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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.
There is no greater disappointment than from those you love.
I love MMT (Modern Monetary Theory). It is the only, absolutely factual, description of federal financing, i.e., Monetary Sovereignty.
So it is particularly painful to read articles in which MMTers depart from fact and begin to theorize, falsely. For example, their “Jobs Guarantee” (JG), formerly named “Employer of Last Resort (ELR),” demonstrates how otherwise clear-thinking people can go wrong.
The name change only hints at the confusion. (At first, the federal government was the ELR. When that idea proved flawed, they thought up a fix, in which private industry would be the ELR, and changed the name to JG.)
I’ve read many descriptions of JG, all different (Ask any 10 MMTers, “Exactly how does JG work?” and you’ll get eleven different answers.)
Perhaps it is the simplicity of the words “Jobs Guarantee” that MMTers find so enticing. Hey, “if people lack jobs, just give ’em jobs.”
But to be truthful, they should call it the “Low-Pay; Crappy-Jobs Guarantee,” for if you dig under the surface, you learn that by necessity, the jobs must be at or below the lowest legal pay, and almost surely will be the dregs of jobs.
MacDonald’s would be thrilled.
Then there is the ongoing MMT theory that federal taxes are necessary to give value to dollars. Once, I mentioned to Professor Randy Wray that not only was there no proof than any taxes were necessary for that purpose, but there already were plenty of local taxes. No federal taxes needed.
At the time he agreed. But since then I’ve not seen a correction to the “federal-taxes-are-necessary” theory. Perhaps I missed it.
And now the latest, painful disappointment comes from that solid MMTer, Yves Smith (actually Susan Webber), who authors the excellent blog, Naked Capitalism, where she published “Removing the Social Security Tax Cap Would Benefit Most Workers”.
Lord save the middle class folks from well-meaning, but economically ignorant, souls who wish to help them. Susan writes:
As Nicole Woo discusses in this Real News Network interview, one simple fix, that of eliminating the cap on who is subject to the tax, would solve most of the gap that is anticipated in long-term projections.
The Social Security tax, as now constituted, is regressive and thus promotes inequality, so lifting the cap also moves the tax system toward being more progressive.
That’s before we get to the MMT issue that “taxing” to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.
Eliminating the cap would “solve” virtually none of the gap (i.e. the gap between taxes collected and benefits paid), because the wealthiest of us collect very little in salaries. And for the same reason, lifting the cap would give only the illusion of progressivity.
And anyway, that gap does not need to be “solved.” Only problems need solutions, and that so-called gap is not a problem.
Susan even says it: “. . . taxing to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.”
She says it, then completely forgets is, because the rest of the article pretends that FICA funds Social Security.
. . . with more and more promised pensions being slashed, and investment returns flagging thanks to QE and ZIRP, the notion that ordinary people can save enough for their retirement is a chimera.
Thus preserving and strengthening Social Security is more important than ever.
Yes, QE and ZIRP have been an economic negative, but with the stock market up about 15% annually for the past 5 years (plus dividends), investment returns are far from “flagging.”
Her point, that Social Security needs to be strengthened is true, but raising taxes won’t strengthen Social Security one iota. That kind of belief has done nothing but punish the middle class.
The rest of the article contains Jessica Desvarieux of The Real News Network interviewing Nicole Woo, the director of domestic policy at the Center for Economic and Policy Research in Washington, D.C. “Her new paper is titled Who Would Pay More If the Social Security Payroll Tax Cap Were Raised or Scrapped?”
DESVARIEUX: So, Nicole, who would actually pay more if this tax cap were raised or scrapped?
WOO: . . . the top 6 percent. So the people who are at the very top of the income scale are the only folks who would have to pay more if this payroll tax cap were raised or eliminated.
DESVARIEUX: And how high would that payroll tax cap have to be raised?
WOO: There are some proposals to eventually slowly phase the cap out entirely. And that would mean that the wealthiest people among us would pay the same rate as the rest of us, which seems kind of fair.
If Congress were to pass a bill like that, the Social Security shortfall that we’ve seen in the future would be reduced by about 70 to 80 percent.
A pants-on-fire lie. Even if Congress raised FICA to 100% of all salaries, the wealthiest among us never would pay the same rate as the rest of us — and Woo knows it. The highest income people have only a tiny fraction of their incomes in salaries.
Many of the upper 1% receive $0 in salary.
And there is no Social Security shortfall. Repeat, THERE IS NO SOCIAL SECURITY SHORTFALL. An honest and knowledgeable interviewer would have screamed “Bullsh*t Nicole. FICA does not pay for Social Security”
DESVARIEUX: But should we really be concerned about Social Security, since it’s solvent and currently has close to $3 trillion in its trust fund?
More bullsh*t. There is no trust fund and there is no money in that non-existent trust fund. It’s an accounting fiction, and the federal government controls the accounting.
WOO: Right now the Social Security trust fund does have a lot of money in it. And that’s because back in the ’80s Congress . . . decided to sort of pre-fund Social Security.
So since 1983, workers, American workers, have been putting more into Social Security than has been coming out. It’s their money that’s in the trust fund.
More bullsh*t. FICA dollars, like all federal taxes, disappear from the economy. When the government wishes to spend, it creates brand new dollars, ad hoc.
WOO: What has happened since the ’80s is actually inequality has increased. So more and more of the wages in this country are above the payroll tax cap–they’re above what’s right now $118,500.
That cap has been moving up with inflation every year. But as the income gaps have gotten wider, more and more of the wealthy’s income has been shielded, which is part of why the trust fund isn’t quite as big as we needed it to be.
Social Security will be fine until about 2033. After that point, Social Security will be able to pay about three quarters of the benefits promised, and nobody wants to see a cut of 25 percent. But that’s still significant money.
More scare-mongering bullsh*t. It means, “If you suckers don’t pay more FICA the federal government will run short of dollars to pay Social Security benefits.”
Do you believe the U.S. federal government, which creates from thin air, millions of dollars every day, somehow can run short of dollars? It’s part of the BIG LIE, funded by the upper .1%.
DESVARIEUX: So, Nicole, are you saying that if we were to do away with this cap, then we wouldn’t run into that issue?
WOO: Some of the bills out there that were in the last Congress would slowly eliminate the cap entirely, and that would take care of 70 to 80 percent of the shortfall. [I.e. the non-existent shortfall]
There are some other bills that raise the cap, like, from 118,000 to 250,000 or to 400,000, and that would mean people would pay the payroll tax, but not on all of their income for the wealthiest,.
And, of course, those bills would take care of less of the shortfall. As people talk about ways to shore up Social Security, this is one of the most effective ways to take care of it.
Even more bullsh*t. Raising taxes does nothing to “shore up” Social Security.
Unlike the state, county and city governments, which are monetarily non-sovereign, and do use tax dollars, the federal government neither needs nor uses tax dollars for any purpose whatsoever.
Even if all federal taxes fell to $0, the federal government could continue spending, forever. (See Step #1 in the Ten Steps to Prosperity.)
And, again, it’s about fairness. It’s about making sure that all workers pay the same rate in their Social Security taxes.
What’s really depressing is not that someone like Woo, who is paid to slather the bullsh*t wide and deep, earns her ill-gotten gains.
No, what’s depressing is that someone like Susan Webber, who knows and supports the facts, chooses to provide a forum for these harmful lies.
There is no greater disappointment. This truly is painful.
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.