–The Obama non-spending spree and the road to depression

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. Until the 99% understand the need for deficits, the 1% will rule. 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.

TPM published an article titled, “An Obama Spending Spree? Hardly” by Sahil Kapur

As a defense against Republican charges that President Obama spent too much, the article really should be called, “With friends like these, who needs enemies.”

Some excerpts:

A dominant theme of the national political discourse has been the crushing spending spree the U.S. has ostensibly embarked on during the Obama presidency. That argument, ignited by Republicans and picked up by many elite opinion makers, has infused the national dialogue and shaped the public debate in nearly every major budget battle of the last thee years.

But the numbers tell a different story.

Obama’s policies, including the much-criticized stimulus package, have caused the slowest increase in federal spending of any president in almost 60 years, according to data compiled by the financial news service MarketWatch.

During the worst recession since the Great Depression, the Obama administration oversaw “the slowest increase in federal spending of any president in almost 60 years.” And this is supposed to be a defense of the President?? At just the time when increased spending is most needed, spending increases were smallest? Yikes!

Obama — unlike his Republican and Democratic predecessors — signed a law in February 2010 necessitating that new spending laws are paid for.

Here, Mr. Kapur parrots the popular ignorance that Monetary Sovereignty is the same a monetary non-sovereignty. Unlike state and local government spending, the spending by a Monetarily Sovereign government is not “paid for” by anything. There is no vault from which dollars are extracted and sent to creditors. The government merely instructs banks to mark up checking accounts. The government can send these instructions endlessly, regardless of tax collections.

Not understanding the difference between Monetary Sovereignty and monetary non-sovereignty is absolute proof one does not understand economics.

In addition, Obama last year signed into law over $2 trillion in debt-reduction over the next decade.

Thereby, converting the United States into Greece. Debt reduction is guaranteed to cause a depression:

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

. . . the President has put hundreds of billions in cuts to Medicare, Medicaid and Social Security on the table in deals that have been derailed, thanks in no small part to the GOP’s resistance to raising new tax revenues to help bridge the budget shortfall.

There’s irony for you. The Democrat wants to slash programs for the 99%, while the Republicans “derail” the deal.

You simply cannot make this stuff up. A pox on both your houses.

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


13 thoughts on “–The Obama non-spending spree and the road to depression

  1. Errr, wow, so the choices are seriously to have a depression from Obama-style economics or to have a full-on system crash from Ryan-style economics?

    I guess I’ll go with Obama. I don’t LIKE the upcoming persistent 10% unemployment, but, I guess it beats people literally starving in the streets once food stamps and Social Security and Medicare goes away.

    What’s most maddening about this is that when the very probable depression/recession hits afterwards is that populace will immediately elect people who will make the situation worse. If this was a style of ‘don’t think you can get off with nominating gongs just because the opposition mounts gongs because we really will go through with our threat of punishing you’ brinksmanship, well, I’d disagree but I’d understand. But as the 2010 elections showed us, people will just reflexively vote for the opposition party.

    I don’t see any way out of this trap. I’d suggest moving, but, I don’t think any Most Industrialized country has shown any more sense.


  2. Well, it’s a defense of the President in the sense that these ridiculous claims that he’s an out of control spender has no basis in reality.

    And I wonder how much of this is just politics on Obama’s part. The GOP is obviously refusing to spend any money, but Obama has still been able to extend UE benefits and the FICA tax cut. On some level, he seems to understand that the government needs to spend more, but it’s practically impossible to do so with this climate.


  3. Why does spending ‘under’ each president start two years after their inauguration? (Clinton ’94, GWB 02′, Obama ’10)


  4. I’m doing my part. I try and tell people why they shouldn’t be worried about our national debt and why they should be worried about the country’s labor situation instead – and they look at me like I’m from freaking MARS! Mind you, a lot of these are the same people who bash the “lamestream media” every chance they get, but when I present them with an alternative view of our country’s economics that’s who they turn to tell me that I am wrong.

    It’s always the same, “More debt is never the answer”, or “China owns our government” (my personal favorite), or “Wait and see, the dollar’s end is coming soon.”

