–How our leaders convince you to support mutually exclusive initiatives, while cutting your own throat

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.

Millionaire tax sought by Obama is panned by GOP as ‘class warfare’
Republican leaders accuse President Obama of trying to incite class warfare by proposing the ‘Buffett rule’ — a new tax on people making $1 million or more.
By Jim Puzzanghera, Los Angeles Times, September 18, 2011

Reporting from Washington— Top congressional Republicans on Sunday accused President Obama of trying to incite class warfare with his proposal for a new tax on millionaires and said they would not support the measure because it would hurt economic growth.

Republicans are correct on both counts. Class warfare has been a mainstay of Democrats’ politics for at least 80 years and taxes hurt economic growth by removing money from the economy.

“Class warfare … may make for really good politics, but it makes for rotten economics,” House Budget Committee Chairman Paul D. Ryan (R-Wis.) said on “Fox News Sunday.” “We don’t need a system that seeks to prey on people’s fear, envy and anxiety. We need a system that creates jobs and innovation and removes these barriers for entrepreneurs to go out and rehire people.”

. . . Senate Minority Leader Mitch McConnell (R-Ky.) said wealthy individuals such as Buffett were free to pay more taxes, but the government shouldn’t impose an increase on people who help provide the investments that create jobs . . . “ we don’t want to stagnate this economy by raising taxes.

Absolutely correct. Tax increases of any kind, whether on the rich or on the poor, remove money from the economy, and are anti-stimulative. And heaven forbid the politicians ever “prey on people’s fear, envy and anxiety.”

But Sen. Lindsey Graham (R-S.C.) said Obama’s millionaire proposal was simply a political move that would do little to reduce the budget deficit. . . .”The truth of the matter is if you raise taxes on billionaires and millionaires it adds a de minimis amount of money to the Treasury to pay off the debt.”

Thank goodness for that. Every dollar of reduced deficit is a dollar stripped from an economy that desperately needs dollars.

Sen. Richard J. Durbin (D-Ill.) showed the tack his party might take when he slammed Republicans for not supporting Obama’s $447-billion jobs bill. “I think his team put together a positive good plan.”

Just one little problem with all this talk: There is no financial difference between a tax increase and a spending cut. Financially, they are identical. Both reduce the deficit; both reduce the money supply. Both are anti-stimulative. Both will result in a recession or depression.

So here we have the Tea/Republicans, the Democrats, the President, the media and the old-line economists all clamoring for debt reduction, but both agreeing the economy needs “jobs and innovation and (removal of) barriers for entrepreneurs to go out and rehire people.”

The Tea/Republicans want spending cuts, while complaining that a tax increase would “stagnate the economy.” The Democrats also want deficit reduction, but with spending increases. If you think you have just fallen down the rabbit hole in Alice’s Adventures in Wonderland, you’re right. There is zero logic being expressed here.

It will be fascinating to see how all the parties, especially the old-line economists, who should know better, play with sophistry, to confuse you into believing:

Tax increases are bad
Spending increases are bad
Deficits are bad
And the economy needs to be stimulated.

A pox on all their houses. I award three dunce caps to all involved, but specifically to President Obama, Representative Paul Ryan, Senator Mitch McConnell, Senator Lindsey Graham, Senator Dick Durbin, the media and the old-line economists (Hello University of Chicago and Harvard Nobel winners.)

Rodger Malcolm Mitchell

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


7 thoughts on “–How our leaders convince you to support mutually exclusive initiatives, while cutting your own throat

  1. Rodger though I agree with you in the abstract, wouldn’t it be fair to say that tax cuts/overall tax policy is better in the sense that it is harder to game and the money gets to more people? It seems to me that we need to fix this from the bottom up and let individuals repair their personal balance sheets. Things like Solyndra really don’t do that. The money spent is so inefficient and concentrated. It is also subject to more abuse where you reward your political patrons. Obviously this can be done with taxes as well but I don’t think they can be nearly as targeted.


    1. Tax cuts are good. They add money to the economy. Spending increases also add money to the economy.

      The wasteful spending for Solyndra added money to the economy, not in the best way, but it still was positive. I’m not suggesting the best use of money is wasteful spending, but wasteful spending is superior to not spending at all.

      I long have said that the way to stimulate the economy is to
      1. Eliminate FICA
      2. Reduce income taxes by raising the standard deduction every year.
      3. Support the states by giving them an annual, per-capita stipend — perhaps $1,000 per person

      Rodger Malcolm Mitchell


  2. Perhaps you can test your theory by playing a Monopoly game according to your rules. I think the flaw is that money is more than numbers and electrons; it is also used to buy food and shelter which are finite.


  3. From Paul Volcker’s NY Times article today:

    “Some mathematical models spawned in academic seminars might support [raising the inflation target]. But all of our economic history says it won’t work… I thought we learned that lesson in the 1970s.”


  4. I think there’s an important qualifier on the issue of tax hikes- a tax hike only removes money from the economy if people actually pay the tax, and if it removes money that would actually be circulated in a productive manner. IF a tax is structured such that the actual intent is to collect $0 by discouraging taxed behaviors and encouraging untaxed behaviors (specifically: discouraging more investment in a bloated financial market and but allowing wages and other capital spending to be fully deductible) then it can have a distinctly stimulative effect similar to direct spending increases by getting stagnant money (or worse, money that’s trying to flood into the newest financial bubble) circulating again along more productive lines.


  5. Karl,

    Yes, for instance a tax on cigarettes benefits health, although to the degree it actually is collected, it does depress the economy.

    Sadly, the government does not have a good record of creating taxes that are narrowly structured to benefit the economy. I can’t think of one.

    Rodger Malcolm Mitchell


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