Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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President Obama’s “American Jobs Act.” What he said; what it means. He said:
It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for the long-term unemployed. It will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business.
Pass this jobs bill, and starting tomorrow, small businesses will get a tax cut if they hire new workers or raise workers’ wages.
This is backwards. Companies don’t hire new workers and give raises to get tax cuts. They hire workers if business improves and they need workers. Another example of the government trying to run businesses rather than helping consumers consume, which would improve business naturally.
And in hiring new workers to get the tax cut, will companies fire old workers? This whole concept is foolish.
Pass this jobs bill, and all small business owners will also see their payroll taxes cut in half next year. If you have 50 employees making an average salary, that’s an $80,000 tax cut.
Excellent, though in typical Obama style, it is too little. There are at least ten reasons FICA should be eliminated — not cut, but eliminated.
And all businesses will be able to continue writing off the investments they make in 2012.
Good. Too little, too late – but good.
Everyone here knows that we have badly decaying roads and bridges all over this country. Our highways are clogged with traffic. Our skies are the most congested in the world. This is inexcusable. Building a world-class transportation system is part of what made us an economic superpower.
Agreed.
And there are schools throughout this country that desperately need renovating. How can we expect our kids to do their best in places that are literally falling apart? This is America. Every child deserves a great school – and we can give it to them, if we act now.
The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows; installing science labs and high-speed internet in classrooms all across this country. It will rehabilitate homes and businesses in communities hit hardest by foreclosures.
Sounds great.
Pass this jobs bill, and companies will get extra tax credits if they hire America’s veterans.
More silly government meddling. So if companies hire veterans, will they also fire, or fail to hire, non-veterans?
Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job.
Even more silly government meddling. So companies get nothing for hiring someone who has been out of a job for “only” five months? How about: Fire an employee and hire another employee to get the $4,000? Truly foolish.
This jobs plan builds on a program in Georgia that several Republican leaders have highlighted, where people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job.
WPA can work. It pumps money into the economy, whether or not people actually “build their skills.”
The plan also extends unemployment insurance for another year. If the millions of unemployed Americans stopped getting this insurance, and stopped using that money for basic necessities, it would be a devastating blow to this economy.
Excellent. And no, it does not encourage sloth. That is a myth. What it does is add dollars to the economy, thus stimulating business, which then will hire more people.
Pass this jobs bill, and the typical working family will get a fifteen hundred dollar tax cut next year.
Sounds good, depending on what a “typical working family” means. It would be far better merely to give actual dollars to every man, woman and child in America, rather than helping only “working families.”
And to help responsible homeowners, we’re going to work with Federal housing agencies to help more people refinance their mortgages at interest rates that are now near 4% — a step that can put more than $2,000 a year in a family’s pocket, and give a lift to an economy still burdened by the drop in housing prices.
The last time this was tried it was an abysmal failure, because the banks were given no incentive to do it. So people wasted years (literally), filling out endless forms, and waiting on endless phone lines, while the banks did nothing. It proved to be a serious negative for the economy.
Better include big incentives for the banks, or it will fail again.
A week from Monday, I’ll be releasing a more ambitious deficit plan – a plan that will not only cover the cost of this jobs bill, but stabilize our debt in the long run . . . it’s a balanced plan that would reduce the deficit by making additional spending cuts; by making modest adjustments to health care programs like Medicare and Medicaid; and by reforming our tax code in a way that asks the wealthiest Americans and biggest corporations to pay their fair share.
What’s more, the spending cuts wouldn’t happen so abruptly that they’d be a drag on our economy, or prevent us from helping small business and middle-class families get back on their feet right away.
Yikes!! Stupid beyond all comprehension. First he lists the money the government will pump into the economy, to revive business. As usual, the plan is too little, too late, but at least it’s a step in the right direction.
But then, he talks about pulling money out of the economy. Hmm, let’s see. If pumping money into the economy stimulates business, what will pulling money out of the economy do? Duh.
Finally, he acknowledges that spending cuts are “a drag on our economy,” so he delays them to some time in the future, when presumably a drag on the economy will be a good thing!? This part of the speech earns four dunce caps.
Millions of Americans rely on Medicare in their retirement. And millions more will do so in the future. They pay for this benefit during their working years. They earn it. But with an aging population and rising health care costs, we are spending too fast to sustain the program.
Nonsense. A Monetarily Sovereign nation can “sustain” any program. Have you heard of any federal checks bouncing. This “sustainability” lie is a relic of the gold standard days, which ended in 1971. Total crap. Where the hell are the honest economists who will reveal this lie for what it is? The fact that so few economists speak up demonstrates the bankruptcy and illegitimacy of mainstream economics.
Ask yourselves – where would we be right now if the people who sat here before us decided not to build our highways and our bridges; our dams and our airports? What would this country be like if we had chosen not to spend money on public high schools, or research universities, or community colleges? Millions of returning heroes, including my grandfather, had the opportunity to go to school because of the GI Bill. Where would we be if they hadn’t had that
chance.How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the Internet and the computer chip? What kind of country would this be if this Chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do? How many Americans would have suffered as a result?
