What will the Ten Steps to Prosperity Cost?

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It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders.

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We had begun to write a short explanation for each of the Ten Steps to Prosperity (listed below and at the end of many posts), when someone asked me, “What will the Ten Steps to Prosperity cost?”

The question seems on the surface to be reasonable, but in fact, it is nonsensical.

There are two parties involved in each Step: The private sector and the federal government. So the question should be divided into two questions:

What will be the cost to the private sector?
What will be the cost to the federal government?

If you quickly examine the Ten Steps, you find that all but one — question #8 — involve no cost to the private sector whatsoever. They all describe financial benefits only.

So, the question simplifies to: “What will be the cost to the federal government?” and that question is nonsensical, for there never can be a cost to our federal government.

I’ll explain: The U.S. federal government is Monetarily Sovereign  (See link). It creates its own sovereign currency, the dollar, by paying creditors. That is the federal government’s primary method for creating dollars.

To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.  The instructions are in the form of a check or wire. When the bank does as instructed, dollars are created.

There is no cost to the federal government for sending instructions.

You might ask, “What do we mean by ‘cost'”? Here are two examples for clarification.

Example 1: 

Let’s say you own a hundred thousand dollars in total, all which reside in your checking account. You decide to buy a car for $25K. You give the car dealer your check for $25K and he gives you the car.

Your check actually constitutes instructions to your bank to deduct $25K from your checking account and to send the instructions to the car dealer’s bank, telling that bank to increase the balance in the car dealer’s checking account.

When your bank obeys your instructions and deducts $25K from your checking account, you then own a total of $75K.

The cost to you has been twenty five thousand dollars.

Example 2:

This time you own zero dollars, but again you decide to buy that car for $25K.

You find a random scrap of paper, and on it you scribble “$25K,” and you give that scrap of paper to the car dealer.

Then — and this is the important part —  imagine the car dealer decides to accept that scrap as payment, and gives you your car. 

Further, the car dealer’s bank also accepts that scrap of paper, and credits the car dealer’s checking account.

You ended with the same amount of money with which you started. (Zero dollars). There has been no cost to you.

Example 2 represents the way the federal government pays its bills. Being Monetarily Sovereign, the federal government creates dollars, ad hoc, by paying bills. (State and local governments, you, and I, being monetarily non-sovereign, can’t do this.)

When the government pays a bill, no dollars are deducted from the total the government owns. Instead, brand new dollars are created.

The reason: Unlike you and me and every other member of the private sector, the federal government does not “own” any dollars, nor does it need to. There are many measures of our economy’s money supply — M1, M2, M3, L — and none of these includes dollars that might be owned by our federal government.

No such measure is possible or even logical for an entity that creates dollars  at will.

When you wrote $25K on that scrap of paper, and the car dealer and his bank accepted it as payment, for that moment you were Monetarily Sovereign. Just like our federal government, you had the unlimited ability to write numbers on paper, and have those numbers accepted in exchange for goods and services — in this case, a car.

Because those scraps of paper were accepted by creditors, just as dollar bills would have been, no dollars were taken from your bank, and the purchase cost you nothing.

In the previous post, we indicated that eliminating FICA would reduce tax collections by about $1.7 trillion in one year. But, this would not cost the federal government $1.7 trillion. It would not cost the federal government anything.

Because federal tax dollars sent to the federal government cease to be part of the money supply, they effectively are destroyed upon receipt. So not receiving dollars that would have been destroyed anyway, represents no cost to the federal government.

Thus, the question, “What will it cost?” is nonsensical.

The correct question is, “How much growth will this add to our economy?” Sadly, it is a question neither I, nor anyone else on this planet, can answer because it involves too many uncertain variables, not the least of which is human psychology.

Economics is extensively intertwined with unpredictable human psychology as well as with other unpredictables (seismology, meteorology, etc.) which is why economic predictions fail, not just in the long term but even in the short term.

That said, federal deficit spending historically has been stimulative and has cured recessions, while reductions in federal deficit spending have led to recessions and depressions.

Talk of economic growth invariably leads to concerns about inflation, which we discuss at the post “The economics of chaos“.

The short answer to the inflation question is: Being a large Monetarily Sovereign nation, the U.S. government has absolute control over the value of the U.S. dollar when it wishes to use that control.

That is a prime reason why despite massive deficit spending, despite many recessions and many wars — even civil and world wars — the U.S. economy never has experienced hyperinflation.  Not even close.

To answer the title question, implementing the Ten Steps to Prosperity will cost our Monetarily Sovereign, federal government nothing, and will narrow the Gap between the richer and poorer, and benefit the public.

There remains no excuse not to implement the Ten Steps.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 (Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) 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.

MONETARY SOVEREIGNTY