He chooses to ignore the fact that if the limit were hit and it could not issue any more securities, the U.S Treasury would only default if it refused to request that the Fed honors all payments due, as explained here.

Republicans and many Democrats agree that national debt is a real long-term problem, so they most likely will agree on raising the debt limit and cut the annual Federal budget.

According to Warren Mosler:

[This] dooms the US economy to suffer from a severe lack of aggregate demand for the foreseeable future. The one very faint glimmers hope are the Senators from CT- Joe Lieberman and Richard Blumenthal, only because they alone know better.

Both have read my book, the 7 Deadly Innocent Frauds of Economic Policy, and have engaged me in thorough discussion, and both know as a fact of monetary operations that:

1.  The Federal govt. can’t run out of money.

2.  Paying off China is nothing more than debiting their Fed securities account and crediting their Fed reserve account, with no grand children writing any checks.

3.  The Social Security issue, therefore, can’t be about solvency, only potential inflation.

4.  For a given size of the Federal govt. there is always a level of taxation that corresponds to full employment.

5.  The trade deficit is an enormous benefit, and we can set taxes at a level where we have enough spending power to support both domestic full employment and the purchase of anything the rest of the world wants to sell us.

However, it is highly unlikely they will even attempt to be heard, because, based on their history, they don’t act with specific regard to public purpose.  They are more micro oriented, acting solely for political gain from their immediate constituents.  So on this issue they will likely play along with what think is their voter’s understanding of these issues, and make no effort to educate them for the public good.

The words that come to mind when that happens are ‘intellectually dishonest.’

But I do hope I’m wrong and that at least one of them comes through for all of us.

There are also others outside of Congress who could come through and save the day.  Current and senior Fed officials in the Department of Monetary Affairs are more than well versed in monetary operations, and know for a fact that operationally, Federal spending is in no case revenue dependent.  And much of the CBO, including former heads, know as a fact of accounting Federal deficit spending equals, and is in fact the only source of net savings of financial assets for the rest of us.  But it’s highly doubtful any of them will come forth to save the day.

Bottom line – believing we could be the next Greece continues to keep us on the path of becoming the next Japan.

Has the U.S. government ever not been in debt? Has it even become close to repaying its debt?

The U.S. has had debt since its inception.
Find the dollar value of U.S. National Debt since 1791 here
Find a chart of U.S. National Debt since 1950 here
“By January of 1835, for the first and only time, all of the government’s interest-bearing debt was paid off.“ This has never happened since. Find more here.
You may want to know that the worst depression on record occurred in 1837, two years after paying off national debt: see :
here

How has public debt reached the current levels?

U.S. National Debt increases when the U.S. Government issues interest-bearing debt and sells it to the public for cash, or to the banks for bank reserves. Accumulation of cash held by the private sector, and of reserves held by the banks, results from government spending exceeding government taxing.

If public debt levels are so high, has the U.S. government ever been declared bankrupt or insolvent?

No, and it has always been able to pay its debt when due. Today, government makes these payments to government debt holders by converting the interest-bearing debt they hold into bank reserves, or cash.

What is the collateral for the national debt? How is this enforced?

There is no collateral for national debt, in the same way as there is no collateral for cash (dollar banknotes in circulation).

Here are some links on the issue, ranging from those that (irresponsibly) spread the debt fears and those that take care to explain the true nature of public debt.

Bloomberg has published an alarmed comment by Laurence Kotlikoff.
This is based on a highly questionable methodology as this paper shows.

A Chinese rating agency must have read Kotlikoff and thus have downgraded U.S. debt, and former Fed Chairman Alan Greenspan seems to confirm these fears.

Many have tried to argue the simple truth of monetary accounting.
Warren Mosler tried it here
Jamie Galbraith tried it here
Randy Wray tried it here
Bill Mitchell tried it here
Marshall Auerback tried it here
Robert Parentau tried it here
Ellen Brown tried it here

And this is a simple Mecpoc answer in ten bullets.

QUESTION: Do you think unemployment is only a problem for the jobless, or do you think unemployment has other ramifications on society?

