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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.
Regular readers of this blog might remember:
Reader Ian Winograd alerted me to the fact that Stephanie Kelton has been chosen to be Chief Economist for Senate Budget Committee. This is great news.
As many of you know, Stephanie is Chair of the Economics Department at the University of Missouri, Kansas City. UMKC is the primary hub for Modern Monetary Theory, the sister of Monetary Sovereignty.
Presumably, Stephanie will have the opportunity to insert some reality into the government’s budgeting process, although she will be constrained by politics.
I then listed some of the problems she would face, including:
Many people go to Washington, filled with knowledge and faith, but then the political birds whisper in their ears — things like “To get along, go along,” and “The people can’t handle the truth,” and “It’s not politically possible,” and the not-so-subtle threat, “You can accomplish more on the inside than on the outside.”
And soon those well-meaning people sip the political drug, and gradually lose their principles, and themselves become part of the Big Lie.
I believe Stephanie has too much courage and honesty to fall into that trap, and here comes a test of my belief in her:
The arch-enemy of truth and one of the foremost purveyors of the Big Lie, Maya MacGuineas just appeared before Stephanie’s committee.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told the Senate Budget Committee today that our long-term budget problems persist despite the recent good news on annual deficits.
To MacGuinness, a reduction in deficits (i.e. austerity, i.e. reduced income for the economy, i.e. “just-what-the-rich-want”) is good news.
Yes, to the rich, starving the economy of money is wonderful, because it punishes the poor more than the rich, thereby widening the Gap between the rich and the rest.
Testifying at the hearing, “The Better Way: Benefits of a Balanced Budget,” MacGuineas cited the advantages of taking steps to put debt on a more sustainable path, as the country’s debt-to-GDP ratio is the highest since WWII.
A “sustainable” debt is one a debtor can pay off in a timely manner. But there is no debt, of any size, the federal government could not pay off. Every debt in dollars is sustainable to the U.S. federal government.
Not only does our Monetarily Sovereign government have the unlimited ability to create its sovereign dollars, but paying off the debt requires that virtually no new dollars be created.
The so-called federal “debt” really is nothing more than the total of T-security accounts at the Federal Reserve Bank. These accounts are much like savings accounts.
How does a bank “pay off” savings accounts? It simply debits the savings accounts and credits checking accounts. No new dollars needed.
So when MacGuineas whines about federal debt “sustainability,” she is mouthing the Big Lie.
MacGuineas said, “trillion dollar deficits are projected to come back within a decade.”
Translation: The government will pump a trillion dollars worth of stimulus into the economy, every year.
And this is a bad thing??
Ideally, MacGuineas said, the country would balance the budget over the business cycle.
Translation: This is ideal for the rich — you know, the people who pay her salary. Not so good for the poor and middle, but who cares about them? Right, Maya?
“This doesn’t mean we should balance the budget every year. In fact, it makes economic sense to borrow during recessions, and save during times of higher growth.
Here, MacGuineas admits (without realizing it) that deficits grow the economy.
That being the case, why would she not want the economy to grow every year. Answer: She is paid by rich people, not to want it.
But getting to balance on average would allow us to save when the economy is strong and have the government help inject more money into the economy when it is weak.
No, federal deficit spending, which pumps dollars into the economy, allows us to save more of those dollars.
MacGuineas listed the benefits of putting the debt on a downward path relative to the economy: faster economic growth, higher wages, lower interest rates, increased flexibility to respond to crises, and declining government interest payments that would free up resources for higher priorities.
That’s a lot of BS for one short sentence:
1. First she confuses deficit reduction with debt reduction — two completely different actions. The government could eliminate all debt tomorrow while continuing to run deficits. Simply liquidate all T-security accounts and transfer the proceeds to the owners.
2. GDP = Federal Spending + Non-federal Spending + Net Exports. There is no mechanism by which removing dollars from the economy leads to “faster economic growth and higher wages.”
3. The Fed controls interest rates, and has them near zero already. Why MacGuineas wants them lower is a mystery.
4. Tying the government’s hands by forcing austerity does not provide “increased flexibility” and does not “free up resources.”
MacGuineas (pretends she) believes the government can run short of its own sovereign currency, so must husband it for emergencies, like you and I must But you and I are monetarily non-sovereign — much different from the U.S. government.
She (pretends she) has no knowledge of the differences between Monetary Sovereignty and monetary non-sovereignty. She’d be fired if she mentioned those differences.
Finally, MacGuineas warned about the danger of increasing deficits. Last year, Congress added $100 billion to the debt through 2024. Congress again 2 this year, faces demands for a highway bill, patching the Sustainable Growth Rate, and preventing sequestration. Without responsible budgeting, they could add $2 trillion above what current law allows.
Translation: Actually she didn’t warn about the danger of increasing deficits. She merely said deficits were increasing. She never explained why that was dangerous. The reason: Increased deficits pump dollars into the economy, enriching the economy and helping it grow.
“The United States is poised to take off economically. In order to do that we need to increase our competitiveness, grow our economy, and ensure the gains are spread broadly. Key to all of those things will be controlling our national debt,” she said.
And there you have the Big Lie, all tied up, nice and neat, into one sentence.
Today, I sent the following note to Stephanie Kelton, along with an attachment of MacGuineas’s posting:
Just curious about this, Stephanie. Since Maya is 100% wrong, as usual, I was wondering how your committee reacted to her comments:
MacGuineas Testifies Before Senate Budget Committee on Balanced Budget
I’ll let you know Stephanie’s response.
Rodger Malcolm Mitchell
The 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. Federally funded, 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)
Initiating The Ten Steps sequentially 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.