–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

#MONETARY SOVEREIGNTY

–How would you make disemployment work?

In two recent posts, we discussed “disemployment,” the fact that increased automation has made, and will continue to make, human work-for-money less needed:

The new paradigm: Disemployment. Less work; more life.

New Paradigm II: What are your plans for the Age of Disemployment?

Although many people enjoy their jobs, the vast majority work because they want money. This vast majority did not grow up saying, “I hope I can have a boss I must please by doing whatever he/she says.” They did not say, “I want to sit in an office cubicle all day, five days a week, or stand in front of a machine, or carry packages, or dig holes or be criticized.”

The vast majority did not grow up hoping one day they would be required to smile at irritable people, or continually to repeat the same words, or wake up early to meet someone else’s schedule, then ride public transportation, or drive through traffic jams in bad weather or be allowed to go away just two weeks out of the whole year.

The vast majority did grow up hoping one day they would lie awake at night, praying for customers, or for a good evaluation, or not to be fired.

No, the vast majority would like the freedom to do as they wished, under circumstances they enjoy – and for the vast majority, that does not mean having to work for money.

“The New Paradigm II” said: When our leaders create plans for curing unemployment, your question should be, “What are your plans for making my life and my children’s lives more enjoyable, more comfortable, safer, healthier — better? What are your plans for the coming age of disemployment?“

Today, I saw an article in the Global Intersection, titled Labor Costs: A Smaller Factor in Globalization

Two key quotes from the article:

A new wave of robots, far more adept than those now commonly used by automakers and other heavy manufacturers, are replacing workers around the world in both manufacturing and distribution.

And

Labor costs are no longer a primary factor in determining where business should locate.

More advanced computers are, and will continue to, replace human labor. Yet, what is the single, most important issue being debated befor the coming election? Human unemployment. See anything wrong with that?

I sometimes feel as though our politicians live in another universe – a universe where nothing changes – and the goal is to solve the problems of yesterday. With the development of ever smarter robots, the days of full employment are gone, forever. Disemployment is the new norm.

If today’s 8.2% national unemployment level bothers you, wait until tomorrow, when disemployment really kicks in, and 20%, 30%, 50% of those wanting money will not be able to work for money. What is Congress’s and the President’s plan for that eventuality? Raise taxes? Cut spending? Create laws against computers?

Let’s begin with three facts:

1. Most Americans work primarily to obtain dollars.
2. Americans use dollars to acquire life necessities and indulgences.
3. The U.S. government has the unlimited ability to create dollars.

Put them together and you have the beginnings of a solution: The federal government should provide more dollars for life necessities and even indulgences, with less requirement for human labor.

Yes, of course, if no one worked, nothing would be done and we’d all starve. But we’re not talking about no one working. We’re talking about working less, and enjoying life more.

And yes, some people love their work. No problem; they can continue to work, if they can find it. And yes, some people may choose not to work at all. No problem; they can live the life non-work affords.

Now for the reality of the majority: Given previous points #1, #2 and #3, we can consider how we might plan for the inevitable disemployment:

1. Legally reduce the traditional 40 hour work week to 30 hours and less.
2. Prevent hunger for lack of dollars. The government could provide for everyone’s basic food supplies by paying grocery stores to offer free milk, meat, fish and vegetables.
3. Provide health care for everyone. The government could pay for 100% Medicare for every American of all ages.
4. Keep people from suffering homelessness. The government to pay for home mortgages at a minimum level (Rather than “minimum wage,” we could have “minimum home mortgage,” where people could add dollars for more expensive homes. Or “minimum rent,” something akin to the government paying for hotel stays).
5. Just as today we provide free education, grades 1-12, the government should provide free college and advanced degree education to every American.
6. Begin with government-paid-for local, public transportation, then expand this by paying airlines and railroads for free national public transportation.

We began this discussion with three facts. There is a fourth fact: Disemployment is the future. As winter follows fall, nothing will stop it.

At first blush, some ideas may seem outlandish, if based on yesterday’s employment reality. But, disemployment already has begun. The coming years will continue to see less and less need for human labor. We can close our eyes to change, and follow the increasingly obsolete “full-employment” paradigm. Or we can begin to discuss ways to meet this challenge.

Summer has ended. Fall has just begun. We can buy heavy clothing for winter – clothing which may seem outlandish based on yesterday’s warm reality – or we can ignore the occasional chilly breeze, and allow ourselves to freeze when the snow falls.

Disemployment is not an “if.” It’s a “when” and the when is upon us. We can rail against the cold, or we can prepare. We should stop looking at unemployment as a problem to be solved, but rather as an eventuality and an opportunity to loosen the binds of obligatory labor.

How would you make disemployment work?

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

#MONETARY SOVEREIGNTY

–Former (?) Debt-Hawk Admits Federal Debt is Necessary

Every so seldom, a notorious debt-hawk will publish an admission that well, yes, not just federal debt, but growing federal debt is necessary for the survival and growth of our economy.

Washington Post
The reality of trying to shrink government
By Lawrence Summers, Published: August 19, 2012
Lawrence Summers, a professor and past president at Harvard University, was Treasury secretary in the Clinton administration and economic adviser to President Obama from 2009 through 2010.

There is a widespread view in both parties that it is feasible and desirable that in the future the federal government should be no larger as a share of the overall economy than it has been historically.

RMM: Yes, it is the widespread view – the wrong view, but widespread. Unfortunately, no one in either party explains why the government’s share of GDP should be no greater than it “has been historically.” The reason for this omission: There is zero economic significance to the debt/GDP ratio.

Second, exactly what has that “historical” ratio been?

(“FGSDODNS” is federal debt. “GDPA” is Gross Domestic Product)

As you can see, the Debt/GDP ratio has had no relationship with Gross Domestic Product growth, and has bounced all over the place — and there is no “historical” ratio.

For structural reasons, even preserving the amount of government functions that predated the financial crisis will require substantial increases in the share of the U.S. economy devoted to the public sector.

First, demographic change will greatly expand federal outlays unless politicians decide to degrade the level of protection traditionally provided to the elderly. Between Social Security, Medicare, Medicaid and some smaller programs about 32 percent of the federal budget, or about 7.7 percent of gross domestic product, is devoted to supporting those over 65.

RMM: Or we can accept the right-wing extremism of self sufficiency – until those same right wing “John Waynes” reach elderly status, at which time they pitifully will cry, “Help me, help me, I’m old and sick and broke.”

As Americans’ health and life expectancy improve, it may be appropriate to revise upward the assumed retirement age. That would, however, be unlikely to counteract the expected 34 percent increase in the share of the population over the next generation who will be within 15 years of estimated life expectancy.

RMM: “Revise upward” expresses the extreme right-wing, “Work ‘til you drop” philosophy, which again, they are guaranteed to disavow, once they get there. (“What? I have to work until I’m 75? Who will hire me? I’m too weak for the physical labor I once did. Wah wah wah.”)

Second, the accumulation of more debt and a return to normal interest rates will raise the share of federal spending devoted to interest payments.

RMM: Yes, those who invested in Treasury securities, will expect to earn interest on their investment. And then, they will spend that interest money, which will stimulate the economy. And by the way, what is a “normal” interest rate”?

Third, increases in the price of what the federal government buys relative to what the private sector buys will inevitably raise the cost of state involvement in the economy. Since the early 1980s the price of hospital care and higher education has risen fivefold relative to the price of cars and clothing, and more than a hundredfold relative to the price of televisions.

RMM: Fundamentally correct, though the private sector pays for most higher education, which is why we have all those excessively indebted college graduates. In truth, the federal government should finance higher education.

If government is to continue providing the same level of these services, government spending as a share of the economy has to rise, by at least 3 percent of GDP.

RMM: Or, we can do as the Tea/Republican Party wishes, and cut government benefits for the 99%, ala European austerity. That seems to work nicely for Greece, France, Italy, Spain et al, whose people very soon may begin to build guillotines for their leaders.

