Benzinga Radio: Why the Budget Doesn't Matter with UMKC's Randall Wray
"Federal government programs cannot become insolvent – period. The federal government will never run out of its own currency to finance its spending."
For L. Randall Wray, professor of economics at the University of Missouri-Kansas City, the debates that have raged in recent years over the "sustainability" of high-expenditure government programs like Social Security and Medicare are utter nonsense. Why? Firstly, the government can't run out of money as long as can issue as much as it wants, and secondly, you can't predict the state of government finance in the distant future.
"Do we ever do a 75-year calculation of the solvency of military spending? Do we ever apply these calculations to other parts of the federal government? No. ...Private firms don't do it either.
"If you think about it, it makes no economic sense for a government to budget 25 years into the future. ...The future is extremely uncertain. We don't know what the world is going to be like in 2025."
Critics speak of an imminent "day of reckoning" for these programs, a time when they will finally be unable to pay the costs of their own services. According to Wray, it is impossible to calculate when or if such a day will come - we simply do not know enough about the future of our economy. Therefore, concepts like a budget should serve only to mitigate corruption and promote efficiency. In other words, we can go ahead and get comfortable with the deficit.
Be sure to check out the audio of the interview in its entirety: UMKC's Randall Wray on the Deficit, the Progressive Movement, and Modern Monetary Theory
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