It takes only two things to keep people in chains:
The ignorance of the oppressed and the
treachery of their leaders.
Being Monetarily Sovereign, the U.S. government has the same money-creation powers as does the “Bank” in a game of Monopoly®. Neither can run short of their own sovereign currency.
If you open a Monopoly® box and discover there are no printed dollars inside, you still can play the game. The Bank simply could create an account ledger — on paper or electronic — and add new money to each player’s account whenever necessary.
The ledger could be something as simple as the piece of paper pictured at left, on which the Banker would tally a balance for each player.
Every time the Bank owed one of the players’ money — for instance the $200 for passing “Go” — the Bank would add that amount to the player’s column.
In short, the Monopoly® Bank has the unlimited power to create new dollars from thin air — as does the U.S. government.
Both are Monetarily Sovereign.
The Bank never can be unable to pay its debts, unless the players wanted that to happen. To the Bank, no debt can be unsustainable.
You can play a full game of Monopoly® without having even one printed Monopoly® dollar in the box.
Similarly, the U.S. federal government never can run out of dollars. When it owes dollars to anyone, it simply marks up the creditor’s checking account. It has the same power to create dollars from thin air as does the Monopoly® Bank.
What then is the credit rating of the Monopoly® Bank and of the U.S. Treasury? Obviously, perfect — AAA+ or whatever the rating agency calls its highest level — a fact that makes the following CNBC/Reuters article so ridiculous.
US to keep Aaa-rating after debt ceiling: Moody’s, Published 13 March 2017
Moody’s Investors Services said on Monday the United States will retain the rating agency’s top-notch debt rating as long as it meets its interest payments even if the government’s borrowing cap is reinstated on Thursday.
“While the periodic impasse over raising the debt ceiling is a credit negative feature of the country’s debt management, it has not affected the sovereign’s credit rating to date,” Moody’s analysts wrote in a research report published on Monday.
Like Moody’s, Fitch has kept its top AAA-rating on U.S. government debt.
However, Standard & Poor’s downgraded the U.S.’ rating by one notch to AA+ in August 2011.
It cited its high level of debt and uncertainty about the federal government’s ability to manage that debt load following a debt ceiling showdown.
S&P ranked the U.S. government lower than the highest rated corporation, conveniently neglecting the fact that if ever the U.S. government decided to default, the dollar would crash, and U.S. corporations would find themselves in serious financial difficulty.
The “borrowing cap” is a limit that Congress, in all its brilliance, has placed on the federal government’s ability to pay for what it already is obliged to pay.
The U.S. government does not borrow, in the usual sense. Like a bank, it accepts deposits. The so-called “debt” is the total of these deposits in T-security accounts.
The idea that the U.S. government arbitrarily, and for no reason, will decide not to pay its creditors is stupid or mendacious, even by normal Congressional standards of stupid mendacity.
If your Congressperson has voted for the “borrowing cap” (aka “debt ceiling”) you have ample proof that he or she either has a single digit IQ or is a liar. No other alternatives are possible.
As for S&P’s stated concern about “high level of debt” and “ability to manage that debt load,” one only can attribute this to duplicity approaching criminality.
While S&P may imagine a politically insane Congress spitefully refusing to pay its bills, a “high level of debt” is absolutely meaningless for an entity having the unlimited ability to add numbers to bank accounts.
The Treasury Department said last week it will embark “extraordinary measures” to meet its debt obligation if the debt ceiling goes into effect.
Year after year, the charade plays out like this:
- One party of Congress (Congress is a U.S. federal agency) pretends it is being frugal and prudent by enacting a debt limit, in a game of “chicken,” to prove the other party is composed of wastrels.
- The Treasury Department (another U.S. federal agency) goes along with the game by heroically embarking on “extraordinary measures” to keep America afloat. The “extraordinary measures” consist of rearranging payments and furloughing poor employees, while making sure that rich people and foreign nations are paid on time.
- The President (also a U.S. federal employee) will thunder outrage at those in the opposing party, for endangering America.
- Finally, when all other alternatives have been explored and rejected, the agencies of the U.S. federal government will halt the charade temporarily, by establishing a larger “debt limit,” as a prelude to a repeat of the charade the following year.
