Tea Party's Economic Agenda Would Cause Next Great Depression

08/30/2010 11:52 pm ET | Updated May 25, 2011

As a former Tea Party Democrat and frequent speaker at Tea Party rallies, I am deeply dismayed by the well publicized Tea Party demands to balance the budget. Such thinking is based on abject ignorance and counter to true Tea Party values. The Tea Party's demands to balance the budget and reduce the Federal deficit aren't merely misguided, but dangerous, and would cause the worst depression in history. I have been, and continue to be, a strong supporter of the core Tea Party values of lower taxes, limited government, competitive market solutions, and a return to personal responsibility. However, their proposals to balance the budget are the same suicidal policies that caused the 6 horrible depressions in the U.S. over the past 200 years. At the worst possible time to take money out of the economy, the Tea Party's proposals would remove an estimated $1 trillion and cause the worst depression in world history, destroying tens of millions of jobs and ruining our children's future.

Modern money, after the demise of the gold standard, is akin to a spreadsheet that simply works by computer. As Fed Chairman Bernanke explained on national television on 60 minutes, when the government spends or lends, it does so by adding numbers to private bank accounts. When it taxes, it marks those same accounts down. When it borrows, it simply shifts funds from a demand deposit (called a reserve account) at the Fed to a savings account (called a securities account) at the Fed. The money government spends doesn't come from anywhere, and it doesn't cost anything to produce. The government therefore cannot run out of money, nor does it need to borrow from the likes of China to finance anything. To better understand this, think about when a football team kicks a field goal; the number on the scoreboard goes from 0 to 3. Does anyone wonder where the stadium got those 3 points, or demand that the stadium keep a reserve of points in a "lock box"?

Moreover, government deficits ADD to our savings - to the penny - as a fact of accounting, not theory or philosophy. This why my proposal for a payroll tax (FICA) holiday will directly increase incomes and savings and thus fix the economy from the bottom up. It will result in $20 billion per week flowing into the hands of people that will pay their bills and spend money. It will be an exact increase in income and savings for the rest of us as anyone in the Congressional Budget Office will confirm. For the Federal government, taxes don't serve to collect revenue but are more like a thermostat that controls the temperature of the economy. When it is too hot, raising taxes will cool it down. And in this an ice-cold economy -- a very large tax cut is needed to warm the economy back up to operating temperature.

While I fully support the Tea Party desire to cut taxes and recognize the need to cut wasteful and unnecessary spending, the tax cuts have to be much larger than spending cuts in order to ensure that less money is taken out of the economy, and not more as the Tea Party is currently demanding.