It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.
One reason our nation is so screwed up: The partitioning of American minds. Liberals follow Rachel Maddow and MSNBC; conservatives follow Sean Hannity and Fox News. Libertarians follow The Daily Bell.
So in many cases, we are talking past one another, citing slanted news as proof of our positions.
I happen to think Rachel is far more informative, intelligent, and truthful than Sean, and way, way smarter than anyone at The Daily Bell. But could that be because she tells me what I already believe and they tell what I know to be lies?
Perhaps. Hey, I’m human.
But to resist my natural urges, I do read Breitbart and occasionally, The Daily Bell, two perfectly awful publications. In my opinion, the former is a conservative shill for anything that benefits the rich, while the latter is an anti-government, libertarian device to hawk gold and silver to suckers.
Both make me angry, and both make me wonder, “How can people believe such tripe.” But at least I can see what “tripe” is being believed. Reading “the other side” is a good learning device.
Here then is an example of tripe from The Daily Bell:
Treasury Department reports $1.2 TRILLION loss in 2017
By Simon Black – February 28, 2018
Earlier this month, the United States government released its annual financial report for the year 2017 — a complete horror show.
Right at the beginning of the report, the government explains that it’s “net loss” for the year was an unbelievable $1.2 TRILLION.
Read that number again. $1.2 trillion. That’s simply staggering. It’s larger than the size of the entire Australian economy… and constitutes a loss of more than $2.2 million per minute.
This is not a conspiracy theory or irrational fantasy. This is the Treasury Secretary of the United States of America publicly announcing that the federal government lost $1.2 trillion on page ‘i’ of its annual financial report.
(Actually, the federal government’s Net Costs for 2017 were $4.5 trillion while its Taxes and Other Revenues were $3.4 trillion.)
Either way, oh, horrors. Mr. Black informs us that our Monetarily Sovereign government, which has the unlimited power to create dollars, so never can run short of dollars, pumped more of those dollars into the economy than it took out.
Is enriching the economy supposed to be a bad thing? He seems to think so.
What’s even more alarming is that 2017 was a great year. There was no war. No recession. No epic financial crisis.
In his introductory letter, in fact, the Treasury Secretary proudly stated that “[t]he country enjoyed a pick-up in [economic] growth in 2017. Unemployment is at its lowest level since February 2001, consumer and business confidence are at two-decade highs, and inflation is low and stable.”
In short, everything was awesome in 2017.
Hmmm . . . Let’s see. The government pumped dollars into the economy; we had an increase in economic growth; unemployment is low, and inflation is low.
Could there be a cause/effect relationship between adding dollars to the economy and economic growth? Of course, there is.
And then, The Daily Bell article piles ignorance upon ignorance:
If the government loses $1.2 trillion in a GOOD year, how much do you think they’ll lose in a BAD year? How much will they lose when they actually do have a recession to fight? Or another war. Or a major banking crisis?
The answer to that question:
This is not an accident. Large economies have more dollars than do small economics. Thus, adding money, while controlling inflation, grows an economy.
More importantly, how long can something so unsustainable possibly last?
Ah, the inevitable word, “unsustainable.”
Can it last? The federal debt has been called “unsustainable” since 1940.
The Daily Bell doesn’t acknowledge that fact and the basic economic fact that a Monetarily Sovereign nation can “sustain” any size debt denominated in its own sovereign currency.
The Daily Bell then further demonstrates its ignorance of Monetary Sovereignty:
In the report, the government reviews its own assets and liabilities… effectively calculating its “net worth”.
It’s just like how an individual might calculate his/her own net worth– you add up the value of your assets, like your home, car, and bank account balances. Then subtract liabilities like mortgage and credit card debt.
The end result is your net worth. And hopefully it’s positive.
The federal government, being Monetarily Sovereign, is not like you and me or any other individual. It also is not like city, county and state governments or private businesses, all of which are monetarily non-sovereign.
Mr. Black doesn’t understand the difference between Monetary Sovereignty and monetary non-sovereignty, yet he writes about economics!
To be clear, a net worth of negative $20.4 trillion means that the government added up the values of ALL of its assets. Every tank. Every aircraft carrier. Every acre of land. Every penny in the bank.
