Given the choice between Paying the poor vs. Starving the poor . . .

Background: The government is paying unemployed people only $300 per week, and (surprise, surprise) some people are reluctant to go back to work at jobs that will cost them money.

People gather to show their support for the 2020 Basic Income March at the Utah State Capitol, Sept. 19, 2020, in Salt Lake City.

The purpose of the payments is to prevent families from falling into poverty, which would also help cause the entire economy to slide into poverty.

The payments themselves, though not enough in of themselves to prevent poverty, do benefit every American, rich or poor, by increasing GDP, narrowing the Gap between rich and poor, and preventing a more serious recession.

So what’s a government now to do about those unemployed people who won’t go back to work? It has several choices.

  1. The government can do nothing different, and let the unemployment payments end at the allotted times. This is the “we’re afraid to do anything controversial, so we’ll do nothing” approach of timid politicians.
  2. The government can stop all payments now. This is the “starve ’em ’til they beg for work” approach that businesses and primarily the GOP want.
  3. The government can set a minimum pay requirement that is high enough to make returning to work financially advantageous. This is the “let businesses pay more because the government is going broke” approach.
  4. The government can eliminate the unemployment necessity, and simply give all people a weekly or monthly stipend. This is the “Social Security for All,”  progressive approach.
Yahoo Money Calls to end pandemic unemployment benefits gain steam after disappointing jobs report By Denitsa Tsekova, reporter for Yahoo Finance and Cashay, a new personal finance website. Follow her on Twitter @denitsa_tsekovaSat, May 8, 2021
Calls to cancel pandemic-era unemployment benefits intensified this week as worries over a labor shortage gained steam, culminating in a crescendo on Friday after a wildly disappointing jobs report for April.
South Carolina and Montana announced plans before the report to end the jobless programs at the end of July, after weeks of local reports across the country recounted how restaurants couldn’t fill positions.
After the jobs report on Friday, the U.S. Chamber of Commerce announced its support of stopping the extra $300 in weekly unemployment benefits, citing worker shortages, while Sen. Roger Marshall (R-KS) introduced a bill to repeal the pandemic unemployment programs.

The Republicans are sure to favor the “starve ’em ’til they beg for work” approach.

The GOP is, after all, the Party of the Rich, and if there is one thing the rich hate it’s for the poor and middle-classes to have more money or power.

It’s all a reflection of Gap Psychology, a state of mind in which the rich wish to widen the Gap between them and the rest of America.

The Gap is what makes them rich (without the Gap, no one would be rich or poor), and the wider the Gap the richer they are.

Interestingly, many of the poor and middle, having been brainwashed by the rich, to favor punishing the poor and middle to favor the rich.

That too is part of Gap Psychology, the desire to come closer to those above you in the social structure, by agreeing with them.

Voting for a right-winger essentially says, “I admire rich people, and though I myself am not currently rich, I aspire to be rich, and in some twisted way, my voting against the poor moves me closer to being rich.”

“While there are certainly people that needed access to increased unemployment benefits during the heart of this pandemic, we should not be in the business of creating lucrative government dependency that makes it more beneficial to stay unemployed rather than return to work,” Marshall said in a statement on Friday.

While $300 per week is hardly “lucrative,” the U.S. Chamber of Commerce most definitely wishes to avoid a “government dependency” by creating a business dependency, in which people are so desperate they will take any job, even at starvation wages.

That is, rather than giving the government power over people’s lives, the U.S. Chamber wants business CEOs to have power over people’s lives.

As to which is the more benevolent rule might be subject to debate.

All the government wants is your vote and your acquiescence. The business CEOs want your sweat labor and your money. Which is more onerous?

What’s to blame for the disheartening job performance in April, though, has no consensus among economists.
After payroll gains missed by over 700,000 — 266,000 jobs were added last month versus estimates of 1 million — a firestorm on Twitter ignited among economists and analysts, who largely agreed that tightness in the labor market existed, but argued over the culprit.

The so-called “culprit” is quite obvious. Too many jobs pay too little.

Despite right-wing wishes, people are not stupid enough to accept a job paying $300 a week (or even a tad more), especially considering the kind of unpleasant jobs those generally are), when $300 are available for not subjecting oneself to unpleasant jobs ruled by unpleasant supervisors.

Complicating matters is that the jobs recovery is not occurring in a vacuum, but amid a public health crisis that introduces multiple variables.
While there is no single measure for workforce shortage, increased work hours and wages are considered some of the signs that indicate employers are struggling to fill jobs and the labor market is tightening, according to Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute. 

