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. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Sometimes you read an editorial that is so amazingly ignorant, you are compelled to shake your head in wonderment. This Chicago Tribune editorial, titled “Please earn your pay. Is responsible spending and cutting really so hard?,” flies above even that high bar.
The editors began by quoting this paragraph from the CBO (Congressional Budget Office) report:
In part because of the higher tax rates and curbs on spending scheduled to occur this year and next, CBO expects that the economy will continue to recover slowly, with real GDP growing by 2.0 percent this year and 1.1 percent next year. … In CBO’s forecast, the unemployment rate remains above 8 percent both this year and next. … Congressional Budget Office
O.K., Tribune. You quoted it. But, do you understand it? Higher tax rates and spending curbs lead to a slow recovery. Repeat it ten times.
Americans with normal vision could go blind reading all the fatalistic projections like those issued Tuesday by the nonpartisan Congressional Budget Office. Or citizens instead could lessen their stress by asking everyone who works in the U.S. House, Senate or White House: Please, earn your pay.
The CBO’s new Budget and Economic Outlook doesn’t lash our federal lawmakers for failing to do their jobs. It does, though, document the rapid rise on their watch of federal debt as a percentage of our gross national product — from an alarming 68 percent in 2011 to a siren-wailing 75 percent in 2013.
Tribune editors. Stop and think. The CBO’s “fatalistic projection” blamed higher taxes and lower spending, i.e. deficit reduction, for projected SLOW growth. Does all your siren-wailing deafen you to the plain English meaning of “higher taxes and curbs on spending”?
The good news is that under provisions of current federal laws, the debt would become more manageable a few years from now.
Trib Editors, the CBO is trying to tell you that’s the bad news. A “more manageable” debt will make for slower growth.
The committee says projecting a rosy reduction in federal debt as a share of our economy assumes that lawmakers will do four things that the committee rates as highly unlikely: (1) allow the tax cuts of 2001, 2003 and 2010 to expire as scheduled, (2) suddenly allow the alternative minimum tax to smack millions more households, (3) fail to enact another so-called doc fix to preserve Medicare payments to providers, and (4) stick to automatic spending cuts triggered by Congress’ failure last year to reach a “supercommittee” deal on cutting future deficits and debt.
If you instead think that Congress and the White House will try to weasel out of Washington’s current and controversial commitments, then the true projected increase in debt would be enormous: The CBO says debt held by the public would rise to 94 percent of GDP in 2022 — the highest figure since just after this financially exhausted nation ended World War II.
At the end of World War II, and until August, 1971, the U.S. was monetarily non-sovereign, and as such, could exhaust its ability to pay its bills. Sadly, the Tribune editors have zero understanding of the differences between Monetary Sovereignty and monetary non-sovereignty, the very foundation of economics.
What does this mean? That the politicians we send to Washington are fiddling while the taxpayers’ future burns. Expanding debt burdens will devour ever more of our government’s resources.
Exactly how does increasing the money supply, otherwise known as increasing the “debt”, devour government’s resources?
Congress and the White House spent most of 2011 failing, miserably, to reach a Go-Big deal on spending and revenue that would begin to curb the nation’s runaway debt — currently rising toward $16 trillion. Democrats fought spending cuts. Republicans fought tax cuts. Our own preference has been for a three- or four-to-one ratio of cuts to tax hikes.
Don’t ask them why. They don’t know. I guess “four-to-one” has a nice feel to it.
Many senators, like irresponsible legislators in Illinois and other profligate states, act as if some robust economic recovery will spare them from offending their political bases and actually … cutting … deficits.
Yikes! More proof the Tribune editors don’t understand the differences between the states (monetarily non-sovereign) and the federal government (Monetarily Sovereign).
The CBO is ready to puncture that silly-gas balloon. The agency warns that the trajectory of future deficits probably depends less on how well the economy performs than on “the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year.”
No, Tribune editors, the CBO said tax increases and/or spending cuts would slow the economy. Try reading the report, again.
That is, lawmakers really do need to decide whether to let the Bush and Obama tax cuts expire, which would raise taxes in a weak economy, and whether to let across-the-board spending cuts take effect as scheduled in 2013.
O.K., you’re starting to get it. Raising taxes in a weak economy is a bad idea. Do you know why? Because taxes take money out of the economy. So do spending reductions. See, taking money out of the economy slows the economy. This isn’t rocket science. It’s economics.
Better to reform the tax code now, take steps to constrain the growth of entitlement spending tomorrow, and make the spending cuts and revenue hikes that will begin to lower our debt. Those measures would prime the U.S. for growth, encourage businesses to expand, and create more jobs.
OMG! Tax increases and spending somehow would “prime” the U.S. for growth?? And encourage business to expand?? And create more jobs??
How? If that nonsense were true, why don’t you want to do it in a weak economy?
Members of Congress, Mr. President, please, earn your pay.Members of Congress, Mr. President, please, earn your pay.
No, Trib editors, earn your pay. You’re supposed to inform your readers, not feed them BS.
I award the editors of the great Chicago Tribune, five dunce caps, the meaning of which they probably will not understand.
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports