Journalism in the Public Interest

From CEO to Candidate, Romney Flip-Flops on Debt

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Imagine how Mitt Romney would campaign if he actually ran as a private equity executive, dangerous though that may be in this era of the Tea Party and Occupy Wall Street.

Aggressively attacked by a super PAC supporting Newt Gingrich, Mr. Romney stands accused of being a rapacious capitalist intent on destroying jobs for personal gain. Mr. Romney has responded: Au contraire! He argues that his work at Bain Capital, one of the earliest and most successful private equity firms, created jobs by making companies more efficient and successful.

Many people on Wall Street are befuddled. After all, a private equity firm creating jobs is like Adam Sandler winning an Academy Award — it would be nice if it happened, but it sure wasn't the goal.

The goal, of course, is high returns.

If Mr. Romney were really running as a private equity executive, how would he view what his campaign regards as one of the nation's most pressing issues, the national debt?

Right at the top of his campaign's home page, Mr. Romney proclaims, "We have a moral responsibility not to spend more than we take in." The United States' debt is such a problem, it's like an addiction: "The first step toward recovery is admitting we have a problem and refusing to allow any more irresponsible borrowing," his site says.

It's almost as if Mr. Romney never worked in — what's that other phrase for private equity? — oh yes, a leveraged buyout firm. Leverage as in debt, debt and more debt. Debt amplifies the returns of L.B.O. firms. Indeed, they often saddle companies with extra debt precisely so that their investors can cash out faster, a technique Bain deployed under Mr. Romney's watch.

L.B.O. firms certainly never think of debt as immoral. When the borrowing is good, private equity is going to grab the money. When Mr. Romney rails against debt, he is running away from his entire career in business.

So what about the federal government? The 10-year Treasury bond rate is 1.87 percent. Since inflation is higher than that, real rates are actually below zero, meaning that a lender to the United States government will get back less money in 10 years than it started with.

That's right: When the government borrows, its lenders actually lose money. Yet foreigners and Americans, institutions and individuals alike are extraordinarily willing to shovel money at the United States government right now.

Are there private equity executives anywhere in the world who would counsel their companies not to borrow at such extremely low rates? I haven't had the privilege of meeting one. Their mantra is, borrow now, for tomorrow the Mayans might turn out to be right. Few indeed are the companies that could borrow that cheaply and not make some kind of return on essentially free money.

"If debt is available to you historically cheaply, it almost always makes sense to take it," said Shivan Govindan, a private equity executive for the Resource Financial Institutions Group. "Your capital strategy isn't something ideological. You are going to optimize it for the best mix."

So, by the logic of private equity, the United States government should borrow much more right now.

But what about the unsustainability of our debt? If a company has out-of-control costs and is spiraling toward default, it should not borrow more. True, but no company that is truly headed toward imminent default can borrow as cheaply as the American government.

If the United States government is headed toward bankruptcy, lenders are surely not acting that way. Maybe those people are making a good decision; maybe they are deluded. It doesn't matter to the borrower.

Of course, an issue for the United States, as for a company, is whether it could put the money to good use.

"Surely, government investments would have a real return in a 10-year period higher than zero, even with waste and corruption," said Paul L. Kasriel, an economist for Northern Trust. "This means that these investments will boost future real G.D.P. growth, which will boost future tax revenues to service the increased debt."

There will be bridges and roads that we must fix over the next decade. We could put more young people in college, improve elementary school education, train veterans so they can find good jobs or finance exploration of alternative fuels. People will quibble — or maybe, in our polarized culture, fight tooth and nail — over the choices, but most could think of something that would be a good investment.

On a deeper level, the debate over private equity raises questions about using the metaphor of America as a business. That kind of thinking can reduce society to the sum of its revenues and profits, ignoring that much of what we do to provide for the common defense and promote the general welfare cannot or should not be measured, especially in economic terms. We take care of our elderly because it is the right thing to do, not because we expect a return on investment. Shouldn't society promote and protect freedom and human rights? Even when there are times when doing so may be expensive or uneconomical?

There are moral issues that confront our country. Debt isn't one of them.

This is not an apt analogy, and shows your lack of understanding of business and finance.

Leverage on a company is limited by the debt markets. Debt investors (hedge funds, asset managers, banks, etc.) will only give a company as much debt as they think it can service and pay back, and will also analyze the total value of the company’s assets in case of bankruptcy (loan-to-value, or LTV).  Debt providers will always make sure the LTV is well below 1:1.  Of course, their analysis can be wrong, and have been wrong in the past.

U.S. debt is also limited by the debt markets, in this case mostly foreign governments like China.  However, since we print our own currency, we can always print more to service this debt. However, this will cause inflation, which is similar to cutting the purchasing power of every citizen in the U.S., not to mention the negative effect on our currency value in relation to the rest of the world.

Companies cannot print more money.  Only countries can.  Therefore, your analogy is wrong.  And yes, debt is a HUGE issue for our country.  We have too much of it, and need to cut spending (incl. medicare) to reduce our reliance on it.

Walter D. Shutter, Jr.

Jan. 18, 2012, 1:40 p.m.

L.B.O. firms often saddle companies with extra debt so their investors can cash out faster.  Fair enough.

One problem, though.  WE can’t cash out.

While all analogies are limited, this one is considerably apt.  A basic premise of economics is that wealth always seeks its best return and while judgement may differ as to where that return is to be found, there appears to be no current shortage of those who believe it is in our Treasury securities.  The government is not hamstrung, as are hedge fund managers, by the need to demonstrate return on investment every quarter or even annually.  Thus, if it borrows at today’s favorable rates and invests that capital in infrastructure, education and other such wealth generating endeavors, the long-term return in the form of higher revenues will more than justify and, ultimately, satisfy the lenders.

Romney actually is the prototypical modern Republican:  There is absolutely nothing he won’t say or do to further enrich or empower himself.

No moral or ethical boundaries whatsoever wrapped in a publicity sheet of religion…again, the hallmark of the modern Republican.

Your thinking is downright scary. As a small business owner I have never been through such tough times as we are going through now. Obama’s total lack of business experience along with his Utopian philosophy are making America a debt riddled society. I will gladly vote for change this time.

Nonsense! on many issues - i will address just a few

John said: “since we print our own currency, we can always print more to service this debt. However, this will cause inflation, “

inflation is not a function of the amount of money in circulation - if that were true we would have ranging inflation right now - given the amount of money supply increase / issued in the past three years is unprecedented in such a short time frame - fact is velocity is way down

inflation is a function of “too” much money chasing too few goods and services - when you have factories and labor today - well below capacity / full employment -  not just in USA but the world you dont have inflation -  we are experiencing deflation in many catagories of SIC code -  no inflation anticpated

oil prices are contrived / fixed right now and inflated beyond demand requirements which are down considerably - posted price of Brent crude easily manipulated by major players as world bench mark given limited supply per day and a lot of supply parties have interest in keeping it up artifically

Romney all day long compares the public debt to family debt - over and over - so the commercial comparision to his LBO business is well within bounds of debate as parallel arguement

fact is -  the national debt is a mirage used to control the sheeple by people like Romney

when china produces goods and sells to USA they receive compensation - dollars - which they can “choose” to keep in a checking account - or- trade for savings - in the form of T-Bonds - which increases the national debt of Bonds outstanding - at any time they can trade back to dollars - which reduces the national debt - and go buy a coal company in australia for example - which obviously does not create inflation in USA (seperate discussion)

so instead of defending Romney with his sleigh of hand - why not call him out on his overleveraging companies at the expense of innovation, jobs and multiple BK’s in USA and compare that to his stewardship of the federal government with his potential future misguided policies

in fact the author is competely correct - you -  ALWAYS-  borrow not when you need it - but when it is available and CHEAP - especially in the case where once in 100 years money costs are less than 3% for 30 year paper

so if this guy Romney knew anything about use of capital and wasting existing US labor - including you - he would be mobilizing for infrastructure projects - the payback for real projects is enormous -  i can think of many with good solid ROI’s

there is NO other reserve currency in the world - the chinese dont want the burden - the EEC is incapable and the swiss have already said go away with that idea - so the reserve position is the USA indefinitely !

people want dollars - use the advantage ! if the currency devalues the USA goods get cheaper for the rest of the world to buy and labor deployed to larger level - whats wrong with that ? when you have 21% unemployment rate

Romney is neither a good businessman nor a knowledgeable macro economist - he is a transparent SALESMEN -wake up !

@John- I disagree with your characterization that “debt is a HUGE issue for our country”. We retired a bigger debt to GDP ratio soon after WWII. We did it with a more progressive tax code under a Republican President, Eisenhower. Also, we are not just another sovereign nation. We have the World’s ONLY reserve currency and note that investors from all parts of the World fled to our debt instruments when they were downgraded. They preferred our treasuries to France’s AAA rated ones. DUH!
@Walter- We can cash out. We can simply declare bankruptcy like many countries and businesses have done and wash the slate clean. Think Argentina. Think AMR recently. I think they need new planes. I saw Dick Armey interviewed by the BBC a while ago and he made it clear China was a fool for trusting that US treasuries would always be a sound investment. He laughed at that notion.

(Not the same John—I’m the usual loudmouth)

I agree with the article, and the disagreement among politicians is the biggest problem we have in this country.  We want to borrow at a loss or not borrow at all, for some reason.

The right thing to do in this climate is to borrow a lot and use that money on projects that will expand the economy through peripheral technologies.  Put a research installation at the bottom of the ocean or on Mars, for example, and the materials, environmental, energy, and other necessary innovations will turn the economy into a powerhouse for decades to come in the hands of small businesses.

For all the (misguided) talk about running the country like a business, it’s amazing that none of the candidates who say so know how to run a business.  They’d rather act like the country is an acquisition than the thing to run, on both sides of the aisle.

I’m curious exactly what you expected the President to do?  I’m not a huge fan of the President, but it seems to me that more responsibility lies on the decades that led up to this recession in which we borrowed well beyond our means without any thought of how or when to pay it back.  Both parties love spending money, especially in their back yard because it means jobs and votes, but it seems odd to work on getting rid of the debt when we’re already in recession.

The other thing that bothers me about this whole thing is that there seems to be the underlying belief in the Republican party that government jobs aren’t “real” jobs.  I bring this up because that’s what cutting the debt would likely mean in this congress.  Why do people seem to think that a government job is a drag on the economy?  I feel like infrastructure, education, public institutions, police, roads, bridges, firemen, clean water, clean air, the FDIC, a judicial system, food inspection, and the CDC all create a world where prosperity is even possible.  It is the foundation on which our financial success rests and many of these things are done by people that work for the government.  At the end of the day I don’t feel like that’s “Utopian.”  I think it’s what we’ve already accomplished and I’m not yet ready to sacrifice it to Ayn Rand.

Barb, I own three small businesses and the one primary reason for the slowdown we are experiencing is because the middle class, our customers, have run out of disposable income. The rich cannot possibly consume the goods and services this economy produces. The middle class can, and when they have the money to purchase DEMAND is stimulated. Increase demand and jobs are created to fill the gap between demand and supply. Problem solved.

John, you are quite correct.  One thing that I take exception to is your contention that we need to eliminate Medicare, which by extension I assume means that you might want to consider throwing Social Security into the mix. 

Both of those items, SSI and Medicare, are paid for from a seperate deduction from an employees paycheck (I increasingly hear it being called by the misnomer “Payroll Tax”, however it is not a tax, it is an Insurance Premium.  It’s an imposed premium to be sure, just like a tax, but it is not a tax.).  They are not part of the Federal budget, despite what we are told.  Although most pie charts, graphs and tables might show it to be that way, those are portrayed incorrectly (perhaps on purpose to rile up those who want something to blame the deficit on?).  The monies come from a seperate fund to which our premiums are being paid to.

