Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
Recently I published a post titled, “The 3.5 billion stealth tax,” in which I criticized the federal government for forcing, or even accepting, repayments of loans to the private sector. I correctly said these repayments were identical to a tax increase, and would have the same negative effect on economic growth.
A reader disagreed, saying,
You generally seem pragmatic, so I would think you would be happy that the banks are paying back the funds – thus addressing the argument that this was a government handout / taxpayers are paying. The next time government intervention is needed, people can point to this as evidence that it doesn’t cost the government / taxpayers anything.“
He doesn’t think my facts are wrong; he feels that because people believe the debt should be repaid, we should not try to fight that widely accepted fiction, even if it will have negative long-term effects.
The problem with accepting a fiction is it always has long term, negative effects.
It’s true that most people were led to believe some cigarettes were “safer” than others (so kept smoking these “safer” cigarettes), and today most people have been led to believe taxes pay for federal spending (so they want reduced spending). But the former wrong belief led to millions of cancer deaths, and the later wrong belief continues to put a cancer on our economy.
According to the Washington Post
Paul Ryan betrays his own views on income inequality
Posted by Ezra Klein
On Thursday, the House of Representatives passed Rep. Paul Ryan’s 2013 budget proposal. The plan’s pleased author didn’t mince words. “We are bearing witness to history this week,” Ryan said.
But my thoughts kept returning to something Ryan said five months earlier. Upward mobility, Ryan said, is the real key to the “American idea.”
Two weeks later, in a 15-page report entitled “A Deeper Look at Income Inequality,” Ryan made his argument again. He seemed to admit a hard truth that Republicans often deny: that government programs for the poor are a crucial way of ensuring income mobility, and as they get squeezed, so, too, do the life chances of those born at the base of the income ladder.
But it is difficult to believe that Ryan’s budget was written by the same guy who wrote this paper. Because in Ryan’s budget, the cuts to Medicaid and other health programs for the poor are twice the size of those to Medicare. The cuts to education, to food stamps, to transportation infrastructure and to pretty much everything else besides defense are draconian. As for the tax reform component, it cuts taxes on millionaires by more than $250,000, but it doesn’t name a single loophole or tax break that Ryan and the Republicans would close.
In short, Ryan tells the absolute falsehood that cutting taxes demands cutting federal spending, and since most federal spending benefits the poor, programs that benefit the poor must be cut. And since most people do not understand the facts of Monetary Sovereignty, I suppose I should go along with the twin fictions that federal tax cuts require spending cuts, and federal deficits should be reduced.
If that would be “pragmatic,” then I will continue to be quixotic, and do my best to spread the truth: Taxpayers do not pay for federal spending, and federal money creation (aka “the deficit”) should be increased.
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