    It’s funny though, whenever I present a statistic or facts that don’t jive with their sense of what the national debt is (which is quite often), I don’t get an answer or a cogent response. Instead, I get laughed at. I ask them why it’s so funny, and I get laughed at some more, but I never, I repeat, I NEVER get a response or an answer as to why I am wrong. It just doesn’t happen.


    1. I like to ask people how it is that China has so much money to lend the U.S., in the first place? If there was a finite supply of USD out there for China to lend, then how do they seem to have an endless supply? Even the fractional reserve system has limits on how many dollars can be created from one dollar deposited (which change when the reserve requirement changes).

      The answer, of course, is obvious, it comes from America. But this is even too hard for most people to understand. Cable television has rotted the minds of this country. It’s sad.


    1. It sure is, and I thank you for maintaining this blog. It was by chance that I found it, and boy am I glad I did. It’s opened my eyes and provided answers to the questions we all ask ourselves. At least the economic and political questions we ask ourselves, anyways.

      On a side note, the hyper-partisan atmosphere in D.C. is a just a reflection of the national sentiment. Everybody loves to piss and moan about how divided congress is. Well, congress is just doing their job. America is divided and our elected representatives are doing what it is we tell them to do. America has always had her opposing viewpoints, but now more than ever things are being taken to a whole new level.

      Whats the cause of this trend? In my opinion, the obvious answer is the rise of political mass media. In particular, cable television 24 hour news networks that don’t really deliver news, but instead deliver sentiment, and opinion wrapped around the news. It’s created a nation full of non-expert “experts”, half on one side of the political spectrum and half on the other side, who are never wrong and know the other side is never right.

      How are our citizens, let alone our politicians,ever going to be able to come to an agreement on ANY issue when this is the case? Your guess is as good as mine.


      1. While I’ll agree that the media has gotten worse, I’m not sure how MUCH worse. The MSM back in the 50s did as much as they could to ignore Civil Rights advances and protests and debates kicked off by Brown vs. Board of Education until things reached a flashpoint. And of course were the total lapdogs of LBJ and Nixon until things reached a flashpoint again.

        I mean, the fact that OWS got listened to after weeks of being ignored is better than the NAACP getting ignored after YEARS or in the case of abolitionists or suffragists for DECADES. It should give people some cause for hope. I just wish that OWS could put together a package of demands that wouldn’t trigger America’s Jealousy Complex or be (rightfully, in my opinion) construed as class warfare.


  5. I agree with your post, Roger, and how ridiculous it is to praise Obama for spending less. However, as long as our currency and central banking remain privately controlled, any increase in federal spending will increase our debt to private bankers and bond holders, yes?

    You say that at the federal level, “There is no vault from which dollars are extracted and sent to creditors. The government merely instructs banks to mark up checking accounts. The government can send these instructions endlessly, regardless of tax collections.”

    Yes, that is how things would be if the U.S. government had monetary sovereignty, i.e. control of the currency and central bank. Unfortunately the private Fed cartel instructs the government, not the other way around.

    On a different note, it nauseates me to see Republicans whine about taxes, and the 99% whine that the rich are not taxed enough. We wouldn’t need federal income taxes at all if our currency and central bank were publicly controlled. Nor would we need loans from foreign nations. The federal government could print money (or create credit) as needed, tbhus attaining true national monetary sovereignty.

    North Dakota is the only state that has a public state bank, and hence the only state that continues to set a new record each year for surplus funds even now, amid the current U.S. Depression.


    1. Yes, that is how things would be if the U.S. government had monetary sovereignty, i.e. control of the currency and central bank. The US government does have monetary sovereignty. The US government has complete control of the currency & the central bank.

      Unfortunately the private Fed cartel instructs the government, not the other way around. Only true in that the crooked TBTF banks make sure to staff the Fed & the Treasury with “experts” who deceive many and act in the interest of the banks & financial sector, contrary to their legal duty. And “donate to”, that is bribe, the legislature & the executive. But legally, operationally, there is not the slightest question that the US Congress & the executive is in charge, have the power, instructs the banks, not the other way around.

