when he states “can’t drill our way out of” the problem.  It sounds nice, but it ignores reality—this is especially true with, as he notes, “7 billion to 9 billion people by 2050, and more and more of them want to drive, eat and live like Americans.”

Fundamentally, the conclusion is spot on:

Until the G.O.P. stops being radical and returns to being conservative, it won’t provide what the country needs most now — competition — competition with Democrats on the issues that will determine whether we thrive in the 21st century. We need to hear conservative fiscal policies, energy policies, immigration policies and public-private partnership concepts — not radical ones. Would somebody please restore our second party? The country is starved for a grown-up debate.

Such competition is needed and is such a debate.  We aren’t getting such at the moment.  And yes, as some will no doubt state, the Democrats are far from perfect.  This is not a post about the virtues of the Democratic Party and it should not be interpreted as such.  It is, however, about the copious vices of the GOP.

FILED UNDER: Campaign 2012, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Brummagem Joe says:

    What was funny about this piece was Friedman’s dismissal of the GOP as essentially a basket case in it’s present form and he then called for a new second party as an essential counterbalance to what he called the magical thinking of Democrats. He then sets out a list of policy priorities for this second party and guess what it bears a striking resemblance to the policy positions of the Democratic party on just about everything.

  2. Hey Norm says:

    The idea that today’s Republican party can pivot to adulthood by November seems far-fetched…but who knows. I would like to think they can begin the process and contribute to the country. But then you look at Romney’s tax plan…and all you can do is sigh.

  3. Jay says:

    I think we urgently need Friedman to be a serious columnist.

  4. Ron Beasley says:

    I usually assume that anything Friedman writes is going to be meaningless nonsense so I don’t bother. That can only lead me to believe I’m right.

  5. merl says:

    @Brummagem Joe: I noticed that too. He wants the things that he already has. He needs a new cab driver or hotel desk clerk to talk to

  6. Drew says:

    “…a coherent Republican opposition that is offering constructive conservative proposals on the key issues and is ready for strategic compromises to advance its interests and those of the country.”

    Read: agree with the Democrats. Perhaps they dont want to be accused of poisoning “the children” at every turn in those, (snicker) “strategic compromises.”

    “But when all the Republican candidates last year said they would not accept a deal with Democrats that involved even $1 in tax increases in return for $10 in spending cuts, the G.O.P. cut itself off from reality.”

    Yeah, like this has ever happened in the history of earth. “Reality” is some peoples views may involve unicorns, perpetual motion machines and Lucy not pulling the football away once again. I’ve never ever seen an organizational budget that didn’t have 10% – 20% of savings in it. If Friedman is so distressed he could start like any competant manager…….with the cost side.

  7. Brummagem Joe says:

    @Drew:

    Yeah, like this has ever happened in the history of earth. “Reality” is some peoples views may involve unicorns, perpetual motion machines and Lucy not pulling the football away once again.

    Oh boy Danny Drew the king of blather is back. I thought you were too busy creating jobs to waste your time giving us the benefit of your wisdom.

  8. Brummagem Joe says:

    @Drew:

    If Friedman is so distressed he could start like any competant manager…….with the cost side.

    And this isn’t universally true by any means either Danny. Most established businesses commence their budgetting process with volume and revenue projections not expenses.

  9. Drew says:

    “Oh boy Danny Drew the king of blather is back. I thought you were too busy creating jobs to waste your time giving us the benefit of your wisdom.”

    Dumb.

  10. Drew says:

    “Most established businesses commence their budgetting process with volume and revenue projections not expenses.”

    Not in a distressed situation, which we obviously are. Flat damned wrong. You claimed to have run businesses yesterday. If this is your worldview, I’m glad I wasn’t an investor. We unload “managers” who, in troubled situations, start with their rationale about how the budget cant be cut and we need more revenue.

    Expense management is relatively easy. Revenue is a bitch. Woudth that government not view the world through the prism of ever more taxation.

  11. Brummagem Joe says:

    @Drew:

    Not in a distressed situation, which we obviously are.

    We’re not in a distressed situation. Not that a country is a business. Only a fool would think it was.

    Expense management is relatively easy. Revenue is a bitch.

    Which is why you invariably start with the revenue side. Only someone with your vast expertise (lol) would think otherwise. Perhaps they should unload you? How can you decide on your cost structure until you’ve identified how many widgets you’re going to sell and the revenue and margin they will generate. It determines everything in good times and bad. Fail I’m afraid Danny Boy.

