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. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Those, who understand even the basics of Monetary Sovereignty, know a Monetarily Sovereign government does not need an outside source of the sovereign currency it has the unlimited power to produce. By way of example, I have awarded dunce capsto certain economics experts, who do not understand the basis for all economics, Monetary Sovereignty.
I am “sovereign” in these dunce caps. I do not need to borrow any. I do not need to collect dunce caps as a tax on recipients. I can create all I wish, any time I wish. I create them by the very act of awarding them.
Identically, the U.S. federal government is sovereign in U.S. dollars. It does not need to borrow any. It does not need to levy taxes to obtain dollars. Uniquely, the federal government creates all the dollars it wishes, any time it wishes. It creates them by the very act of awarding them, i.e. spending them.
Although, federal taxes may have some value in directing certain aspects of the economy, they are unnecessary as a source of federal spending funds. If we eliminated all federal taxing (and borrowing) tomorrow, this would not affect by even one penny, the federal government’s ability to spend. Federal taxes simply remove dollars from the economy and destroy them.
(No, they are not recycled by the government. They are not used or saved by the government. They are destroyed — lost forever.)
And, there is yet another problem with federal taxes, specifically income taxes. They waste one of the most precious commodities the citizens of a nation own: Time.
Forbes, Janet Novack, Forbes Staff, 1/05/2011
Tax Waste: 6.1 Billion Hours Spent Complying With Federal Tax CodeNational Taxpayer Advocate Nina E. Olson multiplied the IRS’ own estimates of how much time taxpayers spend collecting data for and filling out each individual tax form by the number of forms filed to estimate that Americans (both individuals and businesses) spend 6.1 billion hours a year complying with the code. That’s the equivalent of more than 3 million workers toiling away full time, all year. By way of comparison, the Federal government employs the equivalent of 2.1 million full-time civilian workers and Wal-Mart, the nation’s largest private employer, has 1.4 million workers in the U.S., although not all are full time.
That’s 6.1 billion unpaid hours. Not only are millions of Americans unemployed, so earning no money, but the federal government requires Americans to do 6.1 billion hours of unpaid work.
About 60% of individual taxpayers now pay CPAs, enrolled agents, H&R Block or other services to prepare their returns while another 29% use software, such as Intuit’s TurboTax. According to a recent IRS study, the median individual taxpayer (as measured by income) spent $258 in 2007 for tax prep, up from $220 in 2000, in constant, inflation-adjusted dollars.
In summary, the federal income tax is worse than unnecessary. It is costly in terms of both time and money — a useless, harmful exercise.
So what is Ms. Olson’s suggested solution?
Olson called for Congress to fashion reform by beginning with a clean slate—eliminating all $1.1 trillion in annual tax deductions, credits and other tax expenditures, and then adding back only those where “a compelling business case can be made that the benefits of providing the tax incentive through the tax code outweigh the tax-complexity challenges that special rules create.”
In contrast to the deficit panel chairmen, who proposed eliminating tax breaks to both dramatically lower rates and raise an extra $80 billion a year, Olson urged Congress to enact a revenue neutral tax reform for its own sake to produce a system that is “simpler, more transparent, and easier and cheaper for taxpayers to navigate.”
Yikes. First she wants to cost the economy $1.1 trillion. Then she wants Congress to replace some of the lost deductions with new deductions. This is a solution?
In essence she is saying, “We have a purposeless, anti-stimulus process that removes more than $2 trillion from the economy every year. Further, it is a massive time waster. So my suggestion is to continue stealing $2+ trillion from the economy every year, but ask Congress to make the process simpler.”
How about this: Let’s begin to eliminate taxes, and stop taking trillions out of the economy. My suggestion is to increase the standard deduction by $10,000 every year. This gradually would simplify the process by each year making more people eligible for “post-card” returns.
Remember, politicians do politics. So, don’t expect the politicians known as “Congress” to simplify a 100% politically-created monster known as the tax code. It’s like expecting termites to stop building mounds.
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports
#MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Krugman, Keynes, And The Economy
http://seekingalpha.com/article/316883-krugman-keynes-and-the-economy
The resulting situation in Britain in the Keynes-era was the same as that of United States today – massive unemployment due to a lack of customer spending despite interest rates being extremely low. Under such circumstances, said Keynes, government is the only answer: it must increase its spending. It could also encourage others to spend by reducing taxes.
Keynes Was Right,Paul Klugman,http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html?_r=1
Professor Krugman suggests such actions should be taken today in the United States and correctly notes that the so-called “stimulus” package passed by the Congress in 2009 was a mere drop in the bucket compared to the size of the customer shortfall. He also rightly views with disdain the notion that the government can somehow put people back to work and make businesses more profitable and the markets rise by cutting spending and raising taxes to reduce the deficits inherent in an economic decline. If anything, Keynes said, that would cut business even more and result in more unemployment and lower tax collections.
In essence, Professor Krugman’s essay made the classic Keynesian case in favor of the federal government spending more, taxing less, and accepting the resulting bigger deficit. He ignores monetary policy, as Keynes ignored it, probably because interest rates are already so low.
