Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, 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.
Here is a perfect example of news trash: The media’s misleading use of data to sow fear and ignorance.
US gov’t runs $1.3 trillion budget deficit in 2011
Government deficit totals $1.3 trillion for 2011, third year of $1 trillion plus imbalances
Martin Crutsinger, AP Economics Writer, On Friday October 14, 2011
WASHINGTON (AP) — The government ran a $1.3 trillion deficit for the budget year that ended last month, the third straight year it has operated more than $1 trillion in the red.
Obviously, no one wants to be “in the red.” Martin Crutsinger could have said the economy ran $1.3 trillion in the black, which would have been far more accurate.
The 2011 budget deficit was the second highest on record. It’s slightly ahead of the previous budget year’s $1.29 trillion deficit but below the $1.41 trillion imbalance record in 2009.
A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. But those deficits now loom over tense negotiations in Washington.
Lawmakers are under pressure to agree by Thanksgiving on where they can cut $1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in Jan. 2013.
In other words, if our government won’t reduce the stimulus for this moribund economy, the law will “cut Medicare, defense spending and other critical areas.” That will hurt the economy, hurt older people, and hurt U.S. security, but the Monetarily Sovereign U.S. government, which never can run short of its sovereign dollar, will not have to expend $0 and zero effort to create more dollars for our economy. And this is considered good news.
For 2011, the government had to borrow 36 cents of every dollar it spent. The string of massive debts has made interest on that debt the fastest growing budget category. For 2011, net interest payments rose 15.7 percent to $227 billion.
The government didn’t “borrow” anything. It created T-securities from thin air, which meant so-called “lenders” saw their checking accounts debited and their T-security accounts credited. The government didn’t receive one penny. However, the good news is the additional $227 billion that entered the economy in the form of interest payments. Unfortunately, interest rates are so low, comparatively few dollars are reaching Americans.
And by the way, folks, so-called “borrowing” doesn’t reduce the so-called “deficit.” There is zero connection between T-securities and federal deficit spending other than rules requiring T-securities to be created (from thin air) in an amount equal to the deficit. We could have deficits without T-securities and T-securities without deficits.
The government also lost revenue because of the 2 percentage point cut in Social Security taxes, and also it had to pay for an extension of emergency unemployment benefits. Congress approved both in December to boost the sluggish economy.
More accurately: The economy gained dollars because of the 2 percentage point cut in Social Security taxes and the extension of emergency unemployment benefits. So employees and the unemployed had more money to spend.
The nation’s debt is now $14.8 trillion. The enormity of that figure has stoked intense partisan debate in Congress over spending and taxes. Polls show growing voter anger with the inability of both parties to reach solutions to the country’s budget problems.
“Enormity” doesn’t mean “enormousness.” It means something hugely bad. But that $14.8 trillion is the lifeblood of our economy. The voters are angry that the government has pumped $14.8 trillion into the economy. Had the government not added that money to the economy, the entire nation of the United States of America — you, your children and everyone you know — would have zero dollars. Visualize that enormity.
The August budget deal is projected to trim future deficits by $2.1 trillion. That includes the cuts made by the supercommittee and another $900 billion in savings from caps on discretionary spending.
America has 300 million people. So, each man, woman and child in America will sacrifice $3,000 to the debt-hawk gods. If you’re married, the cost to you will be $6,000. Have two children? The cost to the four of you will be $12,000.
And that’s not all. Because each of your friends and neighbors also will lose $3,000, your local economy will take a huge hit, which will propagate throughout the nation, causing further losses. And those losses will cause more losses, and on and on, until we are in another full-blown recession.
But if you are one of those angry voters, who wants the federal deficit to be reduced (so your standard of living can decline), enjoy the fact that your government, which has the unlimited ability to create dollars, will give you fewer of them.
I award Mr. Crutsinger three dunce caps. It would be more, but for the fact he is just a reporter, parroting the popular wisdom. Were he an economist, the award would be five.
I now am running a deficit of about 35 dunce caps (Mr. Crutsinger would call it “in the red.”) Though I am “dunce cap sovereign,” and in no danger of running short, shall I begin to institute a dunce cap tax among my readers? What do you think?)
Rodger Malcolm Mitchell
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