Phony insolvency rears its ugly head, again

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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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The most wrongheaded group I know, the Committee for a Responsible Federal Budget (CRFB) has published a new scare article titled, “Three Trust Funds Face Insolvency in the Next Eight Years.”

To demonstrate why it is total nonsense, I’ll quote from the article:

President Trump faces a challenging fiscal situation now that he has entered office.

Part of that situation includes the impending insolvency of three major trust funds in the next eight years – the Highway Trust Fund, the Medicare Hospital Insurance trust fund, and the Social Security Disability Insurance trust fund – as well as the projected insolvency of the Old-Age and Survivors Insurance trust fund within 15 years, according to the Congressional Budget Office (CBO).

Currently, federal highway spending far exceeds gas tax revenue and other dedicated revenues.

The CRFB fearmongers are telling you that dedicated taxes will be less than spending. And that is true — about dedicated taxes.

But if the federal government ran on dedicated taxes there would be no deficit, no debt — and no economic growth.

It’s just a restatement of the old, thoroughly disproved “balanced budget” notion, that the federal government, being just like you and me, should live within its income.

But, the federal government is not like you and me. The federal government is Monetarily Sovereign. It is the original creator of the U.S. dollar, which it produced from thin air, in arbitrary amounts, in the 1780’s, and still creates ad hoc, every time it pays a bill.

Deficit spending is the federal government’s method for creating dollars.

So yes, projected spending does exceed projected dedicated revenues. But so what? The federal government cannot run short of its own sovereign currency.

And here’s the evidence:

Lawmakers have been patching the trust fund with general revenue since 2008, including a large $70 billion transfer in 2016.

Get that? The CRFB admits that when so-called “trust funds” (in these cases, accounting fictions) supposedly run low, the federal government merely presses a computer key, and increases the numbers in those mythical trust funds.

They don’t do it with “general revenue” (meaning “taxes.) They don’t do it with any revenue at all. Even if all federal tax collections fell to $0, the federal government could continue spending, forever.

The federal government simply presses computer keys, and numbers in accounts are created. It’s the same way they did it in the 1780’s, except they used quill pens then.

Federal spending is not funded by federal taxes. (This contrasts with state and local government spending which is funded by state and local taxes. That’s the difference between Monetary Sovereignty and monetary non-sovereignty.)

But CBO projects those funds to run out by 2021. By 2022, spending will total $58 billion while revenue will total $40 billion; in other words, the program will face a one-third shortfall.

Over the next decade, spending will exceed revenue and reserves by $139 billion – a bit more than what was projected in CBO’s previous projection in March 2016.

Yep, that’s right. Spending will exceed revenue, meaning the government will run deficits — as it has in the vast majority of years since its inception. This is news?

The CRFB was formed in 1981, and for its entire 35-year existence — day after day, month after month, year after year — it has been crying “wolf” about the awful disasters that await us due to our deficit spending.

So, where is the disaster?

Thirty-five years of utter nonsense, thirty-five years of consistently being wrong, and here we are, the most financially powerful nation in the history of the world, and the CRFB still promulgates the same bogus message.

(If you belonged to a cult, and every month your leader told you the world was coming to an end, and he marched you up the mountain to await the cataclysm. And then, when nothing happened, he marched you back down again — how many trips up that mountain would you take, before you began to understand that your leader is a fraud?)

In 1981, the U.S. federal debt was about $775 billion. Today, it is about $15 TRILLION, and we are not one penny closer to insolvency than we were back when the CRFB began its phony scare tactics.

All of this leaves us with four questions:

1. Is there a limit to the number of dollars the federal government can create?

Answer: The limit would be an inflation that could not be contained via interest rate control. To date, the Fed successfully has held average inflation to its 2%-3% target rate, by raising rates when it anticipates inflation, and by lowering rates to avoid deflation.

2. If federal taxes do not fund federal spending, why does the federal government collect taxes?

Answer: For most of the first two centuries of our nation’s existence, we put ourselves on precious metal standards, which meant by our own laws we limited our government’s ability to create dollars, according to the amount of gold or silver it owned.

Thus, by our own hand, we surrendered much of our Monetary Sovereignty, and let our government impose taxes on us.

In 1971, President Nixon arbitrarily changed the law, and ever since that simple stroke of his pen, we no longer rely on taxes. But still we tax ourselves.

The functions of taxes today are:
A. To act as a safety mechanism in the rare event interest rates were not sufficient to prevent inflation
B. To control the economy by taking money from things the government doesn’t like.
C. To help force the usage of dollars by requiring all taxes to be paid in dollars.
D. And this is the important one: To provide the illusion that federal finances are like personal finances, and that federal spending must be limited.

3. Why do politicians, the media, university economists, and organizations like CRFB continue to spread obvious myths about impending federal insolvency?

Answer: All of these sources — the politicians, the media, the university economists, and organizations, are controlled by the rich.

The politicians receive contributions from the rich.
The media are owned by the rich
The universities receive contributions from the rich
And the organizations are funded by the rich.

The primary motive of the rich is to widen the Gap between the rich and the rest. (The Gap makes them rich. Without the Gap, we all would be the same, and the wider the Gap, the richer they are).

Because the vast majority of federal spending is for social programs benefitting the “non-rich,” and thus narrowing the Gap, the rich pay the information sources to tell you that deficit spending for social programs must be cut.

4. Since the CRFB has been wrong every day, every month and every year for 35 years, and the politicians, the media, and the university economists have been wrong for much longer than that (See: “Ticking Time Bomb”), how many more years will it take for the public to realize the warnings are phony — a part of “The Big Lie”?

Can the people continue to be fooled, year after year, forever?

Answer: Yes, so long as there are rich people supporting selfish propaganda-spouting, information sources, the people can be fooled, if not forever, at least for a very long time.

There is no idea, so outrageously bereft of factual support, that a majority of people will reject it.

Our only hope is to educate and to pray that facts eventually will triumph over the inborn compulsion to believe what our leaders tell us, no matter how often they are proved wrong.

We desperately need a leader who will tell the truth. It saps our strength repeatedly climbing up and down that mountain of lies.

Rodger Malcolm Mitchell
Monetary Sovereignty

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ECONOMICS 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..

•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.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Progressives 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 the rich and the rest.

•Austerity is the government’s method for widening the Gap between the rich and the rest.

•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..

MONETARY SOVEREIGNTY