And then subtracted its enormous liabilities, like the national debt. The difference is negative $20.4 trillion, i.e. the government has far MORE liabilities than it has assets.
First, consider the impossibility of adding up all the federal government’s assets. What is the dollar value of the Grand Canyon? What is the dollar value of Yellowstone National Park? A used aircraft carrier? The Congress and the White House? The Washington Monument? A camp or a fort?
As if that were not sufficiently impossible, tell me the dollar value of a government that has the unlimited ability to create dollars? Think about it.
If you owned a printing press that endlessly and legally could print dollars, what would you be worth?
The government’s net worth is hopelessly negative: MINUS $20.4 trillion. And that’s worse than its result from the previous year’s MINUS $19.3 trillion– meaning that the government’s net worth decreased by about 6% year over year.
If the government were a business, it would have gone bankrupt long, long ago.
Finally, one true statement from The Daily Bell. Yes, if the government were a business, it would have gone bankrupt long, long ago.
So, Mr. Black, think very carefully: Why has the government not already gone bankrupt?
On top of that, though, the government separately calculated its long-term liabilities from Social Security and Medicare.
As we frequently discuss, both Social Security and Medicare are running out of money.
Yes, The Daily Bell does frequently make that regrettably wrong statement.
But both Social Security and Medicare are federal government agencies. No federal government agency ever can run out of money unless Congress and the President want that agency to run out of money.
All the hand-wringing about Social Security and Medicare and their so-called “trust funds” running out of money is completely bogus — a performance devoted to fooling the public.
And according to the government’s own calculations (on page 58), the “total present value of future expenditures in excess of future revenue” for Social Security and Medicare is MINUS $49 TRILLION.
This merely means that Social Security and Medicare will spend more than the total of FICA taxes. But, contrary to popular wisdom, FICA does not fund Social Security and Medicare. The federal government does.
Even if FICA collections totaled $0, the federal government could continue funding Social Security and Medicare, forever.
Essentially this means that the two largest and most important pension and healthcare programs in the United States are insolvent by nearly $50 trillion. Altogether, the government is in the red by almost $70 trillion.
Even if those questionable figures were correct, they merely would mean that the federal government is projected to pump 70 trillion more dollars into the economy than it takes out.
The Daily Bell doesn’t understand that enriching the economy by $70 trillion is a good thing for the economy, and no burden whatsoever on the federal government or on federal taxpayers.
It’s remarkable that this is not front page news. There has not been a single utterance from mainstream media about the pitiful, dangerously unsustainable finances of the federal government.
Yes, again “unsustainable.” But as usual, The Daily Bell is wrong, because one of the major problems facing the U.S. is that mainstream media do, in fact, wail about the so-called “unsustainable” finances of the U.S.
And that wailing is what has led to unnecessary cuts in social benefits and the ridiculous “debt ceiling” and equally ridiculous “debt clocks.”
I’m certainly not suggesting that the sky is falling, or that there’s some imminent disaster that will strike tomorrow morning.
But that is exactly what Simon Black, the author, is suggesting, and it is diametrically wrong.
If however, the federal deficit and debt were declining, there would constitute an imminent disaster.
The last time the federal debt declined was during the Clinton administration (1998-2001), and that decline caused the recession of 2001.
But any rational person needs only look to the pages of history to find dozens of examples of once-dominant powers who were crippled by their excessive debts.
It may take several years to feel the full impact. But it would be utterly foolish to believe that this time is different.
Tellingly, Mr. Black does not provide even one example of a Monetarily Sovereign, “dominant power,” that was crippled by debt.
A Monetarily Sovereign nation can be crippled by several things — war, natural disaster, giving up its Monetary Sovereignty (as the euro nations have) — but debt isn’t one of them.
My suggestion to Mr. Black and The Daily Bell: Return to selling gold to suckers. You will do much less damage that way.
That said, I’ll continue to read The Daily Bell (once in a while). It’s painful, but it’s revealing and darkly entertaining. Breitbart, too. As for Hannity — no, that’s too painful. How much ignorance can a human survive?
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.
10 thoughts on “Liberals, conservatives and gold bugs talking past each other.”
In the FRED chart you posted that shows Federal debt and GDP, one disturbing feature of the chart is how those two lines converge after the great recession. Prior to that there was a fairly consistent gap, which had to do with the velocity of federal deficit dollars spent into the economy that helped to drive higher rates of GDP.