  12. Drew says:

    Sorry, BJ –

    You must be the only person on the face of the earth who doesn’t understand that the US is in great financial distress. Credit ratings lowered. Printing money like fools to support the place. The mother of all financial obligations heading toward us in the form of SS and Medicare.

    And you inform us you were (snicker) a manager? How about buffoon or clown?

    You can push back all you want. I’ve owned dozens of companies. We get your types all the time and the Board invariably tires of your arguments and we look at each other……”who has the executive recruiters phone number?”.

  13. Random Commenter says:

    This is my test comment. Attempting to edit in 3…2…1…

  14. Random Commenter says:

    Another comment. last one didnt go so well…

  15. Brummagem Joe says:

    @Drew:

    You can push back all you want. I’ve owned dozens of companies. We get your types all the time and the Board invariably tires of your arguments and we look at each other……”who has the executive recruiters phone number?”.

    Danny…You’re all blather like this that doesn’t add up to diddly squat. For someone whose owned dozens of companies you don’t seem to understand how they work or even how a budget is constructed as you’ve just demonstrated. And companies and countries that are in distress can’t sell their long dated debt for a coupon of 2% you silly child.

  16. Ben Wolf says:

    @Steven Taylor:

    The U.S. does not, and can not, have a public debt crisis. No money is being borrowed. Tax revenues do not fund its spending. These are objective realities when one looks in detail at the government’s fiscal and monetary operations. Its budget is as unlike a household or corporate budget as can possibly be. I recommend learning about the difference between a currency issuer and a currency user, but the short and sweet is: when Congress authorizes spending people at Fed and Treasury sit down at computers and push a series of keys, and money from nowhere appears in recipient’s accounts. There is no transfer of tax receipts or borrowed money whatsoever. There is literally nothing and no one to pay back.

  17. Drew says:

    Nice try, BJ —

    You’ve cracked. I have run and owned dozens of companies, and you are floundering now. Just spewing crap. Did you really run companies? Really? No serious managers I know talk like you are now. Maybe big company guys, generally lightweights. We fire people who speak like you.

    I think its clear. You are a fraud. But carry on, and be all Ricardian with everyone and sech. Snicker…….you got some splainin’ to do, Ricky.

  18. WR says:

    @Random Commenter: I’ve got to say, RC, you come across a lot smarter and less unpleasant than Drew. Of course, you’re not pretending that you buy and sell companies yet.

  19. Drew says:

    Heh. Back chanelling? The thumbs up and down thingy that pollutes this site right now?

    True enough; guilty as charged, I’m unpleasant with complete assholes. Especially those who are unpleasant themselves, and talkin’ crap. Pure unaldulterated crap. But I’m open to alternative approaches.

    As for “pretending,” dream on. I know you want so hard for that to be so.

  20. Tsar Nicholas II says:

    Tom Friedman??

  21. Ernieyeball says:

    The country is starved for a grown-up debate.

    Sure it is. This must be why we have Tea Baggers, Occupods and RonLovePaulBots!

  22. Tillman says:

    You must be the only person on the face of the earth who doesn’t understand that the US is in great financial distress. Credit ratings lowered.

    You mean those buffoons who couldn’t rate mortgage securitization funds worth a damn? The same guys who told the world we were now riskier, and despite this the bond investors poured money into Treasury once the debt ceiling fiasco was old? Yeah, great referees there.

    Wait, wait, your first example was credit ratings lowered for how the U.S. is in financial distress? Have you read anything about the criteria Standard & Poor’s used in its decision? It was over politics, not the country’s ability to repay the debt.

  23. Tillman says:

    Also, if I may say, a forum on the Internet where any dolt can make up a backstory, any backstory you want for a persona to comment as, is not the best place to brag about how “you’ve run companies.” Maybe you should try putting forth reasonable exposition and argument, because your experience means nothing to me unless you can write it down and communicate it effectively. To me, you’re nothing but some dude on a computer.

  24. Gulliver says:

    Wrong on the idea that we require higher taxes, wrong on the idea that the GOP is not ready to govern (they just aren’t ready to do from an angle that Friedman and other left of center folks approve of), and wrong on the idea that anyone is really interested in looking seriously at anything Friedman has to say.

