Mitchell’s laws: Reduced money growth cannot increase economic growth. To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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For those who do not yet understand Tea Party economics, here is a primer. Tea Party economics is the belief that reducing the money supply, by increasing taxes and/or by federal spending reductions, will stimulate the economy.
From Stephen Gandel’s, “State Budget Cutbacks: A Job Market Drag?” 9/19/11: “Even if government doesn’t kick in its normal share of hiring, the economy can still be put on a path of recovery. It’s businesses that matter most and need to be pushed the most to hire.”
O.K., seems reasonable. How do we “push” businesses to hire? Some sort of incentive would be needed. Tax reductions? But tax reductions would increase the deficit.
From Ed O’Keefe’s, “To save money, federal agencies to start buying in bulk” 9/19/11: “Starting this week, several federal agencies and departments will pool their purchases of office printers, copiers and scanners in hopes of collectively saving $600 million in the next four years, administration officials said late Friday.”
I guess we won’t push the manufacturers of office printers, copiers and scanners to hire. When we cut $600 million from their income, they’ll fire.
From Zachary Goldfarb’s, “Obama’s debt-reduction plan: $3 trillion in savings, half from new tax revenue” 9/19/11: “President Obama will announce a proposal on Monday to tame the nation’s rocketing federal debt, calling for $1.5 trillion in new revenue as part of a plan to find more than $3 trillion in budget savings over a decade, senior administration officials said. . . Combined with his call this month for $450 billion in new stimulus . . . “
Ah, so that’s the plan. We’ll take $3 trillion out of the economy; then we’ll add 15% ($450 billion) back into the economy, and call that a “stimulus.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget: “We believe the Super Committee should ‘go big’ and exceed its mandate and actually stabilize the debt. We appreciate the President’s proposal to ‘go medium’ and that he has laid out real specifics, but clearly, much more will be needed.”
How will stabilizing the debt (aka “spend less and tax more”) “push businesses to hire”?
House Speaker John Boehner: Tax increases “destroy jobs.”
Yep, by removing money from the economy, tax increases destroy jobs, the same way that federal spending cuts destroy jobs.
Chicago Tribune editors, 9/19/11: “Our first preference has been for dramatic deficit reductions, with a 3- or 4-to-1 ratio of spending cuts and revenue increases
Perfect example of Tea Party economics: A dramatic reduction in the money supply . . . to stimulate the economy.
Same Chicago Tribune editors as above: 9/19/11: The immediate problem is low demand and the grim reality is that no one really knows a reliable way to raise it. Given time, it will come back.
Well, the way to raise demand is to put more money into the pockets of consumers. But why do that when the Tribune assures us the economy will come back all by itself – while we raise taxes and cut federal spending to drain dollars from the economy. What, me worry?
More Chicago Tribune. “ . . .(a) more realistic formula (is to) . . . address the spending binge of the last few years, a job that, as Boehner acknowledges, will require curbs in entitlements like Social Security and Medicare.”
Yes, cutting payments to consumers like retired people, sick people, doctors, nurses and hospitals should do a great deal to stimulate the economy.
So now you know what “Tea Party economics” means: Reduce the money supply to stimulate the economy. In short, apply leeches to cure anemia. What a wonderful, magical solution.
I award the Tea Party and all those mentioned above a solid 5 dunce caps (out of 5), for total, unmitigated economic ignorance. By the way, for all you debt hawks: I never will run short of dunce caps, even though I continually run a dunce cap deficit. I am dunce cap sovereign, just as the federal government is dollar sovereign. Get it?
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 
Kind of tangential but listen the the first minute or so of Richard Dawkins and think about an ordinary person trying to understand what is happening in the economy. I found it rather revealing.
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lol dunce cap deficit, good one.
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I’m thinking of charging debt-hawks a dunce cap tax, so I can run a balanced dunce cap budget and not run short. Do I now qualify for the Tea Party?
Rodger Malcolm Mitchekll
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well that is a start, but do you watch fox news and accept all of their opinions as fact? I think that is the main prerequisite. In all honesty the cable news networks are as much to blame for our current problems as anyone else is.
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Mark, I agree. Except replace “cable news networks” with “all media.” Can you direct me to one newspaper, one magazine, one TV or radio program where the journalist understands this simple fact: Reduced money growth cannot increase economic growth”?
A pox on all of them.
Rodger Malcolm Mitchell
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Yeah but aren’t most of those media outlets all owned by the same companies that own the cable news networks? I do agree though, it is not just the big news networks spreading the lies.
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Rodger, you should have awarded 6 caps to them. 5 caps is a self-imposed limit and you are not cap-constrained. You can add caps at will 🙂
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” O.K., seems reasonable. How do we “push” businesses to hire? Some sort of incentive would be needed. Tax reductions? But tax reductions would increase the deficit.” Laser-faire or simply put “Leave us alone” We don’t or do want any government help. They in-turn need us.
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What exactly does “Leave us alone” mean? Are you sure you don’t “want any government help?”
No laws regulating banks, brokerages and other financial businesses? No supervision over food & drug producers? No rules about fraudulent marketing? No patent or copyright protection? No laws about racial, religious or gender bias in hiring, pay and promotion? No small business loans? No FDIC? No FEMA? No zoning laws? No unemployment pay? No help for orphans or the disabled? Would you like to build your own roads, bridges, infrastructure? Provide your own police and fire fighters?
