●The more federal 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.
●Cutting the deficit is the government’s method for taking dollars from the middle class and giving them to the rich.
●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 penalty for ignorance is slavery.
The U.S. is Monetarily Sovereign. It never can run short of its sovereign currency, the dollar. As Alan Greenspan said, “The United States can pay any debt it has, because we always can print money to do that, so there is zero probability of default.”
Portugal, by contrast, is monetarily non-sovereign. It cannot print more sovereign currency to pay its bills, for it has no sovereign currency. It uses the euro, an alien currency it does not control.
So one would think that one nation’s problems and solutions might differ from the other nation’s problems and solutions. Sadly, that is not the case. Here is what is happening in Portugal:
Portugal braced for ‘fiscal earthquake’
By Peter Wise, December 31, 2012
Lisbon plans to lift income tax revenue by more than 30 per cent, raising the effective average rate by more than a third from 9.8 to 13.2 per cent. Anyone receiving more than the minimum wage of €485 a month, including pensioners, will also pay an extraordinary tax of 3.5 per cent on their income.
The increases, which the centre-right government has itself described as “enormous”, are designed to ensure Lisbon meets deficit-reduction targets agreed with international lenders as part of a €78bn bailout.
“This is a kind of armed robbery of the taxpayer. It will not just penalise the middle class, it will kill them off,” Luís Marques Mendes, a former leader of Mr Passos Coelho’s Social Democrat party (PSD), said in October when the 2013 budget was presented in parliament.
As Portugal passes the halfway mark of its three-year adjustment program, the steep tax increases facing many families have made the outlook for 2013 — the third consecutive year of austerity, recession and rising unemployment — the grimmest yet.
Total tax revenue has fallen considerably below target this year, forcing the government to implement additional austerity measures to meet even the more relaxed budget deficit targets agreed with the EU and International Monetary Fund in September.
Translation: Tax rate increases and government spending cuts, i.e. “austerity,” always are recessionary, and recessions always decrease tax revenues, which then requires more tax rate increases and spending cuts — an economic death spiral.
It is bleeding a patient to cure anemia.
The coalition will be relying on increased state revenue to account for about 80 per cent of the fiscal adjustment required in 2013 — a reversal of the original bailout plan, in which consolidation was to be achieved mainly through spending cuts.
A couple in which each partner earns about €3,500 a month — two senior university professors, for example — could now find themselves in the top tax bracket, when previously they would have had to earn more than €6,000 a month each to pay the top rate.
The highest income tax rate is be increased in January from 46.5 to 48 per cent and will apply to couples earning more than €80,000 a year, compared with €153,000 previously (income tax in Portugal is levied on family units). They will also pay an additional 2.5 per cent “solidarity tax” on their income.
Translation: The middle class will be brutalized by tax increases.
Income from value added tax, the government’s biggest source of tax revenue representing about 36 per cent of the total, has been falling since 2008, despite a sharp increase in the rate.
Translation: Increasing tax rates is recessionary, so always fails to bring in a proportional amount of money. The value added tax, like FICA, is a regressive tax, punishing the lower income groups most.
Carlos Loureiro, a tax partner at Deloitte, said, “a tax structure in which wage earners, pensioners and a small percentage of companies bear the overwhelming burden is not sustainable. If tax revenue is going to contribute more to fiscal consolidation, we have to change the system.”
Translation: The worst thing an economy can do to itself is to increase taxes and or decrease spending, especially when the immediate victims are the middle class. This results in a two-class economy, composed of a few very rich, and a great mass of impoverished people, in short, a third-world country.
Now, let us compare Portugal with the U.S.
HONOLULU (Reuters) – Fresh from the long legislative fight to prevent a “fiscal cliff” of tax hikes and spending cuts, President Barack Obama warned on Saturday that the United States could not afford further budget showdowns this year or in the future.
“We still need to do more to put Americans back to work while also putting this country on a path to pay down its debt, and our economy can’t afford more protracted showdowns or manufactured crises along the way,” he said in the address, broadcast on Saturday.”
Translation: “Pay down its debt” is a code word for austerity, resulting in an economy like Portugal’s. The difference: Portugal, being monetarily non-sovereign, has no choice.
Lawmakers in the Senate and the House passed legislation this week that raised tax rates for the wealthiest Americans while making Bush-era tax cuts for the middle class permanent. It was a victory for Obama, who campaigned for re-election largely on a promise to achieve that goal.
Translation: The Obama goal was to increase tax rates on the wealthy. Every dollar collected from the wealthy is one dollar less in the economy. This has no benefit for the middle- and lower classes. It, in fact, is adverse for them, as dollars drained from the economy reduce GDP, business and hiring.
Obama said he was willing to do more on deficit reduction and suggested that the hike in tax rates for wealthy Americans was not the last tax change he expected to make.
Translation: “I dramatically increased taxes on you middle- and lower-income people — you who elected me– by increasing your FICA from 4.2% to 6.2%, but I was hoping you are too stupid to notice a 48% increase in your taxes. Now, since you haven’t squealed too loudly, I plan to increase taxes even more (i.e. more austerity), to continue widening the gap between the rich and you.”
Summary: President Obama pretends to believe the United States, like Portugal, is monetarily non-sovereign, and will be unable to pay its bills without tax increases or spending cuts. He is lying, and his lies will destroy your life and the lives of your children and grandchildren.
As he governs like a prime minister of Portugal, he will impoverish America, just as Portugal has been impoverished by its leaders.
In Portugal, the wealthiest people are not suffering and will not suffer. The middle- and lower classes will become poorer and poorer, until Portugal becomes a third world, banana-style republic. In America, the wealthiest people are not suffering and will not suffer. The middle- and lower classes will become poorer and poorer, until America too, becomes a third world, banana-style republic.
That is the goal of the .1% and that is the austerity path our politicians are paid to follow. Despite facing diametrically different problems, Barack Obama and Pedro Passos Coelho, the prime minister of Portugal, are leading their respective nations down exactly the same paths to poverty.
Obama has sold his soul to the devil, and you will suffer the payments.
If enough of you tell him so, perhaps you can make a difference.
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