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Part I Political Money and the Debt Imperative: Why the Budget Can't Be Balanced by Thomas H. Greco, Jr. (1990)
Part II
Part III
Preface
This book began as a compilation of three essays which I wrote during 1988, and which I have since revised several times. These essays comprise Parts I, II, and III. They express ideas which have been slowly taking form over the past nine years, a time during which I have focused much of my attention on fundamental research into the subjects of money and exchange.
Although I have an extensive academic background in management, finance and quantitative analysis, the understanding of economics which I gained through formal study within academia was superficial, narrowly focused and, for the most part based on premises which are questionable at best and in many cases erroneous. From the beginning, my research has been problem-centered and motivated by a growing awareness of the deepening and interrelated global problems of both human and ecological degradation, a strong desire to understand the root causes of these problems and the hope that out of these efforts might come some clues which might lead to a remedy.
.
.
.
Part 1 - Political Money and the Debt Imperative:
Why the Budget Can’t Be Balanced
The Debt Crisis
The whole world today seems to be awash in a sea of debt which threatens to drown us all. Many Third World countries, despite their huge increases in production for export, are unable to pay even the interest due on their accumulated indebtedness to Western banks and governments. In the U. S., the levels of both public (government) and private debt are increasing at alarming rates. The Federal budget deficits of recent years far exceed anything thought possible just a decade ago. Why is this happening and why is it a problem? In order to understand that, one must first understand some financial facts of life.
.
.
.
Why the Federal Budget Cannot Be Balanced
One facet of the debt crisis which is getting increasing attention of late is the Federal government debt and the deficits which have become an inevitable and increasing part of the Government’s budgets. At last, even some orthodox economists and financial experts are saying that there is a limit to how large the Federal debt can get and that something must be done to stem the pattern of ever-increasing budget deficits. The most notable recent action which has been taken by Congress and the President is the Gramm-Rudman Law, which calls for automatic spending reductions if the Congress and the President are not able to meet certain deficit targets over time. This is equivalent to your typical New Year’s resolutions, well intended but not likely to make any real difference. It simply does not address the causes of the problem.
Budgetary problems, in general, reduce to the consideration of the two fundamental factors which comprise a budget - revenues and expenditures. A deficit is simply the result of expenditures exceeding revenues. The logical process for reducing a budget deficit; the one ordinarily followed by businesses and other organizations, is to 1) increase revenues, 2) reduce expenditures, or both. Simple and straightforward. Why, then, is it not possible for the Federal government to eliminate its budget deficits?
Those who practice the "art" of politics will answer that revenues cannot be increased because the people dislike taxes and will resist attempts to increase them beyond a certain amount. And so it is. At the same time, the people demand services from the government, and each Representative is intent on looking good to his/her constituents. Again, true. Indeed, except for the "pork barrel," by which politicians feed the popular illusion that the state is the great benefactor of the people, and the pervasive wish to get something for nothing, the establishment of true grass-roots democracy should have long since become reality.
The Central Government - Central Bank Nexus
What people forget is that government can, at best, only give back to the people what it has taken from the people. The Federal budget is a grand redistribution system designed to take from some and give to others. The obvious and highly touted expenditures for welfare and social programs are but a minimal part of this redistribution, intended to feed the popular myth. By far, the greatest amounts go, not to the poor and disadvantaged, nor to popular social uses, but to various fiefdoms of privilege which have been established in various ways, including, first and foremost, the banking and financial cartel, the "military-industrial complex," the entrenched bureaucracy and special interests with friends in high places.
But this is not the root of the matter. If all were visible and above board, the various political difficulties in reducing spending or increasing revenues could be overcome if the will were actually there to do it and the people were allowed to make their own choices. In order to understand the magnitude of the problem, one must examine it from a different level, one which exposes the interconnections which exist between government finance and the monetary system.
Few people understand that this interconnection exists, much less how it operates. But once this is understood, it becomes obvious that a balanced Federal budget would spell disaster for the economy as it is presently structured. The money supply would shrink and business would grind to a halt. The subsequent depression would be awesome. Why? In order to understand that, one must first understand the nature of the present monetary system and how it operates.