The Tea Party endlessly says, “We want less government, (but of course don’t reduce my Social Security benefits, my Medicare benefits, or my army, etc., etc., etc. And please, please protect me from those nasty terrorists.”)
Real, big-time, John Wayne types until a tornado hits. Then they come crying to the government for help.
The fact is, you need government more than the government needs you. They can produce all the money they want, and buy anything they want, and never have to look for a job or even borrow.
Rodger Malcolm Mitchell
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Ayn Rand, John Galt, and conservatives in general, including the Tea Party, acknowledge a legitimate role for government, including most of the things you mention to eliminate. That’s the “Washington Monument” strategy, completely a straw man. There are plenty of inappropriate things that government does that could be eliminated. Even MMT acknowledges that there is good spending and bad spending, and that it matters.
BTW, and I offered this in 1972 when I entered the work force full time, yes, please, eliminate my Social Security benefits completely, just give me my money back with interest at the prevailing savings account rates during my working years.
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No need to eliminate Social Security benefits. Just eliminate FICA. The two are unrelated.
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Too late for me.
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The rhetoric and their pragmatic applications are at odds.
Ayn Rand writes that force is wrong. To compel anyone against their will is morally wrong. But the only power of government is the power to coerce.
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Yet, in their utopian community Galt and his friends retained the power to expel anyone who didn’t live by the rules that they established for themselves. In a free country, we are all free to leave if we don’t agree with the rules, and free to try to persude others to change the rules. “Governments are instituted among men, deriving their just powers from the consent of the governed.” Whatever coercive powers the government has exist because we allow them.
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If you wanted to nitpick, I think tax increases for the extremely wealthy would do far less harm than spending reductions for the poor and low income earners, as the poor spend pretty much everything they earn, meaning far more economic activity for a given amount of money.
A lot of libertarian/tea party rhetoric reminds me of that scene in monty Pythons Life of Brian, where John Cleese as head of the Peoples Front of Judea exclaims ‘what have the Romans ever done for us!’ to which various members of the group start listing all the various benefits Roman occupation has brought them.
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Rodger,
I’m getting pushback from Jared Bernstein on deficits. On his blog, he wouldn’t post this comment from me: “A nation with monetary sovereignty (such as ours) cannot go broke. Just imagine you had bottomless pockets. That is the United States government.”
Apparently, he disagrees.
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Debt hawks don’t like facts.
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They certainly do not.
Here’s Robert Reich from yesterday: “… given projected budget deficits … if the rich don’t pay their fair share, the rest of us will have to bear more of a burden. And that burden inevitably will come in the form of either higher taxes or fewer public services.”
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Yes, he thinks federal taxes pay for federal spending. Another guy who doesn’t understand Monetary Sovereignty, so he writes the popular wisdom.
Rodger Malcolm Mitchell
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James Galbraith, 2007: “Obviously, Bush’s tax cuts should not be made permanent…”
Interesting. I wonder why James had (and likely still has) that position.
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Wow, I can’t imagine. Drop him a note, ask the question and let me know what he says.
My own response might be, “They should not be made permanent because the cuts should be increased.” 🙂
Rodger Malcolm Mitchell
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He doesn’t respond to my emails anymore. He stopped responding when I started to endorse tax cuts. In all honesty, he strikes me as a class warrior.
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“My house is flooded, I lost everything, where’s my FEMA check? It’s been weeks since I applied.” Gotta love the majority of Americans
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Tell him to contact the Tea/Republicans for help.
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We corporations want government to leave us alone and go away. Your involvement in our business just causes us headaches and lost profits. But, we’ll be happy to use your infrastructure and your technological developments (INTERNET ANYONE) as long as they’re free, free, free……………yeah gotta love Americans.
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“Majority”?
Actually, it’s more like “My house alongside the river / Outer Banks flooded AGAIN this year, just like last year and the year before. You paid to rebuild it both times, where is my check now?”
Very similar to “insurance” coverage for pre-existing conditions. The risk is 100%. Except the people with waterfront property are far better off than the average person without health insurance.
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If the “you” in “You paid . . .” refers to our Monetarily Sovereign federal government, it’s a good deal for you, John O’Connell. When the federal government spends money, that stimulates the economy, benefiting all Americans.
You need to understand Monetary Sovereignty to understand economics. It’s completely different from personal experience.
Rodger Malcolm Mitchell
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Internet Free? You ask CISCO for a 6500, fiber, and bandwidth at no charge. Before TCP/IP and UDP (you know they are don’t mr. liberal) there was SNA and Token Ring (more terms to learn) and they weren’t free either. You see mr. liberal, the internet and everything else made was built by people used their minds to think. There are too many of us left and soon we will be gone and you, the liberal, will have to do it yourself.
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John, what . . . are you saying? I don’t tend to question someone over their grammar, but damn. I cannot understand what you are trying to convey when you do not even bother to use commas (or periods).
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Republicans are right. They say that government programs designed to create jobs won’t actually create jobs. This is true because they demand the government cut jobs in order to pass any legislation to create jobs. It’s a zero sum game.
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Actually, less than zero sum, because we have a trade deficit, which removes money from the economy, thereby costing us jobs, unless we deficit spend.
Rodger Malcolm Mitchell
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