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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..
You, who understand Monetary Sovereignty, know that:
- Before there was the United States of America, there were no U.S. dollars and so could be no taxes in dollars.
- Our Monetarily Sovereign federal government created an arbitrary number of original U.S. dollars from thin air, simply by writing laws. Initially, the government spent dollars without collecting taxes.
- By those laws, our federal government continues to create U.S. dollars from nothing. So long as the government does not run short of laws, it will not run short of dollars, whether or not taxes are collected.
- Thus, unlike state and local (monetarily non-sovereign) governments, the federal government neither needs nor uses tax dollars to pay its bills. It simply creates dollars, ad hoc, as it always has done from the very first day. That is the fundamental difference between federal finances and state/local government finances. (State/local governments do use taxes.)
- Whenever you hear that the federal government, or any agency of the federal government (Social Security, Medicare, the Supreme Court, et al), can become insolvent, know that any such insolvency would be intended by the government. Otherwise, no federal agency ever can be insolvent, even if zero taxes are collected.
Because federal financing is so unlike state and local government financing, and unlike business financing and unlike personal financing, many people can be confused by the differences.
People know they need income in order to pay their bills, so they wrongly assume the federal government also needs income. It doesn’t.
People see the government collecting taxes, so they wrongly assume these taxes are needed for the federal government to pay its bills.
(“Why else would they collect taxes?” I’ll answer this question later in the paper.)
But because it is Monetarily Sovereign, the federal government has no need for taxes or for borrowing or for any other form of income.
This confusion between personal finances and federal finances is supported by such articles as the following, from The Atlantic and the U.S. News & World Report, reprinted in today’s Chicago Tribune:
What Others Are Saying
Jonathan Kay, The Atlantic: The United States is falling apart because — unlike Canada and other wealthy countries — the American public sector simply doesn’t have the funds required to keep the nation stitched together.
Immediately, the article goes off the tracks, never to return. If by “public sector” does the author refer to the federal government or to state and local governments?
He may be confused himself, for what is true for the latter is false for the former.
A country where impoverished citizens rely on crowdfunding to finance medical operations isn’t a country that can protect the health of its citizens. A country that can’t ensure the daily operation of Penn Station isn’t a country that can prevent transportation gridlock.
The federal government has the financial capability to fund comprehensive, no-deductible Medicare for every man, woman, and child in America.
In contrast, if Penn Station is funded by state and local government agencies, it very well can run short of dollars. The author, either intentionally or unintentionally, fails to differentiate.
The Organization for Economic Co- Operation and Development (OECD), a group of 35 wealthy countries, ranks its members by overall tax burden — that is, total tax revenues at every level of government, added together and then expressed as a percentage of GDP — and in latest year for which data is available, 2014, the United States came in fourth to last.
Its tax burden was 25.9 percent — substantially less than the OECD average, 34.2 percent.
If the United States followed that mean OECD rate, there would be about an extra $1.5 trillion annually for governments to spend on better schools, safer roads, bettertrained police, and more accessible health care.
We aren’t told which of those “wealthy countries” is Monetarily Sovereign and which is monetarily non-sovereign. Canada, Australia, China and Japan, for instance, are Monetarily Sovereign. They never can run short of their own sovereign currencies, so can afford to pay any invoice denominated in their sovereign currencies, without levying taxes.
By contrast, Germany, Italy, France, and Greece, for instance, are monetarily non-sovereign. They do not own a sovereign currency; they use the euro which is the sovereign currency of the European Union, and not under the control of any one nation.
Thus, these countries do need taxes in order to pay their bills.
The author mentions “every level of government.” So, while a Monetarily Sovereign government never can run short of its sovereign money, states, counties, and cities can run short.
Unfortunately, in the world today, not one nation acts as a Monetary Sovereign. Every nation on earth functions as though is monetarily non-sovereign, and so even those who don’t use taxes, still collect them
When Canadian governments need more money, they raise taxes. Canadians are not thrilled when this happens. But as Justice Oliver Wendell Holmes Jr. put it, taxes are the price paid “for civilized society.”
Fact: When the Canadian national government needs more money, it creates the Canadian dollars, ad hoc. When any local Canadian governments need more money, they must raise taxes or borrow. Completely different.
The author repeatedly confuses the two, hinting at a serious lack of knowledge about economics.
Brian Riedl, U.S. News & World Report: After doubling to $20 trillion since 2009, the national debt is now projected to soar to an unfathomable $92 trillion over the next 30 years.
To “lend” to the federal government, you invest in a T-security. You instruct your bank to transfer dollars from your checking account to your T-security account at the FRB. The so-called “national debt,” is not like personal debt. It actually is the total of deposits in T-security accounts at the world’s safest bank, the Federal Reserve Bank.
To pay back the principal on these deposits (which it does every day), the FRB merely transfers existing dollars from the T-security accounts, back to the checking accounts of the T-security owners. This is no burden whatsoever on the federal government or on the FRB. The dollars exist. It’s just a money transfer.
At that point, depending on interest rates, between 60 and 100 percent of all individual income taxes will go toward paying the interest on this debt.
Wrong: No federal taxes “go toward paying the interest on this debt.”
When federal taxes are collected, they disappear from the money supply. (This is different from state and local taxes, which remain in the money supply.)
Thus, federal taxes effectively are destroyed upon receipt.
To pay its bills, including interest, the federal government sends instructions (not dollars) to creditors’ banks. The instructions, in the form of checks or wires, instruct the banks to increase the balances in the creditors’ checking accounts.
At the moment the banks obey those instructions, brand new dollars are created.
What is driving the federal budget into bankruptcy? Health care spending. …
The above is a classic statement of the Big Lie.
As we have seen, the federal government cannot go into bankruptcy. Given its unlimited ability to create the laws that create dollars, it never can run short of dollars.
The author blames health care spending for a non-existent problem.
Critics denounce Republican attempts to “slash health care spending.” In reality, their proposals would slow the growth of health care spending relative to the current baseline projections — projections that are completely unsustainable anyway. …
Federal health care spending is not “unsustainable.” The federal government could spend ten times the projected amount and still, that would not be “unsustainable,” as the federal government has the unlimited ability to pay bills denominated in dollars.
(We also have) a Medicare system that currently collects $140,000 in lifetime taxes from the typical retiring couple and then provides them with $422,000 in benefits (all adjusted into net present values). Multiply this by 77 million retiring baby boomers, and Medicare’s long-term shortfall is measured in the tens of trillions of dollars.
The federal government neither needs nor uses taxes to pay benefits. It destroys tax dollars upon receipt, and it creates brand new dollars, ad hoc, by paying bills.
You may ask,
- “Why do Mr. Kay and Mr. Riedl so dramatically misstate the facts about federal financing;
- Why do they confuse Monetary Sovereignty with monetary non-sovereignty;
- Why does the federal government collect taxes it doesn’t need?
The United States, and indeed the world, are run by the very rich. The primary motive of the very rich is to widen the income/wealth/power Gap between them and the rest.
There are two ways for the rich to widen the Gap: Lift themselves up, or push the rest of us down.
The Big Lie that federal taxes fund federal spending pushes the rest of us down in two ways: It takes money directly from our pockets (especially such regressive taxes as FICA and sales taxes). And it provides the false “deficits are unsustainable” excuse that keeps us from receiving federal benefits.
The Big Lie takes money out and prevents money from coming in.
To promulgate the Big Lie, the rich bribe the politicians (via campaign contributions and promises of lucrative employment later). The rich bribe the media (via advertising dollars and ownership of media). The rich bribe the economists (via contributions to universities and employment at “think tanks”).
By controlling all sources of economics information — the politicians, the media, and the economists — the rich are able to brainwash the public into believing their taxes must be increased and their benefits must be decreased — in short, the Gap between the rich and the rest must be widened.
I do not know whether Mr. Kay and Mr. Riedl have been told by their respective publications to write the Big Lie, or whether they themselves have been bribed, or whether they simply are ignorant of basic economics.
At least one of these must be true.
But in any event, their articles are just small examples of the ongoing misinformation that has been pumped into the private sector for many years — the Big Lie that costs you so much, every day of your life.
Were it not for the rich sponsoring the Big Lie, the Ten Steps to Prosperity (below) could already be in force, and your life would be far better than you can imagine.
Rodger Malcolm Mitchell
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 A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) 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 EVERYONE Five 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 FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce 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 business 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.