This book began as a compilation of three essays which I wrote during 1988, and which I have since revised several times. These essays comprise Parts I, II, and III. They express ideas which have been slowly taking form over the past nine years, a time during which I have focused much of my attention on fundamental research into the subjects of money and exchange.
Although I have an extensive academic background in management, finance and quantitative analysis, the understanding of economics which I gained through formal study within academia was superficial, narrowly focused and, for the most part based on premises which are questionable at best and in many cases erroneous. From the beginning, my research has been problem-centered and motivated by a growing awareness of the deepening and interrelated global problems of both human and ecological degradation, a strong desire to understand the root causes of these problems and the hope that out of these efforts might come some clues which might lead to a remedy.
.
.
.
Part 1 - Political Money and the Debt Imperative:
Why the Budget Can’t Be Balanced
The Debt Crisis
The whole world today seems to be awash in a sea of debt which threatens to drown us all. Many Third World countries, despite their huge increases in production for export, are unable to pay even the interest due on their accumulated indebtedness to Western banks and governments. In the U. S., the levels of both public (government) and private debt are increasing at alarming rates. The Federal budget deficits of recent years far exceed anything thought possible just a decade ago. Why is this happening and why is it a problem? In order to understand that, one must first understand some financial facts of life.
.
.
.
Why the Federal Budget Cannot Be Balanced
One facet of the debt crisis which is getting increasing attention of late is the Federal government debt and the deficits which have become an inevitable and increasing part of the Government’s budgets. At last, even some orthodox economists and financial experts are saying that there is a limit to how large the Federal debt can get and that something must be done to stem the pattern of ever-increasing budget deficits. The most notable recent action which has been taken by Congress and the President is the Gramm-Rudman Law, which calls for automatic spending reductions if the Congress and the President are not able to meet certain deficit targets over time. This is equivalent to your typical New Year’s resolutions, well intended but not likely to make any real difference. It simply does not address the causes of the problem.
Budgetary problems, in general, reduce to the consideration of the two fundamental factors which comprise a budget - revenues and expenditures. A deficit is simply the result of expenditures exceeding revenues. The logical process for reducing a budget deficit; the one ordinarily followed by businesses and other organizations, is to 1) increase revenues, 2) reduce expenditures, or both. Simple and straightforward. Why, then, is it not possible for the Federal government to eliminate its budget deficits?
Those who practice the "art" of politics will answer that revenues cannot be increased because the people dislike taxes and will resist attempts to increase them beyond a certain amount. And so it is. At the same time, the people demand services from the government, and each Representative is intent on looking good to his/her constituents. Again, true. Indeed, except for the "pork barrel," by which politicians feed the popular illusion that the state is the great benefactor of the people, and the pervasive wish to get something for nothing, the establishment of true grass-roots democracy should have long since become reality.
The Central Government - Central Bank Nexus
What people forget is that government can, at best, only give back to the people what it has taken from the people. The Federal budget is a grand redistribution system designed to take from some and give to others. The obvious and highly touted expenditures for welfare and social programs are but a minimal part of this redistribution, intended to feed the popular myth. By far, the greatest amounts go, not to the poor and disadvantaged, nor to popular social uses, but to various fiefdoms of privilege which have been established in various ways, including, first and foremost, the banking and financial cartel, the "military-industrial complex," the entrenched bureaucracy and special interests with friends in high places.
But this is not the root of the matter. If all were visible and above board, the various political difficulties in reducing spending or increasing revenues could be overcome if the will were actually there to do it and the people were allowed to make their own choices. In order to understand the magnitude of the problem, one must examine it from a different level, one which exposes the interconnections which exist between government finance and the monetary system.
Few people understand that this interconnection exists, much less how it operates. But once this is understood, it becomes obvious that a balanced Federal budget would spell disaster for the economy as it is presently structured. The money supply would shrink and business would grind to a halt. The subsequent depression would be awesome. Why? In order to understand that, one must first understand the nature of the present monetary system and how it operates.
Part III