Apparently, employers are not struggling enough to make their jobs more attractive, preferring to save money by letting the unemployed struggle.

“If employers really can’t find the workers that they need, they’ll respond by ramping up the hours of the workers,” Shierholz told Yahoo Money.

Rather than hiring more people at improved wages and working conditions, employers prefer to work people to death, even if this requires paying overtime wages.

One clue to unemployment is provided by a story that has been typical even well before COVID:

The New York Times Schools Are Open, but Many Families Remain Hesitant to Return By, Dana Goldstein, Sun, May 9, 2021
Pauline Rojas’ high school in San Antonio is open.
But like many of her classmates, she has not returned and has little interest in doing so.
During the coronavirus pandemic, she started working 20 to 40 hours per week at Raising Cane’s, a fast-food restaurant, and has used the money to help pay her family’s internet bill, buy clothes and save for a car.
Rojas, 18, has no doubt that a year of online school, squeezed between work shifts that end at midnight, has affected her learning.
Still, she has embraced her new role as a breadwinner, sharing responsibilities with her mother, who works at a hardware store. “I wanted to take the stress off my mom,” she said.
“I’m no longer a kid. I’m capable of having a job, holding a job and making my own money.”
“There are so many stories, and they are all stories that break your heart,” said Pedro Martinez, the San Antonio schools superintendent, who said it was most challenging to draw teenagers back to classrooms in his overwhelmingly Hispanic, low-income district.
Half of high school students are eligible to return to school five days a week, but only 30% have opted in.
Concerned about flagging grades and the risk of students dropping out, he plans to greatly restrict access to remote learning next school year.

And thus, the Gap between the rich and the rest widens, and it is the lower-income groups who help widen it, not only with their votes but with their personal life decisions.

We discuss, in Ten Steps to Prosperity (See below), this common, seeming paradox, of children and their families rejecting even free college, to work: (See Step 5. Salary for attending school.)

It demonstrates why unemployment is a multi-faceted situation, having disparate reasons that cannot be addressed by just one government action.

Lack of good schooling can doom otherwise bright children, our nation’s greatest asset, to lives of wasted potential and abject failure — a great loss to America and a threat to our international leadership. Returning to the original article:

Average hourly earnings for workers in labor and hospitality also increased to $17.88 in April, up from their pandemic low of $16.92 in July and are higher than their pre-pandemic level of $16.90 in February 2020, according to data from the Labor Department.
Some economists pointed to the increase as a sign that employers are competing with the enhanced unemployment benefits, specifically the extra $300 a week that the Chamber of Commerce said “results in approximately one in four recipients taking home more in unemployment than they earned working.

What a disgrace for America: While corporations and their executive leadership pocket record salaries and perks, 25% of the workforce makes less than $300 a week!

Shierholz noted that the wage increases in some sectors may not be robust enough.
For instance, nonsupervisory workers in leisure and hospitality still make less than $21,000 a year after wage increases, according to Shierholz, or about $10 an hour.
“While there’s definitely signs of isolated and temporary tightness in the labor market,” Shierholz said, “a lot of the huge complaints that we’re seeing really are about businesses being frustrated that they can’t find workers at extremely low wages.”

If your business can’t survive even at slavery-level wages, you had better reassess your business model. Or maybe, just maybe, you should go out of business and not rely on poverty dependency to populate your workforce.

The number of women in the labor force fell by 64,000 in April, while the number of men increased by 493,000, Michael Madowitz, an economist at American Progress, pointed out to Yahoo Money.
“If there is a labor shortage, it’s all about women,” Madowitz tweeted on Friday after the jobs report.

Well, perhaps not exactly:

Scant difference between total unemployment (red) vs women unemployment (blue).
In Summary The purpose of a government is not to increase business profits or to maximize the wealth of the very richest among us.
Nor is the purpose of government to maximize employment.
The sole purpose of government is to protect and improve the lives of the people — all the people.
And since the majority is composed of people, whose lives most need improving — the poor and middle classes — government should focus on helping them rather than on punishing them for not accepting menial labor at starvation wages.
Unemployment is not a disease to be cured by punishing the victims, as the right-wing politicians wish.
Unemployment is a failure symptom of a Monetarily Sovereign government, despite having infinite financial assets, fails to use those asset to address in its primary purpose: To improve the lives of the people.