Fourth, several methods that have been used to repress the deficit, such as federal pension liabilities and the deferred maintenance of federal infrastructure, will soon be unsustainable.

RMM: Right: Spending of pension dollars grows the economy, while infrastructure spending reduces unemployment. And by the way, our Monetarily Sovereign federal government can afford both.

Meanwhile, there is a steady decline in the fraction of tax returns that are audited and evidence of growing tax noncompliance. Both reflect unsustainable cuts in spending. And on almost any reasonable view of the state’s responsibility, large increases in inequality such as those observed in recent years should call forth increased government activity.

RMM: Almost buried in the article is the media-denied fact that federal deficit reductions always increase the gap between the upper income 1% and the 99%. (Yet, in the next election, millions of Americans will vote to reduce the federal deficit. Go figure.)

Defense spending, which represents 4.7 percent of GDP could be reduced significantly. But our military is badly stretched by sustained deployments.

Technology could greatly reduce government costs in some areas, the largest parts of the federal budget involve cash or in-kind transfers (which) are far less susceptible to productivity-enhancing technologies. (Also) efforts to identify waste, fraud and abuse invariably come up with only negligible savings.

RMM: In short, even Lawrence Summers has come to understand there is no economically sound way to reduce deficits and many reasons not to. But that won’t change the minds of most politicians and right wing extremists (Is there a difference?), who will continue to claim, “It is feasible and desirable that in the future the federal government should be no larger as a share of the overall economy than it has been historically.”

For the next three months the nation will debate the merits of growing vs. shrinking government. But for the next three decades the United States will confront the reality that major structural changes in its economy will compel an increase in the public sector’s fraction of the total economy unless the functions that the federal government has long performed are substantially scaled down.

RMM: “The merits of growing vs. shrinking the government” should be the debate, but unfortunately it is not. The debate has devolved to: “How to shrink the government” aka “How to send us into depression while increasing the gap between the 1% and the 99%.”

But at least and at last, Lawrence Summers seems to get it. That’s one. Is there now hope for the rest of the 300 million?

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

–Krauthammer sneers at you ignorant peasants

Every so seldom, I need a good laugh. So I read an article by one of the right-wing, high-paid apologists for the upper 1% income group. Take Charles Krauthammer (please). Although what Krauthammer preaches is . . . no other word for it . . . stupid, he himself is not stupid.

No, he’s a smart, bought-and-paid-for prostitute, who apparently has become so rich and so successful duping the innocent, he is sydicated in hundreds of newspapers (most owned by the 1%), and is a panelist on (of course) Fox news (owned by Rupert Murdoch and his family).

Am I too harsh? Should I temper my remarks with civility? You be the judge:

Charles Krauthammer says Ryan could become a major political force
By Charles Krauthammer Washington Post

Krauthammer sneering at you

Vice-presidential picks are always judged by their effect on the coming election. They rarely have any. They haven’t had a decisive influence since Lyndon Johnson carried Texas for John Kennedy in 1960. (That and Illinois put Kennedy over the top.)

Translation: “This is a subtle reminder to you liberals that your hero, Kennedy, stole his election. It’s irrelevant to this article, but I never miss a chance to ‘dis’ the liberals.”

This time, however, the effect could be significant. The Democrats’ ‘Mediscare’ barrage is already in full swing. Paul Ryan, it seems, is determined to dispossess Grandmother, then toss her over a cliff.

Translation: “A ‘Mediscare barrage’ is when you people learn the Ryan plan screws, not Grandmother, but Grandmother’s kids and grandkids. We hope you’re as callous as we are, so will be pleased, when we assure you our dreadful plan doesn’t apply to you, but only to your children.”

Republicans have a twofold answer. First, hammer home that their Medicare plan affects no one over 55, let alone 65. Second, go on offense. Point out that President Obama cuts Medicare by $700 billion to finance Obamacare.

