Is the “Fiscal Cliff” a Fiction?

The Real News Network has the interview Is the “Fiscal Cliff” a Fiction?

I have selected some pieces from the transcript:

But I think the important thing is for people everywhere—for Americans, for other people, but particularly people in the United States—to realize that this deficit is not a problem. Once you realize it’s not a problem, then it becomes easier to argue against cuts in it, whether Obama’s for them or anyone else is for them. I mean, there are a lot of people out there on the left or whose hearts are in the right place who really do think it’s a problem if the government is spending a lot more money than it’s taking in. That’s a problem, that we have a debt that’s equal to annual GNP. But it’s not a problem, and people ought to realize it’s not a problem
The first thing to realize is almost 40 percent of the U.S. Debt is owned by the U.S. Government itself or by state governments. Another 20 percent or so is held by various private pension funds.

So think about that for a moment. The biggest single holder of U.S. debt is the Social Security system. The interest rate goes up. What happens to [incompr.] The Social Security system has more money and is more solvent. I’m not for interest rates going up, but what I’m saying is it’s not—paying this interest does not mean money down a rat hole. It’s not just throwing money away. People hold those assets. And many of the people who hold them are people like you and me—I mean, particularly me, because I’m retired. So those interest payments in part are what fund people’s pensions. And that should be kept in mind when you’re thinking about whether or not the debt is a problem.

The whole interview puts together in one place a lot of the economic principles I have been talking about in various articles on this blog.

Based on the comments on The Real News Network web site, there seem to be two camps. The camp to which I belong, is the one that says “finally an interview that puts many of the economic issues together in one place.” The other camp seems to be, “this guys an idiot and can’t possible know what he is talking about.”

For the second camp, I hark back to Mark Twain’s famous quote, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Of course the other side would just repeat that quote to me.

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