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●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The more federal budgets are cut and taxes increased, the weaker an economy becomes. .
●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.
●Austerity is the government’s method for widening the gap between rich and poor.
●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.
●Everything in economics devolves to motive, and the motive is the Gap.
According to the Reason.com website:
Matt Welch is editor in chief of Reason, the libertarian magazine of “Free Minds and Free Markets.” He is co-author, along with Nick Gillespie, of the 2011 book The Declaration of Independents: How Libertarian Politics Can Fix What’s Wrong With America, which Tyler Cowen called “the up-to-date statement of libertarianism.” Welch also wrote the 2007 book McCain: The Myth of a Maverick.
Recently he wrote and published: If We Only Spent All the Money, Then Everyone Would Be Prosperous!.
In attempting to prove that federal government spending is counter productive (the usual libertarian dogma), he asked four questions (probably assuming they could not be answered).
But we answered:
1) Why were states not measurably more prosperous after increasing government spending by more than 80 percent in real terms between 2003 and 2007?
Our Answer: The states, unlike the federal government, are monetarily non-sovereign. Their spending is funded by taxes and borrowing. To increase spending, they must increase taxes or borrowing — both of which ultimately punish local taxpayers.
By contrast, the federal government is Monetarily Sovereign. Federal spending is not funded by taxes or by borrowing. The federal government creates dollars ad hoc, by paying bills, which is why federal spending is stimulative while state spending is not.
2) Between the time of Bill Clinton’s last submitted budget of $1.8 trillion, and Barack Obama’s first submitted budget of $3.6 trillion, did the average American become more or less prosperous?
Our Answer: While the rich get richer, the “average” American has not benefited sufficiently from GDP growth. Said another way, the Gap between the rich and the rest has widened.
There are many reasons for this, having to do with tax laws, labor supply and mostly the political power of the rich. Just one example: Consider FICA’s huge negative effect on “average” people, and the minuscule effect on the rich.
3) The United States after World War II, Canada in the 1990s, and Australia in the 1980s all became significantly more prosperous—despite ample warnings to the contrary—after cutting, not increasing, government spending. Wha’ happen?
Our Answer: Depends on what you mean by “significantly more prosperous.” GDP has risen in a relatively smooth line since 1945, with the exception of recessions.
Every depression in U.S. history, and almost every recession, has immediately been preceded by reductions in deficit growth and cured by increases in deficit growth. [See Items #3 and #4 at: Summary ]
4) Is there a ceiling on what percentage of GDP the government should account for, and if so why should there be one, and where should it be?
Our Answer: No, there is no ceiling and no reason for a ceiling.
If ever you’d like to discuss these facts, please feel free to contact me.
Rodger Malcolm Mitchell
Sadly, the libertarians never have acknowledged the basic facts of Monetary Sovereignty. To show how this ignorance continues through the years, here is a Reason.com article from May 2009
“Gov. Sanford says that he does not want to take the money, the federal stimulus package money,” (Gov.) Schwarzenegger told ABC’s This Week on February 21, 2009. “And I want to say to him: I’ll take it. I take it because we in California…need it.”
But does California, or any other state, really “need” federal money during this economic downturn? Only if you accept the premise that state budgets should roughly double every decade.
No, Mr. Welch, the states need federal money because they are monetarily non-sovereign. They do not have the federal government’s unlimited ability to create their sovereign currency, because they don’t have a sovereign currency.
Unlike a Monetarily Sovereign government, which is sovereign over its currency, a monetarily non-sovereign entity needs income to support spending. That is why long term survival requires a positive balance of payments for states, counties and cities, but not for the federal government.
It remains a mystery why educated people continually state their belief that federal finances are like state and local (and personal) finances. The evidence is right in front of their noses.
You and I, like state and local governments and businesses, are monetarily non-sovereign. All of us, in order to pay our bills long-term, require our total income to equal or exceed our total outgo. The federal government neither needs nor uses income to pay its bills.
In 40 of the past 45 years, the federal government has run deficits. And the five non-deficit years saw only modest surpluses. Today, federal spending has exceeded taxes by about $18 trillion (depending on what’s counted). Yet, the federal government has no difficulty whatsoever paying its bills — nor ever will.
In short, to buttress their false logic, libertarians and others ignorant of economic reality, repeatedly equate monetarily non-sovereign governments with Monetarily Sovereign governments.
We very seriously wonder: What is there about Libertarians that makes them incapable of learning economics?
Rodger Malcolm Mitchell
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. (Refer to this.)
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.
1. A growing economy requires a growing supply of dollars (GDP=Federal Spending + Non-federal Spending + Net Exports)
2. All deficit spending grows the supply of dollars
3. The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
4. The limit to non-federal deficit spending is the ability to borrow.
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 growth lines rise. Increasing federal deficit growth (aka “stimulus”) is necessary for long-term economic growth.