Thursday, August 25, 2011
Treasury bond sales: Welfare for the rich!
It's been well discussed here as well as in many other MMT blogs on the web, that the government doesn't need to sell bonds. It spends simply by crediting bank accounts and the sale of bonds isn't necessary for the government to have the funds to pay for goods and services.
On the contrary, bond sales have historically functioned merely as a tool used to manipulate the level of reserves in the banking system in order to set interest rates. But now that the Fed pays interest on reserves, the sale of bonds is even more unecessary. So why do we keep on doing it? I have no idea.
Who buys bonds?
Mostly affluent people. I don't know too many poor people or even middle class people who are wondering what Treasury securities they are going to buy with their extra savings. Only rich people have that worry. Warren Buffet owns over $40 billion in Treasury securities by his own admission. So our government is basically paying interest to rich people like Warren Buffet for no reason at all. It's welfare for the rich and the numbers are huge. Take a look...
Here's what the government pays out in interest and what it pays out on some other, important spending items.
Interest payments $194 bln
Education $206 bln
Unemployment Ins $106 bln
Temporary Assistance to Needy Families (TANF) $17bln
Food Stamps $4.6 bln
So the government spends 40 times more money paying interest to rich people than it does for food stamps.
It spends twice as much paying welfare to rich people as it does to help the unemployed.
It gives more than 10 times more to rich people than it does to needy families.
It gives about as much to rich people as it spends, in total, on education.
Pardon me, but these are disgraceful statistics. It's one thing to say that we need to spend a lot on national security, because without that, even food becomes moot. (You can't eat if you're blown up.)
However, to spend this kind of money subsidizing the rich when so many people--kids, families, etc--are going hungry or simply desiring an education or needing a helping hand during an economic depression, that is totally immoral, I'm sorry. Welcome to our government, our leadership and our economic reality.