    We require more revenue and far, far less spending. The revenue comes from enlarging the tax base – despite the wacko left’s idea that you should just squeeze a little more blood out of the shriveled turnip – and the less spending part is anathema to liberals. In other words, the GOP, as defunct as it might seem at the moment, is far more ready to govern than the left. Can anyone say 3 years without even a budget being submitted by the Democratic Senate? That three year number looms rather large since 1/3 of that time was when they completely controlled both houses.

    The GOP wins out any day over Obama’s cotten-candy governance. Everything he proposes and promises tastes real sweet but as soon as you take a bite it just melts away into nothing of any substance. You’re left with a bigger hole in your wallet or credit card and nothing but a bunch of cavities in the end

  25. An Interested Party says:

    Also, if I may say, a forum on the Internet where any dolt can make up a backstory, any backstory you want for a persona to comment as, is not the best place to brag about how “you’ve run companies.”

    Indeed…it’s fascinating when random anonymous strangers on the internet brag about all that they supposedly have and all that they have supposedly done…who is or is supposed to be impressed…at least Michael Reynolds has actually written books…

    …despite the wacko left’s idea that you should just squeeze a little more blood out of the shriveled turnip…

    Who knew that people like Mitt Romney were nothing more than shriveled turnips…

    The GOP wins out any day over Obama’s cotten-candy governance.

    Awww…a shame that most people don’t agree with you…

  26. Gulliver says:

    @AIP
    “Who knew that people like Mitt Romney were nothing more than shriveled turnips…”

    Only one tiny problem with your oh-so-liberal “fair share for the rich” approach – the numbers gained by even confiscatory tax levels on the 1% don’t even come close to making a dent in the revenue shortfall. For that matter you could confiscate the entire wealth of the top 5% of earners and it wouldn’t make a dent in the problem. Not. Even. A. Dent.

    Sorry, but that “Mitt Romney types are the problem” approach is all smoke and mirrors to sell the idea of Democratic support for the “little guy.” Like snake-oil, the attraction is all in the sales pitch and not the effect. Not a valid policy approach and certainly not a viable solution for addressing the issue- just more plain and simple diversion politics that doesn’t hold up to any serious scrutiny when you look at the numbers.

    Awww…a shame that most people don’t agree with you…

    Yeah, you guys did so well 13 months ago, didn’t you? But, hey, I respect someone who still clings to the childhood optimism that lets you close your eyes and pretend the world will be just like you want it to be … if you just wish hard enough .

  27. Well, the great sad thing is that both parties seem willing to do nothing this year, and bet it all on Election 2012. The Republicans especially, but the Democrats too, are waiting to see if they can govern the easy way … with a full congressional majority.

    Chances are though, we’ll end up with split government, and political game plans for the following election.

    Political incentives are counterproductive. I mean, we can hate the game and hate the players, but the fundraisers will still be stuffing the PACs, and Congressmen will be retiring rich.

  28. Just 'nutha ig'rant cracker says:

    @Ben Wolf: I have been critical of your view before, but recently I read an article that outlined that the Treasury itself holds by far and way the largest portion of the debt–something on the order of $8 trillion dollars–and from what I could surmise by reverse accounting the numbers, has held that portion for a significant time. I’m still not enough of an economist that I fully understand your view, but some pieces that have been curious to me are starting to coalesce. Thanks.

  29. Just 'nutha ig'rant cracker says:

    @john personna: You, Ben Wolf, and Hey, Norm were the only sane commenters on this episode of the “Drew and BJ Hijack the Thread.” Thank you all for your participation.

  30. Stan says:

    @Gulliver: Raising taxes on the upper 5% won’t by itself cure our budget problems, but we have to start somewhere to keep our budgetary problems from getting worse. But they aren’t what’s bothering me, and they shouldn’t be bothering you. At the cost of repeating what everybody knows, our corporations aren’t suffering from lack of cash. What they need is demand, and they won’t get it until our middle class and working poor have enough disposable income to sustain our consumer economy. What you and other fiscal conservatives are demanding is an illusion – the hope that we can somehow work our way back to prosperity by simply cutting the budget. It didn’t work for the Germans in 1930, it didn’t work for the US in 1937, and it’s not working now for the British. We need fiscal stimulus now and enough intestinal fortitude in the future to combat our ever rising prices for medical services. Both are necessary, and it’s a shame that so many of our conservatives don’t realize it.

  31. superdestroyer says:

    People forget that the Democrats are not proposing tax increases to lower the deficit but in order to increase spending on entitlements and pork programs for the core groups o the Democratic Party.

