The most economically destructive question: “Who will pay for it?”

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

Mitchell’s laws:
•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money.
•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.

•The single most important problem in economics is the Gap between rich and the rest..
•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.
•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..


Just because its title is “Fact Check,” doesn’t mean it actually is checking facts

AP FACT CHECK: Glossed-over realities in Democratic debate

A look at some of the statements Saturday night and how they compare with the facts:

CLINTON on rising premiums and out-of-pocket costs for the privately insured after enactment of Obama’s health care law: “I would certainly build on the successes of the Affordable Care Act and work to fix some of the glitches.”

THE FACTS: Obama’s law was mainly about expanding coverage for the uninsured, and even former officials of his administration say major work still has to be done on cost control. In other words, rising costs are more than “glitches.”

One of the health care law’s main brakes on costs — a tax on high-value workplace coverage — has been put on hold by the new federal budget deal. Clinton had called for complete repeal of that levy, known as the Cadillac tax. Many economists believe the tax would help keep costs in check by forcing people into leaner insurance plans.

The real facts: “Cost control,” as it currently is used, has little to do with efficiency, productivity, better service, better medical outcome or any other positive feature.

Rather, “cost control” is a euphemism for Make the public pay more and the federal government pay less.

The federal government has the unlimited ability to pay, and its payments enrich the economy — two facts never mentioned.

SANDERS on his proposed single-payer health care system: “The average middle-class family will be saving thousands of dollars a year.”

Sanders says his plan for a government-run health care system along the lines of Canada’s and Western Europe’s would save money for families and taxpayers.

But such a major transition would involve winners and losers, as well as new taxes in place of premiums.

When the nonpartisan Congressional Budget Office looked at the concept back in the early 1990s, it concluded that a single-payer system had the potential to save money but that wasn’t guaranteed.

Moreover, individuals would have less freedom to choose their insurance packages, a trade-off that not everyone would accept.

The real facts: A true single payer system need not involve any new taxes. Our Monetarily Sovereign government does not need to levy taxes to fund payment.

Federal taxes do not fund federal spending. That is the essence of Monetary Sovereignty.

The purpose of a single-payer system is not to save the government money; the purpose is to save the people money and to provide health care for all.

Trying to save the government money not only is negative for the economy, but leads to a complex, convoluted, Rube Goldbergian system like Obamacare.

Finally, with single payer, individuals do not need “freedom to choose their insurance packages.” The single payer pays for hospitals, doctors and procedures, so no so-called “freedom” is necessary.

SANDERS: “The cost of college education is escalating a lot faster than the cost of inflation. There are a lot of factors involved in that. And that is that we have some colleges and universities that are spending a huge amount of money on fancy dormitories and on giant football stadiums.”

CLINTON: “States have been disinvesting in higher education … So states over a period of decades have put their money elsewhere; into prisons, into highways, into things other than higher education.”

THE FACTS: Clinton comes closest to diagnosing the problem accurately. College expenses are unsustainably high, but luxurious dorms aren’t the big driver that Sanders portrays. Public universities are charging more because they receive less in state government support.

Demos, a left-leaning think tank, said in a May study that the decline in state funding accounted for 79 percent of tuition hikes between 2001 and 2011. Just 6 percent was due to construction costs.

True: College costs have become completely unaffordable for many families, and a life-style sacrifice for most families. And the states are struggling to pay their bills.

So, here is the problem:

Sanders would make up that lost government money by providing free tuition, paid for with a tax on financial transactions.

Clinton would offer federal dollars to encourage states to do more and keep students from having to borrow.

It’s unclear how either plan would control colleges’ costs, though.

In short, both candidates and indeed, both political parties, want to make college affordability an obligation of the private, monetarily non-sovereign sector (states and colleges), while saving dollars for the Monetarily Sovereign entity (the federal government), which has no need to save money.

In government speak, “saving” means increased taxes or cutting benefits to the economy, so long as the federal government spends less.

SANDERS: “Middle class in this country for the last 40 years has been disappearing.”

THE FACTS: It’s no secret that the middle class is struggling. The costs of college, health care and housing continue to rise, while wages have barely budged for two decades.

The Pew Research Center reported earlier this month that the majority of Americans are no longer “middle income.”

“The closer look at the shift out of the middle reveals that a deeper polarization is under way in the American economy,” Pew concluded.

Every new benefit to the economy is required to answer the question, “Who will pay for it?” meaning that all benefits to the people must be paid for by the people, i.e. there would be no federal benefits.

When the middle classes and the poor need help, then the middle classes and the poor will have to pay for that help. Don’t ask the federal government to do anything.

Convincing the public to save money for the federal government (which needs no financial protection), rather than to protect the private sector (which is desperate for financial help), has been the great triumph of the rich over the rest — the great triumph of senselessness over logic — the great triumph of fiction over fact:

The most economically destructive question: “Who will pay for it?”

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 Click here
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.


Recessions come only after the blue line drops below zero.

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.


11 thoughts on “The most economically destructive question: “Who will pay for it?”

  1. Single-payer can only work with Monetarily Sovereign entities like the U.S. government. It cannot work at the state level, although some states have tried.

    Vermont passed legislation in 2011 outlining how its single-payer system would work. However Senator Bernie Sanders and Vermont governor Peter Shumlin (Democrat) could never arrange the money to implement it. On 14 Dec 2014, Governor Shumlin gave up, and dropped his pursuit of single payer.

