Mitchell’s laws: Reduced money growth cannot increase economic growth. To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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For those who do not yet understand Tea Party economics, here is a primer. Tea Party economics is the belief that reducing the money supply, by increasing taxes and/or by federal spending reductions, will stimulate the economy.

From Stephen Gandel’s, “State Budget Cutbacks: A Job Market Drag?” 9/19/11: “Even if government doesn’t kick in its normal share of hiring, the economy can still be put on a path of recovery. It’s businesses that matter most and need to be pushed the most to hire.

O.K., seems reasonable. How do we “push” businesses to hire? Some sort of incentive would be needed. Tax reductions? But tax reductions would increase the deficit.

From Ed O’Keefe’s, “To save money, federal agencies to start buying in bulk” 9/19/11: “Starting this week, several federal agencies and departments will pool their purchases of office printers, copiers and scanners in hopes of collectively saving $600 million in the next four years, administration officials said late Friday.”

I guess we won’t push the manufacturers of office printers, copiers and scanners to hire. When we cut $600 million from their income, they’ll fire.

From Zachary Goldfarb’s, “Obama’s debt-reduction plan: $3 trillion in savings, half from new tax revenue” 9/19/11: “President Obama will announce a proposal on Monday to tame the nation’s rocketing federal debt, calling for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade, senior administration officials said. . . Combined with his call this month for $450 billion in new stimulus . . . “

Ah, so that’s the plan. We’ll take $3 trillion out of the economy; then we’ll add 15% ($450 billion) back into the economy, and call that a “stimulus.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget: “We believe the Super Committee should ‘go big’ and exceed its mandate and actually stabilize the debt. We appreciate the President’s proposal to ‘go medium’ and that he has laid out real specifics, but clearly, much more will be needed.”

How will stabilizing the debt (aka “spend less and tax more”) “push businesses to hire”?

House Speaker John Boehner: Tax increases “destroy jobs.”

Yep, by removing money from the economy, tax increases destroy jobs, the same way that federal spending cuts destroy jobs.

Chicago Tribune editors, 9/19/11: “Our first preference has been for dramatic deficit reductions, with a 3- or 4-to-1 ratio of spending cuts and revenue increases

Perfect example of Tea Party economics: A dramatic reduction in the money supply . . . to stimulate the economy.

Same Chicago Tribune editors as above: 9/19/11: The immediate problem is low demand and the grim reality is that no one really knows a reliable way to raise it. Given time, it will come back.

Well, the way to raise demand is to put more money into the pockets of consumers. But why do that when the Tribune assures us the economy will come back all by itself – while we raise taxes and cut federal spending to drain dollars from the economy. What, me worry?

More Chicago Tribune. “ . . .(a) more realistic formula (is to) . . . address the spending binge of the last few years, a job that, as Boehner acknowledges, will require curbs in entitlements like Social Security and Medicare.”

Yes, cutting payments to consumers like retired people, sick people, doctors, nurses and hospitals should do a great deal to stimulate the economy.

So now you know what “Tea Party economics” means: Reduce the money supply to stimulate the economy. In short, apply leeches to cure anemia. What a wonderful, magical solution.

I award the Tea Party and all those mentioned above a solid 5 dunce caps (out of 5), for total, unmitigated economic ignorance. By the way, for all you debt hawks: I never will run short of dunce caps, even though I continually run a dunce cap deficit. I am dunce cap sovereign, just as the federal government is dollar sovereign. Get it?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com


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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY