Increasing Government Debt = the Rich Get Richer, the Poor Get Poorer.
16 May 2019 [link youtube]
Youtube Automatic Transcription
a rise in debt isn't an indication that
we're living beyond our means because as phattest puts it one person's debt is another person's asset or as I equivalently put it debt is money we owe to ourselves it would really take the mask off this argument if he just gave one example I'm gonna give you one example right now that's very telling who owns government bonds who owns this debt Microsoft does Microsoft is a company with one hundred and thirty three billion dollars to spend and they have put 84% of that money into government bonds that's over 111 billion u.s. dollars now although it is hypothetically true that a poor person might scrape their money together and buy a government bond it's incredibly unlikely poor people and even middle-class people do not have money to spare on government bonds and even during World War two you may have a few heartwarming examples of poor people who managed to buy bonds managed to support the war effort by a government debt and make a few dollars back on their investment nevertheless if you look at the math disproportionately it is the richest of the rich who will benefit from the government offering debt having debt held by your wealthy is only in the future going to transfer that taxes that burden in our future generations of those poor and middle-income classes paying that tax their taxes to finance that debt that the wealthy owns to pay it back for themselves so what's gonna happen they're gonna pay it they're not getting anything back they're not getting anything back with interest but the problem is is that's gonna transfer money away from these and households these poor middle and ik Americans up and then the problem becomes much more crippling when you talk about middle class people and poor people who do not have the option to profit from government debt the way Microsoft is and you ask them why are you paying taxes do you realize so that the more and more the American government is in debt the greater and greater a percentage of your income is going to make the rich richer and by the same token it's making you poor although it is true that in Western democracies rich people pay the vast majority of taxes in fact it seems incredible if you look at a pie chart of united states tax collection of the money the government gathers from the population it's amazing how much of it comes from the richest 1% the richest 5% the richest 20% of the country although that is true nevertheless if you have ever been among the working poor you know just how hard it is to part with the few hundred dollars the government is taking from you in taxes I can remember working at Starbucks and the money being taken out of my paycheck to me that was a really appreciate anew life after university and so on every few hundred dollars the government took away from me really mattered I may have had the comforting delusion that the money being taken away from me as a poor underemployed university student working in Starbucks I may have had the comforting delusion that the money being taken away from me was to help people even poorer than myself and that's a very very powerful notion of social responsibility that motivates the poor in the middle class to pay their taxes and it's very damaging to that sense of I know the ethos of the taxpayer if we can admit that the government's tax dollars are in fact being used to make the rich richer to make the richest people and the wealthiest corporations richer the blindingly obvious fact about government debt as such the mechanism of government raising money through the selling of government bonds is that it makes the rich richer and the poor poorer and I'm gonna talk it through with you in this video this is not any kind of crazy conspiracy theory it's a blindingly obvious fact of 21st century economics that neither the left-wing nor the right-wing are talking about especially since the year 2008 we've become accustomed to a very insincere dance in which the left-wing is Pro debt and Pro deficit they're just in favor of expanding I don't know government spending whether to help the poor or perhaps to invade Afghanistan a military occupation of Iraq the other things that costs billions and billions of dollars taxpayers money but any case the left-wing has generally taken up the position of advocating for more debt for more deficit spending whereas the right-wing has expressed mmm reservations about this although as you all know in the United States the Republican Party has lavished money on projects such as the invasion of Afghanistan lately they're talking about spending a lot of money on building a wall between the United States and Mexico so when they want to spend money the Republican Party are quizzically all of a sudden in favor of debt and deficit spending Paul Krugman is one of the world's most influential people I think I can say he's one of the world's most powerful people he's an economist and he is left-of-center I would not say he is far left-wing but he's perhaps on the on the left side of the Democrat Party in the United States gonna quote Paul Krugman here and this is in some ways a completely typical left-of-centre position especially since there's 2008 antonio fat has commenting on recent work on deleveraging with the lack thereof emphasizes one of my favorite points no debt does not mean that we're stealing from future generations globally and for the most part even within countries a rise in debt isn't an indication that we're living beyond our means because as fattest puts it one person's debt is another person's asset or as I equivalently put it debt is money we owe to ourselves so that is dishonest in a profoundly important way saying that debt consists of money taken away from some people and given to other people very much intentionally obfuscates the mechanism which has been clear since the invention of government bonds government debt that what it does is take money away from the poor in the middle class and give it to the richest people and we're just corporations in our society we often think about these debts as putting