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Posted at 8:41 AM ET, 02/17/2011

Obama insists he doesn't add to the debt

By Jennifer Rubin

You have to sympathize just a bit with the White House's new press secretary, Jay Carney. He's being asked to defend the indefensible, namely the assertion additional borrowing doesn't "count" in assessing whether we are adding to our debt. Watch for yourself:

It is, in a word, embarrassing. And when the White House press corps is incredulous at the lack of honesty by the administration, you know just how badly the Obama team has stumbled.

By Jennifer Rubin  | February 17, 2011; 8:41 AM ET
Categories:  Budget  
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Comments

Our politicians are not serious about the fiscal disaster that is coming in 6-8 years when we are paying several times more interest on our debt. We need to act NOW. Serious spending cuts must happen. But the Dems are criminially irresponsible and the GOP is weak and gutless and not a lot better. And people who always want 'free money' for themselves and their allies, paid for by other people, are a big part of the coming train wreck.

Posted by: jmpickett | February 17, 2011 8:59 AM | Report abuse

History will remember that when we had time to stop the fiscal disaster, our politicians hemmed and hawed, and the truly idiotic were actually proposing high speed choo choo.

Posted by: jmpickett | February 17, 2011 9:02 AM | Report abuse

Obama is laying a political trap for the Republicans. He thinks the American people will flinch from serious cuts and turn on whoever proposes them. He may be right, but we're headed for disaster. We're borrowing 43 cents of every dollar we spend. Republicans will have to go first, whatever the consequences.

Posted by: eoniii | February 17, 2011 9:23 AM | Report abuse

I agree with Eoniii. The dems running Obama are not that stupid to put up a budget that goes opposite to the national dialogue on debt reduction. I have not yet been able to figure out their strategy but I know they have a card up their socialist sleeve. I hope whatever the plan is it backfires on them but even if it does we the American people will still be damaged by his irresponsible behavior. For every single point interest rates rise it will cost the taxpayers 140 billion dollars a year in higher interest payments on the national debt. This is the real disaster that is looming.

Posted by: eddiehaskall | February 17, 2011 9:40 AM | Report abuse

The Dems may well be hoping for a govt shutdown, which they think will politically damage House Republicans - same as 1995. If that's indeed the goal, then it's unforgivably shameful of them. Hopefully the voters will see through such a ruse and blame Obama & Co rather than Boehner & Co. The political climate on such matters is a whole lot different today than it was in 1995...

Posted by: RitchieEmmons | February 17, 2011 10:03 AM | Report abuse

The Dems may well be hoping for a govt shutdown, which they think will politically damage House Republicans - same as 1995. If that's indeed the goal, then it's unforgivably shameful of them. Hopefully the voters will see through such a ruse and blame Obama & Co rather than Boehner & Co. The political climate on such matters is a whole lot different today than it was in 1995...
Posted by: RitchieEmmons

Hi Ritchie,I'm glad you're here because at least you listen. NOTHING,I repeat,NOTHING is going to happen to improve our economy until we have a thorough debate on monetary policy. That's step #1. So Ritchie,first let me mention Ronald Reagan
"Reagan was an intellectual supporter of the gold standard and was enthusiastic enough to cut a television ad ahead of the 1980 New Hampshire primary endorsing it. The clip was shelved after production when the monetarist camp in his campaign led by Milton Friedman convinced him to drop it, although it did make it on the air by accident. That year Reagan told an audience, “No nation in history has ever survived fiat money, money that did not have precious metal backing.” This was not so much a radical statement in 1980: the dollar’s gold link through Bretton Woods had only been severed less than a decade earlier."
Please read the entire article
http://blogs.forbes.com/richdanker/2011/02/14/reagans-monetary-history/
Also,for your education,is another piece,if you're up to it.
http://www.forbes.com/2011/02/03/gold-standard-dollar-economics-opinions-contributors-nathan-lewis.html
Here's the reality,All NeoConservatives are opposed to any discussion of monetary policy because,though ignorant of the economics,politically they instinctivly know that a change in monetary policy threatens the entire NeoCon logical edifice. Conservatives just don't know the Economics,but they are open to a debate on MP. Liberals are 100% opposed to any debate,like the NeoCon, the Liberal Agenda is threatened by a change in monetary policy.
Ritchie,I don't expect you to agree with me,but I believe you're one of the few at this site who can tolerate a discussion of this subject.Also,I think you know by now,
that I have been following this issue for a long time,and an well qualified to have opinions on this,as well as presenting the history of this situation.
BTW,you are exactly right in your opinion that the Dems are positioning the Repubs to shut down the Government. If the GOP falls for this,Obama wins the confrontation. The ball is in Boehner's court,and he's not a pro level player.

