We have another proclamation that Keynesian policies are dead. My difficulty with that claim consists of the fact that there has not been a burial as yet, and Keynesian policy has always been a rotting corpse. Even Lord Keynes had great doubts about Keynesian policy. The delayed Death scene is basically caused by the allowance Keynesian policies give Politicians to spend other peoples’ money, all without taxing anyone for anything. One has to kill that Skunk every day, and everyone gets tired of the repetitive labor. I once advocated a plan where legislators had to pay a percentage of any deficit aroused from their own Salaries, but legislative passage proved impractical.
James Galbraith presents another side to the argument. His entire contention states that the elements which are functioning well should not be distorted in the balanced budget debate; a factor on which I could agree. It is not the fault of the Poor and the Elderly that Congress spent the Social Security Fund. Taxpayers paid the taxes in good faith, while legislators only used the circumstance to further their own agenda, without resort to actually funding a sound tax system. They now want to reduce or destroy the programs, because there is the necessity of repaying the Fund. The only thing Politicians resist more than raising Taxes to pay for their excesses is raising Taxes to fund the expenditures of others. The one thing Politicians cannot do is attack popular programs, so the outcome of this current battle remains unknown.
Here is a man who can skirt the major issue: whether Government debt should be utilized as Collateral in the first place. Government debt consists of unfunded expenditure without methodology for repayment; remember, Governments are highly adverse to establishing a Tax base to actually repay debt. Securitization of such debt does not Collateral make, only a system of Gambling where Bettors place money on the stability of political motivations. It is not like a Mortgage or Business debt of set duration and Interest rate. Government debt will only be replaced by future debt of indeterminate duration and Interest rate, never with a refunding cycle where it is actually paid; politicians totally incapable of paying for their own Expenditures through taxation, let alone the Expenditures of their predecessors. Securitization of such debt only completes the process of running the Printing Presses to print a different form of Currency. The underlying context foretells nothing but Inflation. lgl