…………………………………………………………………………

Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ]

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:

  • Monetary Sovereignty describes money creation and destruction.
  • Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

What is the purpose of government? What is the purpose of business? What are their goals and methods?

We are not born with governments and businesses. We create them. But why?

Why do people voluntarily allow themselves to be ruled by others? You might believe it is not necessarily voluntary, particularly in the case of dictatorial governments.

But there always are vastly more ruled than rulers, and if government was not what the ruled wanted — if government was a burden — they have the numerical power to rid themselves of this device.

Sometimes this happens. Sometimes the governed rise up and free themselves of dictators. And when they do, what happens?

They form another government.Brexit: Rediscovering Europe as a win-win project – EURACTIV.com

So what is the purpose of this institution that virtually all humans and even some animals have adopted.?

It has persisted for millennia, so it clearly has an evolutionary advantage.

While one can list several specific purposes, there is one general, overall purpose of government:

The purpose of government is to improve the lives of the people.

Government is a form of mandated cooperation. Having a government says two things:

  1. Cooperation is more efficient than working individually, and
  2. Cooperation works better when there is leadership

So we give up our individual freedoms and rights to reap the benefits of cooperation and leadership. In that sense, businesses are very much like governments.

We form businesses because specialization is more efficient than the “jack-of-all-trades” who most often is “master-of-none.”

To accomplish this efficiency, businesses are formed as legal mini-governments, complete with rulers and the ruled.

Governments tell people what to do and what not to do, and the people allow this because it improves their lives.

Business owners and managers tell their people what to do and what not to do, and the people allow this, because it improves their lives.

The purpose of business is to improve the lives of the people.

That said, it is crucial not to confuse purpose with goal. While improving the lives of the people is the purpose of government and business, it is not the goal of government and business.

The goal of government and business is to improve the lives of the leaders.

The leaders accomplish this goal via several methods.

In analyzing government and business, we not only must consider purpose and goal but also, method. Governments essentially balance two methods: Providing benefits and applying force.

The benefits — food, clothing, shelter, medical care, entertainment — lead to acquiescence among the populace.

Government force — laws, police, military — does the same. Either way discourages action against the leaders.

Businesses also balance two methods: Providing benefits and force. The benefits are promotion, salary, and perks, while the force is demotion and firing.

Again, business and government use similar methods — the carrot and the stick — to reach their goals.

Keep the purpose, the goals, and the methods of business and government in mind as we discuss the following articles.

Pay a Living Wage or ‘Flip Your Own Damn Burgers’: Progressives Blast Right-Wing Narrative on Jobs Posted on May 8, 2021 by Yves Smith
Yves here. Glad to see someone is calling out the Republican “You need to keep them hungry so they’ll turn up” approach to labor management.
Corporate profit share of GDP has been record highs for years, which means nearly two times the level Warren Buffett deemed to be unsustainably high in the early 2000s.
Time for corporate owners to pay a decent wage.
By Kenny Stancil, staff writer at Common Dreams. Originally published at Common Dreams
………………………………………………………………………………………………………………………………………………
The U.S. Chamber of Congress blamed last month’s weak employment growth on the existence of a $300 weekly supplemental jobless benefit and began urging lawmakers to eliminate the federally enhanced unemployment payments that were extended through early September when congressional Democrats passed President Joe Biden’s American Rescue Plan.
“No. We don’t need to end [the additional] $300 a week in emergency unemployment benefits that workers desperately need,” Sen. Bernie Sanders (I-Vt.) said in response to the grumbles of the nation’s largest business lobbying group.
“We need to end starvation wages in America.”
“If $300 a week is preventing employers from hiring low-wage workers there’s a simple solution,” Sanders added. “Raise your wages. Pay decent benefits.”
According to the Chamber’s analysis, the extra $300 unemployment insurance (UI) benefit results in roughly one in four recipients taking home more pay than they earned working.
In response to that claim, Sanders’ staff director Warren Gunnels said: “If one in four recipients are making more off unemployment than they did working, that’s not an indictment of $300 a week in UI benefits. It’s an indictment of corporations paying starvation wages.”

The problem: Government believes that the more benefits government gives to workers, the more likely the government’s goal — improving the lives of the political leaders by acquiring votes — will be reached.

Business believes that keeping salaries low will improve business’s goal of improving the lives of business leaders by increasing profits.

Today, Government benefits to the people are high enough that going to work provides little marginal benefit for many people.

The Republican proposed method is for the government to stop paying benefits, so that workers will be starved back to work, and business profits will keep increasing.

