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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, and the motive is the gap.
What parts of the following two stories are “good news” and what parts are “bad news”?
First, the “General Motors” story:
U.S. Lost $11.2 Billion in GM Bailout, TARP Report Says
By Tim Higgins Apr 30, 2014
The total includes $826 million that the Treasury wrote off in March for its remaining claim in old GM. In December, the government had put the loss at about $10.5 billion on its $49.5 billion investment.
The Treasury sold its remaining shares in GM in December. While the government lost money, its exit paved the way for an influx of fresh investor capital.
Warren Buffett’s Berkshire Hathaway Inc. and State Street Corp. were among investors to buy into GM. J. Kyle Bass’s Hayman Capital Management LP also took a stake in GM.
And now, the “offshore” story:
IRS Chief Says It Can’t End Companies’ Offshore Tax Deals
By Richard Rubin Apr 30, 2014
The U.S. Internal Revenue Service probably can’t take regulatory action to stop companies from lowering tax bills through deals that put their legal addresses outside the country, IRS Commissioner John Koskinen said.
Pfizer Inc. (PFE) this week proposed the biggest such deal yet, a $98.7 billion takeover of AstraZeneca Plc (AZN) that would move the largest U.S. drugmaker to the U.K. for tax purposes and allow it to pay a lower tax rate.
Pfizer would join at least 19 other companies making or contemplating similar transactions, including Chiquita Brands International (CQB) Inc. and Omnicom Group (OMC) Inc., the largest U.S. advertising firm.
Cracking down on deals in which U.S. companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration, a Treasury Department official said yesterday.
The official, who requested anonymity to discuss the administration’s plans, said the transactions emphasize the need for a revision of the U.S. tax code that includes reducing rates. Earlier this year, the administration proposed making the deals, known as inversions, harder to accomplish.
The U.K.’s rate is 21 percent and will decline to 20 percent next year, with no tax on active businesses outside the country.
In contrast, the top U.S. corporate rate is 35 percent. Companies also must pay U.S. taxes when they repatriate foreign profits, after receiving credits for foreign taxes.
(Current U.S.) law prevents companies from receiving the tax benefit of an overseas merger if their existing shareholders still owned 80 percent or more of the company’s stock after the deal.
In his budget plan released this year, President Barack Obama proposed lowering the 80 percent threshold to 50 percent. That plan would raise $17 billion for the U.S. Treasury over the next decade.
Some members of Congress, including Democratic Senator Jeanne Shaheen of New Hampshire, have introduced bills that would tax inverted companies as domestic if they are managed and controlled in the U.S.
So what is the good news and what is the bad news? Regular readers of this blog know the right answers. The answers by those who do not understand Monetary Sovereignty, will be wrong.
Everything that subtracts dollars from the U.S. private sector is economically bad news. Conversely, everything that adds dollars to the private sector is good news.
Dollars going to or from the federal government are irrelevant, since the government, being Monetarily Sovereign, has the unlimited ability to create dollars and neither needs nor uses incoming dollars.
So, among the good news phrases are:
*”U.S. Lost $11.2 Billion in GM Bailout” ($11.2 billion added to the U.S. economy)
*”While the government lost money . . .” (i.e. the economy gained money)
*”IRS Chief Says It Can’t End Companies’ Offshore Tax Deals” (The IRS will take fewer dollars from U.S. corporations, i.e. from the U.S. economy.)
*”. . . move the largest U.S. drugmaker to the U.K. for tax purposes and allow it to pay a lower tax rate.” (More dollars will remain in the U.S. economy).
*” . . . includes reducing rates . . . ” [Lower taxes strengthen the economy.]
Among the bad news phrases are:
*”The Treasury sold its remaining shares in GM in December.” (Money was deducted from the private sector)
*”Cracking down on deals in which U.S. companies move their legal address outside the country to pay lower taxes is a priority for the Obama administration . . .” (Obama wants to reduce the U.S money supply.)
*”The U.K.’s rate is 21 percent and will decline to 20 percent next year, with no tax on active businesses outside the country. In contrast, the top U.S. corporate rate is 35 percent. Companies also must pay U.S. taxes when they repatriate foreign profits, after receiving credits for foreign taxes.” (Not only does the U.S. government take more from the private sector than do other governments, but these taxes make U.S. industry less competitive in world markets).
*”President Barack Obama proposed lowering the 80 percent threshold to 50 percent. That plan would raise $17 billion for the U.S. Treasury over the next decade.” (The U.S. economy would lose $17 billion.)
*” . . . the top U.S. corporate rate is 35 percent . . . ” (The highest in the world, taking the most money out of the U.S. economy.)
*”. . . members of Congress . . . have introduced bills that would tax inverted companies as domestic if they are managed and controlled in the U.S.” (More money would be taken from the U.S. economy).
Bottom line: The next time you read or hear that the federal government “lost” money, that probably is good news, particularly if the private sector made money. But if the federal government “made” money, that’s bad.
[The situation is different for state and local governments, which are not Monetarily Sovereign.]
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
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
Vertical gray bars mark recessions.
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.