–Congress in Wonderland: Cut the deficit, but don’t cut the deficit. And it’s all their fault.

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

●Austerity starves the economy to feed the government, and 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.


Congress demands not to do what it previously demanded to do and still demands to do, but denies it. And if you understand that, you have serious mental problems, which qualify you to run for office.

For several years, Congress – especially the Tea/Republicans, but to a lesser degree, even the Democrats – have demanded that the federal deficit be reduced. Some in Congress have demanded a “balanced budget” ($0 deficit), or even a federal surplus (pull dollars out of the economy).

So determined have our political leaders been to cut the deficit, via tax increases and spending cuts, they passed a law requiring a $500 billion deficit reduction beginning January 2013. Now, Congress and the President act as though it wasn’t they who passed the law.

Recently, a sense of shock and outrage has rippled through Washington at the relization that what they all wanted to happen may actually happen. The finger-pointing has begun.

Washington Post
CBO warns of significant recession if Congress doesn’t act to avoid fiscal cliff
By Lori Montgomery, Updated: Wednesday, August 22, 11:13 AM

The nation would be plunged into a significant recession during the first half of next year if Congress fails to avert nearly $500 billion in tax hikes and spending cuts set to hit in January, congressional budget analysts said Wednesday.

The massive round of New Year’s belt-tightening — known as the fiscal cliff or Taxmageddon — would disrupt recent economic progress, push the unemployment rate back up to 9.1 percent by the end of 2013 and produce economic conditions “that will probably be considered a recession,” the nonpartisan Congressional Budget Office said.

Isn’t that amazing! If you remove $500 billion from the economy, you actually will cause a recession? I’m stunned, or I would be stunned, if I hadn’t been preaching the same thing for the past 15 years.

A growing economy requires a growing money supply. The federal deficit is the government’s method for adding dollars to the economy. Cut the deficit and you reduce the dollars coming into the economy, and thereby cause recessions and depressions. Always.

The outlook is considerably darker than the forecast the agency released in January, when the CBO predicted that the fiscal cliff would trigger a mild recession in the first half of 2013 followed by a quick recovery.

Since that forecast was issued, Congress has steepened the cliff by extending a temporary payroll tax break and emergency unemployment benefits, which are now also set to expire in January. In addition, CBO analysts have concluded that the underlying economy is weaker than had been predicted.

Let’s see if we can figure this out. Congress and the President extended that payroll tax break and unemployment benefits, because this pumps dollars into the economy. (The increase in federal deficit spending helps stimulate the economy.) And they understand that a decrease in the federal deficit will drive the economy off the “fiscal cliff.”

So what should Congress and the President do now? Hmmm . . . . Increase the deficit and stimulate the economy, or reduce the deficit and go off the fiscal cliff? Really difficult problem, isn’t it?

The shock would be felt for years to come, with the unemployment rate stuck above 8 percent through 2014, the agency said. And the effects are likely to be felt well before the fiscal cliff hits, as “businesses’ and consumers’ concern about the scheduled fiscal tightening will lead them to spend more cautiously than they otherwise would have” during the remainder of 2012.

The CBO’s latest fiscal outlook is likely to fuel the raging debate over budget policy as the nation barrels toward the Nov. 6 elections. Republicans, including presidential candidate Mitt Romney, want to postpone the biggest chunk of the cliff — $331 billion in tax hikes — to give Congress time to overhaul the tax code. Democrats, including President Obama, say they will not delay tax hikes set to hit the richest Americans, those earning over $250,000 a year.

Er, ah, excuse me. I almost hate to mention the obvious but . . . How about increasing the deficit by cutting taxes and increasing deficit spending? The U.S. government is Monetarily Sovereign. Unlike the states, counties, cities and euro nations, it has the unlimited ability to pay its bills. So what’s the problem?

Republicans quickly accused Democrats of inviting economic disaster.

