–Why starve the economy to feed the governement?

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.

●Austerity starves the economy to feed the government
●Austerity leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.


Why starve the economy to feed the government?

Federal spending sends dollars into the economy. Federal taxes take dollars out of the economy. When federal spending exceeds taxes, more dollars go into the economy than come out. This is the government’s deficit and the economy’s profit.

Our political leaders, the media and the old-line professors are fixated on the health of the federal government’s finances. They are fixated on what they call the “federal deficit” and the “federal debt.” But the problem is not the finances of the government which, being Monetarily Sovereign, never can run short of dollars. The problem is the finances of the economy which already has run short of dollars.

The bigger the so-called federal “deficit,” the bigger the economy’s profit. Why worry about the federal “deficit,” when we really should worry about the economy’s lack of profit?

The federal government is not in recession. The economy is in recession. So why starve the economy to feed the government?

Unemployment is not a problem for the federal government; unemployment is a problem for the economy. So why do the Tea Party, the Republicans and even the Democrats starve the economy to feed the government?

Poverty, loss of home, bankruptcy, illiteracy are not problems for the government; they are problems for the economy. So why cut the federal deficit and starve the economy to feed the government?

When federal spending exceeds taxes the economy makes a profit. To recover from the recession and to grow, the economy needs profits. So why cut spending and increase taxes? Why starve the economy to feed the government?

The right wing claims to love Americans and to hate big government. But their plans involve “deficit” cutting, which starves the economy and feeds the government. Why feed what you hate while starving what you claim to love?

We should stop worrying about the federal “deficit.” Instead, we must worry about the economy’s lack of profit. The government doesn’t need the money. The economy needs the money.

We must stop starving the economy to feed the government.

Rodger Malcolm Mitchell
Monetary Sovereignty

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


8 thoughts on “–Why starve the economy to feed the governement?

    1. I must laugh at the website you just linked to. All their finest moments in US history occurred because of large government spending which was only possible because of large deficit budgets, and a large government “debt”


  1. I promise I won’t keep harping on this but one of my big issues at least as I understand it (along with a few smaller ones) with MMT and MS is this sentence…

    “Federal taxes take dollars out of the economy.”

    This is a bit deceptive.

    Federal taxes do redirect money from the economy but does it really take it out of the economy, or does it really reduce the “money” supply. The answer to that question, I GUESS, depends on how you look at things. It is also the reason why people “don’t get” MMT or MS when you first talk to them about it is because…

    When taxes are paid and the gov accounts are credited 2 things happen the second of which is not all that bad or I should say is easily fixed.

    First the gov still has credits or “money” that can be used to offset any any debits that the gov makes… that is taxes offset any spending the gov does. Those credits don’t diminish or cease to exist. Further by law when there is any neg balance T-securities are issued (Fed debt = T-securities outstanding).

    The second thing that happens one account of fractional reserve banking which creates the problem MMT and MS points out but which has an easy solution is that like you or me the gov has accounts with the federal reserves (just like you or I have accounts at our bank). When we open or close an account with the bank it affects their reserves or how much the bank needs to keep and not lend out. However when the federal gov accounts are credited this credit affects the total reserves in the banking system and hence it reduces the money supply or as is popular in MMT/MS it “destroys” money.

    However and this is where the the problem is easily solved (not that I necessary endorse the solution) that is if the “economy” needs the money the federal reserves can make up the difference. This is what is referred to as printing money or these days hitting the keyboard. This is one of the reasons or at least one of the “official” reasons the federal reserves was created to begin with to balance out the flows of money provide reserves.

    The thing that MMT/MS points out is that unlike you or me who may have a borrowing limit set by the banks or others, the gov does not. It is similar to if you or I, if we could set our own limits on how much we could spend or borrow. However we are restrained. The only limits for the gov is “conomic realities” and the limits the the gov puts on itself since the federal reserves will just print the money to cover gov deficits. In addition if THE LAWS were changed the gov would not have to issue T-securities, they could just print the money.

    Finally issuing T-securities to cover the debt or suggesting it is a profit has its own problems and there are other issues but that is for another time…


    1. There are several measures of the money supply: MB, M1, M2, M3, L, Total Outstanding Domestic Nonfinancial Debt. Federal taxes reduce them all.

      There is NO measure of the money supply that is not reduced by taxes.

      Credits in federal accounts are not part of the money supply. No amount of arguing, rationalization or discussion will change this fact.


  2. Taxes do not redirect money from the economy but they direct people production to the public provisioning of goods and services.

    This is core MMT/MS and, presumably, also the basis of the main ethical argument for MMT/MS not proposing the abolition of continuously enduring taxes: public provisioning of some goods and services is good.

    A complimentary argument is that taxes force a single main currency in a geographical area, which is also good.

    I agree that MMT/MS proponents have kept implicit their ethical arguments and this is a weakness for acceptance and dissemination of MMT/MS.

    That taxes direct people production to the public provisioning of goods and services is a factual argument. That this is good is a value judgment. Stating even implicitly the value judgment has fairness issues that MMT/MS had in some way avoided to discuss.

    Let us assume that people agree to the public provisioning of goods and services that is currently being made in the state they are citizens of; let us assume also that people agree that such provisioning could not be done without taxes.

    Say that personal income corresponds to productive action of an individual. Then the fraction of taxes paid by such income over the income gives a value to the equivalent contribution of said individual to public provision of goods and services.

    There is a fairness issue. Do citizens perceive that they receive public goods and services in a fair proportion to the fraction of their income they contribute?

    This issue can further be analyzed in the dimensions of overall state efficiency and distribution of taxes along citizens.

    I will agree that a monetary theory not addressing explicitly the issue has little chance of being further considered by people “in-the-median”. Mainstream do address the issue explicitly.


  3. Rodger,
    Now that Mitt has named Paul Ryan as his running mate, I don’t see him winning in November. Talk of cutting entitlements essentially concedes Florida. I don’t think Romney can win without Florida and I don’t see any great epiphany coming from their side.
    Obama needs to get rid of all those Clinton people on his staff. Who knows? As a lame duck, maybe he can put this deficit BS to rest and start to take care of Main St. instead of Wall St. (Pipe dream?)


  4. It’s funny how these conservatives ( these Republicans or RePUKES ) think the American people are going to do without national health insurance for a few more years so that the wealthy won’t have to pay more taxes!


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