–Economics 101: To cure anemia, bleed the patient. Then starve the goose that lays the golden egg.

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.

As we struggle to recover from the recession, there are those who believe that in some magical way, federal taxes benefit the economy:

Honey, They Shrunk The IRS
Tue, 01/17/2012, David Cay Johnston, The National Memo.

(This opinion piece originally appeared at Reuters.com.)

Congress will spend a trillion dollars more than it levies this year, so how do Washington’s politicians respond to the 11th consecutive year of federal budgets in red ink? They plan to shrink the IRS.

Go figure. Cutting the IRS budget by more than 5 percent in real terms makes as much sense as a hospital firing surgeons or a car dealer laying off salespeople when customers fill the showroom.

Shrinking the IRS makes sense if you believe government is too big and that cutting everywhere is the best way to shrink government. But this is the staff that generates revenue, and there is easy money to be made. Instead of cutting, we should be expanding the revenue-generating staff because there is plenty of tax money to be had, even in this awful economy.

IRS data show that auditors assigned to the 14,000 or so largest corporations found $9,354 of additional tax owed for every hour spent testing tax returns in the 2009 fiscal year. The highest-paid IRS auditors make $71 an hour. Based on a 2,080-hour work year, that works out to around $19 million of lost revenue annually for every senior corporate auditor position cut from the payroll.

It makes no economic sense to trim the ranks of auditors who generate more than a hundred times their annual salaries. Run a business that way and you go broke.

The author demonstrates total ignorance of Monetary Sovereignty. He thinks monetarily non-sovereign, private business finances are similar to Monetarily Sovereign federal finances. Hello? Mr. Johnston? The federal government cannot go broke. Even if federal taxes were reduced to $0, the government would have no difficulty paying its bills.

So why would President Barack Obama and Congress cut the IRS budget? Their actions illuminate the rise of corporate power and values, and the diminishing voice of Joe Sixpack, thanks partly to how we finance election campaigns. Then there is the growing army of corporate lobbyists and the Supreme Court’s decision in Citizens United, which allows corporations (and unions) to spend all they can afford on influencing elections.

The IRS benefits “Joe Sixpack”? I wonder how that works. Here’s the author’s answer:

If the IRS budget is cut, the losers will be workers and ordinary investors, who will find it harder to get their questions answered and their problems resolved by the agency.

Got it. The real purpose of the IRS is not to grab more of our money: it’s to answer our questions. I never knew that.

The winners will be tax cheats among sole proprietors and other business owners, who are subject to less verification. The latest IRS tax gap report, issued Jan. 6, estimates that just one percent of wages escapes tax, while 56 percent of “amounts subject to little or no” verification do so.

America’s biggest corporations, those with more than $250 million in assets, also may escape some tax if the IRS budget is cut. These nearly 14,000 companies pay about 86 percent of corporate income taxes.

So business will pay less tax? And this is a bad thing? In the unlikely event America elects politicians who understand Monetary Sovereignty, one of their early acts will be to eliminate all business taxes, a step which greatly will benefit the American economy and reduce unemployment. Business is what supports us. Why we insist on stealing grain from the goose that lays the golden egg, is beyond my understanding.

IRS budget cuts worsen budget deficits and send a corrosive signal that only chumps file honest tax returns. So you have a choice. Do nothing and suffer the consequences or call your congressman, senators and the White House — today — and then vote in politicians who support, rather than undermine, tax law enforcement.

Ah, so it’s not a money issue; it’s now a moral issue? I didn’t know that, either.

Folks, be sure to call your political representatives and ask — no, demand — that more tax dollars be ripped out of your paycheck and sent to the federal government — the government that neither needs nor uses taxes or any other form of income. Then, if that makes you feel good, simply send the rest of your money to the Treasury. Or even more simply, burn all your dollar bills.

With friends like Mr. Johnston, we taxpayers don’t need enemies.

I award Mr. Johnston two, well-deserved dunce caps.

And he need not send one back to me as a tax payment. Like the federal government, I neither need nor use taxes. I’m dunce cap sovereign.

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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports


4 thoughts on “–Economics 101: To cure anemia, bleed the patient. Then starve the goose that lays the golden egg.

  1. Didn’t I tell you before that one way for a Federal spending cut to stimulate the economy would be to cut back on IRS compliance programs? Apparently Congress DOES read your blog!


  2. So you’re saying that because (maybe) we have bad laws (taxes) it’s better to have fewer policemen (IRS) enforcing them? Even conceding that you’re right about the laws, allowing the better-off to escape them reduces the chance that they’ll ever be changed.


    1. Yes, if there is a bad law, there should be few policemen enforcing it. Why would you want to increase the enforcement of a bad law? Tax laws are changed incrementally. The rich are not concerned about bad laws that negatively affect the poor.


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