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.
Here are excerpts from a 4/24/12, Chicago Tribune editorial titled, “Profiles in Failure.”
As Democrats and Republicans in Washington perpetually trade blame for our deteriorating federal finances, the Supreme Court has moved three years closer to emptying its trust fund. Mark that on your calendar for 2033, not the 2036 proclaimed only a year ago.
Congress also is on life support. The legislative branch is expected to spend its last dollar in 2024. That’s . . . five years sooner than . . . projected as recently as 2010.
A year ago, trustees warned that the White House and also the military would be out of money by 2018. As of Monday, that date is 2016.
Shocking, isn’t it. Four federal agencies — the Supreme Court, Congress, the White House and the Military, all doomed to run out of money within the near future. Doesn’t seem possible, especially considering that the U.S. government has the unlimited ability to create dollars, and never, ever, ever can be unable to pay any bills of any size.
So how can agencies of the federal government run out of money?
Well, they can’t. No agency of the federal government can run out of money unless the government wills it. Confession: I modified the Tribune’s editorial. It really reads:
As Democrats and Republicans in Washington perpetually trade blame for our deteriorating federal finances, Social Security has moved three years closer to emptying its trust fund. Mark that on your calendar for 2033, not the 2036 proclaimed only a year ago.
Medicare also is on life support. The hospital insurance program for seniors is expected to spend its last dollar in 2024. That’s . . . five years sooner than . . . projected as recently as 2010.
A year ago, trustees warned that Social Security’s disability insurance fund would be out of money by 2018. As of Monday, that date is 2016.
The point is: The Supreme Court, Congress, the White House, the Military, Social Security and Medicare all are agencies of the federal government. None can be unable to pay their bills, unless Congress willfully cuts payments. All federal agencies’s bills are paid by the Treasury.
The Supreme Court, Congress, the White House, the Military do not have a special FICA-like tax to support them. They have no special tax at all. Yet miraculously, they do not go bankrupt. How can this be? No income; lots of bills to pay; and still they survive, year after year. How do they do it?
Simple. Taxes do not pay for federal spending. Unlike you and me, unlike state and local governments, unlike businesses, our Monetarily Sovereign federal government does not need a source of dollars with which to pay its bills.
I receive Social Security benefits. On the 4th Wednesday of every month, the number in my checking account suddenly is a couple thousand higher than it was the day before. How? The U.S. Treasury sent instructions (not dollars) to my bank, to raise the number in my account. My bank did as instructed and voila, my checking account is higher.
That is exactly the same way the federal government pays all of the bills for the Supreme Court, Congress, the White House, the Military and Medicare. It just sends instructions to increase numbers in accounts — which it can do endlessly.
If I sent a legitimate invoice to the federal government for $100 trillion, the government would instruct my bank to raise the number in my checking account by 100 trillion, and my bank would obey. Literally speaking, the government would not have sent me a hundred trillion dollars. It would have instructed my bank to increase the numbers in my account by a hundred trillion.
Again, literally speaking, my checking account does not and would not “contain” any dollars at all. It merely would show an accounting balance that reads 100,000,000,000,000.
Even though my account at my bank supposedly contained $100 trillion, my bank could not show me those hundred trillion dollars. They could assure me the dollars are in my account, and they could show me statements to that effect, but they could not show me the dollars that supposedly are in my account. In fact, they couldn’t show me any dollars at all. Dollars are invisible, non-physical accounting notations.
The point is, my revised version of the Tribune editorial, and the Tribune editorial itself, both are total bullsh*t. The only way the federal government could run short of dollars is for mathematics to run short of numbers. That’s all dollars are: Numbers in accounts.
The Social Security and Medicare “crises” are monstrous lies. They are inventions that do nothing but increase the income gap between the 1% and the 99%, by cutting payments to the 99%.
If Congress wished it, tomorrow the Treasury could add several trillion to the numbers in the Social Security and Medicare “trust funds,” simply by instructing changes in accounting balances. Why does the Tribune, along with virtually all other media, not understand this basic truth?
I don’t know. Bruce Dold, the Editorial Page Editor, and I have corresponded many times. He keeps thanking me (politely) for my information, then publishes yet another, amazingly wrong-headed editorial.
One thing Bruce refuses to do is justify his position with facts. He doesn’t argue. He doesn’t tell me why I’m wrong. He just thanks me. Sometimes he tells me he’s looked into it, and hasn’t changed his opinion. But always, politely.
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