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As always, the lying Chicago Tribune wants you to believe the United States government can run short of its own sovereign currency.
The purpose: To take away your Social Security and Medicare benefits that the richest .1% do not want you to have.
Welcome back, balanced budget amendment
The Republican Congress should launch this ‘desperate but necessary device’
Chicago Tribune, 12/12/16
In 1994, Congress was considering a constitutional amendment to require the federal budget to be balanced. A stubborn habit of running deficits had gotten out of control in the previous decade and a half, quadrupling the national debt.
“The balanced-budget amendment is a desperate but necessary device for restoring discipline to the management of the nation’s treasury by Congress and the president,” this page said then.
It was a lie then, and it is a lie now. The federal deficit is the federal government’s method for growing the economy by adding dollars to the money supply.
Larger economies have more money than do smaller economies. Therefore, to go from smaller to larger an economy must have more money. Federal deficit spending is how the government accomplishes that goal.
The amendment, sponsored by Illinois’ own Democratic Sen. Paul Simon, passed the House but fell one vote short of the necessary two-thirds majority in the Senate. Ensuing developments only highlight how useful the rule could have been.
After a brief spell of budget surpluses during the Clinton administration, deficits came roaring back, topping out at $1.55 trillion in 2009, during the Great Recession.
What the lying Chicago Tribune fails to mention is:
1. Clinton’s surpluses caused the recession of 2001.
2. That recession was cured by the reduction in the surplus during 2001.
3. Almost every recession has been caused by reduced deficit growth
4. Almost every recession has been cured by increased deficit growth.
5. The federal government has not and cannot run short of dollars.
6. There is not mechanism by which removing money from an enconomy can help that economy grow. Federal surpluses remove dollars from the economy.
One might think that a Balanced Budget Amendment would merely stagnate the economy, because it would freeze the amount of federal dollars entering the economy. However, even the smallest amount of inflation would deflate the economy, as the value of the money supply would shrink.
Clinton’s surpluses began in the 1st quarter of 1998 and reversed in the 2nd quarter of 2001 when a recession began.
The total government debt has tripled since 2000, and projections say it will expand at an unhealthy pace in the coming decade.
The lying Chicago Tribune, either by ignorance or intent, switches from “deficits” to “debt.” The two are substantially different.
Deficits are the differences between taxes and spending. Debts are deposits in T-security accounts at the Federal Reserve Bank.
It would be possible for the government to run trillions of dollars in deficits, while accepting zero deposits in T-security accounts — and vice versa.
And what is it that makes the pace of deposits in those T-security accounts “unhealthy”? The Tribune never says, nor does any other debt fear-mongering site ever say.
They all feel it’s enough to claim the deficit and debt are “too high,” without providing any substantiation.
On the contrary, there is massive evidence that deficits stimulate economic growth, and insufficient deficit growth causes recessions and depressions.
It doesn’t even embarrass the lying Chicago Tribune that the federal “debt” has tripled in 16 years and we are in a period of economic growth.
(Actually, the federal debt has, since 2000, gone from about $3.7 trillion to $13.9 trillion — almost quadrupled, and yes, the economy is growing.)
It is a symptom of serial liars, that they are not embarrassed by the revelation of their lies (See: Donald Trump).
But there is one glimmer of hope: the revival of the balanced budget amendment.
With Republicans in control of 33 legislatures after this year’s election, the chances of ratification by the states are good. And 28 states have already gone so far as to call for a constitutional convention to consider such a measure.
The prospect of a convention that could stray into further amending the Constitution may be enough to spur Congress to approve the amendment and send it to the states, with 38 required for ratification.
The last time such a proposal came to a vote, in 2011, it fell well short in the House, partly because supporters of the idea couldn’t agree on the particulars — notably whether to include a spending limit of 18 percent of GDP.
The version introduced last year by Rep. Bob Goodlatte, the Republican chairman of the House Judiciary Committee, set the spending ceiling at 20 percent of GDP.