The Democratic proposed method is for businesses to pay more — enough to tempt workers to forego government benefits, but this may reduce profits.

While both goals are different, and the methods may seem incompatible, the solution is mind-numbingly simple: Do both.

Rather than the current either/or of government benefits coming instead of business benefits, as unemployment compensation does, pay government benefits in addition to business benefits.

This would come under the heading:

Medicare for All, Social Security for All, Free College for All, etc.

A wage of $300 per week is at poverty levels. It is a starvation wage. It is an “abandon all hope” wage.

How a multi-billionaire, a person whose wealth measures up to $170 billion could countenance such a wage, is beyond cruel.

Do these people lack all sense of sympathy and empathy? Are they made of compassionless stone?

Well, yes. Compassion comes from Latin, and means “co-suffering,” as in “I feel your pain.” But how many of us really do feel someone else’s pain?

Keep in mind, the goal of business is to improve the lives of the leaders, and the leaders are certain that keeping costs down, which leads to keeping salaries down, will improve profits and thereby improve their lives.

“Raise your wages and benefits or flip your own damn burgers and sweep your own damn floors,” Gunnels added.
Other progressives like former labor secretary Robert Reich and Rep. Alexandria Ocasio-Cortez (D-N.Y.) also chimed in. “We do not have a shortage of willing workers in this country,” Morris Pearl of the Patriotic Millionaires said in a Friday afternoon statement responding to the Chamber. “We have a shortage of employers who are willing to pay workers enough to live.”
“Claiming that today’s disappointing jobs report is a result of expanded unemployment insurance is nothing more than a cruel tactic to pressure the administration into helping companies that they represent to continue to underpay and exploit their workforce,” Pearl continued.
“Our leaders are supposed to be helping to increase wages for low paid workers, not helping employers to keep wages down.”
“Instead of blaming struggling workers,” Pearl continued, “large corporations that do not pay their employees a liveable wage… should take this moment to self-reflect.
Maybe—just maybe—paying their workers more than starvation wages would incentivize workers to reenter the workforce.”

Yes, this is all true, but it ignores the true goal of business: Profits that enrich the leaders.

One might argue that paying workers more will make the workers bigger consumers who in buying more will enrich companies, but that too ignores reality.

If Company “A” pays its workers more, those workers may spend more, but not necessarily with Company “A.”

If Ford raises wages, nothing says those newly enriched workers will, out of the goodness of their hearts, buy Fords.

The public has as little compassion as do the business executives. The people who formerly were myriad small-business customers, but now are Amazon customers, have proved that.

Loyalty is something honored more in the breach.

Writing for Jacobin earlier this week, Sandy Barnard noted that another overlooked factor is the increased morbidity rates among food and agricultural workers, which increased more than any other occupation during the Covid-19 pandemic.

Is big agriculture supposed to have such guilt that workers immediately are given raises? Dream on.

“Living, breathing people… have decided they do not want to risk their lives for $7.25 per hour and no health benefits,” Barnard wrote.
Rep. Ilhan Omar (D-Minn.) responded to the Chamber’s call for an end to enhanced unemployment benefits by arguing that “the interests of big business are at war with the interests of the working class.”

And that is the fundamental problem. It is a war, with one side winning and the other sides losing.

The solution is for all sides — government, business, and the populace — to win.

Government can win — win votes, that is — by providing benefits.

Business can win by paying enough to attract workers — while remaining profitable. The populace can win by receiving benefits from both sides, from government and from business.

There absolutely will be no long-term solutions that involve either business, government, or the people losing.

The only intelligent solution is for all sides to get what they want, or at least to get enough of what they want. See the Ten Steps to Prosperity, below.

…………………………………………………………………………

Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ]

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:

  • Monetary Sovereignty describes money creation and destruction.
  • Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

 

 

Drinking when thirsty causes cramps, as does the national debt limit.