In short, the U.S. government agencies waste time and energy staging useless games among themselves. It’s all theater, to mystify an audience (you and me).
And that, folks, is why you pay Congress, the President, and the Secretary of the Treasury those high salaries and delicious perks — just like Hollywood actors.
U.S. Treasury Secretary Steven Mnuchin on Thursday called on Congress to raise the federal debt ceiling “at the first opportunity.” and announced the first of several likely cash management measures aimed at staving off a U.S. default.
Given his exalted position, Mnuchin should have said, “The ‘debt limit’ is a farce and should be ended forever.” He didn’t, nor did his predecessors. In politics, one keeps a job by going along with his bosses’ lies. Mnuchin is paid to read from the script.
Meanwhile, U.S. Senate majority leader Mitch McConnell told Politico on Thursday the United States will not default on its debt and will raise its debt limit in some fashion.
He too, should have admitted that the “debt limit,” which will require many hours of useless and senseless debate, must be eliminated. He didn’t, nor did his predecessors. He keeps his job by giving the electorate the lies they have been trained to demand.
The lies come at you from everywhere. For instance, here is Mark Zandi, chief economist at Moody’s Analytics:
Moody’s Analytics chief economist: Why the Republican tax plan is set up to fail
Yahoo Finance, October 23, 2017
By: Mark Zandi
The Trump administration and Republican Congressional leadership want to go big on tax reform. They have proposed a broad set of changes to the corporate and personal income tax codes, including tax cuts and revenue raisers.
Remember, as you read the rest of these excerpts, that Zandi is the chief economist for Moody’s. (If he is the CHIEF ECONOMIST, one wonders what the subordinate economists are like.)
While the proposal is light on many important details, taken in total, it would not add significantly to economic growth, but it would add significantly to future budget deficits and the nation’s debt load.
The use of the words “debt load” tells you what Zandi wants you to believe: “Debt is bad.”
Never mind that the so-called “debt” merely is the total of deposits in T-security accounts, quite similar to bank savings accounts.
Zandi wants you to believe these deposits are some sort of threat or burden. They are neither. They are deposits. Nothing more. You probably own some bank accounts. Banks love deposits. In days of yore, banks gave toasters to people who open accounts.
Businesses would be big beneficiaries of the Republican plan, enjoying an estimated net tax cut of $2.5 trillion over 10 years on a static basis—ignoring the impact of the tax cuts on the economy and thus tax revenues.
See that little phrase, “tax revenues.” Calling them “revenues” is part of the pretense that the federal government uses taxes to fund federal spending.
In business accounting, income is necessary to pay for outgo. In federal accounting, income pays for nothing. The federal government uniquely doesn’t use income.
Unlike state and local taxes, federal taxes cease to be part of any money supply measure. In short, federal tax dollars are destroyed upon receipt. The federal government creates brand new dollars, every time it pays a bill, just as the Monopoly® Bank can create brand new dollars to pay bills.
Neither the federal government nor the Monopoly® Bank needs tax dollars. Both can “play the game” with zero income.
The biggest corporate tax expense is the proposed reduction in the top marginal rate from 35% to 20% and repeal of the corporate alternative minimum tax.
Lowering the top tax rate on pass-through income and allowing businesses to reduce their tax bill by completely expensing their investment for at least five years are also costly.
To help pay for this largess, the plan eliminates business-related tax loopholes, although they are not spelled out, and even closing them all would not raise much revenue.
We’ve bolded the words “costly,” “pay for this largess,” “loopholes” and “revenue,” to demonstrate Zandi’s sly attempt to equate federal finances with state and local government, and personal, finances.
- Cutting federal taxes does not “cost” anyone anything — not you, not me, not the federal government. On the contrary, tax cuts put money into your pocket and mine. The federal government has no use of tax dollars. It destroys them.
- No one “pays for” tax cuts. Rather, we all “pay for” taxes. Reducing taxes reduces what taxpayers “pay for.”
- The word “largess” implies that you receive a generous gift from the government when they don’t pay taxes. The opposite is true. Tax dollars belong to you, the public, until they forcibly are taken by the federal government. If a thief fails to steal your money, you don’t consider that you have received “largess.”