First, the lying Chicago Tribune said it was a deficit problem. Then it became a debt problem. Now it’s a spending problem. Make up your mind, Tribune.
“Deficit,” “debt,” and “spending” are strikingly different, but when one has zero facts one uses zero facts. So the Tribune changes subjects from paragraph to paragraph in its efforts to deceive you.
Where did 20% come from? What is the evidence that federal spending should be limited to 20% of GDP?
There is none, but that doesn’t bother the lying Chicago Tribune.
But there hasn’t been much appetite in Washington for tough fiscal decisions, so the details didn’t much matter.
Apparently, the details don’t much matter to the lying Chicago Tribune, either.
Each version contains an escape hatch for emergencies like wars and recessions, allowing Congress to run a deficit by a three-fifths vote of each house. The spending limit, if included, could be waived by a two-thirds vote of each.
Wait a minute! An “escape hatch” to increase spending (or deficits or debt) in case of recessions?? If spending (or deficits or debt) are bad for the economy, why would anyone want to institute these supposedly harmful actions in the case of a recession?
Wouldn’t a recession be the last time one would want to introduce an “unhealthy” action?
Apparently, the lying Tribune has forgotten it’s premise that spending (or deficits or debt) are harmful. There’s an old saying, “If you lie, you need a good memory.”
In practice, all this means a constitutional amendment is no guarantee of fiscal responsibility. With enough members who are averse to restraining spending or raising taxes, the limit could be breached in good times as well as bad.
State experience indicates that ingenious lawmakers can find ways around the balanced budget requirement that exists in 49 states, including ours. Illinoisans know all too well that the mandate is hardly airtight: Next year, the state government, already awash in unpaid bills, is expected to go into the red once again, possibly by another $5 billion.
And now, the lying Chicago Tribune sneaks from Monetary Sovereignty to monetary non-sovereignty. The federal government is Monetarily Sovereign, meaning it never can run short of its own sovereign currency the dollar.
Illinois is monetarily non-sovereign, meaning it has no sovereign currency. It uses the dollar, over which it is not sovereign, so it can run short of dollars.
Not to differentiate between the two either is ignorance on the level of abject stupidity, or it is lying on the level of abject enormity. I suggest it is the latter.
Still, the federal experience shows that without such a requirement, lawmakers have an even easier time spending beyond the government’s means. The fact that a constitutional amendment could be evaded is no reason to reject it. A determined thief can get into a locked car by smashing a window, but most people lock their cars anyway.
The lying continues and continues. The U.S. federal government has no “means.” It can pay any invoice of any amount at any time. All through wars, recessions, depressions, inflations and stagflations, the U.S. government never has bounced a check.
The better course would be for Congress and the president simply to summon the will to keep outlays at a level not to exceed income, year after year. As we learned in the 1990s, that option is not outside the realm of possibility. But until such time as our leaders volunteer to abandon their irresponsible ways, a balanced budget amendment offers a good way to make them.
In the event the federal government and the states are deceitful enough to pass a “Balanced Budget Amendment,” we absolutely, positively will have a depression that will make the Great Depression look like Disneyland.
If such a ridiculous amendment actually looks like it might pass, here is my advice for you:
Don’t buy stocks. Don’t buy corporate bonds. Don’t buy gold or silver. Don’t switch to euros or yen or to any other foreign currency. Don’t move to Canada or to Switzerland.
Do this: Sell all your assets and deposit every dollar into U.S. T-bond accounts at the Federal Reserve Bank. Those will be the only investments in the world that reliably will gain value.
Why? Because the U.S. government always pays its bills, no matter how high they may be, and no matter what the lying Chicago Tribune might imply.
By the way, don’t give this advice to the lying Chicago Tribune. Let them go under. Serve them right.
Sadly, their employees would suffer more than the rich owners. It is ever thus.
Rodger Malcolm Mitchell
The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.