    What Friedman needs to understand that as the Republicans collapse and the Democrats become the one relevant party, that competing in the global market or dealing with long term structural problems will not occur. As the Democrats become dominate, politics will be about government goodies, who gets them and who pays for them.

    The party of unlimited immigration, a million lawyers, social workers, public sector employees, and ethnic grieve groups will not have the capability to deal with the long term problems o the U.S. But it will have the ability to increase taxes, increase spending, increase the public sector pay roll, and increase entitlement spending.

    What Friedman should be discussing is what happens to the U.S. when it can no longer compete in the global market.

  32. superdestroyer says:

    @john personna:

    Do you really think that in a country with a million lawyers and a million full time activist, that any politician will be willing to accept responsiblity for their own proposals ans action?

    What Friedman needs to understand is that politic in the future does not require two political parties. When politics is about government entitlements, who pays, and who receives, then one political party is enough to make those decisions.

    As the U.S. slides into become a second world country, the Friedman of the U.S. will be fine in the patron class. The real question is what will happen to the peon class in the U.S.

  33. Brummagem Joe says:

    @Drew:

    No serious managers I know talk like you are now.

    Of course we don’t all have your experience of buying companies and firing lightweights. Only serious managers with your expertise could be expecteed to write such relevant and intelligible comments as these:

    Heh. Back chanelling? The thumbs up and down thingy that pollutes this site right now?

    True enough; guilty as charged, I’m unpleasant with complete assholes. Especially those who are unpleasant themselves, and talkin’ crap. Pure unaldulterated crap. But I’m open to alternative approaches.

    As for “pretending,” dream on. I know you want so hard for that to be so.

  34. Brummagem Joe says:

    @Just ‘nutha ig’rant cracker:

    that the Treasury itself holds by far and way the largest portion of the debt–something on the order of $8 trillion dollars

    The US public debt is around $14.5 trillion. Of this about 10 trillion is held by the public (roughly 45% US and 55% overseas). The remaining 4.5 trillion consists of intra governmental debt like that owing to the SS trust fund. It’s certainly not 8 trillion. The debt does not include guarantees to GSE’s like Fannie/Freddie and private entities which total perhaps another 5 trillion. This isn’t legitimately part of the debt but conservatives sometimes like to include it because it inflates the number.

  35. Brummagem Joe says:

    @Ben Wolf:

    No money is being borrowed.

    Er…no. We owe approaching $10 trillion to the holders of our bonds at home and overseas. The treasury had a major debt auction about a month ago.

  36. Ben Wolf says:

    @Brummagem Joe: When someone buys a U.S, bond, their bank debits their account and sends the money to its holding account at the Fed. The bank then disburses some of its reserves from its operating account at the Fed to the government’s account. The buyer’s money is never gotten hold of or spent by the government. When the bond matures the same reserves which were disbursed to the government’s account are sent back to the buyer’s bank, which then credits his money back to his checking account. At no point is money actually borrowed and used to fund government spending. The $10 trillion in bonds are literally savings accounts, the money just sitting there collecting interest.

  37. bandit says:

    We’re not in a distressed situation.

    You are high

  38. Brummagem Joe says:

    @Ben Wolf:

    When someone buys a U.S, bond, their bank debits their account and sends the money to its holding account at the Fed. The bank then disburses some of its reserves from its operating account at the Fed to the government’s account. The buyer’s money is never gotten hold of or spent by the government. When the bond matures the same reserves which were disbursed to the government’s account are sent back to the buyer’s bank, which then credits his money back to his checking account. At no point is money actually borrowed and used to fund government spending.

    Yep money is fungible and can take the form of a piece of paper or an electronic book keeping transaction. This doesn’t mean that when money moves out of the bond purchaser’s account and ultimately into the government’s account (to cover revenue deficits) that a loan has not been made and a debt incurred.

  39. An Interested Party says:

    Not a valid policy approach and certainly not a viable solution for addressing the issue- just more plain and simple diversion politics that doesn’t hold up to any serious scrutiny when you look at the numbers.

    Ahh, but Mitt Romney paying less than a 15% tax rate is such a valid policy approach…by the way, of course spending cuts will have to be combined with tax increases to deal with the budget problems, but this notion that the wealthy are already being squeezed is fantasy…

    Yeah, you guys did so well 13 months ago, didn’t you? But, hey, I respect someone who still clings to the childhood optimism that lets you close your eyes and pretend the world will be just like you want it to be … if you just wish hard enough .