@Barb- You do realize that the debt and deficit problems Obama and the Democratic-led Congress are dealing with now we the result of the profligate spending of the 108th Congress under George Bush, don’t you? 2 wars, 2 tax cuts and Medicare Part D were unpaid under the last iteration of Republican “leadership” and I use that term loosely. In addition, TARP which recapitalized Wall Street and the financial services sector was forced on Congress by Paulson and Bernanke as the only way to save the World’s markets. It was done without any strings attached. Bush endorsed it and signed the bill into law. All of them are Republicans by the way and the current crop of Republican Presidential candidates all agree they would not accept a compromise of a 10:1 ratio of spending cuts to revenues increases. All one has to do is look at both Europe and the UK sinking into another recession to notice that “Expansionary Austerity” guarantees lower growth and lower wages in the short term. We don’t need to go there, though. We can choose long term austerity along with immediate, short term infrastructure spending to pull ourselves out of the hole created by deregulation of financial markets and erasing taxes when times were good. It’s really that easy.

BARB, appreciate your comment; however, suggest you read Jacob Hacker/Paul Pierson’s book “Winner Take All”. You need to understand that we are suffering from a planned effort to create massive inequality of wealth and opportunity, brought to you by our friends on the other side of the isle over the past 40 years. Mr. Obama is doing his best to place the nation on a solid, concrete foundation rather than on the system created to funnel money and opportunity to the upper 10%. Wake up and vote based on research, not emotion.

Business owners do not make business decisions based on taxes.  They pay taxes based on business results.  To blame their difficulties on excessive taxes is ridiculous.  Show me the business man who decided NOT to make a profit because he’d have too much tax to pay if he did…show me the one! 

Obama is doing the best anyone could possibly do now with this collection of fools in the Republican House.  He inherited a house of cards that had been set up by the previous administration and was already collapsing.  The best thing that ever happened to John McCain is that he got defeated…otherwise HE’d have had to explain how his own party led him into such a death spiral.  Let’s put some people with something besides ideology into a leadership role in Congress.

Rich people will take care of themselves…they always have!  After all, they are “‘winners,” right?  That’s what winners do….they win.  So why do we have to tilt the field so far in their favor that they CAN’T lose…?  What a bunch of whiny wusses!!  These aren’t the capitalists of old, these are spoiled brats that care about no one but themselves….introduce Mitt Romney (Mr. $375,000 speaking fees is “very little”).  Not a chance Mitt….not a bloody chance Mr. “nearly 15% tax rate”,

The purpose of public debt is different than the purpose of private debt. One is seeking a return for “society” and another is seeking a return for an individual borrower. The types of debt have nothing to do with each other.

I just bought a house and now have a mortgage, if I were voted into office I wouldn’t have a government agency go around buying houses.

I give Mr. Romney full credit for his success in the private market, but dealing as the president has many restrictions under article 2 of the constitution as well as congress as President Obama has sadly learned.
No Question we have a debt that is beyond belief, 16 trillion and rising.
I agree with Ron Paul on how to reduce…But I don’t want a socialist state that history has certainly proven simple won’t work.

I don’t care if we have a republican or a democrat as the president, nothing is going to get by congress.
One of the biggest mistakes I think this country made was by listening to the media and having a split congress and a non majority that would favour the president and not having limited terms for all!

Romney( who it would seem is going to be the republican choice) can “flip flop” all he wants. Nothing will change if we remove Obama and elect him to replace…NOTHING…

We’re better off sticking with Obama and keep the good fight going..Then changing the term lengths to a period of 6 years period…Just think what could get done if we could just get rid of this four year term that is really 21/2 years and then trying to get reelected.Not to mention this horrble decision by the supreme court to say corps. have the same rights as a real live person…Super pacs How stupid!!!

yep, I got off track..sorry
thanks for reading

Cynthia Mills

Jan. 18, 2012, 5:03 p.m.

Erik—yay.  Well said.

@Bill- So you think Mr. Paul would be successful in bringing both sides together? I certainly don’t see that. I think he would be even more frustrated as President than he is now. I lump him with Perot and The Donald; good ideas once in a while, but no concept of diplomacy or compromise, especially under the current hyper-partisanship.

