Warren Mosler on Federal Deficits

     I recently had a discussion with Greg on the question of the phrase 'government debt' where he argued that the very phrase is a problem. My answer was that I'm not sure about that-I'm still not.

     http://diaryofarepublicanhater.blogspot.com/2015/02/keynes-vs-abba-lerner-on-pubic-debt.html

     I do see from looking at what Mosler and other MMters that they do argue that bonds are not sold so the govt has the money to spend here or there. Here is Mosler:

     "We all know how data entry works, but somehow this has gotten turned upside down and backwards by our politicians, media, and, most all, the prominent mainstream economists. Just keep this in mind as a starting point: The federal government doesn’t ever “have” or “not have” any dollars. It’s just like the stadium, which doesn’t “have” or “not have” a hoard of points to give out. When it comes to the dollar, our government, working through its Federal agencies, the Federal Reserve Bank and the U.S. Treasury Department, is the score keeper. (And it also makes the rules!) You now have the operational answer to the question: “How are we going to pay for it?” And the answer is: the same way government pays for anything, it changes the numbers in our bank accounts. The federal government isn’t going to “run out of money,” as our President has mistakenly repeated. There is no such thing. Nor is it dependent on “getting” dollars from China or anywhere else. All it takes for the government to spend is for it to change the numbers up in bank accounts at its own bank, the Federal Reserve Bank. There is no numerical limit to how much money our government can spend, whenever it wants to spend. (This includes making interest payments, as well as Social Security and Medicare payments.) It encompasses all government payments made in dollars to anyone."

    http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf

    However, there is some fine print:

    "This is not to say that excess government spending won’t possibly cause prices to go up (which is inflation). But it is to say that the government can’t go broke and can’t be bankrupt. There is simply no such thing."

     Ok, so that still shows that even if nothing can stop the govt from spending anything it wants to spend it on there is still a reason why we can't just spend without limit-don't get me wrong we're currently far away from any such limit in the US today.

      If you go to far ether or not you want to call this 'printing money' then you harm the value of your currency. It's not so simple as like that old show lots of us in our early 40s used to watch in the 70s, Bewitched, where the good witch Samantha used to wiggle her nose and stuff would appear out of thin air.

    I mean if it were then the govt should simply send $10 million dollar checks to all individuals and $100 million checks for businesses and we can all live in a land of milk and honey. I'm not mocking or discounting the point just that it needs to be qualified. Achieving prosperity is not as simple as conjuring up whatever we want-unfortunately.

    Again, this is not to say Mosler is wrong but just read the fine print even he lays out which shows that it's not just about a blank check where we can write in whatever we like.

    It still does mean that there is a need for taxes and public debt-whether or not we want to call it that. Indeed, according to MMT, the whole reason for the existence of money is so we can pay our taxes.

   Again, even if prosperity is still even following Mosler as easy as having your own Genie where she gives you whatever you want, still it may be easier than it is now when politicians tell us that the government has to live within its means like a family.

   UPDATE: Regarding public debt, though, consider what Mosler says here:

    "From our point of view (not the federal government’s), we need to first have U.S. dollars to be able to make payments. Just like the children need to earn the coupons from their parents before they can make their weekly coupon payments. And state governments, cities, and businesses are all in that same boat as well. They all need to be able to somehow get dollars before they can spend them. That could mean earning them, borrowing them, or selling something to get the dollars they need to be able to spend. In fact, as a point of logic, the dollars we need to pay taxes must, directly or indirectly, from the inception of the currency, come from government spending (or government lending, which I’ll discuss later)."

   What this means then is the idea that you can never run out of money is only true for nations-that have their own currency. So at the state level, you really are limited by how much you can spend-as ultimately you need the federal government to give you your American dollars.

  So then they-assuming the federal govt doesn't give them enough to fully cover everything they want to finance do need taxes and or public debt to pay for their spending?