●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Background: Our Washington politicians are owned by the upper 1% income group, which wants the income gap between them and the other 99% to increase. That is the primary mission of the rich.
To accomplish that goal requires increasing the net incomes of the 1% compared to the net incomes of the 99%. Comparative income is far more important than absolute income.
Reduced federal spending not only leads to recessions, but punishes the 99% far more than the 1%, because the vast majority of federal spending benefits the 99% more. Spending for Medicare, Medicaid, Social Security, defense, etc. all account for a greater percentage of the 99%s income.
GDP (Gross Domestic Product) is the most commonly used measure of our economy.
New York Times
Leaders at Work on Plan to Avert Mandatory Cuts
By Jonathon Weisman, Published: October 1, 2012
WASHINGTON — Senate leaders are closing in on a path for dealing with the “fiscal cliff” facing the country in January, opting to try to use a post election session of Congress to reach agreement on a comprehensive deficit reduction deal rather than a short-term solution.
Senate Democrats and Republicans remain far apart on the details, and House Republicans continue to resist any discussion of tax increases. But lawmakers and aides say that a bipartisan group of senators is coalescing around an ambitious three-step process to avert a series of automatic tax increases and deep spending cuts.
Translation: The “fiscal cliff” would be caused by a combination of spending cuts and tax increases. To avoid the “fiscal cliff,” Congress plans to institute spending cuts and tax increases. Understand?
First, senators would come to an agreement on a deficit reduction target — likely to be around $4 trillion over 10 years — to be reached through revenue raised by an overhaul of the tax code, savings from changes to social programs like Medicare and Social Security, and cuts to federal programs.
Translation: “Deficit reduction target” is identical with a Net Private Savings reduction target (Federal Deficits – Net Imports = Net Private Savings). “Overhaul of the tax code” is identical with increase in taxes collected. “Changes to Medicare and Social Security” is identical with cuts to Medicare and Social Security.
GDP is calculated this way:
GDP = Federal Spending + Non-federal Spending – Net Imports.
Therefore, deficit reduction = GDP reduction = slower growth, or recession or depression.
If those efforts failed, another plan would take effect, probably a close derivative of the proposal by President Obama’s fiscal commission led by Erskine B. Bowles, the Clinton White House chief of staff, and former Senator Alan K. Simpson of Wyoming, a Republican. Those recommendations included changes to Social Security, broad cuts in federal programs and actions that would lower tax rates over all but eliminate or pare enough deductions and credits to yield as much as $2 trillion in additional revenue.
Translation: If Congress fails to cut spending and increase tax collections (either of which would cause a recession or depression), another plan would cut spending and increase tax collections (thereby causing a recession or depression).
House Republicans, favored to retain control regardless of the presidential and Senate results, have not been part of the Senate talks so far and could be difficult to sway to back a package with significant new revenue even if it wins bipartisan Senate support.
Democratic leaders are already signaling a major stumbling block: they will accept no deal that extends Bush-era tax cuts for the rich, even for six months.
Translation: Both parties want to increase the income gap; Republicans want to increase it faster.
Other senators, like Lindsey Graham, Republican of South Carolina, have counseled a more incremental approach to head off mandatory deep military cuts next year. Senator Richard J. Durbin of Illinois, the second-ranking Democrat, had suggested finding enough savings for a six-month delay on taxes and cuts to give negotiators more time.
Translation: Since nothing has been done in the past six months, more time is needed to do more nothing.
But Mr. McConnell compared the government to a ship sinking under the weight of Medicare and Social Security and said that temporarily holding off the automatic budget cuts and tax increases would not avert a disaster.
“Even if we rearrange the chairs, fix the tax thing, fix the sequester, the ship’s still going down,” he said in an interview. “I want to deal with it altogether. The next best opportunity is the end of the year.”
Translation: Budget cuts and tax increases are necessary to cause the recession the 1% wants. But we Republicans refuse all tax increases, which leaves only budget cuts. However, we don’t want cuts to the military budget, which leaves only cuts to Medicare and Social Security, the prime benefits to the lower and middle classes. That is the best way to increase the income gap.
On Monday, the nonpartisan Tax Policy Center released a new study estimating that if nothing is done, the expiration of all the Bush-era tax cuts would raise taxes by more than $500 billion next year alone, an average increase of $3,500 per household. Middle-income families, it said, would see taxes rise by an average of almost $2,000.
Translation: Congress intentionally created this situation, so that “solving it” by reducing tax increases and spending cuts actually would look like a benefit. If the 99% is told their taxes would increase $2,000, and Congress heroically steps in to increase taxes “only” $1,000, the stupid 99% will be happy.
Senator Tom Udall, Democrat of New Mexico, said figures like those and forecasts anticipating a recession if nothing is done have prompted some consideration for postponing any tax increases or spending cuts for a year. But he said lawmakers want to lock in action on the deficit now.
Translation: Big spending cuts and tax increases will cause a big recession. So let’s lock in smaller spending cuts and smaller tax increases, so we can have a smaller recession.
“You have to have the framework of a plan,” he said. “We need to find something that’s going to make us come to the table and put our fiscal house in order.”
Translation: No matter what we do, it only will be a first step. “Fiscal house in order” means no deficit, or better yet, a surplus, thus guaranteeing a depression.
House Speaker John A. Boehner of Ohio says he will not accept any deal that raises tax rates or “decouples” the Bush-era tax rates by extending some but allowing others to expire.
Translation: We have to protect the rich. Hey, we’re Republicans. What did you expect?
Senators have also failed to agree on a mechanism to enforce a deficit reduction plan. Mr. Durbin has suggested that if Congress cannot agree on changes to the tax code, entitlements and spending in six months, the automatic spending cuts and tax increases should go into effect.
Translation: This is the same “fiscal cliff” facing us today, but delayed six months. How’s that for a solution?
But the bipartisan group of senators says that medicine has already proved too tough to swallow. Instead, the backstop should be an acceptable deficit reduction program like Simpson-Bowles.
Translation:Suddenly, Simpson-Bowles, which was so bad, neither party wanted it (and it has to be really bad for both parties to hate it) — suddenly, it has become a viable alternative.
Bottom line: No matter how Congress and the President twist and turn, there is one simple fact that will not go away: GDP = Federal Spending + Non-federal Spending – Net Imports.
There is no way to remove money from the economy without hurting the economy. Period.
The deficit-reduction goal is both harmful and unnecessary for a Monetarily Sovereign nation.
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%
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 Imports