at the backs of our children and our children's children the way we're going in our children's children's children but it really matters of whose children are paying these the step back so for that seventy percent if we look back at our previous wars World War one in World War two that was mentioned we had these bond campaigns so low and middle income Americans can go down to the post office as low as ten cents at a time and start buying government debt and they're gonna save that government debt until when they're ready to cash it in so you today own investment it's an investment they're gonna get eventually that money back just like many people do today who can afford to do that so who can afford to do that your wealthy Americans those who are lucky to have retirement accounts probably own aportfolio hold some government debt having debt held by your wealthy is only in the future going to transfer that taxes that burden in our future generations of those poor middle-income classes paying that tax their taxes to finance that debt that the wealthy owns to pay it back for themselves so what's gonna happen they're gonna pay it they're not getting anything back they're not getting anything back with interest but the problem is is that's gonna transfer money away from these and households these poor middle and ik Americans up psychologically and culturally people seem to think of buying government bonds as a positive thing they think of it in a positive way because of the experience of World War two the idea that the average man or even a poor person could scrape some money together and buy war bonds that they could buy government debt that they could lend to their money to the government and that they could help the government defeat the Nazis they could help the United States defeat the Germans that could help England defeat the Germans and at the same time they could make some sort of profit for themselves that all society could become war profiteers that's become a very powerful propaganda notion that that really shaped the transition in Western democracies to governments being massively reliant on debt and nobody really questioning who gets rich and who gets poor from this transaction as Paul Krugman says here sleeting Lee after all it's merely an interaction of one person with another person one person's debt is another person's asset yes indeed it would really take the mask off this argument if he just gave one example I'm gonna give you one example right now that's very telling who owns government bonds who owns this debt Microsoft does Microsoft is a company with one hundred and thirty three billion dollars to spend and they have put 84% of that money into government bonds that's over 111 billion u.s. dollars now although it is hypothetically true that a poor person might scrape their money together and buy a government bond it's incredibly unlikely poor people and even middle-class people do not have money to spare on government bonds and even during World War two you may have a few heartwarming examples of poor people who managed to buy bonds managed to support the war effort by a government debt and make a few dollars back on their investment nevertheless if you look at the math disproportionately it is the richest of the rich who will benefit from the government offering debt offering to pay interest on bonds partly of course because those are the people who have the money to spend partly for other economic and cultural reasons now the one aspect of this story that does get discussed in economics and politics in 21st century is what's called the crowding out effect conservatives right-wingers and libertarians will complain that there's a profound problem throughout the economy because Microsoft for example out of their 133 billion dollars if they are putting more than a hundred billion of that into the government's hands if they're taking that money and not using it to innovate new computers they're not using it to research how to make better software or better hardware or something they're not using it to research how to put a man on the moon or a cure for cancer they're taking over 100 billion dollars that investors have given them and investors have given them that money with the hope that they will make more computers make better computers that that sort of thing and instead Microsoft is profiting from taxpayers that's what this is when they quote unquote invest in US government and agency securities when they buy government bonds when they buy public debt what they're doing is profiting from taxpayers taxpayers will pay them money by the government what the right-wing conservatives and libertarians will complain about is that this has a dampening effect on innovation that this in many ways robs capitalism of the main mechanisms of its kind of strength vitality and even transparency right if you have bought stock in Microsoft you've invested in Microsoft but in reality what you're doing is indirectly buying government savings bonds what sense does the stock market make what sense is the price or value of Microsoft as a company make and yes if you just take a moment to imagine throughout the whole economy the fact that there are corporations and companies everywhere and indeed of course banks themselves financial institutions themselves investment firms brokerages there are all kinds of companies that instead of using their money in ways that are truly productive instead of using money that they have invested in their in their company to employ people instead they're giving that money to the government so the government can innovate Afghanistan so the government can go into debt operating hospitals all the things the government does good and bad that does indeed a road the conceptual and pragmatic basis of what capitalism is supposed to be and that complaint only comes from the right-wing I have never once heard anyone on the right-wing neither a libertarian or conservative I have never once heard any of them complain that very fundamentally what this mechanism is doing is taking money away from the poor taking money away from the middle class and giving it to the richest people in our society it is making the rich