●The more federal 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.
●Cutting the deficit is the government’s method for taking dollars from the middle class and giving them to the rich.
●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.
●The penalty for ignorance is slavery.
Economists analyze myriad economic measures and descriptions: Inflation, recessions, depressions, deficits, debts, money (of all descriptions), exports, taxes wars and other world events, politics, GDP, GNP, appropriate laws, population changes – the list goes on and on.
The purpose of an economy is to improve the welfare of a population. Welfare can include many things, income, health, happiness, food, housing, education, also on and on.
If we are looking for a “welfare” measure of an economy, we could do worse than consider the income gap. As the gap grows, the rich few(call them the 1%) reap increasing rewards, and the many (the 99%) sink ever deeper into domination by the 1%.
The more the Dukes and Lords play, the more the commoners struggle to survive. Always has been, always will be.
Government is the primary driver of an economy, and especially in our democracy where government responds to the private sector, the single most important goal of economists should be to teach the private sector what the government should do to narrow the gap.
Last July, we published “No, it’s not your imagination. The upper 1% really are screwing you more.” It showed how the gap has grown enormously in the past few years, creating the new American monarchy.
The higher the GINI ratio, the greater the income gap.
The post provided tongue-in-cheek “advice,” appropriate to the current political debate, about how best to widen the gap between the rich and the rest:
1. Maintain or even increase the FICA tax. This tax directly punishes lower salaried people. Institute a national sales tax or VAT to “broaden the base.” Poorer people devote a greater percentage of their income on consumption.
2. To “save” Social Security, tell the 99% it’s insolvent, so you must reduce benefits and continue to increase the SS starting age. Also, continue to tax SS benefits, as these benefits are most important to lower income people.
3. To “save” Medicare, tell the 99% it’s insolvent, so you must reduce payments to doctors, hospitals and other health care providers. That way, more of the best doctors will opt for “boutique” practices that only the 1% can afford. Don’t pay for expensive procedures (that only the rich can manage).
4. Cut military spending. The military employs the 99%. Military equipment production companies provide jobs to the 99%. Keep cutting postal and other government employment. Also cut domestic spending, as the vast majority of domestic spending benefits the 99%.
5. “Broaden” the income tax base by increasing the number of lower income people forced to pay taxes. Continue the Alternative Minimum Tax (AMT); it catches more of the 99% every year, and the 1% know how to avoid it.
6. Cut federal spending to reduce “big government.” The reason: Most federal spending creates jobs for the 99%. Especially cut food stamps, unemployment compensation, Medicaid, aid to education, job training and all other federal aid programs. The upper 1% don’t use them.
7. Cut financial assistance to the states. Virtually everything the states do benefits the 99%, and since the states are monetarily non-sovereign, they only can get money by taxing their own people, tourism or exports. The rich know how to avoid taxes. State tourism and imports mostly are inter-state money transfers – a “beggar thy neighbor” system.
8. Continue to spread the myth that the U.S. government is, or soon will be insolvent, like Greece, and that federal taxes pay for federal spending. These ideas confuse the 99% and give you a good excuse to cut anything that benefits them. Continue the federal debt limit exercise. Pretend federal finances are the same as personal finances.
9. Continue to allow banks to trade for their own accounts, and always bail them out when their investments go sour. Never accuse any banker of criminal activity. Banks are special.
10. Nominate more arch conservatives to the Supreme Court. Alito and Thomas are good models. The “Citizens United” decision was an excellent step forward in providing the rich with greater power vs, the poor.
Keep these 10 “suggestions” in mind as the arguments over spending and taxing and austerity play out, during the next few months and years.
Also, consider that President Obama made these statements during his second inaugural address:
“We, the people, still believe that every citizen deserves a basic measure of security and dignity. We must make the hard choices to reduce the cost of health care and the size of our deficit.”
“The commitments we make to each other through Medicare and Medicaid and Social Security, these things do not sap our initiative. They strengthen us.”
Translation: “Although Medicare strengthens us, we must take dollars out of the economy by cutting Medicare costs.” (See suggestion #3, above).”
The population has been brainwashed into believing the federal government is like the private sector, i.e. it can run short of dollars to pay its bills, and taxpayers owe federal debts. No amount of academic instruction has changed this intuitive belief – a belief mouthed every day by politicians and the media, both of which are owned by the 1%.
