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Bernie Sanders’ comments on the Panama Papers and the Panama Free Trade Agreement, were a simultaneous combination of truth and falsehood. Can you spot the differences?
“We now know, as a result of the ‘Panama Papers’ released by an international consortium of investigative journalists, that more than 214,000 entities throughout the world have been using a law firm in Panama to avoid paying taxes.
“At a time of massive income and wealth inequality in the United States and around the world, the wealthiest people and largest corporations must start paying their fair share of taxes. Children should not go hungry while billionaires use offshore tax havens to avoid paying their fair share of taxes.
“The Panama Free Trade Agreement put a stamp of approval on Panama, a world leader when it comes to allowing the wealthy and the powerful to avoid taxes.
“I was opposed to the Panama Free Trade Agreement from day one. I predicted that the passage of this disastrous trade deal would make it easier, not harder, for the wealthy and large corporations to evade taxes by sheltering billions of dollars offshore.
I wish I had been proven wrong about this, but it has now come to light that the extent of Panama’s tax avoidance scams is even worse than I had feared.
“My opponent, on the other hand, opposed this trade agreement when she was running against Barack Obama for president in 2008. But when it really mattered she quickly reversed course and helped push the Panama Free Trade Agreement through Congress as Secretary of State. The results have been a disaster.
“The American people are sick and tired of establishment politicians who say one thing during a campaign and do the exact opposite the day after the election.
“It is time for real change. As president, I will use my authority to terminate the Panama Free Trade Agreement within six months.
My administration will conduct an immediate investigation into U.S. banks, corporations and wealthy individuals who have been stashing their cash in Panama to avoid taxes. If any of them have violated U.S. law, my administration will prosecute them to the fullest extent of the law.”
Sanders is correct about the “massive income and wealth inequality.” That is the single biggest economic problem facing America and the world.
He is wrong about wanting the rich to pay their “fair share of taxes.” There is no “fair share of taxes, simply because there neither are, nor ever can be, fair taxes. (See: Which Taxes Are Fairest? Which Taxes are Least Fair?)
Since it is functionally impossible for taxes to be fair, it is equally impossible for shares of taxes to be fair.
However, allowing the wealthy to avoid taxes, while less wealthy do not have these exits, is manifestly unfair, and not just unfair, but bad economics.
Our economy relies upon the great mass of people (“the 99%”) having sufficient spending and saving dollars, and when disproportionate dollars are taken away by the federal government, the economy suffers.
Sanders is speaking in sound bites, which by necessity, ignore the true complexity of taxation.
For example, state and local taxes are economically neutral; the dollars do not leave the money supply, but rather are deposited in banks and later recirculated.
By contrast, federal taxes are economically harmful in that all dollars sent to the Federal government disappear from the money supply. They neither are deposited nor recirculated. The federal government creates brand new dollars, whenever it spends.
Because all federal taxation removes dollars from the economy, it has a negative effect on economic growth. This is true for federal taxation of the rich, the middle, the poor and businesses.
Taxing businesses, i.e. removing dollars from businesses, when one wishes to increase the health and growth of businesses is economically non-sensical. Dollars taken from businesses cannot be used to pay salaries, to pay suppliers or to reinvest for growth.
Taxing individual consumers, when one wishes to grow the demand and purchasing power in the economy, is equally nonsensical. You cannot spend, save or invest the tax dollars taken from you.
The only positive effect of federal taxation would occur when the rich are taxed as part of a larger program to reduce the Gap between the rich and the rest (See: #8 in the Ten Steps to Prosperity — below).
In summary, the goal should not be to collect more federal taxes. Businesses and the 99% should not pay federal taxes at all. The federal government, being Monetarily Sovereign, neither needs nor uses tax dollars.
The goal should be to grow the economy while narrowing the Gap between the rich and the rest.
The problem is not with free trade agreements, per se. Making trade easier should help both parties. The devil is in the details.
Any agreement, no matter how seemingly benign, will affect individuals differently. Jobs will be gained; other jobs will be lost. Some companies will prosper; others will suffer. Some people will benefit from lower prices; some business will benefit from higher prices.
The measure of any trade agreement is how it affects each nation, overall.
For example, our trade with China has cost American jobs for the few and lowered prices for the many. On balance, it probably is beneficial, especially if duties (which go to the federal government and disappear from the economy) have been lowered.
Sanders knows all this, but undoubtedly he believes he cannot explain it, especially not in sound bites to an audience that is ignorant of economics.
So he makes it a “tax fairness” issue, with trade agreements as the bogeymen.
Some truth mixed with some lies may be the best we can get from a politician.
At least it’s not all lies.
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 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 grow the economy, and narrow the income/wealth/power Gap between the rich and you.
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
THE RECESSION CLOCK
Recessions begin an average of 2 years after the blue line first dips below zero. A common phenomenon is for the line briefly to dip below zero, then rise above zero, before falling dramatically below zero. There was a brief dip below zero in 2015, followed by another dip – the familiar pre-recession pattern.
Recessions are cured by a rising red line.
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.
•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..
•No nation can tax itself into prosperity, nor grow without money growth.
•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports)
•Deficit spending grows the supply of money
•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control.
•The limit to non-federal deficit spending is the ability to borrow.
•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..