When I was in elementary school, way, way, way back in the 1940s (!), common knowledge was:Expert Advice for Keeping Young Athletes Hydrated and Healthy!
  1. Drinking water during physical activity causes cramps.
  2. Applying heat to sore muscles prevents stiffness.
  3. Swimming in the summer causes polio.
We all knew these things to be true, while we looked back at previous generations and smirked at the people who believed in witches and a flat earth. In the near future, generations will look back at us, and snicker at some of our beliefs, as expressed in the following AP article:
Associated Press Treasury warns of need to deal with national debt limit By MARTIN CRUTSINGER, AP Economics Writer
We see that the article was written, not by some uninformed amateur, but by the Associated Press’s Economics Writer.
WASHINGTON (AP) — The Treasury Department says it will employ measures to avoid an unprecedented default on the national debt this summer, but officials say those measures could be exhausted “much more quickly” than normal given the unusual circumstances of the global pandemic.
The national “debt” is the total of deposits into Treasury Security accounts. When you invest in a T-bill, T-note, or T-bond, you open a T-security account. This account most closely resembles a bank safe-deposit box into which you deposit money. The money never leaves your box until you take it, just as the dollars never leave your T-security account until you take them.
The Treasury will continue to initiate the types of bookkeeping maneuvers it has used in the past to keep the government from breaching a level that would trigger a default on the massive national debt.
The Treasury, the Federal Reserve, and Congress all are agencies of the federal government. Among them, they have created all the rules regarding federal finances. Those “bookkeeping maneuvers” are under the absolute control of the federal government. Nothing can “trigger a default” unless the federal government wishes it.
“In light of the substantial COVID-related uncertainty about receipts and outlays in the coming month, it is very difficult to predict how long extraordinary measures might last,” Brian Smith, Treasury’s deputy assistant secretary for federal finance said.
They are not “extraordinary” measures. They simply would be bookkeeping adjustments. The federal government created its byzantine bookkeeping system to suit its unique needs, and this system arbitrarily is changed whenever the federal government wishes to change it. No set of circumstances ever can force the federal government to “default” on any of its financial obligations. 
The government has been able to borrow enormous sums of money to finance trillions of dollars of support during the pandemic because the limit on borrowing has been suspended. But after July 31, the limit will return to whatever debt level exists at that time.
The federal government has the infinite ability to create its own sovereign currency, the U.S. dollar. In the 1780s, the federal government created from thin air, an arbitrary number of U.S. dollars and gave each dollar an arbitrary value. Since then, the government arbitrarily has created trillions of U.S. dollars, and has given those dollars arbitrary values. Having this infinite ability eliminates any need to borrow dollars. And indeed, the U.S. federal government does not borrow. T-bills, T-notes, and T-bonds do not represent borrowing. They are deposits into accounts, the purposes of which are:
  1. To provide a safe parking place for unused dollars, which helps stabilize the dollar, and
  2. To help the Federal Reserve control interest rates which helps to control inflation.
The government does not touch the dollars in those accounts. It does not use those dollars to pay its debts. To pay off the misnamed “borrowing,” the government simply returns the dollars in the accounts. The so-called debt “limit” too, is an arbitrary number, that Congress can (and many times has) increased at any time it wishes.
The national debt subject to the limit now stands at a record $28.1 trillion. That amount covers debt the government owes to itself in the form of commitments to Social Security and other government trust funds. The amount of the debt that is held by the public currently totals $22.1 trillion, an amount slightly higher than 100% of the entire economy and heights not seen since the huge borrowing the government did in the 1940s to finance World War II.
The fact that deposits into T-security accounts exceed Gross Domestic Product is relevant of nothing. This is known as the Debt/GDP ratio, which though often quoted, has no meaning whatsoever. It predicts nothing, and it evaluates nothing. It does not indicate the past, current, or future health of the economy. It is no better an economic measure than would be the number of runs scored by the Chicago Cubs in the 2nd inning of their next game.
Borrowing has soared in recent years to finance huge budget deficits that reflected increased spending on domestic and military programs in budget deals then-President Donald Trump reached with Congress and also to cover the costs of Trump’s $1.5 trillion tax cut approved by Congress in December 2017.
The federal government does not borrow, and so called “borrowing” does not finance federal spending. The federal government finances its spending by creating dollars, ad hoc. The more it spends, the more dollars it creates. Spending is the federal government’s method for creating dollars. In its infinite wisdom, Congress created rules that require the issuance of T-securities to equal in value the net total of federal government deficits (the excess of spending vs. income). Because these rules are obsolete (if they ever had any value), the government, rather than eliminating the rules, instituted a “cheat.” One branch of the government (the Federal Reserve) creates from thin air, dollars to deposit into T-security accounts, to satisfy the needs of a useless rule. Thus, the Federal Reserve owns about $6 trillion of U.S. “debt.” If need be, the Federal Reserve could own all of U.S. “debt,” or the entire “debt” system could be eliminated.
Over the past year, the higher deficits have reflected the trillions of dollars the government has spent to provide support during the pandemic-triggered recession. In the latest package, President Joe Biden got Congress to approve $1.9 trillion in March to provide $1,400 payments to individuals and other types of support for individuals and small businesses.
The President and Congress simply passed laws that create spending. No law was made regarding the funding of this spending, because no law was necessary. Federal spending creates its own funding.
Treasury officials did not specify what measures it will employ if Congress has not acted by the July 31 deadline to either raise the borrowing limit or simply suspend the limit for a period of time. What Treasury essentially uses book-keeping maneuvers to avoid a debt default. They basically entail withdrawing money invested in government accounts such as the fund that covers government pensions. The money is always replaced with any lost interest once the debt limit standoff is resolved.
There is no real “debt.” There is no real burden on the government or on taxpayers. It’s all arbitrary juggling of the books. The government owns the books and all the laws. It can do whatever it wishes.
Congress has never railed to deal with the debt limit by the deadline although in 2011 the standoff between Republicans and the Obama administration was so prolonged that Standard & Poor’s, the credit rating agency, downgraded a portion of the country’s AAA credit rating for the first time in history.
Standard & Poors made fools of themselves. At one point several U.S. corporations was given a higher credit rating than the U.S. government. Consider what would have happened to these corporations had the U.S government defaulted. The corporations’ money and their credit rating would have become worthless, or near so. No domestic entity can have better credit than the U.S. government. 
Treasury said it expects to borrow $463 billion in the current April-June quarter which will be part of its plans to borrow $2.28 trillion for the full budget year, which ends Sept. 30. The $463 billion represents a significant jump from the government’s initial estimate three months ago that it would need to borrow just $95 billion in the current quarter. The change was attributed to passage of the most recent virus relief bill of $1.9 trillion in March. The government ran up a record $3.1 trillion budget deficit last year, reflecting the COVID relief spending and a drop in revenues caused by the recession. Private economists believe the deficit for the current budget year will be even higher, possibly hitting $3.3 trillion.
Those budget deficits are nothing more than the number of dollars the federal government plans to add to GDP.

