Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.
Today, Americans are suffering from unemployment, which means Americans are suffering from lack of income — particularly the so-called “99%” who comprise the middle and lower income groups. And today, the political campaigns are in full swing, with politicians telling you what they think you want to hear.
And today, they will tell you what they plan to do about our economy, and particularly about the federal deficit. So today, might be a good time to remind you, once again, why the federal government doesn’t increase deficit spending.
After all, if the federal government would spend more on goods and services, while cutting taxes, this would create more jobs, reduce unemployment and put more dollars into the pockets of Americans. So, why not increase federal deficit spending?
As you know, the federal government (unlike state and local governments, businesses, the euro nations and us private people) is Monetarily Sovereign. It has the unlimited ability to create dollars.
If the government owed you a trillion dollars, it simply would instruct your bank to increase the number in your checking account by 1,000,000,000,000. Done! “Paying for” its debts is no problem for the federal government. It never can run short of dollars.
The federal government doesn’t even need taxes. If federal taxes were $0, the federal government still could create as many dollars as it wished, and still could pay you that trillion dollars. So, why not increase federal deficit spending?
According to Table S–6. Proposed Budget in Population- and Inflation-Adjusted Dollars (Government Printing Office), the total proposed 2012 budget is $3.7 trillion, of which $1.5 trillion is for Medicare, Medicaid and Social Security, which goes into the pockets of us Americans. That’s a good thing, right?
So why not increase deficit spending on things like Medicare, Medicaid and Social Security?
Another $884 billion goes for “Security,” much of which pays soldiers’ salaries and the domestic companies that make the guns, planes and ships for the military. We all hate war, but financially, paying soldiers as well as domestic companies that hire people, would seem to be a good thing for our economy. Right?
If the federal government can create all the dollars it wants, and most of those dollars go into the pockets of Americans, why not increase federal deficit spending?
Now, some people will tell you that although millions of Americans and American businesses are struggling financially, and although the federal government can create unlimited dollars, and although these dollars would go into the pockets of Americans, while supporting vital services like health care, education, infrastructure and defense, the deficit should be reduced.
Why? These people will tell you deficit spending causes inflation.
They will tell you that inflation is our biggest worry and we should remember the Weimar Republic and Zimbabwe hyperinflations. Never mind that the Weimar hyperinflation was caused by the onerous post-WWI conditions put on Germany by the Allies. And never mind that the Zimbabwe hyperinflation was caused by Robert Mugabe’s stealing of land from farmers and giving it to people who didn’t know how to farm.
And never mind that despite wars, recessions, depressions and federal deficit spending, we never have experienced hyperinflation. Those people fear a hypothetical, never-experienced problem more than the real problem of a recession from which we have not yet recovered.
So for those people, I again offer the following graph:
As you can see, there has been zero relationship between federal deficit spending and inflation. Zero.
So if the federal government is capable of unlimited deficit spending, and if deficit spending helps cure unemployment and puts dollars into American pockets, and does not cause inflation, why do we not increase federal deficit spending?
The answer: Ignorance and intent.
Some of our leaders — politicians, economists and the media — are ignorant of the facts. And some of our leaders, knowing the federal spending which reduces unemployment and puts dollars in the pockets of the 99%, also reduces the income gap. They don’t want that. They are the servants of the 1%, bought and paid for.
The next time you read about or hear someone saying the federal deficit is too high, “unsustainable” or should be reduced, know this: That person either is ignorant of the facts or intentionally wants to increase the gap between rich and non-rich. There are no other alternatives.
Now, the challenge is to find a politician who will tell the truth about the economy. Good luck with that.
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