The debt hawks are to economics as the creationists are to biology. Those, who do not understand Monetary Sovereignty, do not understand economics. If you understand the following, simple statement, you are ahead of most economists, politicians and media writers in America: Our government, being Monetarily Sovereign, has the unlimited ability to create the dollars to pay its bills.
There are crooks and then there are Crooks. Congress falls in the later category, and lest you think I am exaggerating, let’s begin with unfunded mandates. A federal unfunded mandate is a legal requirement that the states, counties or cities provide some service or product, for which the federal government provides no reimbursement.
The purpose of an unfunded mandate is to make Congress look financially prudent, while tossing the cost into the laps of the states, counties and cities. It’s a Congressional con game.
One might think if a Monetarily Sovereign government – a government with the unlimited ability to create dollars and pay any bill of any size – if that government wanted something done, it would budget for it and pay for it. Certainly, one might not expect a Monetarily Sovereign government to force monetarily non-sovereign governments, which cannot create money, to pay for federally-desired projects. But that is exactly how Congress operates.
According to The National Conference of State Legislatures:
The Unfunded Mandates Reform Act of 1995 (UMRA) was adopted in an effort “…to curb the practice of imposing unfunded Federal mandates on States and local governments.” According to the Congressional Budget Office (CBO), UMRA defines a mandate as any provision in legislation, statute, or regulation that would impose an enforceable duty on state, local, or tribal governments or the private sector, or that would reduce or eliminate the amount of funding authorized to cover the costs of existing mandates.
Since 1995, CBO has identified eleven laws that contain intergovernmental mandates which exceed the UMRA threshold ($50 million in 1996 dollars; adjusted annually for inflation, $69 million in 2009).
Intergovernmental Mandates under UMRA that Exceed the Threshold (listed by date of enactment):
* an increase in the minimum wage (P.L. 104-188, 1996)
* a reduction in the federal funding to administer the Food Stamps program (P.L. 105-185, 1998);
* a provision preempting state taxes on premiums for prescription drug coverage contained in the Medicare Prescription Drug and Modernization Act of 2003 (P.L. 108-173, 2003);
* a preemption of state authority to tax certain Internet services and transactions (P.L. 108-435, 2004);
* a requirement that state and local governments meet certain standards for issuing vital-statistic documents (P.L. 108-458, 2004). Driver’s license requirements were repealed and replaced with the REAL ID Act (P.L. 109-13), which under UMRA is not considered a mandate that exceeds the threshold.
* a provision that eliminates federal matching funds for administrative expenses funded by incentive payments to states as it relates to the child support enforcement program (P.L. 109-171, 2006);
* a requirement that all government entities, including state and local governments, withhold 3 percent on certain, non-essential government payments for property or services (P.L. 109-222, 2006);
*an increase in the minimum wage (P.L. 110-28, 2007)
*a preemption of state authority to tax certain Internet services and transactions (P.L. 110-108, 2007);
* a requirement that public transportation agencies and rail carriers implement various security measures and vulnerability assessments, and institute training programs and background checks for certain employees (P.L. 110-53, 2007);and
* requires commuter railroads to install train control technology (P.L. 110-432, 2008).
Congress has shifted at least $131 billion in costs to states over the past five years, according to NCSL’s Mandate Monitor
Yes, that’s $131 billion in expenses that are forced on monetarily non-sovereign governments by a Monetarily Sovereign government.
But it gets worse. The federal government collects money from the residents of states, in the form of taxes, and in the case of 14 states, returns less money to those states than it collected.
State / Fed Spending Per Dollar / State Budget Shortfall
/ of Fed Taxes /
Florida $0.97 $3.6 B
Texas $0.94 $13.4 B
Oregon $0.93 $1.8 B
Michigan $0.92 $1.8 B
Washington $0.88 $2.9 B
Wisconsin $0.86 $1.8 B
Massachusetts $0.82 $1.8 B
Colorado $0.81 $988 M
New York $0.79 $9 B
California $0.78 $25.4 B
Delaware $0.77 $377 M
Illinois $0.75 $15 B
Minnesota $0.72 $3.9 B
New Hampshire $0.71 n/a
Connecticut $0.69 $3.7 B
Nevada $0.65 $1.5 B
New Jersey $0.61 $10.5 B
So here we have $131 billion + in unfunded mandates, plus many billions more taken from states in the form of unreturned taxes. I call it outright theft, and for no reason. The federal government doesn’t need the money; it’s Monetarily Sovereign. It creates money.
Years ago, some parents of child movie stars stole the money their children earned, rather than putting it away for the children’s futures. Laws were passed to protect the kids. The parents were simply disgraceful, but while they were crooks, at least they had a use for the money. Congress is worse. It steals the states’ money and doesn’t even have a use for it. It destroys the money it steals.
That truly is evil.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. It’s been 40 years since the U.S. became Monetary Sovereign, , and neither Congress, nor the President, nor the Fed, nor the vast majority of economists and economics bloggers, nor the preponderance of the media, nor the most famous educational institutions, nor the Nobel committee, nor the International Monetary Fund have yet acquired even the slightest notion of what that means.
Remember that the next time you’re tempted to ask a dopey teenager, “What were you thinking?” He’s liable to respond, “Pretty much what your generation was thinking when it screwed up my future.”