Posted by: rcaruth | February 17, 2011 11:08 AM | Report abuse

You have to be kidding. This budget "addresses the problem"?

No it doesn't! It adds $1.6T in debt this year alone! And we all know, no budget controls anything after that first year. The rest is fairy tales and hope.

Obama sets up this debt commission then ignores every one of their suggestions because they said we should reduce spending. Obama wants more government, more spending, on principle.

Only in Obamaland can an *increase* in spending, an *increase* in the budget deficit over last year, be considered a "reduction".

Posted by: Publius1969 | February 17, 2011 11:14 AM | Report abuse

You have to be kidding. This budget "addresses the problem"?

Obama's economic policies have been a total disaster. But who in the GOP is a gamechanger? Only the Pauls are on the right track regarding monetary policy,and no one else in the GOP has one shred of credibility, WHY,because the dollar is very unstable,let's say we cut a Trillion $s from the budget,no one knows what the "Value" of those Trillion piece of paper will be six months from now,much less ten years from now. I know this isn't fun,but the dollar is like Liberal ethics,it is strictly situational.

Posted by: rcaruth | February 17, 2011 11:29 AM | Report abuse

Hey there RCAR. I do recall that monetary policy has been high on your agenda for years now. I don't at all disagree with your fears and instinctively agree that being on a metal standard is more desirable than on a fiat standard. But I don't know enough about micro economics to make a case either way. (I read both of those articles twice btw).

Can you explain to me the pains we would have to go through if we were go from fiat back to metal today?

Can you also explain to me *why* a fiat currency is bad compared to metal? Those articles say that things were good under gold and then went sour after 1971 because of Nixon taking us off the gold standard, but neither explain *why* fiat is bad.

I apologize if I've just assigned you a task that's going to take up half your day, but I'm interested in what you have to say here. If you've explained all this before at contentions, I'm afraid I've forgotten it. I apologize for that also.

Posted by: RitchieEmmons | February 17, 2011 12:32 PM | Report abuse

Ritchie, I'll keep it simple for now. There a very standard misunderstanding of what Gold backed currency accomplishs. The general but MISTAKEN belief is that gold backed money in and of itself,prevents inflation. It does not. In this context,Inflation,neither Fiat nor Gold backed money are the cause or the blame for inflation,it's the human beings who manipulate the monetary system,whatever it is that cause inflation.
The real benefit of Gold Backed money is that it prevents trade deficits. And by doing that helps stabilize the value of money(Prevents inflation/Deflation) How does it do that. Simple. If large amounts of our gold backed currency flow to countries like China and Saudi Arabia,and those countries feel like we are inflating our currency(BTW We are in the process of EXPORTING inflation with our fiat currency right now which will soon bite us in the ass as those inflated $s return to us in exchange for our commodities,businesses,and real estate) our dollars will flow back to us,and our gold will flow to China and SA. That's why Nixon dumped the Goild Standard in 1971,he knew we would be saying BYE BYE to our entire gold supply which would have flowed to Russia,holder of EuroDollars&Originator of the Eurodollars originator,liscensed by the US treasury Dept BTW/a Russian owned Bank in Leichtenstein),&SA,holder of Petrodollars.
Politically speaking,the core of the economics of the NeoCons is the trade deficits,the moving of wealth from the US to the rest of the world,in NeoCon terms,gives it the leverage/capital to export Exceptionalism. That is why all NeoCons oppose a gold standard,the GS will change the paradigm back to the days when domestic prosperity trumps world political/military domination,you can't have it both ways.
So,the CORE problem of our Fiat money system is that it was hijacked by Internationalists to create a system with Fiat money,Floating Currency,and "FREE TRADE"ie TRADE DEFICITS which has had a dramatic impoverishing effect on the US middle class. Warning Signs:(1)Zero interest rates/ (2)Trillions of American $s in Foreign hands (3)Outsourcing of our jobs,companies,and capital that will result in the Implosion of our wealth(4)The age of chronic unemployment(5)The increase in wealth of the top 1%
All this in the name of a Marxist philosophy called Trotskism,largely unfamiliar to most NeoCons. The fall of the USSR wasn't the end of the process,The NeoCons have been a powerful 5th column,weakening us in ways that Stalinist/Marxists could never accomplish.