Since 2010, the rate of debt growth has increased dramatically relative to GDP. This trend has everything to do with the widening gap between the 1% and the 99%. Federal deficit spending today is largely helping enrich the 1% at the expense of everyone else (new Republican tax law being the latest example). While increasing federal deficit spending is certainly sustainable, the current trend on how that deficit spending is being used in the economy is most assuredly not.
I like your analysis. Of course. nothing says that deficit spending should proportionately increase GDP. There are far too many factors influencing GDP for there to be a proportionate response to one factor: Deficits.
As you noted, the point is that deficits are not “unsustainable” and in fact are beneficial to economic growth.
Totally agree that deficits by themselves don’t necessary drive proportional responses in GDP, but federal spending does. Deficits (outside of recessions) are driven by policy choices and those choices can have widely varying economic effects, both good and bad.
Trillion dollar deficits based primarily on tax breaks to the wealthy will have a much different economic impact than trillion dollar deficits spent on infrastructure, health care, or education. While the former is not necessarily bad, the latter is certainly more beneficial for the 99%.
My point in the first post was that if the federal deficits post 2010 were based on public investment rather than Wall Street handouts (including low interest rate monetary policy), tax breaks, corporate subsidies, and foreign defense spending, then it is unlikely we would have seen the convergence of GDP and federal debt. It is also likely that wealth/income inequality would be in a much better condition than is evident today.
Increasing federal deficits are both desirable and sustainable, increasing wealth inequality is neither. Both are policy choices.
Yes, with regard to federal spending, “where” is even more important than “how much.”
There is a way of writing GDP in terms of fiscal deficit.
GDP = govt spending + non govt spending + net exports
= ( fiscal deficit – 0*tax) + K (fiscal deficit -tax) + net exports ,
K being an empirical factor on the order of 4 (almost exactly 4)
The economy runs on fiscal deficits.
For the value of K see my plots in
If UBI is added to fiscal deficit, GDP increase to (1+K) UBI. K, the economic multiplier for the economy. For USA it is 4. Probably the same for all economies.
This boost is = 5*UBI. All this money in peoples’ hands will do wonders because private enterprise is self interest. There will automatically improvements to schools, roads and so on, people like nicer surroundings and a clean environment.
What did this cost? UBI Is in the nature of created zero cost money. An infinite return on investment!
Of course, you can get more GDP by removing all federal taxes too, by 4* tax.
Why is this curve not used by conventional economists?https://skeltonphd.files.wordpress.com/2013/06/slide1.jpg
the federal balance of created money.
By “conventional,” do you mean economists who were educated by professors who have no understanding of Monetary Sovereignty?
My question for such people is: “How are your comments about federal finances different from what you would say about state finances?
Surprisingly (or perhaps not surprisingly), that question never is answered on point. They usually digress into something off subject, and never do get around to the subject, which is money creation, taxes, borrowing, and inflation.
I wrote recently and there were a lot of snide remarks about MMT. That’s why I asked the previous money balance which rubs them the wrong way.
I literally wanted your comments after your reviewing what I asked you to review.
From: Choi, KiWhan
Sent: Thursday, March 01, 2018 4:46 PM
To: ‘#Monetary Sovereignty – Mitchell’
Subject: RE: [New post] Liberals, conservatives and gold bugs talking past each other.
Thanks. Anyhow, have you watched some YouTube videos of Prof. Kotlikoff here https://www.kotlikoff.net/node/8 ?
He is a smart, prestigious, and experienced expert, and his ideas seem not bad. Let me get your comments after you watching some of his videos if you don’t mind.
I agree that the USA is monetarily sovereign. However, it does not mean that we may ignore such a huge deficit and money printing, which may cause inflation and bubbles?
Keeping balance is not important to have a sound economy?
Depends what you mean by “balance.” If you mean a balanced federal budget, that would be a disaster for America. If you mean there is some point at which a deficit can cause inflation, I agree. But we are nowhere near that point, especially since that never has happened in ourhistory.
If you want my opinion about Kotlikoff, go to: https://mythfighter.com/2014/08/01/why-america-is-ignorant-laurence-kotlikoff-teaches-our-children/