Those who understand the reality of Monetary Sovereignty, have been fighting intuition, “common sense” and the endless telling of the same lie by the 1%, the politicians and the media. We are outgunned, outmanned and outspent. Our head-on attack, even with all the facts on our side, doesn’t make a debt in the public’s armor of disbelief.
To make a case, begin with what people already believe — not with something they reject — and build from there.
I ask the followers of MMT, and like-minded thinkers, to switch their primary argument from deficits, debt, taxes, money creation, banking laws and other inanimate concepts, and instead humanize our economic problems by focusing on the gap – that historical source of human misery and domination.
The populace cannot and will not understand why deficits should be larger and “debt” should not exist at all. This is not what they know about deficits and debt.
The populace cannot and will not understand why taxes don’t pay for federal spending, nor why the government does or does not create dollars by spending dollars. This is not what they have been told about taxes and spending.
All the discussions of federal banking laws, Monetary Sovereignty and seigniorage will not penetrate.
What the populace does understand and believe is the gap – the fact that the rich are getting richer and the poor, by comparison, are getting poorer.
Using the gap as a starting point, we can segue into additional facts:
1. The income gap is what makes some people rich and there rest of us struggle. The rich want the gap to grow, because the gap allows the rich to dominate the rest of us. Without the gap, there would be no rich and no poor.
2. The gap is large and has been growing, because the rich pay the politicians to make that happen, and because the rich own the media.
3. The rich rich bribe the politicians via campaign contributions and promises of lucrative jobs after the politicians leave office.
4. The politicians widen the gap by increasing such taxes as FICA, and by reducing benefits for social programs – all under the pretext that the government is running out of money.
These four points are far more believable to most people, than is the notion that the deficit is too low. So, begin with what people already believe, factually and intuitively.
Only when you have your listeners nodding in agreement, should you begin to explain why the government is not running out of money, does not need to raise taxes, does not need to cut the deficit, does not need to borrow the dollars it creates and never, ever, ever should pursue austerity.
The populace is more interested in gossip that “feels correct” (the 1% paying to deceive them) than in the scientific facts of Monetary Sovereignty.
When you discuss economics, begin with the four points of the gap.
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
25 thoughts on “–MMT: To make your case, begin with what people already believe”
Excellent post and probably the only way to achieve anything will be incrementally. More letters to the editor, more pressure on economists like Paul Krugman that have some of the basics down. I’ll get started but first have to work on “paying” the National Debt my parents left me – if everybody thinks that way it must be right.
Is it possible that the wealth gap is large and growing because the rich refuse to provide great wages and great benefits to their employees?
Here’s part of an article Bernie Sanders wrote a couple weeks ago:
“In America today, we have the most unequal distribution of wealth and income of any major country on earth, and more inequality than at any time period since 1928. The top 1 percent owns 42 percent of the financial wealth of the nation, while, incredibly, the bottom 60 percent own only 2.3 percent. One family, the Walton family of Wal-Mart, owns more wealth than the bottom 40 percent of Americans.”
Rodger, what a great post. Really GR8888!
It is a fact 100% of the increase in income since 1976 has gone to the top 10%. Yes, zero to the 90%.
So what cause the gap to increase? Human nature says a gap must exist, even though all men are created equal their free will always them to either gain more or lose more either by skill or luck.
Please explain to all of us ,Why do “private for profit banks ” (PFPB) banks have an obvious advantage in gaining MORE PROFIT THAN THE TOTAL AMOUNT OF MONEY IN EXISTENCE?
Answer is ,”They are not only allowed to “print” our currency (something that should anyone else do would be criminal as it would be called counterfeiting) but they also are allowed to charge (a taxation) on that ‘money’.
And they can ‘print” more than $100 trillion without a “Debt Ceiling” .
How about an article on this fact. It would be more than GREAT-i
Lending creates dollars.
When the banks create dollars, it is a collaboration between borrowers and lenders. The private sector is equally responsible for bank money creation. One legitimately could ask, “In a loan transaction, which party is creating money, the lender or the borrower.
