It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.
Today, we have the theater of the absurd. Congress prepares for the phony “debt ceiling” debates, exacerbated by the phony “tax cut” debates. The debates will be based on two fundamental lies:
Lie #1: Federal taxes fund federal spending.
Lie #2: Federal deficits and debt negatively impact economic growth
The truths are:
Truth #1: The federal government, unlike state and local governments, is Monetarily Sovereign. It does not use tax dollars. It creates brand new dollars, ad hoc, every time it pays a creditor. Even if all federal tax collections were $0, the federal government could continue spending forever.
Truth #2: Federal deficit spending stimulates economic growth by adding dollars to the economy. Federal debt is the total of deposits in T-security accounts, which receive economy-building interest from the federal government.
The previous post, “Examples of CNBC, Reuters, et al shoveling BS on your head,” ended with the following paragraph:
“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.”
Politicians are not the only ones who lie at the behest of the rich. The media too, are bribed via advertising dollars and by ownership. Even the economists are bribed via university contributions and think-tank employment.
Then, there’s the Committee for a Responsible Federal Budget (CRFB). We’ve spoken of them before, and not in flattering terms. Here is their latest nonsense, designed to make you think your federal benefits should be cut:
President Donald Trump and the GOP Congress want to give America a tax cut, and no doubt most Americans want one. Who wouldn’t? But there is a math problem. It has to be paid for, or the tax cuts get added to our already record-high national debt.
No Maya, a tax cut doesn’t need to be “paid for.” The only thing taxpayers “pay for” is the taxes, themselves. Cut taxes and the public will pay less.
If you go to a store and find that prices have been cut, do ask to pay more for fear your children will have to “pay for” those cuts?
To bring down tax rates as much as the president wants would cost a huge amount — so huge, in fact, that politicians in Washington are having a hard time figuring out how to pay for what has been promised.
Here is how the federal governments pays for its spending: It sends instructions, not dollars, to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
The instant the bank does as instructed, brand new dollars are created, and added to the nation’s money supply. The instructions then are cleared by the Federal Reserve. That is how federal deficit spending grows the economy.
So long as the federal government does not run short of instructions, it always will be able to pay for anything in dollars. No one in Washington needs to “figure out” how to pay for anything.
In recent weeks, the Trump administration and GOP leaders released an Initial tax “framework,” that we estimate could add upwards of $2.2 trillion to the debt. That is equal to $17,500 per U.S. household.
Federal deficit spending = private sector income. The CRFB actually admits that the budget would put $17,500 into the pockets of each U.S. household.
Unfortunately, this is an average. The details indicate that almost all the dollars would go to the very rich, with scant benefit to the lower- and middle-classes
Debt not only suppresses economic growth, it suppresses future wages.
You have just read two lies in one sentence. Federal debt is a bookkeeping consequence of federal deficits, which add dollars to the private sector. These additional dollars stimulate economic growth.
Further, there is no economic mechanism by which federal deficit spending “suppresses future wages.” Although there is no direct connection between federal debt (T-securities) and wages, if anything, federal deficit spending plus interest on T-securities adds dollars to the economy, which would stimulate wage growth.
Americans must ask themselves, is a $500 or $1,000 tax cut worth it if your kids are not only going to have to pick up the tab but also earn thousands less a year in income because of it?
You have not “picked up the tab” for past debt, and your kids will not “pick up the tab” for future debt. But you and your kids do pick up the tab for taxes, yesterday, today, and tomorrow.
When the federal government cuts taxes and/or increases federal spending (aka deficit spending), that puts money into the pockets of Americans.
But wait — there is hope. Tax reform that is paid for can bring down tax rates, simplify the tax code, and grow the economy — all without hurting our kids.
The above paragraph is insidious. Yes, tax reform can bring down tax rates, but didn’t the CRFB just tell us that collecting less tax (thereby adding to the deficit) will “suppress economic growth, and suppress future wages?
The CRFB talks on both sides of its mouth.
To pay for reform, politicians will have to fight back against some politically powerful special interests and end some popular breaks that are ingrained in the tax code.
These “tax expenditures” — various deductions, credits, exclusions, and exemptions — amount to nearly $1.6 trillion per year.
The CRFB and the rest of the debt Henny Pennys love to use the word “reform,” which implies improvement, whenever they talk about cutting benefits.
The “popular breaks” they want to eliminate are breaks received by you in the middle- and lower-income groups, among which are Social Security, Medicare, Medicaid, poverty aids, education aids, etc.
No cuts in benefits to the rich are being proposed. On the contrary, almost all the proposed benefits go to the rich.
The Senate is working on a budget now that will allow up to $1.5 trillion in unpaid for tax cuts based on the claim that the economy will grow enough to make up the difference. But those growth claims are wildly exaggerated and will ultimately lead to a much higher debt.
Translation: President Reagan claimed, with his trickle down economics, that tax rate cuts will grow the economy so much that more taxes will be collected. It didn’t prove to be true then, and it won’t be true now.
There is a difference between tax rate cuts and tax cuts. It’s not the rate cuts that stimulate the economy. It’s the cuts in actual tax collections that are stimulative.
“Paying for” rate cuts with higher future tax collections would be counterproductive.
Tax cuts do create economic growth but nowhere near dollar-for-dollar.
But wait. There is only one reason why tax cuts create economic growth: They increase the amount of money going into the private sector.
In short, tax cuts increase economic growth by increasing the deficit and debt.
To not add to the debt, most of the tax cut needs to be offset by broadening the tax base, raising other revenues, or cutting spending.
Here is where the CRFB reveals its true motive. “Broadening the tax base” means “charge the poor and middle more.” They are the tax base.
The Gap is what makes the rich rich. Without the Gap, no one would be rich; we all would be the same. And the wider the Gap, the richer they are. The CRFB is a tool of the very rich and powerful, whose primary motive is to widen the Gap between the rich and the rest.
The debt is at near-record levels, and we need to do everything we can to increase the pace at which our economy is growing. Coming up with a real plan for tax reform that will grow the economy but not the debt is worth the effort.
“Near-record levels” is a scare tactic. In 1960, the federal debt was $236 Billion. Today, the debt is $14 Trillion. In that 57 year period, there have been only 4 years in which the federal debt did not set a year-to-year record.
Yet, as the debt has grown the economy has grown. And with good reason. Federal deficit spending (i.e tax cuts and/or spending increases) create economic growth.
Every politician, virtually every news medium, and the vast majority of university and think-tank economists have been bribed by the very rich to tell you that the federal government uses tax dollars to fund spending, and that the federal debt hurts the economy.
It is a damnable lie.
While your state and local taxes do pay for state and local spending, your federal taxes pay for nothing. Your federal tax dollars cease to exist in any money supply measure, the instant they are received by the Treasury. They are destroyed upon receipt.
The sooner you begin to understand that basic economic fact, and see through the ongoing lies, the sooner you will be able to vote for closing the Gap and improving your economic life.
The rich pay people to steal your money, and they try to brainwash you into believing this is necessary.
The BS is raining down on you. Knowledge is your shelter.
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.