Amen, brother. If the Tea/Republicans had existed 100 years ago, America would be a third-rate country, somewhere below Russia. No roads, no schools, no research, no medical care, no medicines, no consumer protections, no safe food – and no money.
Anyway, if what he proposes actually happens, it will help a bit. My fear is that it is just the first step in what will be another “Obama compromise” – give the other guy everything he demands and claim it was a compromise.
And the other guy – the Tea/Republicans – will complain it increases the deficit. Why will they complain? Because they know pumping money into the economy will improve America before the 2012 election, and improving America is the last thing these “patriots” want.
All in all, it was a pretty good speech by a politician who knows nothing of economics — better than I thought it might be. Though again, the proposals are way too little and far too late, we’ll see what actually gets passed.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
I think Obama gets it (Reagan did – didn’t he say ‘deficits doesn’t matter anymore’?) and slowly more politicians are getting it. Overall taxes has dropped in the last 40 years and there is no sign of it increasing (just talk to calm down the constituents). All that has increased is deficits. I think they are ‘getting it’. There is just no way the government can come out and say ‘Deficits don’t matter, we’ll abolish taxes and just print as much money as we need to pay our bills’. The world will think we’ve gone mad (what does it matter if they are wrong?) causing reduced demand for dollars. (I don’t believe all sovereign entities can print money to their heart desire – inflation will catch up to it too soon. Only a sovereign entity that has what we have – reserve currency status – can do that. Take that away and our ability to print money is vastly reduced.) The government has to put up the front of taxes are needed, deficits does matter, blah-blah-blah. But they are doing the exact opposite. Taxes are being reduced and deficits are increasing. You just can’t come out and say it. And yes, I don’t think $450 billion is enough.
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Johan, it works like this.
The Tea/Republicans say the federal deficit is too high and unsustainable, and a high deficit causes inflation. I have records of people saying that since 1940. (See: Debt Bomb )
But if the “high” deficit is “unsustainable,” have you noticed any federal checks bouncing in the last 70 years?
And if the high deficit causes inflation, where is the inflation?
In the Tea/Republican world, facts are ignored in favor of belief.
Rodger Malcolm Mitchell
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Whenever suggestions are brought up about balancing budgets or cutting spending and the defict.Politicans use this tactic to scare the people,behaving as if the world will come to an end–if we do not cut the debt and deficit.
In 2009 the “Tea Party emerged with focus on reducing government spending and regulation. Tea Party Movenment helped bring in a wave of new republican office-holders in the 2010 mid-term elections and whose major part planks during the campaign included cutting the federal spending. These new Republicans and the new Republican House greatly affected the 2011 debt ceiling political debate. Come 2012 elections–more of the same will be going into office—they are “insult to their intelligence”–if brains were taxed,they would get a rebate.
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It would be far better merely to give actual dollars to every man, woman and child in America, rather than helping only “working families.” Rodger Malcom Mitchell
I’ve reached that same conclusion from ethical considerations since the banking system, a government enforced counterfeiting cartel, cheats everyone, both borrowers and savers.
“Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.” John Adams from http://quotes.liberty-tree.ca/quotes_about/banking
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No if blame rests anywhere it rests with the Govt and the people who elect them not the banks.
Banks are simple benefiting from credit scarcity due to inadequate Govt debt and the resulting bank credit.
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This bill won’t be passed. That’s the point. Obama is simply trying to appear as reasonable as possible, in order to highlight how obstructionist the TeaPublican Party is behaving. Money for schools, roads, and tax cuts for everybody, all while reducing the national debt, is pretty much exactly what the average voter wants.
I agree with you that Obama should educate the average voter, and explain to them why all those good things will increase the national debt, and that the national debt isn’t a bad thing at all, but what would that really accomplish anyway? Obama would then be crucified as an extreme leftist by the right, and as a dangerous apostate by the old-school economists, and Congress would reject his proposal regardless. This bill will be whittled away by the Republican House, or flat out rejected, but if it brings us a step further away from Rick Perry returning us to the dark ages of social and monetary policy, than it is a good thing.
The lesser of two evils. God bless America.
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Cosmo,
You may be right, yet I cling to the possibly naive belief that the American people are smart enough to “get it,” if only someone will explain “it” to them. They believe as they do, because for more than four decades, most of the “experts” have fed them the wrong information about federal deficit, debt and spending.
Would it be suicidal for Obama to explain it to them, now? Maybe — so close to election time. He should have explained it just after being elected president, when he had four years to let things sink in. Or he can explain it, if he is re-elected, so at least the nation will be saved.
Rodger Malcolm Mitchell
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I get it, thx to you sir. I was a tax the rich more, cut spending guy till i found your blog. Now I am trying to spread the word but people just think I am crazy.
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Yes, that’s the risk you take. People equate federal financing with personal financing, when there is no comparison at all.