Actually, you yourself can create dollars — legally. Merely lend money and receive a note in exchange. That act creates dollars, and it is what distinguishes lending from giving (Giving creates no dollars, as there is no note).
Just found this reply.
RMM, “Actually, you yourself can create dollars — legally. Merely lend money and receive a note in exchange. That act creates dollars, …”
No, No, that is not correct. That would be “genuine lending” that is taking real money in circulation, giving it to the borrower with a promise to return it. The opposite of a banks “fictitious lending” giving a borrower “new temporary money” they may not even own since most are based on deposits by someone else. Using their promise to return to them (PFPB) more real money than they loan. Re:”The Role of Money”
Apparently, you do not understand the difference between giving money and lending money.
Exchanging currency for a note creates nothing.
I could trade you an apple for an orange, and no additional apples or oranges would be created.
If you hand me an apple, and I promise you an apple in return (a “note”), no additional apples are created.
But when a bank marks up the balance in your account, and you give them a note, that balance in your account, created from nothing, is money that did not exist before.
It’s not reserves, and it’s not an increase in private sector net financial assets, but it is money.
Instead, if the bank handed you a $100 bill, and you handed it an IOU for $100, no additional money would have been created. But they don’t do it that way.
I don’t often understand much of what Lucky says, and disagree with parts that I do understand, but I think he’s right this time.
Your personal note is part of the money supply, the total of which is: Debt Outstanding Domestic Non-financial Sectors.
That is why lending creates dollars, while giving does not.
“Your personal note is part of the money supply, the total of which is: Debt Outstanding Domestic Non-financial Sectors.”
I see, How much of Debt Outstanding Domestic Non-financial Sectors consists of personal notes between individuals, as opposed to more formal bank lending?
I just sold my old golf clubs to my son, in return for his note for $10T. I expect to see that in the stats for Debt Outstanding Domestic Non-financial Sectors next month. I’m going out now to buy some more golf clubs, using my newly acquired money. I think I’ll get Augusta National and Pebble Beach.
I don’t know the answer to your question, but here are a few sectors graphed by the St. Louis Fed. There are, of course, an infinite number of sectors, depending on how you want to divide the economy. Private Debt (Not Associated With A Bank) might be one:
When explaining MMT, start with a point of agreement. The MMT paradigm is hard to wrap one’s head around and understand at first since it is not apparently intuitive and “goes against common sense” from what most people have been taught and are familiar with. So many people have cognitive bias – they reject, ignore or misinterpret information that goes against their beliefs. A big problem is that people still view the federal government fiscal policy as the same as their household finances. It’s amazing that people never bother to think: Where does money come from in the first place? Government has to get dollars into the economy somehow. China and private businesses don’t have printing presses for dollars so to speak. And, of course, the ever prevalent false notion that dollar printing starts hyperinflation and we could become just like Wiemar Germany in the 1920’s or Zimbabwe (…If I just had a nickel for every time this came up when explaining MMT).
For anyone who lived through the 1970’s, it is not necessary to invoke Zimbabwe or Wiemar Germany. It wasn’t hyper, but it was bad enough. We don’t want that again. The tipping point for me and MMT was the explanation for the 1970s. Nobody expects any plausible economic policy to cause hyperinflation in the US. They do fear what they remember having happened to themselves.
Yes, a long way from hyper, but still too high. It was cured by raising interest rates, just as Monetary Sovereignty says (and the opposite of what MMT says).
and the deregulation of natural gas…
Rodger, from my experience, here is what people believe:
There are two problems: Reagan and Clinton. conservatives clinging to the former and liberals that latter.
Reagan drastically cut tax rates for the wealthy and the economy BOOMED. (Btw, so did the national debt, from $700B to $3T, as well as the start of increasing income disparity and wage stagnation.) Followed immediately by, “I’ve never received a job from a poor person, we need small government!” Never mind that Reagan created the Dept of Veteran Affairs, adding 60k federal employees to the workforce. Or the massive increase in the Pentagon’s budget. Or that after promising to cut Social Security benefits, he ended up agreeing to a $165B “bailout” of the program. Or that after the initial tax cut, he ended up raising taxes – 11 times, mostly hitting the working class.
You know, “small government” and “fiscal responsibility”. FREEDOM! Or so the conservative story goes.