I absolutely agree with you that term limits are an important part of the solution to the mean-spirited games being played by both sides. That was a very good Republican idea until many of them gained office back in 1994, then they seemed to like the trappings of their jobs and ran for reelection. You do see that Ron Paul would have been sent home many decades ago if term limits were in place, don’t you?

Paul would never win a National election due to his dovish stance on war not to mention his views on race. He seems to want to relitigate The Civil Rights Act of 1964 and return to the gold standard which is about as likely as having the US eliminate all of it’s nuclear weapons.

“Winner’s take All” will be the next book I buy! The top 1% organized themselves w/Congress ($$$) visa via tax codes, Fed regulations, Bank’g regulations etc…to solidify their wealth. If the top earning Corporations would have dispersed even a fraction of their profits to the employees, down to the janitors, it could have lifted up many & keep the middle class in place. Instead they cut out middle man’gt, drop health care coverage, left wages the same, all the while keeping more for themselves. My belief has always been that if you work a 40 hr work week in this country you should be able to have a saving acct, buy a car, pay for a house & put away for your children’s college. We lost good paying companies like Kaiser, GE (most manufact’g) to overseas. The top 1% consolidated phone companies, power facilities, communications companies only to break them into smaller companies giving us the impression thru the 80’s+ that America was doing well & had plenty of wealth & work to go around. Remember Ross Perot & the “gaint sucking sound”, he wasn’t lieing. We are forced to buy $1 hamburgers from McD’s & detergent from Walmart cuz that’s all we can afford. We have been duped & in my humble opinion…Obama is the only choice we have right now! If a memeber of the GOP gets in the White House; God help us, we’re gonna need it.

The commentor who mentioned that the middle class has no disposable income is spot on! Without the ability to buy,our economy stagnates and without jobs,most of which were shipped to 3rd world nations with the financial support of the government,there will be no jobs,no disposable income and thus,a declining economy! The best way to take back our economy,the largest consumer nation in the world,is to stop buying,particularly products not “Made in USA” which may be hard to do but is necessary to regain our country!

This is another reason Romney is not a good candidate. Have people ignored the obvious already? He BARELY won Iowa, and in New Hampshire, he didn’t even get 2/5 of the vote after a couple candidates got out of the race post-Iowa. Now when he starts campaigning in other states and people listen to his message and look at his background, they’ll see how fundamentally different he is from the other candidates, and if he wins more states, it won’t be by much. Sound familiar?

As a young adult, I am appalled at the childish and catastrophic gambling act our Congress is playing with the future of this country—a future that us youth will inherit before too long—due to short-term political posturing of a power-hungry few.

Rather than putting aside ideological divides for the well-being of this entire country to safeguard the future, our elected representatives, as a whole, would rather replay apocalyptic budgetary scenarios over and over again by putting the country on the brink over simple budgetary matters, and would rather whip up an us-verses-them dichotomy fueled by warped half-truths and a horribly inept and misunderstood notion of political theory (Obama is a socialist, like Glenn Back is an objective journalist).

So many in my generation are utterly disgusted by our representatives, disgusted at the legacy you—the generations before us—are handing over, a legacy of a broken military depleted after two useless wars, an education system that barely teaches its students the basics of math and reading, a health care with skyrocketing costs and diminishing quality, and, most egregious of all, a political system so morally and ethically corrupt at its core by corporate and union money and influence as to leave a whole generation of youth apathetic and dismissive for a better future.


Some other place I made a slightly facetious comment to the effect that South Carolina better think hard before they select Romney for their state has been hit hard by the Republican recession - their unemployment rate has hovered at or above 10% for three years - and Romney’s experience and preference is to quickly dump whatever isn’t profitable and to heck with the people affected in order to repackage the good bits and make a fast buck.

At the time, I said that South Carolina might find itself sold down the river to Mexico…but after a little reflection (and a certain shudder up my backbone), I remembered how Bush and the Republicans were trying to sell our ports off to state-owned corporations based in Islamic countries even after 9/11.  Remember the Dubai Ports World controversy?

Sometimes I forget that Republicans are generally only American for the money in it.