    In November 2016, Colorado will have a state referendum on single-payer (“ColoradoCare”). It too will fail, since (at the state level) single-payer can only be paid for with tax increases and / or with cuts in social services. (Other than taxes on marijuana or tobacco, Colorado voters haven’t passed a statewide tax hike for more than two decades.)

    Single-payer can only work at the federal level where dollars are limitless. Unfortunately most Americans refuse to understand this, because they like to suffer. They dismiss you as a fool if you try to explain the facts to them. They say that austerity and suffering are our only defense against hyper-inflation. They say that without the poverty caused by austerity, we will have the poverty suffered by Greece.

    Of course, there are limitless dollars for wars and for Wall Street bailouts. But this makes no difference, since Americans support the Big Lie even if it kills them. Literally. They particularly love to condemn any positive suggestion by smugly asking, “Who will pay for it?” If you note that dollars are limitless, they evoke the hyper-inflation bogeyman. If you note that the USA is the only developed nation without single-payer, they evoke the “national debt crisis” bogeyman. Anything to prolong their suffering.

    It’s all a question of habits and attitudes.


  2. How do you become a professor of economics at Harvard? You practice the art of pretending to care about inequality while you work to increase it.

    For example, N. Gregory Mankiw is a professor of economics at Harvard.

    Quoting him…

    “Senator Bernie Sanders advocates free tuition at public colleges and universities. The main problem with this idea is that there is no way to make education free. The Sanders plan shifts the cost from the student to the taxpayer. In light of the looming unfunded liabilities already on the government’s books from existing entitlement programs, mainly for older adults, creating a new one for the young seems problematic.”

    And the peasants believe him.

    Rodger asks, “If K-12 is free, then why not college?” N. Gregory Mankiw responds that it is right and proper to charge students with extremely high tuitions, since a college education results in a better-paying job.

    N. Gregory Mankiw is a “New Keynesian” economist — i.e. an elitist. Just as “New Democrats” are right-wing militants who subvert regular Democrats, so “New Keynesians” are right-wing militants who subvert regular Keynesians.

    “New Keynesians” are anti-Keynes, since they favor austerity. They pretend to care about inequality, but their actual mission is to increase inequality by lying and obfuscating, and by confusing people. An example is Paul Krugman, who absurdly calls himself a “liberal.” Another example is Harvard professor Carmen Reinhart, who is a fanatical supporter austerity and inequality.

    (Reinhart, you may recall, published an infamous paper titled “Growth in a Time of Debt,” which championed austerity, and which was cited by every right-wing axxhole from Paul Ryan to EU commissioner Olli Rehn. The paper was later exposed as being nothing more than faked statistics and mathematical errors.)

    Other examples include Nouriel Roubini, Jason Furman, and J. Bradford DeLong.

    Robert J. Gordon, Stephany Griffith-Jones, David Romer, Gerard Lyons — these and other “New Keynesians” all support (and depend upon) the Big Lie.


  3. Hi Rodger,

    I see you have joined in the conversation over at NC regarding Prof. Wray’s, sort of, abrasive dismissal of Positive Money’ debt-free proposal.

    Is it true that banks create money by granting a loan and that 97% of Britain’s money supply is created this way?


      1. Thank you Rodger. I’m quite interested in this subject but largely ignorant on the mechanism of bank lending so please be patient with my queries and curiosities here.

        1. How do private commercial banks fund the loans that they approve? Are they sourcing it from a pool which include depositors’ money, capital stock, investment earnings, etc. as insisted by some bankers?

        2. Or is that just a charade, an accounting gimmick to satisfy the double entry bookkeeping; and that private banks, like the federal gov’t, also create money out of thin air by giving out loans?

        3. What do you think of Ben Dyson’s Positive Money movement in the UK?


  4. Zen:

    Private banks create money by lending. They increase the numbers in borrowers’ checking accounts. This increases the money supply.

    They do not lend “from” any funds. They do not take dollars from one account and add them to another.

    The money banks create is supported by the full faith and credit of the bank, as well as the federal government.

    As for “Positive Money,” it displays a lack of understanding about what money actually is.

    All money is a form of debt. And all financial debt is money. So to try to prevent banks from creating money is functionally impossible.

    If you were to lend your child $1,000 and receive a note in return, your child would have the 1,000 you lent him and you would have $1,000 in the form of the note.

    So, that lending transaction would have created $1,000.

    Since all lending supported by a note creates money, it is functionally impossible to lend without creating money. Unless banks stop lending, they always will create money.

    So “Positive Money” makes no sense at all.


    1. “Unless banks stop lending, they always will create money.”

      Central to PM’s proposal, the way I understand it, is to take that money creating ability away from private for-profit banks and transfer it to a publicly accountable gov’t entity. Spending money into existence vs. lending money into existence.

      What possible problems do you see with this proposal?


      1. Again, unless banks stop lending, they always will create money.

        There is no way for banks, or anyone else to lend, without creating money. The very act of lending creates money.

        So, unless the PM stops banks from lending, they cannot stop banks from creating money. Lending creates money.


        1. Yes, I think that is basically what PM wanted to do – take the allocated power to create money away from private banks.

          And it jibes perfectly well with your #9 proposal on TSTP – federal ownership of all banks.


          1. That would require banks never to lend, not even for mortgages.

            I do not suggest such a thing.

            I suggest that all banks be owned and operated by the federal government, which would take the profit motive out of the equation.


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