Pay Attention Because This Is Important: Your Debt Is A Problem Because You Can’t Print Money. The Government Can. QED.

Pete Peterson is the Republican functionary, founder of Blackstone, and recipient of Timmeh’s Bear Stearns largess, who has a hardon for eliminating that little bit of a social safety net that exists for Americans.  He’s also a world-class asshole:

But what did we get when we presented the idea to Peterson and Schwarzman? We explained why we came to see them. We got 40 minutes (I kid you not, I checked my watch) of name-dropping by Peterson, of all the senior folks he knew in our client’s country. But that wasn’t why our client came to see him; had he bothered to listen, the matter at hand was in the US.

Then he and Schwarzman spent the next 20 minutes talking about Blackstone, and they make it abundantly clear how jealous they were of leveraged buyout king Henry Kravis (at the time, Peterson and Schwarzman were mere advisor types, their looting wealth creating opportunities were far more limited than if they had oddles of investor and bank money to play with).

Well, Pete has taken his looted billions and started the Pete Peterson Foundation:

The Peter G. Peterson Foundation was established in 2008 by Peter G. Peterson, a co-founder of the Blackstone Group. With an endowment of $1 billion, the Peterson Foundation focuses on fiscal sustainability issues related to federal deficits, entitlement programs, and tax policies.

Of course, here’s what Pete really cares about:

Through the Medicare and Social Security programs, we have made promises (as of September 30, 2009) to pay out benefits to eligible recipients in the future, with $38.2 trillion in unfunded commitments to Medicare and $7.7 trillion in unfunded commitments to Social Security.

And a throwaway line for the peasants:

Pete has put his money where his mouth is. If the necessary reforms are adapted to address this problem, Pete will certainly see his own taxes raised. A proponent of fiscal discipline for decades and co-founder of the nonpartisan Concord Coalition in 1992, he believes the wealthy should pay higher taxes and forego government-subsidized benefits they don’t need.

Thanks Pete!  You should feel free to add a little extra into your payments to the IRS, and if you want to forego Medicare and Social Security, that’s just fine with me.  Pete’s been trundling around the country waving the banner of the catastrophe that is represented by the Federal debt (including the 38.2 trillion in supposed Medicare and Social Security liabilities).

With that as prologue, Pete Peterson seems to have infected the body politic with the idea that the Federal deficit and debt is some massive problem that needs to be dealt with now, NOW Dammit!

Think about this.  More people rate the Federal Government Debt as an “extremely serious” threat than rate our wars in the middle east, global warming!, unemployment, and healthcare costs (BTW health care inflation is the reason for that 38.2 Trillion Pete whines about).  AFEP asks, “What the fuck is wrong with you people?”  Yves Smith notes what is really going with this marketing campaign:

It would appear the ground has been laid rather effectively for (among other things) an assault on Social Security and Medicare. As we have pointed out before, Social Security is not under any immediate stress, and it would take only some minor tweaks to alleviate the (well off in the future) strains. And contrary to popular perception, the reason Medicare spending will get out of hand is due to projected medical cost escalation, not demographics. In other words, the “crisis” in Medicare is a symptom of our broken health care system, and not an entitlements problem per se. But in addition to the continued ability of Big Pharma and the health insurance industry’s ability to make a bad situation worse, as witness our healthcare “reform,” consumers have also been deeply conditioned to see more treatment as better.

I think what is really going one is even more perverse.  The reason people are obsessing about levels of federal debt is because they are analogizing it to their own situation.  In essence, “I have a ton of debt and I’m fucked.  Must be true for the federal government too!”  Ironic!  The banksters manage to lever up households, destroy the economy, gain free rein over the public fisc, and then they set up “public policy” foundations designed to strip people of the last of their social safety net.  Impressive, and nice work if you can get it!

Naomi Klein calls this “Disaster Capitalism,” and maybe it is (haven’t read the Shock Doctrine).  But at a minimum its misdirection.  The problem is household debt (mortgages, student loans, credit cards, car loans, etc.).  People know this because that debt is ruining their lives – it IS what is strangling the economy.  So people are analogizing from their personal situation to the government’s.

Analogy fail!

Particularly in view of the fact that the 38.2 trillion dollar Medicare liability could be eliminated by getting rid of private insurance and not putting 80-year olds and the terminally ill on ventilators, and Social Security simply by lifting the payroll tax cap (and treating hedge fund “income” as income), this whole issue is perverse. Even if we decided not to do the sensible thing and allow those who are dying to die with the dignity of not have a tube snaked through their nose, a sovereign government with a monopoly on currency issuance cannot go bankrupt!

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.

I can go bankrupt (and may), you can go bankrupt, but the United States (as long as it’s spending dollars) can’t.  Ever.  If anything, what the government should do is double the size of the federal debt by writing everyone a check for the amount of their household debt.

This whole federal deficit/debt fetishism is retarded.  Really retarded.