Rush Holt Laments Debt Reduction
By Art Gallagher
Congressman Rush Holt (D-NJ) sent the following message in an email to his constituents this afternoon:
Right now, the United States can borrow money essentially for free. In fact, 10-year Treasury bonds have a negative real yield. That is, investors are lending the government money with a guarantee that, in a decade, the US will pay them back less in real dollars. It seems that they are confident that the US is sound over the long term and that the much-decried debt is not the show-stopper some would have us believe.
Meanwhile, the US has tens of thousands of needed projects that would create jobs and produce a clear, positive return to taxpayers. We need to repair crumbling roads and bridges and schools. We need to modernize old buildings that are wasting taxpayer money on electricity, heating, and air conditioning. It is not all construction projects, either. We need to support private companies engaged in research and development. More than anything we need economic growth now that will create jobs now.
Yet last week with the debt ceiling deal Congress took the U.S. government out of the picture, saying in effect that the government will play no direct role in stimulating the economy or making jobs. Not only does it prevent Congress from making these sure-thing investments, but it requires government to cut public services and eliminate jobs, and also to throw many states into destitution.
As the public and policymakers come to recognize the deal’s devastating effects on our economy and our people, I hope we will begin to work around its restraints. Yet until that happens, we must do everything possible to create jobs in ways that do not require federal spending.
The Senate, for instance, can pass patent-reform legislation that the House passed earlier this year to encourage inventors to create new products. The president has proposed an idea to restore health to the housing market by encouraging investors to turn foreclosed homes into rental properties. Congress could also establish an infrastructure bank that would offer low-interest loans to cities and states to invest in public works (but that would take start-up funds).
Let me be clear: measures like these are somewhat indirect and will not be as effective as direct job creation, yet they can be beneficial, and for as long as Congress maintains its self-imposed shackles, they may be the best we can do.
Hmmm, I’m not a rocket scientist, but it seems to me that a negative real yield to investors who buy our debt is not a good thing, for several reasons:
1) It is a sign that investors are not confident enough in the economy to make private sector investments. Investors are essentially betting that they will lose less by investing in Treasuries that they will if they buy private equity, private debt or commodities.
2) Other than Treasuries, the other “safe” investment over the last few years has been gold. Investors may be realizing that gold is overvauled. Now that gold is being advertised on cable-TV like buying real estate with no money down used to be advertised, it is a good bet that the burst of the gold bubble is in sight. When the market wakes up to the fact that the value of gold as a holder of value is perceived and not based upon the demand for the uses of gold, there will be weeping and nashing of teeth. Investors buying Treasuries at a negative yield now are betting that gold is no longer safe. Good bet.
3) The negative yield that Holt talks about is a lot more negative than he thinks. When inflation inevitably kicks in due to all the money that the government has borrowed and spent, and all the money that the Federal Reserve continues to print, the dollar that pays off those 10 year Treasuries in 2021 is going to be worth a great deal less that the dollar borrowed and spent today.
We’re in for a very very long haul of difficult economic times. Rush Holt doesn’t get that.
More from my site
Eck Preparing To Challenge Holt In CD 12
Does Congressional Seniority Matter? Should It Trump Competitiveness?
Gooch would challenge Pallone or Holt
“Crazed Sex Poodle” Gore Coming To Rumson For Rush Holt- Rush Holt Outed in Newly Released Book
Rush Holt’s Shameless Manipulation of the Bean Family
Rush Holt’s Shameless Manipulation Of the Bean Family
Holt/Lautenberg Employment Discrimination Complaint
Holt Fails To Get Bean Bill Passed
Monmouth University Poll: Sipprelle Slipping
Conressman Holt should stick to physics because he does not understand economics.
Let me try to break it down for him.
In order to grow a business or start a business you need capital. Capital = money.
There is not an unlimited amount of capital.
When the government takes our capital that is taxes us and spends that capital it measns there is less capital to be invested by private industry. When it borrows money there is even less capital available to private enterprise. When the government borrows obscene amounts of money well you get the picture.
The reason we had a huge economic expansion at the end of the last century was twofold. Tax rates where cut and people where encouraged to invest in capital markets through IRA’s and 401K’s. This increased the capital available for economic expansion.
Government spending does not help the economy because it is a zero sum game.
Spend less, borrow less and tax less and you spur economic development.
Spend more borrow more and tax more and you suck all the oxygen out of the room and the economy dies.
Common sense and history have proven this to be true.
Let’s see you guys beat Watson the IBM computer… I’ll put my money on Rush- No, not that one…
There is a better way to get “free money”. Eliminate the Federal Reserve. Let the government print it’s own money without borrowing or interest. However, it would be a cold day in Hell to see him support that proposal.