Last time I tore apart a right wing attack piece on Obama’s stimulus. This time, Robert Kuttner of The American Prospect published this gem on Huff Post. Reading this was one of the most annoying things for me. I am skipping all of the stuff about health care and whether social security and medicare are solvent because neither one have a significant future.

So, again, if you need help falling asleep tonight, please read on after the fold…

Doesn’t Robert Kuttner just look like a manipulative asshole?

Mr. Kuttner started it all off by saying that the national debt was “over $10 billion.” While that might be technically correct, $10.6 trillion is quite a bit over, so maybe that was just a typo. He is only a professional writer that is being paid for generating content, so typos should be forgiven.

Then, he tosses out this line of shit:

The public debt was far higher–over 100% of GDP–at the end of World War II, yet the economy began a 25 year boom and the debt ratio quickly came down.

Why? All that debt ended the Great Depression. Wartime spending, as a side effect, put people back to work, recapitalized American industry, invested in science and technology, and created pent up demand for consumer goods. The debt was paid down rapidly after the war.

So all we need to do to have a post-WWII economy is drive up the public debt? Of course, the economy of the US actually made real things back then, and there was not anything resembling the competition that exists today globally. But increasing the public debt is what fuels the economy. The huge disparity between the balance of trade then and now has nothing to do with it. Wealth comes from deficit spending. Thats all there is to it.

Before I go on, I want to throw something in here real quick to provide some perspective. In 1950, the national debt was around $250 billion. There were already several billionaires in the US. In 2009, the national debt is $10.6 trillion. The richest person in the world is worth around $62 billion, that is $938 billion short of a trillion. I mention this because establishment assholes like to use terms like “percentage of GDP” to help explain things a certain way. Keep in mind that we are at the downward slope of an economic bubble right now, so the past few years of GDP should be taken with a grain of salt. With that in mind, check out Mr. Kuttner’s next piece of analysis:

We could easily tolerate a ratio of public debt that peaked at, say 70% of GDP, well below the WWII peak, if that’s what it took to avert a second great depression. And then we could start paying it down once recovery came, as we did after the war. My own view is that we need expanded public spending to avert a depression, about a trillion dollars a year for two years; and most economists think that Obama is at risk of aiming too low, not too high. Obviously, increased deficits and debts in the short run are preferable to a second great depression.

First, and most importantly, Mr. Kuttner and everyone else that knows anything about fiscal policy knows that no one ever has a plan to pay anything down once recovery comes. Look at the 90’s, the fake wealth of the internet barely got the budgets balanced. Even that was only done by stealing social security and medicare payroll taxes. Second, the US did not pay down the national debt after WWII. Since the 1930’s, the national debt has increased. The other issue here is that no one knows if investors will be willing to buy up trillions more in treasury securities. If there are buyers, they will likely want a higher return as the possibility of the US defaulting increases. That means that each year more and more of the federal budget will be dedicated to paying interest payments out to rich people holding federal debt. Last year alone the government sent out $238 billion in interest alone. What if the interest rates go up to 15% like they were in the early 80’s?

This editorial from Mr. Kuttner was typical of the 20th century liberal establishment mindset. The government can do everything for everyone, just look at FDR during the great depression. What none of them will ever say is that the end of the depression was inevitable, as there was not a systemic basis for the economy to continue to contract.

If you add the idea of peak oil into this train of thought, what you end up with is the realization that there is probably an economic ceiling put into place associated with the maximum daily oil production. If the stimulus works, all it will do is test the ceiling and we will end up right back where we are now, only more debt-ridden and with less time than we had to begin with.

I hope this brightened your day,

mike

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