GDP = Federal Spending + Non-federal Spending + Net Exports

The more the federal government spends, the greater is GDP, the primary measure of the economy. Those who oppose federal spending are knowingly or unknowingly opposing economic growth. Unlike you and me, and unlike your state, county, and city, the federal government does not use revenue. In fact, the federal government destroys all income it receives.  To pay its bills, the federal government creates new dollars, ad hoc. Put these facts together:
  1. The only way to cut federal “debt” is to cut federal spending and/or to increase federal taxes.
  2. By formula, cutting Federal Spending cuts GDP
  3. Increasing taxes cuts Non-federal Spending, which cuts GDP
  4. Therefore, the math is absolutely clear: Cutting the federal debt cuts GDP.
Those who try to reduce the so-called federal “debt” are, in fact, sabotaging the American economy. There is no way to reduce the federal debt, or even to keep it level (aka “balance the budget”) without forcing America into a recession (if we are lucky) or a depression. This is demonstrated by history our history of debt reductions:

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807. 1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819. 1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837. 1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857. 1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873. 1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893. 1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929. 1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

When federal debt growth declines, we have recessions (vertical gray bars), which are cured by increases in federal debt growth.
  The Myths Future Generations Will Laugh About
  1. The federal government is too big
  2. The Debt/GDP ratio is too high
  3. Federal spending is “Socialism” (Socialism isn’t federal spending. It’s federal ownership and control over business).
  4. The deficit or debt should be reduced
  5. We should have a federal “balanced budget.”
  6. The federal government is spending beyond its means.
  7. Federal taxes “pay for” federal spending
  8. Personal finance or state/local government finance are like federal finance.
  9. Limits on federal deficit spending are “prudent.”
  10. We don’t need additional federal spending.
  11. We can’t afford programs that benefit the middle and lower-income groups (Elimination of FICA, Social Security for All, Medicare for All, Free College for All, Food and Housing supplements).
  12. The federal government should not “bail out” the state governments.
All of the above are indicators of economic ignorance, equally ignorant to not drinking water when you exercise. P.S. No sooner did I finish writing the above article than I came across this 100% hunk of bullshit:
Looming Budget Catastrophe in Pictures So Simple Even Congress Can Understand Maybe drawings can deter elected officials from their outrageous spending habits where detailed reports have failed to attract their attention.
Lord, have mercy. ………………………………………………………………………… Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ] THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:
  • Monetary Sovereignty describes money creation and destruction.
  • Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 
  The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest. MONETARY SOVEREIGNTY  

Disgraceful: “Respected” economist repeats all the common myths about our economy.