ANSWER: William: Unemployment does have a lot of implications for society as a whole. There is a moral issue—if people have no income, they have no way to support themselves and their dependents. Also, there is a divide between the Anglo-Saxon model and the Continentals. Germany and France have a big social security net that helps you deal with being unemployed… whereas the Anglo-Saxon countries have much more liberal markets and it is less “humanitarian” in the sense that there is little regard to the effects of firing someone.  At the same time you don’t want to end up like France where it is impossible to fire someone because they have such strict labor laws… it’s a question of balance between the two models.

QUESTION: From the perspective of your field of study, in what ways does unemployment harm people and society?

ANSWER: Caitlin: I think that a lot of people, especially in my major, are rushing off to graduate school because that is all that you can really do unless you are one of the very few talented people who can say, ‘I’m going to go become a writer’. I think that there’s going to be a lot of issues because there are so many people with loans. There is going to be an entire generation that is going to be massively in debt.

ANSWER: James: For a present day example – Unemployment is difficult to describe in historical context because we haven’t seen the full implications of it. We don’t know what is going to happen yet. But if what is going on today were to be written down in history books, it wouldn’t be written down as wholly economical. I think, at least in the U.S., you’ve seen a fundamental shift in the type of economy. I think we’re finally seeing a shift into a more service-based economy. And even a recession like this, which is a fairly bad recession, has had a massive effect on the manufacturing sector and unskilled workers. I think that is the group that has been hit the hardest – this kind of middle class of the United States. Historically, it’s going to be interesting to see the consequences of this. I think in the future we might have a higher rate of unemployment than we’ve had in the past. I think a lot of it is based on expectations of trade with China, which is really not that bad of a trade deficit at all, and its perception among the public.

QUESTION: What do you think governments can do to reach full employment?

ANSWER: William: There should always be some room for unemployment. Frictional and cyclical unemployment is probably unavoidable.  Structural unemployment is not so positive, you don’t want to end up like Europe where there are workers that have to change their skill sets. There are social effects which you really want to avoid but aside from that there is a [natural level of unemployment] and that is normal—it creates flexibility for people to change jobs , so that’s a good thing.

ANSWER: James: As a history major, I think full employment is very difficult. The only time full employment was achieved was when you had an agricultural or subsistence farm base without skill specialization or you’ve had a communist type of economy. I was recently reading a report in the NY Times that North Koreans who had crossed the border to South Korea had actually found the capitalist system “oppressive” because they couldn’t go to their factory and work 8 hours a day, but there were additional forces on them to achieve even more. I think that in the capitalist system,  [full employment] is something the government should strive for, but there will always be transitional unemployment that occurs and an inability to utilize people to their fullest capacity. And without a switch to a command type economy, it’s impossible to have complete full employment. Not to say that you can’t bring it low, but it’s impossible to get it down to 0%.

QUESTION: How will unemployment affect you, based on your field of study?

ANSWER: Caitlin: It’s going to be a challenge. I don’t want to go to grad school right away. You have to ask yourself what you really want to do and you get to be creative as far as how can you find something fun to do. It redefines what you do.

ANSWER: James: As a history major, I was expecting to be unemployed after I graduated. I feel like graduate school is almost necessary for a history major to get more specialized. History majors often do well in business. Personally, I would really like to work at a museum, which I think I could get because [history majors] are becoming more scarce and rare. But despite the fact that we are scarce, I think we will still be affected. In terms of the education industry, I think recession is actually not good for it. I think we’re having a short-term bubble in education and once the bubble pops, you will see a fall in the numbers of graduates. I don’t think we’re all pessimistic about graduating, I think we’re a little bit more opportunistic, especially because most of us are graduating at a time where the recession is not as deep. I think currently there is a, and I use this term loosely, fetishism with university education. You see students who aren’t necessarily interested or equipped in what they are studying. So, I think the universities are currently in the bubble and they will suffer when the bubble pops. I don’t know how much credit rides on university education, but it seems like a fair bit.

As one can see from the interview questions above, the term “unemployment” has different implications for those studying in fields outside that of economics. While James answered with concrete facts of the past, Caitlin shared personal experiences with unemployment and William offered several common definitions for the term. With such a diverse population at Franklin, the variety of answers were expected and appreciated. This insight can help us understand unemployment and possibly find solutions for it. Mecpoc hopes to continue this survey of Franklin Students and their opinion of different economic theories, policies and practices. If you are interested in participating in an interview or writing your own article, please contact igarcia@mecpoc.org.