    Talk about childhood optimism…do you really think that the 2010 elections will repeat themselves this year? Sorry to break it you you, sweetie, but that ain’t happeneing, especially with one of the current occupants of the GOP clown car at the top of the ticket…

    As the U.S. slides into become a second world country…

    Of course that coincides with the population of the country having more black and brown people and less white people, right? As the owner of this blog has told you, your act has gotten old real quick…

  40. Hey Norm says:

    Nice to see Drew at his ranting best.
    One thing I’ve learned over the years about people who insist on repeatedly making ostentatious portrayals of their alleged abilities, in the way Drew contiually boasts about his/hers, is that they are invariably full of horse$hit.

  41. Brummagem Joe says:

    @bandit:

    You are high

    No just in touch with reality. Distressed countries can’t borrow for 10 years at a rate of 2%….ask the Italians or Greeks.

  42. @superdestroyer:

    People forget that the Democrats are not proposing tax increases to lower the deficit but in order to increase spending on entitlements and pork programs for the core groups o the Democratic Party.

    Complete. Factually. Wrong.

    That was not what The Grand Bargain was about. It was 1x tax cuts and 4x spending cuts.

  43. @superdestroyer:

    Do you really think that in a country with a million lawyers and a million full time activist, that any politician will be willing to accept responsiblity for their own proposals ans action?

    The last thing we need to do is let Congress off the hook.

  44. Brummagem Joe says:

    @Hey Norm:

    One thing I’ve learned over the years about people who insist on repeatedly making ostentatious portrayals of their alleged abilities, in the way Drew contiually boasts about his/hers, is that they are invariably full of horse$hit.

    The interesting question to me is one of human behavior. Why do they do it? Exhibitionism, Mittyism, Masochism.

  45. Ben Wolf says:

    @Brummagem Joe: As I stated in my previous comment, the buyer’s money never goes to the government’s account. It isn’t borrowing anything. The money used to purchase bonds is not fungible because the Fed is the monopoly supplier of bank reserves. They don’t come from anywhere else and a bond buyer’s money can’t be used to create them. The reserves and the buyer’s money are not spent, they just sit in accounts until the bond matures.

    The entire national debt can be paid back overnight with a (relatively) few keystrokes sending the banks reserves back to their accounts at the Fed. There is no debt because the bond are savings accounts, just liabilities which can be retired with the proverbial flick of a switch.

  46. @Ben Wolf:

    You should say “I support an alternate perspective view of US debt.” People would get then that you are speaking from an unconventional position. If you say “under this view no money is borrowed” people might get where you are coming from.

  47. Hey Norm says:

    @ Joe…
    Probably over-compensating for something that is abnormally small.

  48. Ben Wolf says:

    @john personna: I do not support an alternative view. II am telling you that nothing is being borrowed. The government simply switches reserves back and forth and doesn’t spend any of it nor fund anything with it. When you buy a U.S. bond you are putting your money into a savings account and the money stays there. If that $15 trillion in public debt is just sitting in an account waiting for someone to disburse it to the originating bank then it cannot be said the U.S. must raise tax revenue to “pay it back”.

    It is literally no different than if I began a public service program where I took deposits and put them in a vault, and promised the depositors I would pay them 2% interest. I then go down to my “printing press” and print the 2%, and when the deposit matures I give the depositor their money back plus the promised interest. Now you tell me: am I borrowing from you, or doing you a service as a saver? The most that can be said is the government incurs a liability when it promises to pay interest, but this is not debt.

  49. Brummagem Joe says:

    @Ben Wolf:

    The entire national debt can be paid back overnight with a (relatively) few keystrokes sending the banks reserves back to their accounts at the Fed.

    Theoretically it could if you harbor weird ideas about public finance. The Fed balance sheet is around 3 trillion, total M2 is around 9.5 trillion. For the national debt to be repaid overnight would require trillions of dollars of currency to be conjured out of thin air with no causal link to anything. That worked out really well in Weimar Germany after all. The fact it was electronic would not alter it’s malign effects in the real world. And even using your bizarre reasoning you’re implicity accepting that loans have been made by bond purchasers and debts incurred by the federal govt. Those debts of course are used to fund current expenditures which cannot all be covered by tax receipts.

  50. Franklin says:

    Dear Drew and Brummagem Joe,

    I have heard better arguments between my 4- and 7-year-old.

