Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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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The growing income gap between the top 1% and the other 99% is too large and is bad for America. The purpose of this post is not to discuss the myriad reasons why, but rather to focus on how the gap can be reduced, and whose plan reduces it best.
There are only two ways to reduce the gap:
A. Bring down the 1%
and/or
B. Lift the 99%
That’s it. There are no other choices.
With those two options in mind, read the following excerpts to see which Presidential candidate and which party you believe is headed in the right direction.
Washington Post
Obama, Romney tax plans for ultra-rich offer window on disparate economic views
By Jia Lynn Yang, Published: April 13If Republican front-runner Mitt Romney reaches the White House, he will push for the top 1 percent of American earners to save an average of $150,000 in taxes, according to an analysis of his tax plan by the Tax Policy Center. In a second Obama administration, these Americans would pay about $83,000 more than they do now.
For the top 0.1 percent, the difference is even more stark. Romney’s plan would save them an average of $725,000. President Obama would raise their taxes by $450,000.
Obama has repeatedly called income inequality “the defining issue of our time.” He has proposed raising taxes on millionaires, saying on Tuesday that “broad-based prosperity has never trickled down from the success of a wealthy few.”
Romney, by contrast, waves off Obama’s talk of income inequality as the “politics of envy.” He says the best way to lift people out of poverty and raise wages is to help businesses become more successful. Ease regulations on businesses and lower taxes, Romney argues, and people’s fortunes will rise.
Neither candidate has a strong record of stemming a decades-long trend in this country of widening fortunes between the wealthiest Americans and everybody else.
Obama has overseen a recovery that has overwhelmingly benefited the wealthy. A recent study showed that the top 1 percent of Americans enjoyed 93 percent of the income gains from 2010, the first year of the recovery.
In Massachusetts, Romney did little to reverse the trend of income inequality that was happening in his state. And his work at Bain Capital embodied a pure distillation of American capitalism in which higher returns for investors, not worker pay, were the highest priority.
Bottom line: Obama wants to bring down the 1% by increasing their taxes. Since all federal tax increases have the same effect – they remove dollars from the economy – the Obama plan will punish not only the 1% but also the 99%. Removing dollars from the economy will serve as an anti-stimulus, depressing the entire economy. And as is always the case, when an economy is depressed, the poor are injured more than the rich.
Romney wants to reward the 1%, under the theory that the wealthy will create jobs for the rest. He ignores the simple fact that this never has worked and never will work. The growing gap itself proves that rewarding the rich doesn’t close the gap. Reward the rich and they simply will grow richer.
In short, neither Obama nor Romney advocates solution B, lifting the 99%, and both will oversee a growing gap. Neither of them understands or cares about the facts of Monetary Sovereignty, which understanding would help reduce income inequality.
In the unlikely event either party and either candidate ever wishes to help the 99%, rather than merely consolidating personal power, here is what they will do:
1. Eliminate the FICA tax. It impacts the middle and lower classes, not only directly, but also by making employment more expensive for potential employers. For the lower classes, FICA often is greater than income taxes.
2. Medicare for everyone. Medical expenses are far more traumatic for the 99% than for the 1%, who easily can afford health insurance or even self-insurance. This act also will benefit the states by making Medicaid unnecessary.
3. Increase Social Security benefits to the point where all retired people – not just the 1% — can enjoy a comfortable lifestyle. This has the byproduct of encouraging more people to retire, opening jobs for younger people.
4. Each year, increase the standard deduction on the income tax, so that annually, fewer of the 99% will owe any tax.
5. Send a population-based stimulus payment to each state, so that the monetarily non-sovereign states can afford to improve their infrastructures, education and police and fire protections.
As for Romney and Obama, don’t let them deceive you. Both their plans will widen the gap.
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 
RMM,
I was recently talking to some Obama haters about all his “wasteful” spending. Nevermind that they don’t understand monetary sovereignty. In an attempt to find common ground with them I offered a policy proposal similar to your number 5. I said:
“How about the the U.S. government offer block grants to states on a per capita basis?”
But the following is what I want your opinion on…
I continued “And maybe it could be taken even farther. State government could divide up their money and distribute it to municipalities based on a per capita basis. This would allow all “wasteful” spending to be local decisions.”
So my question: do you think that is feasible? Are some projects just too big and need to be determined by the individual states? Or do you think municipalities could serve the same purpose, but in a more “conservative”-friendly way?
(I’m really trying to find ways to make monetary sovereignty and therefore evil government spending more palatable to conservative friends of mine. As I’m sure you are aware, reason and logic don’t often work very well with these people.)
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Yes, I think it is feasible.
If, for instance, the federal government gave each state $5,000 per resident, I could visualize a state giving $3,000 per resident to each county, and using the other $2,000 for statewide needs, such as roads, state universities, etc.
I’d imagine each state would have its own formula.
Then, after you go to all the trouble of explaining how the money could be used, your friends will say, ‘Yes, but that will cause inflation.” It’s inevitable.
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It’s hard to understand what seems like a visceral hate for anything government among “conservatives”. These same people are often the most vocal supporters of democracy and America, but there’s a total disconnect: many of them seem to abhor the democratic process, ya know… thinking and reasoing and discussing. It’s confusing.
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JK,
Reagan’s line, “The problem is government,” hypnotized people into believing that the private sector does everything better than the public sector. The truth is more nuanced.
In one sense, the private sector does almost everything. For instance, when the government builds a highway, it hires the private sector to do the actual building. So who builds the highway? Who does a better job?
Military planes, tanks, ships, guns and bullets are ordered and paid for by the government, but built by the private sector. A private citizen, the President, is Commander in Chief of the Armed Forces. So is the military a government enterprise or a private enterprise? Who does a better job?