Translation: “The Ryan plan is so wonderful, we want to assure those of you over 55 it will not affect you. No, it only screws those under 55. Feel better?

“And as for that mythical $700 billion, we keep talking about, O.K. Ryan has proposed exactly the same “cuts” in his own budget proposal. (From the Washington Post: “Paul Ryan says he never would have included a $700 billion Medicare cut in his budget if President Barack Obama hadn’t done it first. ‘He put those cuts there,’ Ryan said. ‘We would never have done it in the first place.’”)

Too sad for words

“And O.K., the money doesn’t come out of Medicare benefits, but rather payments to hospitals, which hospitals requested in exchange for the reduced emergency room costs Obamacare provides. But don’t let facts get in the way of my good story.”

For a country with stagnant growth, ruinous debt and structural problems crying out for major entitlement and tax reform? Obama’s “plan” would cut the deficit from $1.20 trillion to $1.12 trillion. It’s a joke.

Translation: “The Romney/Ryan plan would cut the deficit more, by increasing your taxes and reducing your federal benefits, thereby assuring a recession if we are lucky and a depression if we are not. The debt is “ruinous” only if you don’t understand Monetary Sovereignty, which I’m sure you don’t.”

Ryan represents a new constitutional conservatism of limited government and individual opportunity that carried Republicans to victory in 2010, not just as a rejection of Obama’s big-government hyper-liberalism but also as a significant departure from the philosophically undisciplined, idiosyncratically free-spending “compassionate conservatism” of Obama’s Republican predecessor.

Translation: “We don’t want the government telling us what to do and not to do . . . er, ah, except for abortion, which kills babies. (But do carry guns — big guns — which kill everyone.) There, we want the government telling you what not to do.

“Oh, and except for gay marriage. We definitely want the government telling you not to do that. And of course, we want the government to cut your Social Security, Medicaid, and virtually every federal initiative that benefits you of the 99%, because you should be self sufficient — except if you are rich and want the government to pay your business costs.

“And as for ‘compassionate conservatism,’ compassion is for sissies, not for real Americans.”

Ryan’s role is to make the case for a serious approach to structural problems — a hardheaded, sober-hearted conservatism that puts to shame a reactionary liberalism that, with Greece in our future, offers handouts, bromides and a 4.6 percent increase in tax rates.

Translation: “Yes, I know. The U.S. cannot become like Greece, with the former being Monetarily Sovereign and the later being monetarily non-sovereign, but since you are ignorant of economics, I can use the “Greece” word to scare you, and you will believe me.

“And please forget that Obama wants to increase taxes only on the richer people, while I want to “spread the tax base” which will increase taxes on the poorer people, and lower them on the richer people.”

If Ryan does it well, win or lose in 2012, he becomes a dominant national force. Mild and moderate Mitt Romney will have shaped the conservative future for years to come.

Translation: “‘Mild and moderate’ means: ‘I take all positions on all arguments. I agree with you no matter what you think. I even once loved Ryan’s budget, but now I’m not sure whether I do or I don’t, but then again, I’m not sure I don’t or I do – but don’t hold me to that. All I ask is for you to accept my budget, though it doesn’t exist. And please vote for me, whoever I am today or tomorrow.”

The problem with the new conservatism is that it’s fundamentally cold-blooded, describing “freedom” as the freedom from government assistance (which the 99% all need), the freedom to shoot people, especially with really big guns, the freedom to deport aliens, the freedom to force women to raise unwanted children and the freedom to be a bigot.

The old “compassionate conservatism” wanted to improve the welfare of all Americans. The new conservatism makes no such pretense. Rather than “me-first,” it is “me-only,” a conservatism that sneers at the needy for being needy.

It is a rich, white man’s selfish philosophy, and unless you are all four – rich, white, male and selfish — you only will hurt yourself to follow it.

But if you do believe what Krauthammer says, he will sneer at you, ignorant peasant.

Rodger Malcolm Mitchell
Monetary Sovereignty

#MONETARY SOVEREIGNTY

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