richer whether those are individuals who are rich who decide to buy government bonds government debt or if it's a corporation like Microsoft that's rich so that is very fundamentally the mechanism of what government debt is and even in the I don't know morally uplifting context of world war two propaganda that is in fact what government debt always has been so I say again it is true that the vast majority of the tax money collected by the government in the United States is collected from wealthy people as a larger and larger percentage of America's budget is spent quote-unquote paying down the debt or soon as I said as more and more of the government budget is spent paying for interest on the debt that means that a larger and larger percentage of the taxes paid by the rich are going to other rich people and corporations that happen to own government debt so yes that would be if only rich people pay tax it would still be very very difficult to justify what I've just quoted from from Paul Krugman it would be very difficult to say oh well debt isn't bad it isn't a problem because after all one person's debt is another person's asset if you were a multi-millionaire paying a lot in taxes because the wealthier you are the more you pay in taxes morally why would you feel positively about your tax dollars going to make microsoft corporation richer to some extent to make even foreign investors the government of Japan the government of China owned huge amounts of use it to make them richer is that what you pay taxes for and then the problem becomes much more crippling when you talk about middle class people and poor people who do not have the option to profit from government debt the way Microsoft is and you ask them why are you paying taxes do you realize that the more and more the American government is in debt the greater and greater a percentage of your income is going to make the rich richer and by the same token it's making you poor the left-wing in the United States has been in a strangely hobbled position on this issue the left-wing complains typically that spending on the military is too high but the reality is if you look at the percentage of the American budget that's spent in the military and the percentage that's spent paying interest on the government debt paying down the government debt in the next few years what we're gonna see is the military budget shrinking and shrinking and the percentage of the budget going to pay for debt and deficit servicing expanding and expanding at some point and it's not too far in the future the percentage of your tax payers dollars that will be in this way making the rich richer paying the interest on debt will exceed the total budget for the military this is not to say that the conservatives of the right-wing or in a coherent position on this issue it has been completely bizarre that they've advocated for reduced deficit spending for better management the debt in all cases except when they want to rattle their sabers and go to war and then they have an attitude that no amount of money is too much to pay when it comes to conquering Afghanistan a form of public good we all find debatable and dubious at best [Music]
we're living beyond our means because as phattest puts it one person's debt is another person's asset or as I equivalently put it debt is money we owe to ourselves it would really take the mask off this argument if he just gave one example I'm gonna give you one example right now that's very telling who owns government bonds who owns this debt Microsoft does Microsoft is a company with one hundred and thirty three billion dollars to spend and they have put 84% of that money into government bonds that's over 111 billion u.s. dollars now although it is hypothetically true that a poor person might scrape their money together and buy a government bond it's incredibly unlikely poor people and even middle-class people do not have money to spare on government bonds and even during World War two you may have a few heartwarming examples of poor people who managed to buy bonds managed to support the war effort by a government debt and make a few dollars back on their investment nevertheless if you look at the math disproportionately it is the richest of the rich who will benefit from the government offering debt having debt held by your wealthy is only in the future going to transfer that taxes that burden in our future generations of those poor and middle-income classes paying that tax their taxes to finance that debt that the wealthy owns to pay it back for themselves so what's gonna happen they're gonna pay it they're not getting anything back they're not getting anything back with interest but the problem is is that's gonna transfer money away from these and households these poor middle and ik Americans up and then the problem becomes much more crippling when you talk about middle class people and poor people who do not have the option to profit from government debt the way Microsoft is and you ask them why are you paying taxes do you realize so that the more and more the American government is in debt the greater and greater a percentage of your income is going to make the rich richer and by the same token it's making you poor although it is true that in Western democracies rich people pay the vast majority of taxes in fact it seems incredible if you look at a pie chart of united states tax collection of the money the government gathers from the population it's amazing how much of it comes from the richest 1% the richest 5% the richest 20% of the country although that is true nevertheless if you have ever been among the working poor you know just how hard it is to part with the few hundred dollars the government is taking from you in taxes I can remember working at Starbucks and the money being taken out of my paycheck to me that was a really appreciate anew life after university and so on every few hundred dollars the government took away from me really mattered I may have had the comforting delusion that the money being taken away from me as a poor underemployed university student working in Starbucks I may have had the comforting delusion that the money being taken away from me was to help people even poorer than myself and that's a very very powerful notion of social responsibility that motivates the poor in the middle class to pay their taxes and it's very damaging to that sense of I know the ethos of the taxpayer if we can admit that the government's tax dollars are in fact being used to make the rich richer to make the richest people and the wealthiest corporations richer the blindingly obvious fact about government debt as such the mechanism of government raising money through the selling of government bonds is that it makes the rich richer and the poor poorer and I'm gonna talk it through with you in this video this is not any kind of crazy conspiracy theory it's a blindingly obvious fact of 21st century economics that neither the left-wing nor the right-wing are talking about especially since the year 2008 we've become accustomed to a very insincere dance in which the left-wing is Pro debt and Pro deficit they're just in favor of expanding I don't know government spending whether to help the poor or perhaps to invade Afghanistan a military occupation of Iraq the other things that costs billions and billions of dollars taxpayers money but any case the left-wing has generally taken up the position of advocating for more debt for more deficit spending whereas the right-wing has expressed mmm reservations about this although as you all know in the United States the Republican Party has lavished money on projects such as the invasion of Afghanistan lately they're talking about spending a lot of money on building a wall between the United States and Mexico so when they want to spend money the Republican Party are quizzically all of a sudden in favor of debt and deficit spending Paul Krugman is one of the world's most influential people I think I can say he's one of the world's most powerful people he's an economist and he is left-of-center I would not say he is far left-wing but he's perhaps on the on the left side of the Democrat Party in the United States gonna quote Paul Krugman here and this is in some ways a completely typical left-of-centre position especially since there's 2008 antonio fat has commenting on recent work on deleveraging with the lack thereof emphasizes one of my favorite points no debt does not mean that we're stealing from future generations globally and for the most part even within countries a rise in debt isn't an indication that we're living beyond our means because as fattest puts it one person's debt is another person's asset or as I equivalently put it debt is money we owe to ourselves so that is dishonest in a profoundly important way saying that debt consists of money taken away from some people and given to other people very much intentionally obfuscates the mechanism which has been clear since the invention of government bonds government debt that what it does is take money away from the poor in the middle class and give it to the richest people and we're just corporations in our society we often think about these debts as putting at the backs of our children and our children's children the way we're going in our children's children's children but it really matters of whose children are paying these the step back so for that seventy percent if we look back at our previous wars World War one in World War two that was mentioned we had these bond campaigns so low and middle income Americans can go down to the post office as low as ten cents at a time and start buying government debt and they're gonna save that government debt until when they're ready to cash it in so you today own investment it's an investment they're gonna get eventually that money back just like many people do today who can afford to do that so who can afford to do that your wealthy Americans those who are lucky to have retirement accounts probably own aportfolio hold some government debt having debt held by your wealthy is only in the future going to transfer that taxes that burden in our future generations of those poor middle-income classes paying that tax their taxes to finance that debt that the wealthy owns to pay it back for themselves so what's gonna happen they're gonna pay it they're not getting anything back they're not getting anything back with interest but the problem is is that's gonna transfer money away from these and households these poor middle and ik Americans up psychologically and culturally people seem to think of buying government bonds as a positive thing they think of it in a positive way because of the experience of World War two the idea that the average man or even a poor person could scrape some money together and buy war bonds that they could buy government debt that they could lend to their money to the government and that they could help the government defeat the Nazis they could help the United States defeat the Germans that could help England defeat the Germans and at the same time they could make some sort of profit for themselves that all society could become war profiteers that's become a very powerful propaganda notion that that really shaped the transition in Western democracies to governments being massively reliant on debt and nobody really questioning who gets rich and who gets poor from this transaction as Paul Krugman says here sleeting Lee after all it's merely an interaction of one person with another person one person's debt is another person's asset yes indeed it would really take the mask off this argument if he just gave one example I'm gonna give you one example right now that's very telling who owns government bonds who owns this debt Microsoft does Microsoft is a company with one hundred and thirty three billion dollars to spend and they have put 84% of that money into government bonds that's over 111 billion u.s. dollars now although it is hypothetically true that a poor person might scrape their money together and buy a government bond it's incredibly unlikely poor people and even middle-class people do not have money to spare on government bonds and even during World War two you may have a few heartwarming examples of poor people who managed to buy bonds managed to support the war effort by a government debt and make a few dollars back on their investment