      The greatest power these bad guys have is convincing people that the banks, the bond market have any power over the government. If you think that, as far too many do, you simply don’t understand the law & how government finance and economics work.

      We already have a MMT/MS system. All it would take is a very few honest officials to run it & a sane Congress to spend for the general welfare. No structural changes necessary.


  6. To RMM,
    It should be obvious that I lack writing skills (not to mention also other skills),but I believe that my opinion of
    where we have gone wrong and how we can fix it may be of value.
    Or correct it so that it could be.
    This is a long post but I do not know any other way to present it to you. At least I know you will read it, even if not posted.
    Please challenge it , improve it, and post it.
    It has as a basis some of your
    “Mitchell’s laws: The more budgets are cut and taxes increased, the weaker an economy becomes.
    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.”

    “To lower taxes,you must raise revenue somewhere.”
    This is a concept that could help overcome another misconceived concept,”We must end deficit spending”.
    (Note; A Monetary Sovereignty can simply print any funds,BUT may need to overcome “moral hazard and or inflation”)
    How could a government fund, “a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”” at the same time reduce LOWER TAXES (PERSONAL INCOME TAXES TO ZERO), RAISE REVENUE ($4 TRILLION PER ANNUM), AND END DEFICIT SPENDING (TRANSFERRING ASSETS) .
    The solution is so simple (to quote Einstein,”Make it simple”) that it becomes “too good to be true”.
    But we are at a point in history that may allow the 99% to make it happen.
    If in fact correct,”Allow the truth to set us free.”
    Do for the housing industry,construction industry what was done for the automobile industry.
    Almost all economists would agree that the Federal Government as an agent of a Monetary Sovereignty
    has the ability to purchase ALL residential and commercial loans that are in existence on American real estate.
    The Federal Reserve has to power and right to end fractional reserve banking by way of changing the reserve requirement
    to 100% on all loans and financial instruments that are held as assets. There are more consequences to this change but they can be addressed later, for now we will address how residential and commercial loans would work for “we the people”.
    In order to prevent a meltdown (systemic failure) by the instant de leveraging of all these loans they must be made “whole”.
    They must be purchased at 100% of value that is on the books of the present holders.
    This may be, could be, at only 80% of real “market value”
    That is OK, that is one really great “stimulus” that would prevent the catastrophe
    that seems to be unavoidable from any other solution to end this “credit accelerated” crisis.
    It is not deficit spending,as we will have a 100% matching asset (loans) on the books.
    What is the “magic bullet” that allows this transfer of assets to become profitable (raise revenue)
    and lower taxes ?
    The answer is by using “the most powerful force in the universe, compound interest ”
    (may or may not have been stated by Einstein) for the benefit of the 99% instead of the 1%.
    If $55 trillion is needed to purchase all these loans and they were modified as new Government Assumable
    Loans, not guaranteed by the Feds ( the old stupid way )rather actually funded by the Federal Government, we would create a
    new asset worth.
    $55 trillion at 2% for 36 years would produce a revenue of a little over $3 trillion per annum
    for a total payback of $110 over the 36 year term.
    There would be no reason for personal income taxes.
    There would be no reason for deficit spending.
    Raise revenue, eliminate FDIC by backing financial institutions 100% reserve, not by GUARANTYING
    the money rather allow them to borrow the additional $55 trillion to poll their “folly” at 2% for 36 years.
    Let them insure their losses with their money instead of taxpayers money !
    READ MORE…Google…”Great news !! Zero Income Taxes…” OR …”justaluckyfool”
    May the “invisible hand” help guide the 99%.


  7. A couple of takeaways from that – The monumental hypocrisy of the Republicans calling the Obama administration spendthrifts, which leads me to think the Democrats should have spent up like one of the Bushs, as the Republicans are going to hammer them on spending regardless, but the economy would be much better, and unemployment falling, which is all the voters really care about.

    Obama has received no political benefit from running a tight budget, and it’s caused the economy to be weak enough to threaten his re-election. Also shows the bias of much of the media that the Republican line of profligacy has been so widely taken up.


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