Imagine someone with these credentials not understanding how federal finance works.

This is a man who spends a good part of his life being asked to pontificate about economics, yet he promulgates the same old intuitive myths that history has disproven.

I’m talking about

“John Howland Cochrane, an American economist specializing in financial economics and macroeconomics. Formerly a professor of economics and finance at the University of Chicago, Cochrane serves as the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution at Stanford University.”

Here he is, on the right, being interviewed on CNN by Michael Smerconish:

John Cochrane (right) being interviewed by Michael Smerconish

I won’t subject you to the entire interview, but rather with the following quotes give you the gist.

John Cochrane: “Sooner or later debt has to be paid off. The real worry for me is there is no plan to pay off this debt.

“Sooner or later bond markets notice you have no plan to pay it off”

Throughout the interview, Cochrane demonstrates he has no idea what Monetary Sovereignty is, and no desire to learn from history.

The federal “debt” (which isn’t really debt as you know it), is instead, the net total of all deposits into Treasury Security accounts.

When you invest in these securities (aka T-bills, T-notes, T-bonds), you actually open a T-security account in your name. It resembles a safe deposit box with one difference: The federal government pays interest into T-security accounts.

The federal government, being Monetarily Sovereign, has the unlimited ability to create its own sovereign currency, the U.S. dollar. Thus, it has no need to borrow dollars and indeed, the federal government does not borrow dollars.

The purpose of normal “borrowing” is to provide the borrower with money to use for some purpose.

But because the federal government has the unlimited ability to create dollars it does not borrow, the T-securities are not “loans,” and the federal “debt” is not a debt.

That is why, for instance, any money you may put into a bank safe deposit box is not considered a debt of the bank, and it is no burden on the bank to “pay off” that box. It simply returns to you what already is yours.

When you open a T-security account, you are aware of the exact date upon which the dollars in the account will be returned to you. That is called the “maturity” date.

During that period of time, your dollars remain in your account, earning interest. They are not used by any agency of the federal government.

At maturity, the dollars in the misnamed “debt”  are paid off (i.e. returned to you) by the simple act of sending the money in your T-security account to your bank checking account.

This is not a burden on the federal government, nor is it a burden on future taxpayers. It is a simple money transfer from one of your bank accounts to another of your bank accounts.

It is not a transfer of dollars from the government to you. “Paying off” federal debt is a transfer of your dollars to yourself.

At one point Cochrane draws a parallel between federal debt and household debt. Thus he demonstrates abject ignorance of federal financing. The federal government is Monetarily Sovereign. You and I are monetarily non-sovereign.

You and I can run short of dollars, which is why we borrow money. The federal government never can run short of dollars, which is why it never borrow moneys.

At one point, Cochrane says:

“The more the government borrows the less is available for private capital.”

This short sentence is wrong on three counts: 

First, the government does not borrow.

Second, the amount available for private capital is based on federal deficit spending and bank lending, not on deposits into T-securities (which in fact are privately owned capital).

Third, according to Cochrane, the federal government has “borrowed” trillions of dollars, yet there is plenty available for private capital. He simply ignores the obvious facts on the ground.

The Cochrane said,

“This is like a financial crisis. It’s like a run on the bank. It’s like an earthquake. You can’t predict it. The sky falls when people lose confidence that the U.S. will pay back the debt.

The next crisis when the U.S. wants to borrow another $10 trillion, and the bond market says, ‘You guys are not worth it.”

The implication is that the federal government can run short of dollars if the “bond market” won’t lend to them. Utter nonsense.

As we’ve said, the federal government does not borrow and cannot run short of dollars. It creates dollars at will, which it surely has proved in the past 12 months by creating trillions of stimulus dollars.

Further, if Cochrane is implying that somehow the federal government will not be able to sell its T-securities, he has it all backward.

The sole purpose of T-securities is not to provide spending money for the government. The sole purposes are:

  1. To help the Federal Reserve control interest rates by setting a bottom rate, and
  2. To provide a safe parking place for unused dollars, which helps stabilize the dollar.

In the event that the federal government wished to sell T-securities but was unable to find a buyer, the Federal Reserve Bank can (and always has) buy whatever it deems necessary.

The Treasury never can be “stuck” with something it really has no need to sell in the first place.

At one point in the interview, Cochrane displays the following graph to shock you:

It shows the absolutely meaningless fraction: Debt/GDP (Gross Domestic Product).