    That is all.

  51. Brummagem Joe says:

    @Ben Wolf:

    The most that can be said is the government incurs a liability when it promises to pay interest, but this is not debt.

    Er…no. The government is using today’s money lent to it by bondholders to fund current expenditures and promising to pay it back at the end of a fixed term with in the meantime a rental payment for the hire of the bond purchaser’s money for the totality of which it remains liable.

  52. Brummagem Joe says:

    @Franklin:

    I have heard better arguments between my 4- and 7-year-old.

    Very profound. Now would you like to explain where my reasoning is faulty?

  53. @Ben Wolf:

    You say you don’t have an alternative view, but you think the conventional view of fractional reserve banking is all wrong, yes?

  54. BTW, I thought this argument via NPR for higher reserves in banking was pretty good. You’d think it is wrong because reserves don’t matter?

  55. Ben Wolf says:

    @Brummagem Joe: The fault here is clearly mine, as I am failing to write in a way which clearly communicates my thoughts. Let’s try it this way.

    Theoretically it could if you harbor weird ideas about public finance. The Fed balance sheet is around 3 trillion, total M2 is around 9.5 trillion. For the national debt to be repaid overnight would require trillions of dollars of currency to be conjured out of thin air with no causal link to anything.

    This is where things are going wrong. The government does not need to print the sum total of the national debt.

    1) It already printed that money in the form of bank reserves.

    2) The banks used those reserves to purchase U.S. bonds.

    3) The government puts those reserves into its account at the Fed where they sit and do absolutely nothing.

    4) When a given bond matures the very same reserves used to purchase the bond are then sent back to the bank which made the purchase, plus interest which the government does print.

    5) The sum total of reserves used to purchase outstanding bonds is sitting in the government’s account. When it receives the reserves it doesn’t do anything with them, it just shoves them into its account.

    That worked out really well in Weimar Germany after all.

    No. The situation in the Weimar Republic was radically different. It lost a war, owed money in a currency it did not control, suffered collapse in productivity and lost its tax base. These circumstances led to a rejection of the currency by the German people. While such an occurence is technically possible for the U.S. it is also possible the sun will get tired and fall asleep tomorrow, forgetting to rise and ruining my day off.

    The fact it was electronic would not alter it’s malign effects in the real world.

    Whether the money is electronic or paper is irrelevant.

    And even using your bizarre reasoning you’re implicity accepting that loans have been made by bond purchasers and debts incurred by the federal govt. Those debts of course are used to fund current expenditures which cannot all be covered by tax receipts.

    No. I will say this again: The money used to purchase a government bond is a savings account. It is not used to fund spending, and I challenge you to demonstrate that it is being used so. The government spends by creating money out of nowhere and crediting it to accounts. When Congress authorizes spending some dudes and dudettes at the Federal Reserve push buttons and conjure up brand new bank reserves. They dispatch those reserves to the recipient’s banks and create deposits in their accounts. The reserves dispatched do not come from reserves sitting in the government’s account which were used to buy U.S. bonds.

    Let me say it again: the consolidated government (Fed and Treasury) prints every penny it spends and has been doing so for decades. It does not borrow because it is sovereign in its currency and has the authority to create dollars at will. It prints brand new dollars into the economy when it spends and unprints them when it taxes to control inflation.

  56. Brummagem Joe says:

    @Ben Wolf:

    The government does not need to print the sum total of the national debt.

    It would if as you suggested above it was going to repay the entire public debt overnight with a few key strokes

    No. The situation in the Weimar Republic was radically different. It lost a war, owed money in a currency it did not control, suffered collapse in productivity and lost its tax base.

    These were just the proximate causes for the German central bank to conjure currency out of thin air. The effect would be exactly the same were the Treasury/Fed to attempt to conjure currency out of thin air to cover all it’s debts.

    )

    It already printed that money in the form of bank reserves.

    The Fed’s balance sheet of 3 trillion is largely composed of bank reserves. Total public debt is approaching 15 trillion. Explain the difference.

  57. anjin-san says:

    Credit ratings lowered

    Yes, and we would like to thank the GOP for creating the phony crisis that led to this.

  58. Ben Wolf says:

    @Brummagem Joe:

    The government does not need to print the sum total of the national debt.

    It would if as you suggested above it was going to repay the entire public debt overnight with a few key strokes

    Those keystrokes simply return reserves already in existence

    These were just the proximate causes for the German central bank to conjure currency out of thin air. The effect would be exactly the same were the Treasury/Fed to attempt to conjure currency out of thin air to cover all it’s debts.

    Germany had debts because it owed money in a currency it did not control (gold). Because of this it had to borrow in order to spend more than it took in via taxation. When it no longer had capacity to tax and maintain the value of its currency it turned the printing presses to full to buy sufficient gold to repay its debts. The German people lost faith in the currency and rejected it, causing the money to become worthless. If you have an interest in this subject a good article can be found here: http://pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon

    The Fed’s balance sheet of 3 trillion is largely composed of bank reserves. Total public debt is approaching 15 trillion. Explain the difference.

    The reserves used to buy bonds don’t go to the Fed, they go to the government’s account at the Fed. If you wish more detail you can find it here: http://moslereconomics.com/mandatory-readings/soft-currency-economics/

  59. Ben Wolf says:

    @anjin-san: The bond market knows the credit agencies are hogwash and that the government cannot involuntarily default. GOP stupidity has fortunately not harmed us this time.

  60. Brummagem Joe says:

    @Ben Wolf:

    Those keystrokes simply return reserves already in existence

    What reserves would these be? The total fed balance sheet is around 3 trillion. What don’t you understand about this? The amount required to immediately pay off all the publicly held part of the debt alone is 10 trillion so the only way in which this happens overnight is for the Fed to create at least 7 trillion of currency out of thin air and lend it to the US govt so it can meet it’s obligations.

    Germany had debts because it owed money in a currency it did not control (gold).

    Do you know what a proximate cause is? Because the various things you list were proximate causes for the creation of currency out of thin air so that the German govt could meet it’s obligations. I don’t need it explaining to to me but obviously you do, nor do I need to go to weird monetary web sites like Mosler that promote crackpot theories.

    We can trade these relative perspectives all day without arriving at a conclusion so I guess I’ll just leave it to others to decide whose perspective is closer to reality.

  61. Brummagem Joe says:

    For anyone interested in an examination of the flaws at the center of all the Mosler/Roche/Wolf baloney…here’s a succinct one although even then it’s fairly wonkish so I can’t imagine why anyone would bother ploughing through it. Anyway for Masochists and insomniacs here it is.

    http://seekingalpha.com/article/242669-the-trouble-with-modern-monetary-theory

  62. Ben Wolf says:

    @Brummagem Joe: You’re being silly, and so is the polemic you linked to. It argues:

    Lie # 1:

    “Well,” the MMTers say, “the fact that the government is self-funding – and could technically fund itself without bonds or taxes at all – means that worrying about deficits is stupid! Deficits don’t matter!”

    MMT argues deficits are critical because underspending robs the private sector of net financial assets, while overspending causes inflation.

    Lie # 2:

    “But hold on one minute,” the Modern Monetary Theorists say. “There will ALWAYS be demand for U.S. currency – because we need it for transactions and payroll and taxes!”

    MMT argues taxation creates a base level of demand for the dollar, along with productivity and spending. MMT also explicitly states that government abuse of its monopoly on the dollar can cause the populace to lose faith in the currency. It has never argued there will “always” be demand regardless of what the government does.

    Lie #3:

    MMTers think and act as if deficits don’t matter, no matter how big they get, solely because Uncle Sam can write his own checks in a neat little closed-loop system.

    Already debunked, but the polemicist seems under the impression that repeating the lie will make it more acceptable.

    Lie #4:

    They pooh-pooh the idea that investor preference will ever shift away from $US debt and currency to a significant degree because the U.S. is, at this present point in time, still hegemonic and strong. In part they lean on the chartalist taxes and transactions argument – a leg of the stool we have already kicked out.

    No, we don’t. Japan and Britain and Sweden and Russia and Argentina and most nations in the world use the same monetary system we do. Relative strength is not a consideration.

    Lie #5:

    The government relies on collateral.

    Not really a lie, just the proof in the pudding our polemicist has utterly failed to understand MMT’s basic observations. The government’s currency relies only on the faith of its citizens, because the currency has no intrinsic value.

    Lie #6:

    Modern Monetary Theorists have another problem. They don’t properly address productivity, and the productivity issue is extremely important.

    Already addressed, but our friend has decided to go back to it and pretend it is an entirely new argument. He can go to the very websites of the people he slanders and find quite a bit of discussion on productivity.

