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●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 ultimately 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.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
Many posts on this blog discuss the fact that the U.S. federal government, unlike you and me, and unlike the cities, counties, states, companies and the euro nations, is Monetarily Sovereign, and so, does not need income. It creates all the dollars it needs for spending by the very act of spending dollars.
When the government pays a bill, it simply sends instructions to the creditor’s bank, telling the bank to increase the balance in the creditor’s checking account. These instructions are in the form of a check or a wire, and when the bank follows the instructions, dollars are created.
Unlike we monetarily non-sovereign entities, the U.S. federal government can send such instructions endlessly. For more background on this, you might wish to read: “I just thought you should know.”
We are left with the obvious question, “Why does a government, that does not need income, levy taxes?” Considering that the U.S. federal tax code is perhaps the most complex, convoluted, inefficient, ever-changing, incomprehensible, economically damaging set of laws ever created in the history of the world, this question is important.
Why indeed, does the government force us to spend millions of unproductive and unpleasant hours calculating taxes, then take dollars from our pockets to pay those taxes, then spend more dollars to investigate, prosecute and even jail those who don’t pay taxes, properly?
One cannot imagine another exercise that costs so much in time and money, causes so much grief, and has so little value (none) as the U.S. federal tax system.
So, again, why do we do this to ourselves?
Economic Control Federal taxes are used to control certain details of the economy. By adjusting tax rates among long-term, short-term, real estate, interest, salary and various enterprises (oil drilling, farming, energy saving, etc.) the government encourages and discourages certain activities.
However, the government could accomplish the same things without taxes, by rewarding (paying dollars) rather than by punishing (taxing dollars).
Provide Demand: Years ago, I had this discussion with proponents of Modern Monetary Theory (MMT) a kissin’ cousin to Monetary Sovereignty (MS). It was (and I believe remains) their belief that federal taxes are necessary to provide demand for the dollar. By requiring people to pay their taxes in dollars, the federal government assures that people will want and use dollars.
I suggest this is partly true, but mostly false. The “true” part is that requiring taxes to be paid in dollars does indeed create demand for the dollar.
But, because there are plenty of state, county, city, village, park district, water district, etc., etc. taxes to provide demand for the dollar, federal taxes are not necessary to provide dollar demand.
Control Inflation: A second belief is, the purpose of federal taxes is to control inflation. If dollars were not removed from the economy by federal taxation, there would be too many dollars in the economy, and this would cause inflation.
This is like saying a pail must have holes in the bottom, otherwise it will overfill. Clearly, the solution to overfilling is to pour less water into the pail. To prevent having too many dollars in the economy, the federal government simply could spend (create) fewer dollars.
Further, since 1971, when the U.S. went off the last vestiges of a gold standard, there has been no relationship between federal deficit spending and inflation. In the past 40+ years, inflation has been associated with oil prices, not with federal money creation.
More importantly, our Monetarily Sovereign federal government not only has the unlimited ability to create dollars, but it also has the unlimited ability to set the value of those dollars. It could, if it chose, devalue the dollar relative to other currencies, revalue (upward) the dollar or renominate (introduce a wholly new currency.)
The U.S. federal government being the inventor of the dollar, and having arbitrarily created all the laws that make the existence of the dollar possible, is in effect, the “God of the dollar.” It has unlimited power over all aspects of the dollar.
The Federal Reserve, a government agency, controls inflation to its target rate of 2% – 3%. That target is based on the idea that a small amount of inflation stimulates the economy, by creating the incentive to buy goods and services today, rather than waiting until tomorrow, when prices will be higher.
Redistribute Wealth: A third belief is, federal taxes are necessary to redistribute wealth and to prevent some people and some families from being so rich they, in effect, become sovereign dictators. In theory, it is a protection for the “not-rich.”
But, the United States is loaded with billionaires, and these people have enormous power, verging on dictatorial power. So clearly, federal taxation has not worked to prevent concentration of wealth, and the reason it has not worked is the tax code is a product of the wealthy.
Rather than protecting the middle- and lower-income groups, the tax code, as constructed by the rich, is a far lesser burden on the rich than on the rest.
While the rich pay more in total tax, they still are left with a massive surplus, while the poor and middle-classes struggle to pay their taxes and still save anything for the future.
Consider FICA, the single most regressive tax in American history, and the tax that often exceeds income taxes for many lower-end, salaried people. While it purportedly pays for Social Security and Medicare, in reality its sole purpose is to widen the gap between the rich and the rest.
Thus, federal taxes do not redistribute dollars, but in fact are a kind of “false flag” operation, designed to appear created by a benevolent Congress to benefit lower income groups while, actually having been created by the rich, to benefit the rich.
This is why Congress (having been bribed by the rich, via campaign contributions and promises of lucrative employment), the media (owned by the rich) and mainstream economists (controlled by the rich via contributions to universities and by lucrative employment) all combine to spread the “BIG LIE” that federal taxes are necessary.
“Sin” taxes: Taxes on cigarettes, liquor and other recreational drugs may be the sole appropriate use of federal taxation, though perhaps these might better be the function of state and local governments than of the federal government.
Summary on taxation: Federal taxes do not support federal spending. They are inefficient, unnecessary and having been created by agents of the rich, serve only to widen the gap between the rich and the rest.
Federal taxes can, and should be, eliminated.
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
As the lines drop, we approach recession, which will be cured only when the lines rise.