It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.
My feelings are split regarding the GOP tax “cut” plans.
First, on the good side: If it passes it may be the death knell for the politicians who voted for this take-from-the-poor, give-to-the-rich monstrosity. Even those who still back Trump will, at long last, wake up.
Or is that too much to hope?
Second, it will add an estimated $1.5 trillion to the federal deficit. This means, the U.S. federal government, which never can run short of its own sovereign currency, will add $1.5 trillion dollars to the economy.
Though most (nearly all?) of those dollars will go to the rich, and thus widen the Gap between the rich and the rest, adding dollars to the economy is necessary for economic growth.
The formula is:
Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports.
The two terms — Federal Spending and Non-federal Spending — increase with an increased money supply, which in turn is increased by deficit spending.
There is ample evidence for the positive relationship between deficit growth and economic growth. Even the GOP tacitly admits that this relationship exists by claiming (correctly) that tax cuts will grow the economy.
How do tax cuts grow the economy?
Tax cuts grow the economy by leaving more dollars in the economy.
“The economy” includes you, me and American business. When any of us has more money to spend, we tend to spend more, which increases GDP. That is why taking money out of our pockets, via taxes, reduces GDP, and why cutting taxes increases GDP.
This is straightforward and should be easy to understand, except when the politicians, the media, and even the university economists confuse you with the ridiculous proposition that deficit spending should be cut.
If tax cuts grow the economy then deficit spending grows the economy. Since deficit spending grows the economy, why would anyone wish to cut deficits?
Here are the (wrong) reasons most often given:
- Deficits are “unsustainable.” No one knows exactly what that means, but presumably, the idea is that the federal government will run out of dollars to pay its bills. But our Monetarily Sovereign government cannot run short of its own sovereign currency. There is nothing “unsustainable about federal deficits.
- The federal government is like you and me. It must live within its means. (This was an Obama favorite). But the government is not like you and me. You and I are monetarily non-sovereign. You and I can run short of dollars to pay our bills; the federal government cannot.
- Deficits cause inflation. (This usually is followed by a mention of Weimar Germany and/or Zimbabwe). Inflation is caused not just by too much money Supply but by too little Demand for money and too little Supply of goods and services compared to Demand..
NO RELATIONSHIP BETWEEN DEFICITS (RED LINE) AND INFLATION (BLUE LINE)
Deficits refer to money supply, but they do not refer to money demand, goods and services supply, or goods and services demand.
Further, “deficits” refer only to net dollar creation by the federal government, but do not include net dollar creation by the private sector, mostly by banks. Every time a bank lends, it increases the money supply.
Hyperinflations like Weimar and Zimbabwe are caused by shortages, not by money “printing.” Weimar had a shortage of gold to pay its bills. Zimbabwe had a shortage of food, when its leader, Robert Magube stole land from farmers. The hyperinflations caused the money “printing,” and not the other way around.
In summary, the GOP tax bills will increase the deficit and the debt. That’s the part I like.
What I don’t like is that the bills reward the rich and widen the Gap between the rich and the rest. From THE WEEK:
At a Politico Playbook forum on Wednesday, Sen. Marco Rubio (R-Fla.) said that cutting taxes needs to be followed by cutting spending on popular federal programs.
“I analyze this very differently than most,” Rubio said. “Many argue that you can’t cut taxes because it will drive up the deficit. But we have to do two things. We have to generate economic growth which generates revenue, while reducing spending. That will mean instituting structural changes to Social Security and Medicare for the future.”
He suggested reducing benefits and raising the retirement age for future retirees, so people can prepare for the changes.
“Tax reform is the economic component of this equation,” Rubio said. “When more people are working, there are more taxpayers and more revenue, but that alone won’t be enough. You are still going to have a debt problem in the absence of spending cuts.”
The legislation already includes $25 billion in automatic Medicare cuts for next year alone, along with $111 billion in other cuts to federal programs, and it would either raise taxes or keep them the same for 6.3 million Americans 65 or older in 2019 and 10.8 million by 2027.
Let’s be absolutely clear: THERE IS NO “DEBT PROBLEM.” It is a fiction promulgated by the rich, to make you accept the belief that your benefits should be cut. It is their attempt to widen the Gap between the rich and the rest.
Even AARP has acknowledged there is no need to cut benefits. You may not remember this, but back in 2012, the federal government declared a FICA tax “holiday.” Here are excerpts from a post we published that year:
AARP President Rob Romasco admits FICA does not support Social Security, Wednesday, Aug 15, 2012
In an August 14th online discussion, AARP President Rob Romasco answered questions about Social Security funding, and essentially admitted the BIG LIE, though he didn’t realize it at the time:
The “BIG LIE” is the statement that the federal government relies on federal taxes to pay its bills.
Comment From Guest: “I hear conflicting statements in the media about Social Security running out of money. What is the real story: Is it expected to run out of money?”
Rob: “Social Security receives money from 3 main sources: the payroll tax, interest earned from bonds that are held in the Trust Funds, and the taxation of benefits.”
That is the myth — that Social Security receives money from taxes.
But, federal taxes do not fund Social Security. The so-called “Trust Funds” are an accounting myth, that the federal government can increase, decrease, or do without at will, and still pay all its financial obligations.
Comment From Guest: “Is the FICA tax holiday hurting Social Security?”
Rob: “This is a very good question… The FICA tax holiday is in no way hurting the Social Security program. Even though the payroll tax was decreased by 2 percent, money is transferred from the ‘General Fund’ to make up for the lost payroll tax.”
So there you have it. To pay for the “lost payroll tax,” money is transferred from the mythical General Fund. And in fact, to pay for any “lost” tax, money always can be transferred from the mythical General Fund.
If there were no payroll tax at all – i.e. if FICA were $0 – money to pay Social Security benefits still could be transferred from the mythical General Fund.
What does this all mean? The General Fund, the Social Security Trust Fund, and indeed all federal funds are accounting fictions.
They all are nothing more than numbers on balance sheets, and the numbers are wholly controlled by the U.S. government. That is what we mean when we say the government is Monetarily Sovereign. Contrary to the lies you have been told, your children and grandchildren will not “pay for the debt,” any more than you currently pay for the $14 trillion debt.
The government actually has the power to pay off the entire debt tomorrow, without levying a single penny in taxes, and without inflation.
You might ask your Senator or Representative, “If, in 2012, the government could continue paying Social Security benefits without collecting FICA tax from me, why can’t it continue to pay my Social Security without collecting FICA tax from me?”
The gobbledegook answer you receive should be amusing, though not informative.
Bottom line: Cutting taxes grows the economy, which is a good thing. The GOP plan will, as all GOP plans do, widen the Gap between the rich and the poor/middle classes.
If you have at the very least, $5 million – $10 million in assets (that’s AT LEAST), you personally will benefit from the GOP plan. If you have $100 million or more, you will come out like a prince.
If you have less than that bare minimum, or if you plan to collect Social Security, Medicare, Medicaid, or any other poverty benefits, you will be worse off.
Hey, it’s a GOP plan. What did you expect?
And, why do you think President Trump hides his tax returns?
Anyway, we have elections coming up next year, so this time, vote.
It’s not enough to gripe after the fact.
And though marching is good, today’s GOP doesn’t pay attention to your marches.
When you stay home, that’s a vote for the rich, who do vote for themselves and who buy votes from others.
Don’t vote for the politicians; vote for yourself.
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.