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●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 ultimately 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 penalty for ignorance is slavery.
●Everything in economics devolves to motive.
Exactly, what is federal wasteful spending, and why is it bad?
Imagine there are only two men in America. Our Monetarily Sovereign, federal government pays one man $10 to dig a hole, and pays the other man $10 to fill it in. Is this an example of wasteful spending? If so, why?
The word “wasteful” is a pejorative. Anything labeled “wasteful” is bad by definition. So yes, wasteful federal spending would be bad — if it existed. But does wasteful federal spending really exist?
Keep in mind that our federal government is Monetarily Sovereign. This means:
*The federal government, unlike state and local governments, has the unlimited ability to create dollars. It never can be forced to run short of dollars.
*The federal government creates dollars by spending. To pay a bill, the government instructs vendors’ banks to increase the balance in the vendors’ checking accounts. This is how the federal government creates dollars.
*Thus, unlike state and local taxes, federal taxes do not pay for federal spending. Even if federal taxes were $0, the federal government could continue to instruct vendors’ banks to increase the balance in vendors’ checking accounts, i.e. the federal government could pay its bills.
*Therefore, taxpayers do not pay for federal spending.
*And federal spending for one purpose does not replace federal spending for another purpose.
So again, exactly what is federal “wasteful” spending?
The Heritage Foundation, a mouthpiece for the notorious, right-wing, billionaire activist Koch brothers, offers:
1. Programs that should be devolved to state and local governments;
2. Programs that could be better performed by the private sector;
3. Mistargeted programs whose recipients should not be entitled to government benefits;
4. Outdated and unnecessary programs;
5. Duplicative programs; and
6. Inefficiency, mismanagement, and fraud.
Numbers 1 and 2 merely represent the Koch’s attempt to shift spending from the federal government (which can afford anything) to burden the state and local governments and the private sector with unaffordable spending. The purpose: To widen the gap between the rich and the rest by eliminating government spending, the vast majority of which benefits the non-rich.
Widening the gap gives the rich even more power over the rest, and power is what the rich want.
Number 3 reveals its purpose by the use of the word “entitled.” To the rich, no one but the rich is entitled to anything. Social Security, Medicare, Medicaid, food stamps and other aids to the middle and poor all are “mistargeted entitlements.”
But surely, “outdated,” “unnecessary,” “duplicative,” “inefficient” and “mismanaged” programs must be examples of federal wasteful spending, and they would be except for one detail, and that goes back to the first question in this post: Exactly, what is federal wasteful spending?
Or said another way: Is it possible to “waste” something for which there is an unlimited supply?
Your rowboat floats in the middle of Lake Michigan. You have a bucket of fresh water, which you now use for cleaning your boat. Have you “wasted” the fresh water?
Or: Your boat floats in the middle of the Atlantic ocean. Again you use your bucket of fresh water to clean your boat. Have you wasted the fresh water?
In the first case, there is no waste. You’re in the middle of a giant lake, having unlimited fresh water, and you now have a clean boat. In the second case, there is waste, because you’re in the middle of a salt-water ocean, and that lost fresh water is irreplaceable. It was wasted.
And that is how the Monetary Sovereignty of the federal government differs from the monetary non-sovereignty of state and local governments and the private sector.
I submit that the term “wasteful” cannot apply to federal spending. Yes, some federal spending may be more productive than other federal spending, but no federal spending precludes other federal spending. It simply is not correct to say that federal spending for “A” could have been used for “B.”
All federal spending has one huge advantage for the economy: All federal spending adds dollars to the economy, which grows the economy. (GDP = Federal Spending + Non-federal Spending + Net Exports)
What about Heritage/Koch’s final caveat, “fraud”? Is fraud an example of wasteful spending?
It depends. If the fraud steals dollars from someone in the private sector, it is wasteful. But if the fraud steals dollars from the federal government, it may be criminal, but it isn’t wasteful. In fact, it adds dollars to the economy.
Even counterfeit dollars grow the economy. So long as they are not caught, they add to private sector buying power.
Let’s get to motivation. Why does Heritage/Koch, and all the bought-and-paid-for politicians and equally bought-and-paid-for university economists stress about federal waste?
The primary financial motivation of the rich is to widen the gap between themselves and the non-rich. It is the gap that makes them rich. Without the gap, no one would be rich, and the wider the gap, the richer they are. What the rich call “waste,” are benefits to the non-rich.
As Heritage/Koch said,
“It is possible to reduce spending and balance the budget. In the 1980s and 1990s, Washington consistently spent $21,000 per household. Simply returning to that level would balance the budget by 2012 without any tax hikes.
The Kochs et al, want reduced federal spending — reduced Social Security, reduced Medicare, etc., etc., etc. The goal is to deprive the non-rich and to widen the gap.
The best way to rationalize reduced federal spending is to call it “wasteful.” Nobody likes waste. Even the people most affected by cuts in federal programs feel obliged to agree that “waste” must be eliminated. As Heritage/Koch says:
“Lawmakers seeking to rein in spending and budget deficits should begin by eliminating this least justifiable spending while also addressing long-term entitlement costs.”
And there you have it: “Long term entitlement costs.” Get rid of entitlements and the rich will have even more power over the rest.
Should there be any limit to so-called “wasteful” spending by the federal government? Yes, that limit is an inflation that cannot be prevented or cured by interest rate increases.
So, what are the 5 ways to eliminate wasteful federal spending?
1. Target all federal spending toward the goal of narrowing the gap between the rich and the rest.
There are 4 additional ways, but to recite them would be wasteful.
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise.