–GREAT NEWS! The deficit is down. Uh . . . wait a minute!

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

Mitchell’s laws:
Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

●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.
==================================================================================================================================================================

Here is some GREAT NEWS!:

U.S. budget deficit lowest since 2008: Treasury
BY DAVID LAWDER

(Reuters) – The U.S. budget deficit fell by nearly a third to $483 billion in fiscal 2014, the lowest level since 2008, as a quickening economic recovery boosted tax collections and spending grew only modestly, the Treasury Department said.

Here’s a graph of that GREAT NEWS:

monetary sovereignty

The vertical gray bars represent recessions. Question: What happens in advance of recessions?

The deficit was the lowest since a $459 billion budget gap in fiscal 2008, which was followed by four straight years of $1 trillion-plus deficits in the wake of the financial crisis.

Question: What happens during recessions that cures recessions and re-grows the economy?

U.S. Treasury Secretary Jack Lew and White House Budget Director Shaun Donovan hailed the data on Wednesday as a “return to fiscal normalcy.”

Lew told a news conference the United States was now in a period of fiscal sustainability that is providing a strong foundation for growth.

Translation: “Fiscal sustainability” means the federal government now will be able to create enough dollars to pay its bills — as opposed to the fact that being Monetarily Sovereign, the government never can run short of its own sovereign currency, the dollar, to pay its bills. See the difference?

“What I don’t think we have is an emergency right now,” Lew said. “The challenge we have is to sustain the economic engine so that we’re seeing the growth now and over these next 10 years.”

The improving fiscal picture has sapped the urgency for a major budget deal between Congress and the White House aimed at slashing deficits by trillions of dollars over the next decade and starting to reduce the $17.8 trillion federal debt.

Translation: The challenge is to sustain the economic engine by reducing the fuel for the economic engine. Yes, it’s a real challenge.

Lew insisted he has not given up on further deficit reduction, but said budget savings could not come at the expense of economic growth.

Translation: He will continue to cut the baby’s formula, but not at the expense of the baby gaining weight. Understand?

Donovan told Reuters on Tuesday he wanted to further reduce those budget cuts next year and would be willing to consider some savings to mandatory spending programs to reach a deal with Republicans, who control the U.S. House of Representatives.

Translation: We’ll have to cut (gut) Social Security and Medicare benefits to please the Republicans and their (and our) rich donors, who want to widen the Gap between the rich and the rest.

Fiscal 2014 revenues grew 9 percent to $3.02 trillion, boosted by a jump in individual and corporate tax receipts and a 31 percent rise in Federal Reserve earnings, mostly from the central bank’s massive bond portfolio.

Translation: The poor and middle class have suffered tax increases and benefit decreases. As everyone knows, this helps grow the economy.

As for those earnings by the Fed, they come from interest that would have gone into the private sector, i.e the economy.

Outlays grew just 1 percent to $3.50 trillion.

Translation: The amount of money we pumped into the economy grew only 1%.

Receipts last month grew 17 percent to $352 billion while outlays were up 9 percent to $246 billion.

Translation: We took more money out of the economy than we put in. That’s how we grow the economy. It’s complicated, so trust me.

“A nearly $500 billion deficit is nothing to celebrate,” said a spokesman for House Budget Committee Chairman Paul Ryan, a Republican who has been touted as a possible 2016 presidential candidate. “And CBO still projects that, in the coming years, the deficit will rise even higher to unsustainable heights.”

As regular readers of this blog know, you are being treated to a government con job, courtesy of the rich. They want deficits to be reduced, then reduced more, then reduced again, because reducing deficits widens the income/wealth/power gap between the rich and the rest.

The politicians are owned by the rich, and will say and do exactly as the rich tell them to say and do.

They count on us not understanding the difference between federal financing and personal financing. They want us to believe that in some unknown way, the U.S. federal government — the creator of U.S. dollars — can run short of U.S. dollars.

Yes, it’s GREAT NEWS — if you’re among the wealthiest .1% of Americans.

If you enjoyed the last recession, you positively will love the next one.

Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================
Ten 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. Tax the very rich (.1%) more, with higher, progressive tax rates on all forms of income. (Click here)
9. Federal ownership of all banks (Click here and here)

10. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)

The Ten Steps will add dollars to the economy, stimulate the economy, and narrow the income/wealth/power Gap between the rich and the rest.
——————————————————————————————————————————————

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
Monetary Sovereignty

Monetary Sovereignty

Vertical gray bars mark recessions.

As the federal deficit growth lines drop, we approach recession, which will be cured only when the growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.

#MONETARYSOVEREIGNTY

23 thoughts on “–GREAT NEWS! The deficit is down. Uh . . . wait a minute!

  1. Bring it on baby… Remove the excess debt/credit from the system. Let the real economy come back.

    Sure, the credit contraction will appear to impact the economy somewhat – but this is healthy actually. The negative issue is the emission of credit – which destroys real incomes.

    The emission of credit pulls forward demand, until no more can be pulled. Current consumption removes future consumption – since you will not buy tomorrow what you bought today on credit. So technically you are only fooling yourself. Only the banks and the government thieves benefit from this arrangement since it increases banks earnings and allows politicians to give handouts – fools asking for deficit spending are fanatics.

    I bet Megan McArdle very well understands this.

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  2. I did some research from Wikipedia:
    http://en.wikipedia.org/wiki/Deficit_reduction_in_the_United_States

    It says that: “The U.S. federal government has run annual deficits in 36 of the past 40 fiscal years, with surpluses from 1998-2001.”

    A quote in the post from Paul Ryan is: “…in the coming years, the deficit will rise even higher to unsustainable heights.”

    Here is my comment — If the US has been running deficits for almost all of the past 40 years, how is that not sustainable?

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  3. Well said, Rodger. Shared.

    OT, but something happened to me yesterday that made me think of you. I was having a civil discussion with econ friends and one of them got butthurt and started attacking me personally, then blocked me. You can probably guess which econ tribe I am talking about.

    It reminded me that while I have sometimes disagreed with you on particular issues, and sometimes debated with you, that you were always civil and stuck to the issues. You never called me names, and so far at least, you haven’t blocked me or banned me from your site (knock on wood). You often attempt to back up your claims with data. I admire you for all those personal characteristics.

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    1. Here is how federal taxing and spending works.

      Imagine we are playing Monopoly and I am the banker.

      There is a new rule in this game: I am allowed simply to take pieces of paper, write “ONE DOLLAR” on them and spend them as DOLLARS.

      I can do this without limit,so I never can run short of DOLLARS.

      Now, during the game, you pay me a FIVE DOLLAR bill. But, since I create DOLLARS at will, I have no need of it.

      I can burn it, toss it in the garbage, or I can paint it blue and tape it to my forehead — or do anything else I want with it. Makes no difference. Your FIVE DOLLAR bill is useless and worthless to me.

      Now think, how many DOLLARS do I have?

      Dollars go in and dollars go out. And the federal government keeps records of all this movement.

      But since the federal government has the unlimited ability to create dollars, it makes no sense to say that federal taxes pay for anything.

      That, by the way, is the reason why all measures of the money supply count only dollars in the private sector.

      By any measure of the money supply, the federal government has no dollars.

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    2. That dollars get “deleted” is pure nonsense. Taxes do pay for government spending.

      Its not rocket science.. Just check the national debt 5, 10, 15 years ago. You wouldnt think it increased because more dollars got created, do you?

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    3. @kbar325 There is no way to prove that these dollars get deleted because they don’t.

      There is no proof that they do get deleted. The way Roger describes it below is not totally accurate.

      Just because the government “Cannot run out of dollars” or because it creates dollars does not mean it does not spend the tax receipts it gets or that it does not use them to offset spending. They don’t keep track of the inflows/outflows just for fun!!

      Ask yourself this why is it the deficit is only $400 or so billion and not $3+ trillion or the actual amount we spend each year or ask yourself why is it that it is only deficit spending that adds net dollars to the economy (I believe I read that on this blog somewhere, or I believe that is something MMT believes in, if not I stand corrected) and not all spending??

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      1. Not much of a mystery here, By definition, the deficit is the difference between federal spending and federal tax receipts.

        Deficit spending adds dollars to the economy, because putting more dollars in than taking out, adds dollars. So?

        That said, dollars going to the government no longer are part of any money-supply measure. They disappear — effectively are destroyed.

        For instance, if M3 (a money-supply measure) were $1 trillion, and you sent $1 billion to the government, M3 would fall to $999 billion. Those $1 billion you sent to the government would have been destroyed.

        Dollars only exist when they are in the private sector. There is no measure of dollars owned by the government. Can you see why this must be so?

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        1. Yes, your correct, receipts to the government are no longer counted as part of the money supply (actually I think they are just not counted against reserves at the Fed but that is whole other thing).

          However it is an awfully big leap to then say that not counting the receipts as part of the money supply is equal to the receipts being destroyed and it is an even larger leap to then say the receipts are no longer available for government to use or spend.

          What your referencing to is just an accounting convention because the governments accounts cannot be used as reserves or counted against the money supply, it would have too great a distortion if they were or it would be similar to double accounting.

          Yes in your example the money supply may go down to 999 billion but the treasury still has the billion dollars (that is until it is spent), it is not that it is destroyed, it is just not being counted. The billion dollars is still available for the government to spend, No actual money is being destroyed or not used by the government!….

          It is a little like saying that I really don’t get paid or receive an income because I don’t count it against my assets that is against may savings accounts (ie..my savings account/ my retirement accounts/ my 401K).. that is because my pay goes into my checking account and since I spend it I don’t count as an asset. That does not mean I do not get payed or I don’t receive the income, it just means it is not counted as part of my savings.

          Or It is along the lines of trying to suggest that if your gross pay is $50,000 and then at tax time with all the deductions you get, say it equals 2,000 that your gross revenue is actually $52,000 a year.

          What you are suggesting is jut accounting conventions and not actual cash flows…..

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          1. There is no “actual cash flow.” Dollars are not physically real. They do not “flow.” Everything is accounting. Cash “flow” is an accounting term, and does not mean anything like liquid flow.

            You probably visualize the government having a store of dollars, from which it sends out some to pay its bills. Just like you and me. WRONG.

            To pay its bills, it sends instructions (not dollars) to creditors’ banks, instructing the banks to increase the balances in creditors’ checking accounts.

            At the moment the banks obey those instructions, dollars are created. It is the banks that create the dollars, not the Treasury, by following the Treasury’s accounting instructions.

            The federal government has the unlimited ability to send instructions, plus (and this is the important part) the unlimited ability to approve those instructions. You and I don’t.

            Dollars exist only as accounting notations. And they exist only in the private sector. They do not exist in the Treasury, for the simple reason it would make no sense to ask the question, “How many dollars does the Treasury have?”

            The Treasury has no dollars and needs no dollars. It send instructions and approves those instructions.

            But perhaps you have the answer to the question: “How many dollars does the Treasury have?”

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          2. Yikes..did you actually think I was referring to physical dollars??

            The government cannot even create a website never mind the thought of them holding on to trillions of physical dollars and then using those dollars to settle millions upon millions of transactions that occur each year……

            No, I’m good I know the difference.

            As an aside I am a little confused as to what you are referring to when you say there is no actual “cash flow” and compare it to “liquid flow”?? Again did you think I meant a physical flow…literally like a liquid stream of money ?? I don’t know but that is kinda weird you would throw that in….

            Anyway as you say it is accounting, and hopefully you are aware that one of the main purposes of accounting is to keep an account of cash flows (solid, liquid, electronic or otherwise..) and the adjustments to those cash flows along with an account of assets vs liabilities and so on.

            I assume you meant those comments in reference to the government because the rest of us in one form or another keep track of our cash flows.

            So if the government or the Treasury did not have cash flows then what are all the records they keep?? How would we know if the government was deficit spending and if it was creating money or not??

            In any case this really has nothing to do with whether the government spends the tax receipts it receives or not.

            As to the government ability to create unlimited money or not…we already discussed that and again it has nothing to do with whether the government spends the tax money it receives or if it destroys it or if it is counted against the money supply.

            But you do ask a good question when you ask how many dollars does the government ie..the treasury have…

            The short answer and…. lets not get sidetracked by the idea of physical/electronic money, we all know what we are taking about or I would at least hope so…but the short answer is whatever the difference is between inflows and outflows at the time you want to look at it…. whatever it is a surplus or deficit at any given point you look at it.

            The longer answer is that the government as noted above, at any given moment, is conducting thousands of transactions and millions upon millions during the year involving trillions of dollars. There is no way you can match all these up dollar for dollar. One moment you may have a surplus the very next a deficit.

            However at any given period you can look at the aggregate and account for the inflows and outflows and whatever the inflow and outflows amount to at the point, that is how much the government has.

            Since the government has been running deficits for how many years now (?) you are correct that the government/treasury has no money..electronic or otherwise. That along with the fact that millions of transactions are going on which cannot be matched up dollar for dollar is the reason why it may seem like the government has no money.

            But lets flip that for a second. Say all the government’s bills were paid off, all its debts was paid off (and please let not go off and talk about debt I am only bringing it up to make a point) and the government ran an actual surplus and it ran one for a couple of years, how would that be handled or reported. Would a surplus actually be reported, would the governments accounts still be $0 because the money is being destroyed and how would we even know or would we know….. or would they have a positive balance, would they then actually have any money??

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    1. The first part of the quote is an important qualifier “Since the government has been running deficits….”

      In any case if your implying that I think the government (here I mean treasury) has money in the sense that it has a “savings” account as you or I would have a savings account, then no it does not and your right on that account.

      Even if the government did run surpluses for various reasons it probably would not maintain a savings account or “hold” dollars.. although I think Al Gore proposed something like that regarding social security and his lock box when surpluses where forecast-ed for many years out in 2000 in any case with the deficits it has not been an issue.

      However even though the government doesn’t “hold” dollars it still receives dollars and it accounts are more like yours/our checking accounts except as you correctly state, the payments cannot bounce…unless someone in the government tried to make a payment of some ridiculous amount say 900 trillion, and the government does not need to “have money in its account’ first before it can spend again unlike you or I.

      On this I totally agree.

      So as you ask if the government has no money how does it pay its bills??

      The answer is pretty obvious it receives revenue from taxes and when it runs deficits because of law or how the system is set up it receives money when it borrows or issues treasury notes.

      I also agree with your statements that the govement does not need to tax in order to spend, it could reduce taxes to $0 and still spend or it does not need to borrow (it could change the laws) or that could just issue money directly through spending and that it cannot run out of dollars (technically it cannot run out of dollars but it could run out when inflation kicked in and if people no longer accepted them but that is another issue..).

      I agree with this…this is how the government finances work and really you cannot argue with it.

      However the idea that the government does use revenues from taxing and borrowing it just not how it works. There is just no proof otherwise the only way you could argue it is by using semantics or by trying to weave together a narrative that just does not fit!!

      So let me ask you a question I asked above what if we ran a surplus for more than a year or so?? What if the treasury paid off their debts and the politicians did not want to give out tax breaks so the net would at least be $0, what if they actually ran a real surplus. Lets put aside what we think might happen economically ie..if we would have a recession or if the gap between rich and poor would grow etc… what would actually happen, would those dollars be “destroyed” as you describe and would the governments accounts read $0, even though there was a surplus or would a surplus even be recorded…what would happen….would the government now have “savings” and actually have dollars??

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        1. Sorry I’m late getting to this but it made me want to inquire a bit also.

          True, a surplus sucks. What I think smerls is trying to say is money (the surplus) actually does exist for that particular moment and is not destroyed and therefore could be “spent.” So he is implying (I think) the next step is when bills have to be paid, does the existing surplus get touched (deducted) or is it completely bypassed in favor of instructions sent to banks and nothing happens to the surplus?

          I may be putting words in his mouth but that would at least be my question for clarifying what the accounting process is.

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  4. I’ll take the blame for this meaningless argument. Never has so much be discussed so passionately about so little.

    I. The federal deficit is the amount collected in taxes, less the amount spent. The calculation of the deficit connects income with outgo.

    Looked at that way — as income minus outgo — one might be tempted to say income helps fund spending.

    II. Yet, the fact remains, even if there were no income at all, spending could continue at the same pace. Income has no effect on spending.

    Looked at that way, there is no connection between income and spending, which means income literally disappears and spending literally is funded out of thin air.

    Mathematically, there is no difference.

    So why have I been saying that taxes are destroyed (Version II)?

    Because Version I leads to the beliefs that federal financing is like personal financing, and “we are broke” (per Rep. Boehner), and the deficit is too big and the federal debt is too big, and all the other nonsense versions of the Big Lie.

    Knowledgeable people know that U.S. dollars are nothing more than numbers in balance sheets, and the government has the unlimited ability to change those balance sheets at will.

    The government never unintentionally can run short of dollars.

    Spending is based on Congressional allocations, and Congress never consults the Treasury to learn whether there are “enough” dollars available. There always are “enough,” no matter how high the deficit.

    That being the case, what happens to tax dollars?

    After one answers that, one then can answer, How many angels can dance on the head of a pin?”

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    1. Really simple to grasp. And no wonder financial economics is so complex. Those who benefit from the jargon want to keep it that way lest we the people catch on to their game and call their bluff. Game over. The idea of money has no scientific backing; strictly a legal game/procedure being pulled over our eyes, made to appear real and ultimately enforced by guns and police.

      BTW, angels, unlike the head of a pin, are not real so an infinite number can be assigned to occupy any space, and congress can make any payment with angel-money.

      Like

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