If we get stuck with Obama and his cronies for another 4 years, please get back with me in 4 years and let me know how you all are doing. We are losing more freedom everyday in America. Apparently, many are fine with this. ibsteve2u’s comment, “Sometimes I forget that Republicans are generally only American for the money in it” is offensive. It shows how badly this country has become divided. We need to work together and I don’t see how it can be accomplished when we have politicians from the President on down and the media fueling the fires of discontent and people like ibsteve2u sucking it all up.

lollll…hit a nerve, did I, Barb? 

Did attempting to contradict my statement with your knowledge of the Republican position that they shouldn’t have to pay taxes to support and build this country that enriches them leave you…frustrated?

I have heard the same spin you did, Barb. Please tell me what personal freedom(s) you have lost? As Denzel Washington said in Philadelphia, “explain it to me like I was a child”. You can’t believe how many times I have asked a conservative or Tea Party backer to do this. Guess how many responses I have received? ZERO, because they have lost none!

Let me answer your question now. I am doing much better than I was under Bush/Cheney. My stocks and bonds are way higher and we’re moving in the right direction. We just need to replace the intransigence of the new and inexperienced House freshmen, so we can overcome the Great Recession and job losses Obama was handed. We need more infrastructure spending even if it is in Republican districts.

I really don’t understand why people cling to the idea that Ron Paul is racist or that his ideas don’t hold water with other conservatives, or even liberals. First off, it’s disputed whether those racist letters were written by Ron Paul in the first place, secondly he is the only candidate who is willing to address the War on Drugs (Primarily effects minorities) and other laws that forcefully discriminate, as opposed to socially. Paul said his opposition to the Civil Rights act was on a philosophical level with the constitution, but both he AND Rand Paul have stated they would not pursue repealing it. Ron Paul’s foreign policy is often mis-represented, he is not opposed to military force, he is opposed to pre-emptive wars and wars of aggression. Many conservatives and conservative pundits will openly embrace the idea that they like Ron Paul’s economic ideas. Ron Paul even has the support of some democrats on various issues these days, including the Federal Reserve and the NDAA.

Aside from the exploitation that is very, very possible under the NDAA (Signed by Obama, backed by Romney and most other legislators in the WH) we HAVE had various other minor breaches of true Freedom of choice and civil liberty. Many of the government regulating departments, while they often carry a noble cause, do in fact limit our freedom of choice as consumers, and consume a large part of the federal budget, and are often extraordinarily ineffective at the things they aim to do. Those ARE breaches of Freedom that we did not have until the 1900s and on, whether you agree with the things they aim to do or not. You can apply this to just about every Federally funded/run department that aims to control what products consumers are allowed access to legally, such as the EPA.

Also, can you explain to me why wanting to earn money and be fiscally successful and responsible are frowned upon by Liberals? Just because somebody makes a lot of money doesn’t mean they are corrupt corporatists. Most people become succesful because they put their time and effort into it, I think that should be applauded.

Anyways, I don’t think that bipartisan co-operation IS infact the answer, because it obviously has not worked for us so far. I think thinking in terms of parties AT ALL is the wrong way to look at in the first place. I have no idea why I decided to respond here, I’m sure very few people would actually read this and even fewer will agree. Enjoy.

Here’s some info on Ron Paul if you’re of a mind to…make up your own mind:

The Debt became the central Republican mantra for 2012 because they have no other issue that resonates with the public.  And it is based on the Big Lie, i.e., Obama created the entire debt.  The GOP has no ideas regarding ways to reduce the debt except for gutting the social safety net and letting what remains of the middle class pay off the structural debt created by, the GOP.  And who among the GOP candidates is the biggest proven enemy of the middle class:  Mitt Romney, the man who shut down companies and shipped jobs overseas.  The ultimate problem with The Debt as a campaign issue, aside from Romney’s baggage, is that anyone can research the real sources of the structural underpinnings of our current debt:  Medicare Part D ($1 trillion, unfunded), the Bush tax cuts of 2001 and 2003 ($5 trillion in 10 years, unfunded) and the Afghanistan and Iraq wars (estimated total tab - $3 trillion, unfunded).  Most of the real damage was done between 2001-2006 when the GOP controlled all three branches of government, but now they pretend Obama created the entire debt and they had nothing to do with it. This is the way they roll.  On the issue of tax equity they have no answer so they scream, Class Warfare.  Putting these clowns back in office would be like declaring war on ourselves.