Posted by: rcaruth | February 17, 2011 1:21 PM | Report abuse

Ritchie,

The theory is that fiat currency is bad because it gives the government the power to devalue the currency by printing money. That is the same reason the power to print money is taken out of the hands of the politicians and placed in the unelected and independent Federal Reserve. You can't print more gold, so it is not subject to devaluation.

However, the fact that a government power is subject to potential abuse does not mean it must be eliminated. If the U.S. went to a true gold standard, all of your money would become essentially worthless. This is because the U.S. holds no significant gold reserves to back its currency, much less its trillions of dollars of debt. The value of gold would multiply by a thousand, or maybe ten thousand, and essentially all wealth would be instantly transferred to the few people who own gold. All governmental entities would be instantly bankrupt, as would all banks and most businesses. The whole idea is as ridiculous as wearing a tinfoil hat to ward off the alien brainwaves.

The U.S. was not actually on any gold standard before 1971. Currency was theoretically backed by gold reserves, but it wasn't actually redeemable for gold and the reserves were nowhere near adequate to redeem the currency. It was just a pleasant fiction, useful for maintaining international monetary stability and exchange rates in the post-war rebuilding period.

Posted by: Larry3435 | February 17, 2011 1:44 PM | Report abuse

Ritchie,

Using gold to back your currency has absolutely nothing to do with trade deficits. If you import more than you export, you have a trade deficit. It doesn't matter what you use for money in making the trade. Yes, it is true that if you run a trade deficit long enough you deplete your national wealth, but that is true whether your country uses gold, fiat currency, or wampum.

Posted by: Larry3435 | February 17, 2011 1:51 PM | Report abuse

Thanks RCAR. Can you also tell me how hard/easy it would be to go back to gold today (I mean economically, not politically)?

"Warning Signs:(1)Zero interest rates/ (2)Trillions of American $s in Foreign hands (3)Outsourcing of our jobs,companies,and capital that will result in the Implosion of our wealth(4)The age of chronic unemployment(5)The increase in wealth of the top 1%"

I don't disagree with you on your points, but I'll address some of these. When you say we're "outsourcing" our jobs, I'm not sure it's as much of a crisis as you or others may think. All those jobs that are being outsourced are those low impact jobs (making sneakers, manning call centers, etc...). We are still, by far, the leading manufacturer of tangible goods in the world. The goods we make are high tech things. We've simply sent the low tech things overseas. If nothing else, that means we can buy a pair of Reeboks for $60 rather than $150. America has been there, done that with the low tech stuff and is off and running to the next horizon. China et al - they're still well in our rearview mirror in this regard.

As for increased wealth in the top 1%, that's a very liberal political viewpoint usually. The implication is that there is an always constant amount of money out there and it's being divvied up unfairly. The reality is that there has always been monetary expansion. The top 1% might be getting wealthier, but so can those at the bottom at the same time. As a matter of fact, I'm perfectly happy to see the top 1% do better as I like to see *everyone* do better. Not to mention my rising tide/all boats belief. Even the poor have things today that, relatively speaking, yesterday's poor never had (cars, ipods, cell phones, etc...).

