●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which 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.
Gosh, it seems like years ago since we read this:
Pressure Builds on Deficit Panel to ‘Go Big,’ Beyond Its Mandate, in Cuts
By Jackie Calmes, Published: September 12, 2011
WASHINGTON — Led by President Obama, pressure is building on the new Congressional committee on deficit reduction to “go big” — beyond its mandate to shave as much as $1.5 trillion from budget shortfalls over 10 years.
A group of at least 57 prominent business executives and former government officials have signed a petition in support of a greater deficit reduction, which they are to release at a news conference on Monday. Among them are former treasury secretaries, budget directors and economic advisers to eight presidents; former Congressional leaders; and executives of top companies.
Their letter reflects a broad sense of urgency in both parties, and among economists and businesses, that the nation must put in place long-range measures to shrink future deficits.
Only a $1.5 trillion dollar cut? President Obama was a piker. The notorious CRFB published this:
The Committee for a Responsible Federal Budget — along with many other lawmakers, business leaders, former government officials, and organizations — is calling on leaders in Washington to enact a comprehensive deficit-reduction plan of at least $4 trillion to put the U.S. back on a sustainable fiscal path. In order to stabilize and reduce debt as a share of the economy, lawmakers will have be bold and “go big.”
Yes, GO BIG was all the rage. Politicians were falling all over themselves, each trying to demonstrate their inner John Wayne by going bigger than the next guy.
In August we published two posts about this phenomenon of phoolishness: (Trying to survive in this world of debt-hawk finger pointing and voter remorse. GO BIG!! and Congress in Wonderland: Cut the deficit, but don’t cut the deficit. And it’s all their fault. If you haven’t read those articles, you might give them a try.
It now occurs to me, that only two months later, we don’t hear “GO BIG” any more. Suddenly, the realization has set in, as those two little words, “go big” — have been replaced by two other little words — “fiscal cliff.”
In August we showed how the so-called “fiscal cliff” would come from a puny deficit reduction of just $560 billion, and here these politicians and businessmen had been asking for a $4 trillion dollar “GO BIG” deficit reduction. Now “go big” seems magically to have disappeared from the political lexicon.
Such is the intelligence of the American public: Little, two-word slogans can have more effect than all the facts in the world.
We’ve spend fifteen years explaining that when the federal government spends more dollars than it receives in taxes (federal deficit), this adds dollars to the economy (economic surplus). And when the government taxes more dollars than it spends (federal surplus), the economy runs a deficit. Yes, a federal deficit = an economic surplus, which is the only way the economy can grow. And cutting the deficit cuts economic growth.
Now, this shouldn’t be too hard to visualize. Dollars flowing to the government, flow out of the economy, and the fewer dollars the economy has, the less chance it has for growth. Duh!
But the American public didn’t get it. No, it took two words — “fiscal cliff” — to make a point we’ve failed to make for fifteen years. Well, O.K., whatever it takes.
But wait. Both Obama and Romney, and the Republicans and the Democrats, and the media and the old-line economists, have kept right on saying the federal deficit should be reduced. Yikes!
So here’s where we are. Try to follow closely. This is your sanity test:
A “go big,” $4 trillion deficit reduction will “put us on a sustainable fiscal path,” far better than a mere $1.5 trillion deficit reduction. But an even smaller, $500 billion deficit reduction will send us over a “fiscal cliff.” And the economy will grow more if there is an economic deficit than a federal deficit, because people can run short of dollars, while the federal government cannot run short of dollars.
If you understand the above paragraph, please seek immediate psychiatric help. Your doctor will give you medication to calm you when the depressions (financial and emotional) hit.
Rodger Malcolm Mitchell
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’s 99%
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 “–Take this 20 second sanity test.”
I think the fiscal cliff refers to a one-year sum, and the 1.5 and 4T refer to 10 years worth, and are heavily back-end loaded. Their aim is to continue relatively large deficits until the economy recovers, and then make up for it with big deficit reductions later. So, even the 4T is only 400B a year, on average, less than the 560B in one year; and it is not suddenly 400B in the first year, it gradually builds up.
Nevertheless, your point is quite valid.