nevertheless if you look at the math disproportionately it is the richest of the rich who will benefit from the government offering debt offering to pay interest on bonds partly of course because those are the people who have the money to spend partly for other economic and cultural reasons now the one aspect of this story that does get discussed in economics and politics in 21st century is what's called the crowding out effect conservatives right-wingers and libertarians will complain that there's a profound problem throughout the economy because Microsoft for example out of their 133 billion dollars if they are putting more than a hundred billion of that into the government's hands if they're taking that money and not using it to innovate new computers they're not using it to research how to make better software or better hardware or something they're not using it to research how to put a man on the moon or a cure for cancer they're taking over 100 billion dollars that investors have given them and investors have given them that money with the hope that they will make more computers make better computers that that sort of thing and instead Microsoft is profiting from taxpayers that's what this is when they quote unquote invest in US government and agency securities when they buy government bonds when they buy public debt what they're doing is profiting from taxpayers taxpayers will pay them money by the government what the right-wing conservatives and libertarians will complain about is that this has a dampening effect on innovation that this in many ways robs capitalism of the main mechanisms of its kind of strength vitality and even transparency right if you have bought stock in Microsoft you've invested in Microsoft but in reality what you're doing is indirectly buying government savings bonds what sense does the stock market make what sense is the price or value of Microsoft as a company make and yes if you just take a moment to imagine throughout the whole economy the fact that there are corporations and companies everywhere and indeed of course banks themselves financial institutions themselves investment firms brokerages there are all kinds of companies that instead of using their money in ways that are truly productive instead of using money that they have invested in their in their company to employ people instead they're giving that money to the government so the government can innovate Afghanistan so the government can go into debt operating hospitals all the things the government does good and bad that does indeed a road the conceptual and pragmatic basis of what capitalism is supposed to be and that complaint only comes from the right-wing I have never once heard anyone on the right-wing neither a libertarian or conservative I have never once heard any of them complain that very fundamentally what this mechanism is doing is taking money away from the poor taking money away from the middle class and giving it to the richest people in our society it is making the rich richer whether those are individuals who are rich who decide to buy government bonds government debt or if it's a corporation like Microsoft that's rich so that is very fundamentally the mechanism of what government debt is and even in the I don't know morally uplifting context of world war two propaganda that is in fact what government debt always has been so I say again it is true that the vast majority of the tax money collected by the government in the United States is collected from wealthy people as a larger and larger percentage of America's budget is spent quote-unquote paying down the debt or soon as I said as more and more of the government budget is spent paying for interest on the debt that means that a larger and larger percentage of the taxes paid by the rich are going to other rich people and corporations that happen to own government debt so yes that would be if only rich people pay tax it would still be very very difficult to justify what I've just quoted from from Paul Krugman it would be very difficult to say oh well debt isn't bad it isn't a problem because after all one person's debt is another person's asset if you were a multi-millionaire paying a lot in taxes because the wealthier you are the more you pay in taxes morally why would you feel positively about your tax dollars going to make microsoft corporation richer to some extent to make even foreign investors the government of Japan the government of China owned huge amounts of use it to make them richer is that what you pay taxes for and then the problem becomes much more crippling when you talk about middle class people and poor people who do not have the option to profit from government debt the way Microsoft is and you ask them why are you paying taxes do you realize that the more and more the American government is in debt the greater and greater a percentage of your income is going to make the rich richer and by the same token it's making you poor the left-wing in the United States has been in a strangely hobbled position on this issue the left-wing complains typically that spending on the military is too high but the reality is if you look at the percentage of the American budget that's spent in the military and the percentage that's spent paying interest on the government debt paying down the government debt in the next few years what we're gonna see is the military budget shrinking and shrinking and the percentage of the budget going to pay for debt and deficit servicing expanding and expanding at some point and it's not too far in the future the percentage of your tax payers dollars that will be in this way making the rich richer paying the interest on debt will exceed the total budget for the military this is not to say that the conservatives of the right-wing or in a coherent position on this issue it has been completely bizarre that they've advocated for reduced deficit spending for better management the debt in all cases except when they want to rattle their sabers and go to war and then they have an attitude that no amount of money is too much to pay when it comes to conquering Afghanistan a form of public good we all find debatable and dubious at best [Music]