●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