You see, passing the law — in fact threatening filibuster if the law wasn’t passed — does not constitute “inviting economic disaster.” No, failing to overturn the law you insisted on, that’s what invites economic disaster. Got it?

“This CBO report underscores why on August 1, I and other House GOP leaders urged the Senate to follow the House in passing legislation that would steer our nation clear of the fiscal cliff,” House Speaker John A. Boehner (R-Ohio) said in a written statement. “Instead of threatening to drive us off the fiscal cliff and tank our economy in their quest for higher taxes, I would urge President Obama and congressional Democrats to work with us to stop the coming tax hike that threatens our economy and replace the looming defense cuts with common sense reforms.”

Hey John, aren’t you “America is broke” Boehner, who demanded that the federal deficit be cut. There are only two ways to cut the deficit: Raise taxes and/or cut spending. And you don’t want to raise taxes?? Or cut spending??

Unless the election helps to resolve the standoff, the same political gridlock that has prevented a deficit-reduction deal for much of the past two years would this time produce one of the biggest rounds of deficit reduction in modern history. Instead of exceeding $1 trillion for a fifth straight year, the 2013 deficit would instead plummet to $641 billion, the CBO predicts.

So the argument is: Do we cut the deficit less, thereby hurting the economy less, or do we cut the deficit more, thereby hurting the economy more? Again, I hate to mention the obvious, but what about helping the economy by increasing the deficit?

The national debt is growing apace, with debt owed to outside investors set to hit 73 percent of the overall economy by the end of September.

What everyone mistakenly calls “the debt” is nothing more than the total of deposits in Treasury security accounts at the Federal Reserve Bank. Why should the government or you worry about “too much” money deposited at the Federal Reserve Bank?

That’s the highest level in more than 60 years, and nearly double the level in 2007, before the onset of the Great Recession.

There is no known mechanism by which deposits in T-security accounts at the FRB, can cause a depression. What did cause the Depression? How about the 10-year reduction in deficits immediately preceding the Depression? Pulling dollars out of the economy for 10 years might have had something to do with weakening the economy. You think?

There also is no known mechanism by which deficit reduction grows the economy. Pulling dollars out of the economy never can be stimulative.

And despite this, Congress and the President still say they wish to cut the deficit, while the editors of some newspapers even urge us to “Go Big,” i.e. make big cuts in the deficit. The notorious Chicago Tribune editors wrote, “Count us in the noisy chorus that wants the supercommittee to “go big” — that is, not merely to meet its minimum mandate but to make far more drastic reductions in future deficits.” Yikes!!

Lewis Carroll wrote about these people. But this isn’t funny.

Rodger Malcolm Mitchell
Monetary Sovereignty

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America

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 Imports


One thought on “–Congress in Wonderland: Cut the deficit, but don’t cut the deficit. And it’s all their fault.

  1. Not one Presidential candidate’s platform, even fringe candidates like Jill Stein, call for anything but serious deficit reduction. Every candidate running for Congress echoes these same sentiments. Either no candidate for any office understands this issue or they are ALL dupes for the 1%. We’re pretty much screwed.

    Check out my new response post for morons who scream for deficit reduction all across the internet:

    “Deficit spending is not the same as the Federal Debt. The Federal Debt is the total of outstanding T-Bills and it is a redundant accounting feature required by Congress. A Monetarily Sovereign government doesn’t have to get its “money” from anywhere, it simply creates it. With the economy running nowhere near full capacity, inflation is not a problem. If it becomes a problem the FED can increase interest rates, making “money” more valuable. The US went off the gold standard in 1971, nullifying the need for the US government to either tax or borrow. Remember, Federal Deficits=Private Savings. The money (from deficit spending) does not need to ever be “paid back.” It is an economic investment for the future from the public sector to the private sector. Of course politicians and the media won’t tell you that because their primary concern is to increase the income gap between the 99% and the 1%. Stop being duped.”


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