●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.
The so-called (originally by Ben Bernanke) “fiscal cliff” is, to quote Wikipedia;
. . . laws which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit beginning in 2013. These laws include tax increases due to the expiration of the so-called Bush tax cuts and across-the-board spending cuts under the Budget Control Act of 2011.
Translation: The fiscal cliff results from reduced deficits.
Some analysts have argued that “fiscal slope” or “fiscal hill” would be more appropriate terminology because while the cumulative economic effect over all of 2013 would be substantial, it would not be felt immediately but rather gradually as the weeks and months went by.
Translation: Whatever the fiscal cliff is, it will be “substantial” and felt over weeks and months –actually, for years.
The Congressional Budget Office reported an increased risk of recession during 2013 if the deficit is reduced suddenly, while indicating that lower deficits and debt over time improve long-term economic growth prospects.
Translation: Sudden deficit reduction will cause a recession, but through the unfathomable magic of political mathematics, slower deficit reduction will improve economic growth.
How does that work? No one seems to know, or if they know, they aren’t telling.
Nearly all proposals to avoid the fiscal cliff involve extending certain parts of the 2010 Tax Relief Act or changing the 2011 Budget Control Act or both, thus making the deficit larger by reducing taxes and/or increasing spending.
Translation: As we said, to avoid a recession, increase the deficit, but to grow the economy, reduce the deficit. You may find this confusing, but the voters seem to understand it perfectly, as the vast majority favor reducing the deficit while avoiding recession.
What does the Congressional Budget Office (CBO) say?
Large budget deficits would reduce national saving . . .
Uh, er, excuse me, CBO, but how can lower taxes (taking less money from the people) and increased federal spending (sending more dollars into the economy) reduce savings? The actual formula is Federal Deficits – Net Imports = Net Private Savings
Interest payments on the debt would consume a growing share of the federal budget, eventually requiring either higher taxes or a reduction in government benefits and services.
Translation: Raise taxes, cut benefits and destroy lives now, so we don’t have to raise taxes, cut benefits and destroy lives later. (The lives already will be destroyed; no need to do it twice.)
By the way, CBO, but what is that weasel word, “eventually”? Federal spending already has grown massively without tax increases. So why would future spending require tax increases, especially for a Monetarily Sovereign government having the unlimited ability to create its sovereign currency?
Bottom line: Cutting the deficit reduces GDP, and is unnecessary, because the government can create unlimited dollars (and for you debt hawks, no, this does not cause inflation.)
Then, there is this from Fox News (My bible for facts):
Boehner calls on Obama to ‘lead’ on averting ‘fiscal cliff’
Published November 09, 2012
WASHINGTON – House Speaker John Boehner on Friday put the ball in President Obama’s court over the so-called “fiscal cliff,” calling on the president to step up with a solution to avert the double-whammy of spending cuts and tax hikes that threatens to trigger another recession.
“This is an opportunity for the president to lead,” Boehner said late Friday morning. “This is his moment to engage the Congress and work towards a solution that can pass both chambers.”
Translation: We dare you to try to do anything that will benefit the country and make the Democrats look good. We double dare you. Remember your last term? Our filibusters still wait at the ready.
Boehner had already telegraphed that he wants the president to be in the driver’s seat on a deal, and not pass the tough decisions to Congress. “We’re ready to be led,” he said.
Translation: You may be in the driver’s seat, but my foot is on the brake.
The Congressional Budget Office said failing to avert the spending cuts and tax hikes would send the nation into another recession and drive up the jobless rate to 9.1 percent by next fall.
But trust us, in the long term, recession and unemployment actually will be good for America. The higher the jobless rate, the better things will be for the Republicans in 2014. We did it before; we can do it again.
The CBO analysis says that the cliff would cut the deficit by $503 billion through next September, but that the fiscal austerity would cause the economy to shrink by 0.5 percent next year and cost millions of jobs.
Translation: That’s our plan: Cut the deficit; cause a recession.
Democrats continue to demand that the Bush-era tax rates lapse for those making $250,000 and up. Republicans continue to insist on keeping tax rates stable for everyone.
Translation: Taking dollars from the rich, somehow does not take dollars from the economy. No one knows how that works, but it’s great demagoguery, especially to influence clueless voters.
Boehner, though, has said he’s willing to accept “new revenue” in exchange for serious entitlement cuts.
Translation: This has been our goal all along. Cut Social Security. Cut Medicare. Cut Medicaid. Cut aid to the poor. Do everything possible to increase the income gap between the rich and the rest.
Many of his Democratic allies hope Obama will take a hard line when he addresses the matter Friday. Republicans warn that a fight could poison efforts for a rapprochement in a bitterly divided Capitol and threaten his second-term agenda.
Translation: If you sacrifice the benefits to the poor and middle classes — benefits Democrats have struggled to achieve for 70 years — we promise to help you with voters. Really, we do. Would we lie?
A new study estimates that the nation’s gross domestic product would grow by 2.2 percent next year if all Bush-era tax rates were extended and would expand by almost 3 percent if Obama’s 2 percentage point payroll tax cut and current jobless benefits for the long-term unemployed were extended as well.
Translation: Cutting taxes grows the economy. Amazing. Who could have predicted that. Next you’ll try to tell us that increased spending (the other way to increase the deficit) also grows the economy.
Voters can be made to believe anything. So let’s admit that cutting the deficit hurts the economy, but tell them we need to cut the deficit to help the economy. Then, we can cut benefits to the middle and lower classes, increase unemployment and widen the income gap — and the voters actually will believe we’re trying to help them!
Instead of causing a fiscal cliff, we’ll cause a fiscal slide. Both will push the lower 99% income groups to the bottom; one will just do it a little slower.
Ah, the voters, bless ‘em. We tell them white is black, and black is white, and they believe it. Anyone want a ride down the fiscal slide?
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