Then there is Clinton. Surpluses (!!!) and massive tax increases on the wealthy (what was it? all of 4%??), and the economy BOOMED. Never mind that Clinton “reformed” welfare and repealed Glass-Steagall. Or most importantly, by complete happenstance unrelated to his policies, he had strong economic winds at his back by way of the dot.com bubble and private sector leveraging. (We know how that all turned out.) And income inequality widened and wage stagnation continued.
You know, “big government” and “fiscal responsibility”. EQUALITY! Or so the liberal story goes.
Oh, the irony. But that’s where the debate typically ends, from both sides. Because…my hero! POINTS!
Your challenge: take down Reagan and Clinton and their respective “stories”. Much of it can be explained away by understanding sectoral balances and that “small government” and “big government” don’t mean what many think it means. And neither does “fiscal responsibility”.
Great question. Well, Rog …..?
I like the fundamentals of the approach, but I would change #1 slightly
1. The income gap is what makes some people rich and the rest of us struggle. The rich want (like all of us) to get richer, and when they do the gap grows. Without the gap, there would be no rich and no poor.
I know you believe their intent is to harm others rather than to help themselves, but I think most people don’t, and when you say it they immediately tune out. The more neutral statement sets the foundation for the others, which they do believe, and which reinforce their willingness to listen to your message.
You want to be richer. The rich want to increase the gap. Their motivation is different from yours. It is the gap, not absolute earnings, that makes them rich.
If you made $1 million a year and everyone else made $1,000, you would be rich. But if everyone else also made $1 million, you would not be rich.
The rich want power, and one gets power by lifting yourself or pushing down the other guy.
That is why the politicians, especially the Republicans, are bribed to cut Social Security, cut Medicare, cut food stamps, cut unemployment compensation, cut federal employment, cut Medicaid — cut, cut, cut everything that benefits the 99%.
Roger, there is an excellent essay titled “What is Conservatism and What is Wrong With It?” by Philip Agre of the UCLA that addresses this point and the question brought up by golfer1john. It can be read here: http://polaris.gseis.ucla.edu/pagre/conservatism.html
Agre has a very definite viewpoint on this (one with which I agree) and lays his argument out in detail, while still being very readable and accessible. We naturally do not want to think that a whole class of people have evil intent toward the rest of us. It may be true that some of them don’t even think their aims are evil, but just the way things should be. That is to say, they really have no conscience or feelings for the vast majority of other people.
Apologies if you’ve read this/covered it before.
You’re right. It is an excellent essay. It says what I’ve been saying, and it says it better.
Golfer1john writes regarding the 1%: “I know you believe their intent is to harm others rather than to help themselves, but I think most people don’t, and when you say it, they immediately tune out. The more neutral statement sets the foundation for the others, which they do believe, and which reinforce their willingness to listen to your message.”
I totally disagree.
From what I have seen and read, most people understand that the 1% want slaves and servants, and are engaged in an all-out assault against the 99%.
Unfortunately the 99% cling to their brainwashing that they must submit to austerity because the U.S. government is “broke.”
Therefore we must continue to explain that austerity is deliberate GENOCIDE. Austerity is engineered famine. Anyone who denies this, or calls this an exaggeration, is living in a dream world, and is thereby supporting the genocide.
One form of living in a dream world is to gloss over the truth with “neutral statements,” as the MMT people do. “Neutral statements” do not change the fact that genocide is genocide.
If you put a million people into a concentration camp, and you starve them to death, then you have murdered a million people, even though you did no more than stand guard outside the fence.
Excellent post. It’s nothing less than a world-wide propaganda war, currently dominated by the neo-liberal elite, such that calm logical statements of the economic truths are seen as ignorant nonsense by the deluded 99% and especially the self-serving mainstream economists. The 99% are fed a diet of neo-liberal narrative and framing by the media, so literally don’t know any better. The media range from the paid-for lickspittles at one end down to the clueless, but converted by propaganda, at the other. They are the main powerful weapons of the 1%.
We have a fringe blogosphere.
Rodger…. Please respond to Trixie’s 1/23 query re. ‘Reagan v Clinton’ economic approach/outcome contrasts. You slippery devil! Kidding
but most interested in your take …………
I don’t see any question in the comment.