    Intermission: The author then attacks George Soros. Why? I don’t know as he isn’t involved with MMT. All I can figure is that our friend Brummy has linked us to a right-wing loon.

    Lie #7:

    Real wealth is not created by a printing press or punched out by government decree. Real wealth is assets, savings, goods and services – the productive output of the underlying economy itself.

    Every primer on MMT discusses this at length and clearly states that real resources are the limiting economic factor, not money.

    The polemicist uses words like “stupid”, “dumb”, “charlatans”, “tricksters”, “smug” and “bullies” in what is laughably purported by Joe to be a critical analysis of Modern Monetary Theory. It should also be noted the polemicist fails to provide links or quotes to substantiate his claims. He simply makes baseless assertions and our friend Joe has decided that’s good enough for him.

    Joe: That you came up with this within a day (it would take months of study to understand the dynamic of MMT) is a clear indication you’ve made no effort whatsoever to understand any argument I’ve made. That you linked to a hit piece which you appear to have accepted uncritically is unfortunate but predictable.

  63. Brummagem Joe says:

    @Ben Wolf:

    You’re being silly, and so is the polemic you linked to.

    Not really. And it’s a refutation not a polemic. There are in fact plenty of others if anyone is interested in googling the topic but this was rendered in fairly easy to understand terms which is why I linked to it. And the only uncritical acceptance I’ve seen is yours of this MMT baloney which no one outside cranks takes seriously. But no matter, as I said, I’ll leave other decide whose closer to reality.

  64. Ben Wolf says:

    @Brummagem Joe: And when your argument fails you turn to insults. Well, you should be proud. You’ve slandered, ad hominemed and shown a general lack of manners in your quest to propagate neo-liberal myths typical of conservative dogmatists. Perhaps you can find another blog where people will say MMT is “stupid”; I’m sure that will add further gravitas to your name-calling. Those who wish to ruminate on scholarly work may, however, wish to read this:

    http://www.epicoalition.org/docs/functional_finance.htm

  65. Tillman says:

    The most that can be said is the government incurs a liability when it promises to pay interest, but this is not debt.

    Debt is not a liability. The impossible is real; logic is the illusion.

    Okay, beyond that little hiccup, I need to understand something real quick: what is it exactly you think governments issue bonds for?

  66. Drew says:

    Thats fine Tillman, BJ and norm.

    Wallow in your dreams, losers and has beens. The proprietor of this blog knows who I am, because I use my professional email address. and he could call bullshit on me. I’m exactly who I say I am. And I’ll take your supposed collective contributions and see you, and raise you.

    I’m still out here in the private equity world slugging it out. We believe in manufacturing. We invest in manufacturing. We create investor value and jobs in manufacturing.

    You guys just masturbate and spew inane philosophy.

  67. Brummagem Joe says:

    @Drew:

    You guys just masturbate and spew inane philosophy.

    What was that you saying Danny about how professional managers communicate?

  68. Brummagem Joe says:

    @Ben Wolf:

    And when your argument fails you turn to insults. Well, you should be proud. You’ve slandered, ad hominemed and shown a general lack of manners in your quest to propagate neo-liberal myths typical of conservative dogmatists. Perhaps you can find another blog where people will say MMT is “stupid”; I’m sure that will add further gravitas to your name-calling. Those who wish to ruminate on scholarly work may, however, wish to read this:

    Somewhat over the top like many of your pronouncements.

  69. Brummagem Joe says:

    @Ben Wolf:

    And btw here’s a neat little takedown of MMT crankery by a well known non conservative dogmatist.

    http://krugman.blogs.nytimes.com/2011/08/15/mmt-again/?

    MMT is a classic bit of sophistry.

  70. Tillman says:

    @Drew:

    You guys just masturbate and spew inane philosophy.

    I do both of these things, sure, but you still can’t seem to type a cogent argument. Is the ability to persuade others lacking in the private equity world?

    Man, if you actually represent private equity managers as a group, I so don’t care how much your taxes go up.

  71. Brummagem Joe says:

    @Tillman:

    Man, if you actually represent private equity managers as a group, I so don’t care how much your taxes go up.

    We might not be able to agree about the precise status of the Waffen SS but Drew’s intellectual capacity presents no such doubts. I suppose it’s not impossible, Daddy might have parachuted him in, but I wasn’t kidding when I said I’d worked for a private equity firm at arms length and I think I can say with conviction I never came across anyone like Drew. Even when they are loud they’re not incoherent.