@max:  I would quibble with “Putting these clowns back in office would be like declaring war on ourselves.”  Technically, it would be the American people siding with the Republicans in the Republicans’ war upon the American people.

I.e., the war is ongoing, and whether or not we put a Republican into the White House is not going to change that; the Republicans will continue their war against the American people, the American Dream, and the American way of life regardless.

The war, in fact, will continue until either the Republicans are defunded by eliminating the oil addiction the Republicans enforce and rolling back deregulation and “flood-up/trickle-down” economics or by simply voting the Republicans out of all offices at all levels of governments and thereby eliminate them as a viable political party.

It took from 1973 forward for the Republicans to gain the amount of power and inflict the amount of damage that they have to date; beating them and ending the forced decay of America isn’t going to be a “piece of cake” no matter how often the Republicans tell us to eat same.

@Casey- Ron Paul stated he would not have voted for the Civil Rights Act of 1964. When someone prefers to return this issue to the states, it’s tantamount to overturning those very rights. After seeing the Republican debate there, can you imagine what South Carolina would do with blacks, if it were left up to them? Additionally, Mr. Paul personally defended the racist newsletters that were mailed out under his name:  It would be a mistake to consider Paul in the mainstream today unless you believe blacks should only have 3/5’s of a vote or restaurant owner’s should have the right to deny service to a black person sole based on the color of his skin. Racist indeed!

A Young One:  Thank you for your intelligent comment.  Sometimes we of the older generation forget that we are leaving behind a legacy that our young people have to live with.  We are now suffering horribly from the last 8 years of a Republican president who’s mantra was “spend, spend, spend, and to hell with it.”  He took us through 2 unpaid wars, Medicare Part D that was unpaid for, and several other items that hurt us.  I have to believe that our current president is doing the best job possible despite, as you call them, the childishness, of our Congress and House of Representatives.  Instead of working together to get us through this mess we’re in….they spend more time fighting about things that aren’t helping anyone but themselves.  Our government, as they say, is the “best money can buy,” and that’s sad.  Apparently, our Supreme Court is also in the same category.  We older people want the same legacy that we can leave our younger generation—a world where we all can live fairly well, where we can all own a home (small or otherwise), a car, raise a family, send our children to school to get a GOOD education, and find decent-paying jobs.  Until we start forcing our politicians to do the jobs that they were hired for….we will never see this in our lifetimes.  I apologize for our government….and I apologize for the legacy that we are seemingly leaving you….I can only hope that more people can see that the road we’re on (if we elect another Republican president) at this moment is NOT the road we need to be on.  Let’s hope that there is STILL “Hope” to be found with President Obama!

Wonderful and insightful article, and much in agreement with Nobel Prize winning economist Paul Krugman, who, so far, has gotten it right both here and abroad.

I would like to introduce readers on this page to Modern Money Theory. Before I expound on what it is here’s the best written primer on MMT- remember to give up on any and all notions you may have had about, money, government debt and our banking system, they are most likely wrong unless you were already well versed in MMT.

“A sovereign government faces no solvency issues. It also does not have to go through the logic that restricts a household – that logic runs like this – if we spend more than our income now, we have to borrow. To pay the loan back we have to ensure we have revenue (income) in the future. If we borrow too much we will face major corrections in our balance of income and expenditure and we may have to seriously forgo spending later.

That is the logic that the users of the currency have to consider every day. They have to finance every $ they spend and so planning is required to ensure they don’t “blow their credit cards”! But that logic doesn’t apply to a sovereign government. They can spend now (even if they simulataneously issue debt – which I remind you has nothing to do with financing the spending). They can also spend later as well as service and pay back the debt without compromising anything.”

Finally, in conjunction with MMT I would ask that the reader look at this web site
The Centre of Full Employment and Equity web site shows the basic ideas behind fiscal deficit spending that will move us closer to full employment.

Jesse Eisinger

About The Trade

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