The biggest economic question of today: Who can answer it?

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, 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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Here is today’s single, most important economic question. Whoever answers it can save our economy. Send it to economists, newspaper and magazine editors, columnists, radio and TV personalities, politicians, bloggers and members of the public.

Please add the answers to the “Reply” section of this post.

The Question
How does
a tax increase
or
spending decrease
reduce unemployment
or
grow the economy
?

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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

12 thoughts on “The biggest economic question of today: Who can answer it?

  1. Easy: Tax increases and spending decreases, or a combination of the two, summon the lord god Xenu and he flies his intergalactic mothership to Earth to remove the bad thetans causing the economic crisis with his e-meters for the money we saved for him. Duh.

    Sadly, my explanation is just as good as any you’ll get from a politician or pundit.

    Like

  2. If you increase taxes on corporations that do not create jobs in the U.S. this might be a way a tax increase could lower unemployment. The higher percentage of Americans they hire the less they pay in taxes all the way to nothing if you hire all of your workers in the U.S.

    I do understand your point though, I know removing money from businesses and regular people never does anything but hurt the economy, but I still think even if taxes were zero that still wouldn’t stop corporations from shipping all their jobs off to where ever the labor is the cheapest. I would remove all corporate taxes at first and see how many jobs come back, and if it still isn’t enough then place a tax on those businesses who do not hire Americans.

    If you think it would be a bad idea please tell me why you think that, thanks.

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    1. What about small businesses? What about companies, that by the nature of their business, don’t use a lot of labor. What about companies that buy parts from overseas.

      I suspect the whole idea would involve a great deal of federal inspection of businesses, and interfere with best business practice. I’d rather simply eliminate taxes, and let our businesses compete.

      Rodger Malcolm Mitchell

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  3. Democrats argue that higher taxes on the wealthy do not decrease growth. They point to every decade from the 50s to the 90s as proof of this.

    Also, they argue that higher taxes on the wealthy causes them to put that money into their businesses rather than hold onto it. Seems like a stretch to me.

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    1. Regarding the Democrats’ argument that letting the Bush tax cuts expire for the wealthy will cause the wealthy to put more of their money into their businesses, I’ll need to see some empirical evidence from them before I’ll buy it. It may just be a case of Democrats trying to find any logical reason to raise taxes on the wealthy.

      Like

    2. Tyler brings up a good point that I’ve been thinking about for a little while. How did the economy do so well after WW2 with taxes being so high? I think I know the answer but would like to verify what I’m thinking is correct.

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  4. SnoDog, actually, we had a whole series of recessions following WWII: 1945, 1949, 1954, 1957 and 1960. Times didn’t begin to improve until federal deficits began to hold steady at 3% – 6% growth. Then, when they dipped again, we had another recession in 1970. (http://research.stlouisfed.org/fredgraph.png?g=2Pe)

    During this period, we had to limit deficits, because we were on a gold standard.

    Of course the world changed in 1971, when we became Monetarily Sovereign, and didn’t need to limit deficits.

    Rodger Malcolm Mitchell

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    1. Thanks Mr Mitchell for replying. I was thinking all that spending from WW2 enabled people to rely on their savings but what you said makes more sense.

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  5. Decrease IRS spending on random audits: results in a tax reduction and increased aggregate demand

    Decrease OSHA spending on measuring the height of fire extinguishers and fining employers for mounting it at 37″ instead of 39″, and other picayune non-value-add activities: reduces cost of regulatory compliance, increases productivity and output

    Decrease farm subsidies to ADM and other giant businesses: (maybe not, but it feels good and can’t hurt)

    Decrease spending on all tariff enforcement: increased trade benefits, reduced price of imports, increased aggregate demand

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  6. Rodger,

    I’ll be attending an economic roundtable tomorrow featuring Maya MacGuineas, Lawrence Mishel, Mihir A. Desai, Steven Rattner, David Walker, and Paul Kimball.

    I’m going to ask Lawrence Mishel the biggest economic question of today.

    Like

    1. Be ready to hear the most outrageous, round-about, off-point answers. They probably will use words like “consumer confidence,” “credit rating” and “inflation,” none of which answer the question.

      Or, they may mention extreme examples of government waste — how federal cuts actually improve the economy by eliminating something the speaker doesn’t like.

      What they will fail to mention is that even wasteful spending adds dollars to the economy, and those dollars circulate into consumers’ pockets, which adds to overall demand.

      The roundtable will guarantee that all federal cuts — for example firing 25,000 postal employees — will eliminate waste, and will not increase unemployment.

      And please, please don’t ask them if they understand Monetary Soverignty. No use embarrassing them. Anyway, more likely, they won’t bother to answer you.

      Good luck.

      Rodger Malcolm Mitchell

      Like

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