Don’t feel bad. Even the old-line economists don’t get it. The best economics in America is not being done at Harvard or the University of Chicago — big Nobel winners — but at the University of Missouri, Kansas City.
Rodger Malcolm Mitchell
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The belief about Govt debt = bad is so strong that change will take a time. I’m posting on various sites with a simple message
Like we need money for retirement. And as debt = credit = money we need more debt to generate this credit needed for retirement savings etc.
I have got through to some already. And one by one is the way change occurs.
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Good article Rodger.
But if you keep increasing the number of dunce caps awarded like this, you run the risk of running an unsustainable level a dunce caps to criticism ratio.
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Good one! 🙂
I may have to tax Obama a dunce cap or two, or I’ll run short — or we’ll have a dunce hyper-inflation!
Oh wait, we already have one. It’s called Congress.
Rodger Malcolm Mitchell
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Rodger you are right on the mark as always. My only quibble. Based on my acquaintances with many “tea party, etc” people, I would say their beliefs are based on ignorance, not vindictiveness. In that sense, you are giving them too much credit. That is, they are well intentioned but have no clue. On the good
news side, I have been able to convince almost half of them (those that I know,
that is) that they are wrong. It helps that (a) the logic of how to create growth
is so simple and (b) the reality that the federal deficit = private savings (ignoring
net exports) is eye-opening. Thanks
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Congratulations. That’s a tough sell, because people don’t believe money is a “free lunch.”
But, for some people there comes an “aha” moment, when they get past personal experience, and realize the federal government is different from private entities. Sadly, most people are not truly open to learning.
Rodger Malcolm Mitchell
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i was relieved to learn that the sky really isnt falling. imo, would’nt most people take this as a new begining, something positive that benefits everyone. the current system is definitely a race to the bottom. an endless supply of unemployed workers for corporations to choose from and pay as little as possible in wages and benefits. i find it hard to believe that politicians dont know how it all works.
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Agree.
The logic is sound.
I focus on retirement saving. That we need Govt debt to generate net non Govt financial savings
Focusing on unemployment is often a waste of time because many do not care in the slightest about the unemployed. And actually think they are a waste of time that we should not really incur more debt helping.
But saving for retirement affects everyone. And this is where I start. Without Govt debt savings by one person always results in debt by another one. And this creates a dog eats dog environment that is now smashing the young etc.
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Excellent article Mr Mitchell.
Personally I’ve come to the conclusion that I’m against this stimulus plan. It’s benefits would be minimal and then people would just say “see stimulus doesn’t work”. It needs to be 5-6 times larger IMO to make a real difference. Do it right or don’t do it at all is my motto.
I agree with giving everyone the tax break and not just working folks. Imagine if all the homeless people were given a few thousand. That money would surely get spent and put back into the economy.
Sometimes I wonder if we will ever get out of this mess. It seems like war or MMT/MS is our only hope. I pick MMT/MS.
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SnoDog,
You’re right. See my post of about 5 minutes ago.
Rodger Malcolm Mitchell
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Unemployment insurance absolutely contributes to sloth. I have first hand knowledge of this, it does actually happen. I’m not saying we should eliminate unemployment insurance, but it does make people less likely to seek employment. I work in a high wage profession, and I’ve seen people milk unemployment. Imagine yourself a low wage worker. The unemployment benefit versus low wage job is a pretty easy decision to make.
What about somebody who is laid off and is seriously considering early retirement. These people will milk the benefit as long as they can; I would!
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I suppose it could be said that all federal benefits contribute to “sloth.” Social Security encourages earlier retirement than otherwise would be possible. Medicare allows people to quit work, rather than to keep working to pay for or acquire health insurance.
Sure, there always will be people to “game” any system. But given the choice between that and starvation for the unemployed families, I’ll settle for a few “sloths.”
Rodger Malcolm Mitchell
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Hah! What about the sloth of those who have gotten rich off the government backed counterfeiting cartel, the banking system? Or if they are not slothful do you consider the amount of time they spend wrecking the economy well spent?
Many people cannot afford to be non-slothful in the sense that they cannot afford to do the work they would prefer. The rich can afford to do any work they like, any time they wish, for as long as they wish. If every one could do that don’t you think sloth would decrease?
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I was making a very narrow point, please don’t try to read anything more into it than what I said. People do get lazy and some people are much more prone to it than others. My concern is a never ending extension of unemployment. I’m not a fan of black and white arguments, truth is usually some shad of gray. My thoughts are that unemployment insurance is mostly a very good thing, but we shouldn’t let that blind us to how it can corrupt a person into laziness.
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Behind all of the “Hoopla” of partisanship, the leaders of the two parties worked together in
collusive harmony. The Republican and Democratic parties may not be identical, but they
Produce nearly identical results.
I have no doubt s that our government is not without men and women of honor. But the system
Itself is fundamentally corrupt and functions in ways inconsistent with the spirit of genuine democracy.
This anyone with eyes to see recognizes.—-Each of us are “Keepers of our Soul”
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