- “Revenue” implies that the federal government has received something of value. But, in fact, while it is of value to you, it is of no value to the government. If you flush your dollars down the toilet, that is not considered “revenue” for your city sanitation department.
The big winners are the top 5% of taxpayers, with current incomes well over $300,000 per year. Taxpayers that make between $150,000 and $300,000 per year benefit the least, and would actually eventually pay more in taxes. Taxpayers making less than $150,000 will take home a modestly higher sum after-tax.
To help pay for these cuts, the plan eliminates personal exemptions except for mortgage interest and charitable giving along with most itemized deductions.
The big revenue raiser is the elimination of deductions for state and local income, sales tax and property taxes.
There are those misleading words, again: “Pay for” and “revenue.” Apparently, Zandi understands that repeating a lie makes it more believable.
Boosters of the Republican tax proposal argue that it will significantly increase economic growth, this additional growth will generate roughly enough additional tax revenue for the plan to pay for itself.
That is, there would be large so-called supply-side effects from the tax cuts. So large that on a dynamic basis—after accounting for the bigger economy—the plan will not add to the nation’s deficits and debt.
The nation’s deficits are income for the nation’s people. Every dollar of deficit is a dollar that goes into the public’s pockets. Zandi, and others of his ilk, want you to believe that more dollars in your pocket is a bad thing.
They also want you to believe that your investments in your T-security account (aka “debt”), which the federal government easily could return to you today via money transfer, (i.e. “pay off” the debt) are bad for you. Utter nonsense.
The plan will not meaningfully improve economic growth, at least not on a sustained basis.
Given that the economy is currently operating at full employment, however, stronger inflation and higher interest rates will result.
The higher rates wash out the economic benefit of the lower tax rates on investment, and the economy ends up no bigger than it would have been without the tax cuts.
These are widely promulgated misunderstandings.
- “Economic growth” most often is measured by Gross Domestic Product (GDP), the formula for which is: GDP=Federal Spending+Non-federal Spending+Net Exports. Tax cuts, which add to the gross money supply, increase GDP.
- Inflation is not increased money supply. Inflation is the value of money (Money Demand/Supply) vs. the cost of goods and services (Goods & Services Demand/Supply). Many factors other than money supply and employment affect inflation, not the least of which are efficiency and productivity. With each passing day, labor has become a smaller inflationary factor. Thus, despite low unemployment and massive deficits, we currently have low inflation. (See “Debt Henny Pennys.”)
We’ll conclude with a short article that appeared in The Week:
Trump rejects limiting before-tax 401(k) deductions to pay for tax cuts
President Trump on Monday rejected the possibility of raising money to pay for Republican tax cuts by reducing the pre-tax contributions Americans can make to their 401(k)s.
Trump’s position on the matter removes one option as Republicans rush to push through the legislation by the end of the year.
Republicans are looking for ways to help pay for more than $1 trillion in corporate and individual tax cuts, including eliminating the federal deduction for state and local taxes.
The notion that a federal tax increase can “pay for” a federal tax decrease is wrong, wrong, horribly wrong. While that can be true of state and local taxes, it simply is not true of our Monetarily Sovereign government’s federal taxes.
In the next few weeks, you will read and hear about Congress struggling mightily to cut taxes without increasing the debt or deficit. It’s all performance art for your befuddlement — a comedy of errors that has run since at least 1940.
Deficits, i.e. cutting your taxes and giving you benefits, enrich you by putting dollars into your pocket. Federal deficits are the economy’s surpluses. Deficits grow the economy.
The so-called “debt” is just safe, interest-bearing deposits in T-securities accounts, similar to bank savings account deposits. The entire debt could be paid off tomorrow, without creating one new dollar, simply by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security owners.
Neither federal deficit nor federal debt is a threat, or a burden, or anything to be minimized.
Your politicians lie at the behest of the rich because they are bribed by the rich. The rich want you to believe the federal government can’t afford to give you such benefits as Medicare for All, Education for All, poverty aids, lower taxes, and other help that would narrow the Gap between you and the rich.
It is a gigantic, ongoing con job. It’s all Hollywood.
Tell your Congressperson you aren’t fooled or amused.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
The 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.