Noticeably absent in the recent "fiscal cliff" negotiation results was anything resolving the government's burgeoning annual deficit. Writers like your humble author tend to rail (generally rightfully so) on legislators and even economists who seem to preach the need for austerity to the masses, but won't obligate those same legislators to practice austerity in their government jobs.
So they have two solutions for this problem:
1.) Austerity for the masses
2.) Rampant-to-hyper inflation for the economy.
Take, for instance, the $1-trillion coin. The idea, first floated by someone in a blog post (if one of you came up with this idea, say so!), is to simply have the Treasury Department wipe out the $1,074,000 deficit for this year (so far) ... just consider it paid in full. Like printing a coin for $1.074 trillion and using that coin to pay for the debt.
Problem is, that "coin" will then circulate into the economy. There is already around $15.8 trillion in our GDP. Adding another $1 trillion with NOTHING produced for it will simply cause inflation. When the economy gets flooded with mere paper, the prices of everything will adjust accordingly. They will go up. By adding $1 trillion to the economy, you increase the money supply by about 7%, so theoretically, the prices of everything will go up by 7%.
In reality, prices will go up in a series of steps, generally by industry. The increase would filter itself down throughout the economy dependent on how markets value certain commodities and anything else you can purchase with money. But you get the idea: Inflation will go up around 7%, and our money will be worth 7% less.
Some economists believe that such a move as a $1 trillion coin might stabilize our precarious economic reputation enough that the badness of such a hyperinflationary move will be filtered down fairly evenly throughout the economy.
So how does liberal ideology play into this?
On the desperate conservative end, the government should stop spending more than it takes in, right now. Yes, there will be some pain. But dog gonnit, the United States government takes in enough money to function. We just need to lop some of these extra expenses (think $600 hammers, $3,000 toilet seats), and find a way to close that $1 trillion gap.
On the desperate liberal end, inflation does not matter. The more the government can grow, the more it can exact social justice from the wealthy who, no matter the economy, thrive and unfairly keep the money for themselves. If anything, we should confiscate the liberal's wealth and redistribute it.
Mid-line liberal ideology: to quote one of the liberal readers of this author:
The debt, of course, is created by Congress through spending authorizations. Once that debt is created, it has to be paid. If the Government runs out of funds to pay the debt, they need to borrow to make sure we pay the debt we've already created - thus the debt ceiling has to be increased to allow the government to pay its bills.
Bottom mid-liberal line: We already made the promise, so we need to find a way to pay what we promised. Some liberals acknowledge that the promises were unwise, even stupid to make. Of course, others (the desperate liberals) will defend any deficit spending as long as the objective is social justice.
And this may be the crux of the argument between liberals and conservatives with regard to our deficit. Conservatives want to drastically reduce the size of government, and negotiate what is kept. Liberals want to keep the size of government the same, and cause inflation in the process.
Which is right? Moral? Bot philosophies have a point. Both philosophies will cause human pain and damage, almost just as surely as some people will be the victims of unfairness in life.
And from the looks of it, both philosophies will be here to stay for decades longer. Like an out-of-control train on unknown tracks, where it heads and how it stops may depend on who's at the controls.