In other words, Krugman advocated the classic Keynesian solution for the United States– more federal spending and lower federal taxes.
TIME FOR A QUOTE, a letter written by R M Mitchell May 9, 2003
Mr. Walt Duka
c/o AARP Bulletin
601 E St. N. W.
Washington, DC 20049
Dear Mr. Duka:
This is in regard to your article titled, “Deficits: Danger Ahead?” printed in the May 2003 issue of the AARP Bulletin.
The primary thrust of the article is expressed in the first paragraph: “. . . too much (government) red ink could lead to an economic crisis . . .” Actually, in the history of the United States, a federal deficit never has created an economic crisis. Even the massive Reagan-era deficits, in which the debt grew six-fold in just 15 years, did not create a crisis. They created an economic boom.
The greatest economic crises are created not by deficits, but by surpluses. Take a look at these figures:
In 1817-21 the federal debt was reduced by 29% Depression began in 1819
In 1823-36 ” ” ” ” ” 99.7% Depression began in 1837
In 1852-36 ” ” ” ” ” 59% Depression began in 1857
In 1867-73 ” ” ” ” ” 27% Depression began in 1873
In 1880-93 ” ” ” ” ” 57% Depression began in 1893
In 1920-30 ” ” ” ” ” 36% Depression began in 1929
In 1998-2000 federal debt growth slowed to 1.4% annually. Recession, began in 2000.
In 2000 federal debt growth rose to 4.5% annually and the recession ended.
You mentioned that, “Among other things, deficits reduce the money available for needed improvements, such as for Medicare . . .” In fact, the opposite is true.
Deficits pump money into the economy, increasing the amount of money available for Medicare et al. When the government runs a deficit, it sends more money into the economy than it removes through taxes. A federal deficit is an economic surplus.
That’s why deficits stimulate the economy. They add money. Federal surpluses (which, in fact, are economic deficits) remove money from the economy, which is why they cause recessions and depressions.
The Golden Rule of Economics is: “A growing economy requires a growing supply of money.” If the government does not run a deficit, how will money be added to the economy?
Can the government run deficits forever? Can it run deficits of any size? Surprisingly, the answer is: There is no limit to the size of the debt the federal government, can service. The government has the unlimited ability to produce money.
Reagan proved that even a six-fold debt increase in 15 years can be supported. If we did the same thing today, the federal debt could increase$30 trillion in the next 15 years, not only without adverse effect, but with very positive effect.
I would be glad to discuss these points with you at any time.
Rodger Malcolm Mitchell
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How does your idea of completely eliminating federal taxes reconcile with the MMT notion that taxes drive money?
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I have discussed this with Randy Wray. While I question whether taxes are necessary to give value to money, the point is moot. I am suggesting an end to federal taxes. There are plenty of state and local taxes to “drive money,” even without federal taxes.
Randy agrees.
Rodger Malcolm Mitchell
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You know I have to ask this question.
“Wouldn’t charging interest instead of taxes replace all of the benefits(?) of taxes,at the same time eliminate all of the unfairness of taxes?
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If we don’t tax the dollars back to the treasury where do they go? Do we use them to chase too few goods? Or will people simply keep them in their bank accounts?
Other than that, why not a “negative” income tax of 10,000. Simply have these genius’ pick a maximum annual income, (250000 or so) and cut everyone a check.
We would still need the system in place but few people would care. The government could tax anyone as much as they wanted. Walmart would love the billions in extra sales and the politicians would all get reelected forever.
Then again, wouldn’t it be more feasible to pass a Constitutional amendment to eliminate Congress than fixing the current system?
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This is the answer to your question, “Where do they go?”
Federal Deficits – Net Imports = Net Private Savings
They go into the savings that people use for spending. I’m not sure why there would be “too few goods.”
What you call a “negative” income tax actually is one of the suggestions at Congratulations, you have become President . . .
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“too few goods.”
Usually referred to as inflation. The economy would explode without the Federal tax and spending would accelerate . Not politically not ever going to happen.
But even the political right dreams of such a thing….only they believe it will starve the beast!
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you wrote Roger: While I question whether taxes are necessary to give value to money
I would be interested in your explanation as to what drives fiat money. Why would anyone accept It? Legal tender laws?
I can issue money and you can issue money Roger and it might get accepted by the people who know us, but we have to promise to convert It into something at fixed price. We cannot issue fiat.
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1. Legal tender laws (Same effect as tax laws. Without the weight of law, no money has value)
2. Everyone accepts dollars (same as what gives value to gold)
3. I’d rather accept federal dollars that kristjanbucks. (I trust their full faith and credit more than your full faith and credit) See the benefits of full faith and credit at: https://rodgermmitchell.wordpress.com/2011/06/20/why-a-dollar-bill-is-not-a-dollar-and-other-economic-craziness/
Rodger Malcolm Mitchell
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You’re not the only one expressing a similar opinion about Congress today
http://dilbert.com/strips/2012-01-02/
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