Its rise is a favorite scare tactic by those who cannot explain why the total of deposits into T-security accounts (aka “federal debt”) should have any significant relationship to Gross Domestic Product.

The graph also demonstrates the gigantic increase in the Debt/GDP ratio, which according to debt hawk should by now, have cause an economic disaster of biblical proportions. So where is the disaster?

The fraction Debt/GDP is not predictive of anything and it is not evaluative of anything. It says nothing about future booms, busts, inflations, recessions, depressions, poverty, or prosperity. It is a 100% meaningless fraction that economisfits use all the time.

To demonstrate how meaningless it is, look at these ratios:

Here were some of the lower Debt/GDP ratios a few years ago:

 

Here were some of the higher Debt/GDP ratios at the same time:

Oh, and did we mention that powerhouse Japan’s ratio was 223?

Niow, looking at just the numbers in these two tables, you would expect Lybia to have the healthiest economy, and Puerto Rice to have the sickest, with the U.S. somewhere in the middle.

So called “economists” ignore these obvious facts.

Finally, after briefly admitting that, yes, the government can’t run short of dollars, Cochrane mumbles something about “that would cause inflation.”

Wrong yet again, Mr. Cochrane. Here are excerpts from an article Cochrane wrote ten years ago:

“For several years, a heated debate has raged among economists and policymakers about whether we face a serious risk of inflation.

“That debate has focused largely on the Federal Reserve — especially on whether the Fed has been too aggressive in increasing the money supply, whether it has kept interest rates too low, and whether it can be relied on to reverse course if signs of inflation emerge.

“But these questions miss a grave danger.

“As a result of the federal government’s enormous debt and deficits, substantial inflation could break out in America in the next few years.”

OMG! That was ten years ago, and this guy still is peddling the same old “federal-debts-cause-inflation” nonsense he spouted way back then (!), and he has learned absolutely nothing since. 

Debt and deficits have grown, while interest rates and inflation have stayed low, and still the same old, same old. 

Oh, but the BS goes on and on: 

“If people become convinced that our government will end up printing money to cover intractable deficits, they will see inflation in the future and so will try to get rid of dollars today — driving up the prices of goods, services, and eventually wages across the entire economy.”

The government has run enormous deficits, and people like Cochrane have been telling the people this would cause inflation.

But being smarter than the know-nothing economists, the people have not tried to “get rid of dollars,” and they have not driven up the prices of goods, services, and sadly, “wages across the country” barely have budged.

“This would amount to a “run” on the dollar.

“As with a bank run, we would not be able to tell ahead of time when such an event would occur. But our economy will be primed for it as long as our fiscal trajectory is unsustainable.

And there it is again, the favorite word of the wrong-for-80-years debt hawks: “Unsustainable.”

Any time you read that the U.S. federal debt is, or even soon might be, “unsustainable,: immediately stop reading. The author knows nothing, and reading what he/she says is a waste of your valuable time.

It’s almost as bad as reading that the federal debt is a “ticking time bomb” (which it supposedly has been since 1940, and still ticking).

I am an economist, but for the past 25 years, I have told all who would listen that economics is not a science. It could be. It should be. But it isn’t, because the practitioners deny the obvious and instead rely on their vague intuition.

Not that there aren’t data in economics. There are mountains of data. But econodufuses would rather juggle abstruse data than look at the clear and obvious facts all around them.

They keep predicting causes and effects when the causes keep happening without the predicted effects. 

They talk about ticking time bombs that never explode. 

They talk about unsustainable deficits and debt that have been sustained for 80 years.

They talk about cutting the debt, when every time the debt is cut, we have depressions. (Once, only a recession).

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

They keep making claims that the facts on the ground disprove.

This is science?

And then guys like Cochrane repeatedly go on TV, and write articles, and spout absolute nonsense, with no basis in fact. 

And sadly, people believe it. Even President Biden seems to believe it, and that is the real tragedy.

We could have the Ten Steps to Prosperty (below), end poverty, reduce crime, improve education, and make America that “shining city on a hill,” were it not for the debt hawks.

The debt hawks are to economics as the creationists are to biology. 

Those, who do not understand Monetary Sovereignty, do not understand economics.

…………………………………………………………………………

Rodger Malcolm Mitchell 

[ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ]

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:

  • Monetary Sovereignty describes money creation and destruction.
  • Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. 

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually.
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest. 

MONETARY SOVEREIGNTY