When banks caused the great recession, it was the federal laws and federal oversight (or lack of it), that allowed — even encouraged — banks to make bad loans, then sell those bad loans. So who caused the recession, the banks or the government? Who did a better job?
Progress is made when the government and the private sector work together, usually with the government paying and the private sector doing the actual work.
So blindly cutting government makes no more sense than cutting the private sector. They both are necessary. The debt hawks don’t realize this. In their ideal world, the government loses its most important role: Paying for things.
Somehow, they dream the private sector doesn’t need payment for what it does, so not only can do the physical work, but also pay for it with taxes — in short, zero net pay.
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“Public” vs. “Private” word games.
http://attempter.wordpress.com/2012/04/05/what-is-the-government/#comments
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Longer-term we need to change the economic system from one that privileges investment to one that privileges work. The top 1% (or really the top .1%) don’t end up with so much money because they work harder or smarter than the rest of us. They are essentially being paid for money they already have. A work-based economy (which should also include the other measures you discuss) would still have income disparities, but those would be far smaller than they are today.
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Lifelong,
I empathize with you, but unfortunately, there is no fair way to measure the value of work.
Who deserves more, the guy digging out a frozen sewer on a winter’s night or a scientist looking for the cure to cancer, a rock musician or a symphonic musician?
You’re right if you’re saying that money reward doesn’t measure value to society, but rather than trying to measure the value of work, we should make sure that the least dollar-rewarded among us still are able to lead rewarding lives.
Personally, I think economics bloggers should receive the most! 🙂
(But only if they understand Monetary Sovereignty)
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Well, my ideas along these lines are not quite so airy as that. I was thinking more in terms of employee (rather than stockholder) ownership of firms, and public rather than private sources of finance. Whatever the specific means, the end result would hopefully be a more even distribution of income and wealth, and an economy that was run by and for the majority who have to work for a living rather than (perhaps no longer existing) minority who make money by having money.
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LifeLong,
Are you interested in removing the profit motive system? If so, do you have an alternative incentive mechanism in mind?
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Money that currently is paid to outside investors who do no work would be reinvested in the business or paid as additional compensation to the people doing the actual work. Note that I consider organizing and running a business to be “work”.
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Rodger,
I agree with you of course on the economics of taxing the rich, but there are other factors to consider in creating an ideal tax scheme beyond what’s best for the economy in the aggregate. People who ascend to a certain level of wealth (a level where they very likely can provide for all their needs without any assistance from their communities or governments) can become disconnected from consideration for the health of their societies and by extension the people who populate them. This is doubly true for people of a conservative mindset who don’t see a problem as real unless it affects them on a personal/emotional level. This is compounded by the way capital flows freely between communities and the increasing proportion of ‘wealth’ borne of non-physical/industrial activity (another community tie severed). Perhaps these ills are outweighed by the stimulative effects of a low tax rate, but I’m not sure.
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I think you idea would help. But I also think the root of the problem is that our society gives to private parties what rightfully belongs to the community as a whole.
If the commons are trully used to benefit the whole community, and private parties that wish to claim some part of the commons had to reimburse the community for the full value of their claim, those private parties would either use it wisely and productively, or see their wealth disappear. I also believe that such a system would increase the value of labor, because the value of capital is mostly made up of capitalized income from private hoarding of the commons.
The “commons” should include all land, natural resources, and privileges that come from the community or government.
Another aspect of our problem, is that because the community does not receive full value from private use of the commons, our governments (at least at the state level on down) have to take what belongs to private enterprise in order to fund themselves. In other words, they tax our labor, they tax productive economic transactions, and they tax the products of private labor – all of which should belong to the private parties and not the community as a whole.
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how about neither, jill stein of the green party, we need to start from scratch.
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At the top of the more recent posts, you’ll see this sentence: “Austerity = poverty and leads to civil disorder.”
Your “start from scratch” thought, which I suspect is shared by many, is what will lead to civil disorder. It’s the inevitable result of the unreasonable domination by the 1%.
Unfortunately, the “scratch” often evolves to domination by a different 1%. Same movie; different actors.
Rodger Malcolm Mitchell
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dont we have civil disorder now? isnt it going to get worse as common folk are squeezed more and more just for the basics? the legacy parties clearly have no desire to make life better for the citizens. i really dont think they give a rats ass.
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So what are you going to do about it?
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LIFELONG,
You would eliminate outside investors? Think about it.
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Yes, lifelong… I think that if you want thoughtful replies, you’ll need to be more specific about what you’re actually proposing.
You said “Money that currently is paid to outside investors who do no work would be reinvested in the business or paid as additional compensation to the people doing the actual work. Note that I consider organizing and running a business to be “work”.”
Well, if “outside investors” are not going to earn a rate of return, then they are not going to invest.
How exactly are businesses going to attract investment if investors will not earn a rate of return?
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I’m thinking along the lines of financing businesses through low-interest loans (perhaps in the future from publically-held banks) or even (distant future) outright government grants (fiat currency, isn’t it?). Businesses that need outside financing could get it without conferring ownership rights. This would also go a ways to eliminating the investor class which currently accumulates endless amounts of money while doing nothing to earn it.
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You would eliminate the stock market in favor of debt?
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what am i going to do? should refinance my home before the rates go up.
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That’s what you’re going to do about the civil disorder??
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do you really think that the dems or the repubes are going to change anything for the better(for us serfs anyway) that is why i suggested jill stein of the green party. they have plenty of private-for-profit prisons for the civil disorder.
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In answer to RMM above (replace the stock market with debt), I’m not wedded to any particular scheme of business finance. I would like us to develop a system that (unlike our current one) does not give rise to a hereditary investor class in which the people who do the least of the work end up with the most of the money (and political power). I’m open to suggestions.
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