So, I'm not sure that some of your warning signs are necessarily a harbinger of pending doom. That all being said, I've instinctively thought it's probably better for us to be on a metal standard. If you say it's because of trade deficits, then that's all well and good. I'm in no position to dispute that.

Sort of separately, but for roughly the same reasons, I also think that China has a monetary disaster looming simply because they have been manipulating their currency. I feel like it's only a matter of time before the forces of market nature will eventually doom a manipulated currency. I can provide nothing to substantiate that though. I mention this because it seems to be received wisdom that China is "taking our lunch." Even if they hold a ton of our debt, I don't buy that (for reasons of currency manipulation and other reasons too).

Posted by: RitchieEmmons | February 17, 2011 2:18 PM | Report abuse

Ritchie,see what I mean, who is the bull-sh----r here. I will show you ONE absolute falsehood,and then it's up to you.

Larry says,"theoretically backed by gold reserves, but it wasn't actually redeemable for gold and the reserves were nowhere near adequate to redeem the currency"
Our dollars were absolutely 100% redeemable for Gold,not on the individual level,but the CENTRAL BANKS had the absolute obligation to redeem currency for GOLD at 35$. The problem was that because of US Debt,by 1971,the market price of Gold was over 100$ an Oz. So if you held a bunch of US dollars you could send them to us and recieve our Gold valued at 35$OZ,and resell them,on the world market, for $115 OZ. Nixon was f---ed,and he bailed himself out. If Gold was not redeemable as Frank claims(just do a Google Check on what happened in 1971)why did Nixon bother going thru all these mechinations?

Also,the idiotic argument that there is not enough Gold to back up the currency,is idiotic. It all hinges on how you value the Gold in relationship to cash. If there was only one Oz left of Gold in the whole world,and we valued that OZ at 500 Trillion Dollars,each paper dollar would be redemmed at 0ne 500 trillionth of an OZ,if you read about Weimar,that's about what happened.

Posted by: rcaruth | February 17, 2011 2:24 PM | Report abuse

Thanks Ritchie,fror having an important conversation here
Thanks RCAR. Can you also tell me how hard/easy it would be to go back to gold today (I mean economically, not politically)?

Economically,very very difficult. Why?,here are some other symptoms of the Fiat money Gordion Knot.(1)Shadow Banking System/our credit creation generator(2)Off Book accounting/"real"value of institutional/individual debt(3)Use of Super Complex Derivatives(4)The Dominance of the FIRE(Finance,Insurance,RealEstate) markets over Industrial markets(5)The Dominance of Consumer spending over Industrial spending as a part of GDP/70-30%,(6)The reinflation of the Debt Bubble by TARP,Stimulus,and QE2.(7)Impenitrability of the FED(8)Forty years of Fiat money thinking(9)The unreliability of our economic #s including GDP,Inflation,Unemployment etc etc due to unreliabilty of unstable currency to measure our economy

The way it would work is there would be a time frame put on the Fiat money,say after 12 months,all Fiat money would have to be exchanged for Gold Backed money,or it would be deemed worthless. That would bring untold Trillions of pieces of paper called dollars out of the woodwork/mattresses to be redeemed at some scary ratio like 100 fiat dollars for one gold dollar. It will be a nightmare,but less nightmare than if we keep going with our present system. Reminder,NO FIAT MONEY SYSTEM IN HISTORY HAS LASTED MORE THAN 50 YEARS WITHOUT BANKRUPTING THE HOST NATION. WE ARE FORTY YEARS IN,HOW DOES IT FEEL?

Posted by: rcaruth | February 17, 2011 2:44 PM | Report abuse

RCAR, thanks for explaining.

Larry, thanks for your contribution too. I have some points on my Wampum card with Foxwoods casino (in CT). I think it'd be ok if we used that as currency. I'd be a little ahead of the game!

Posted by: RitchieEmmons | February 17, 2011 3:57 PM | Report abuse

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