An excellent idea, soon to be ruined

“In a generation hard hit by the Wall Street crash of 2008, the government forgives all student debt and ends the absurdity of sentencing an entire generation to a lifetime of debt for the ‘crime’ of getting a college education,”
Sen. Bernie Sanders

I could not agree more. Education is our prime device for creating America’s economic growth and leadership.

The notion of making education difficult to obtain, while punishing those who get an education, either is madness or stupidity — both, really.

Two of The Ten Steps to Prosperity — Step 4: Free education for everyone, and Step 5: Salary for attending school (see below) address the issue.

Image result for bernanke and greenspan
It’s our little secret. Don’t tell the people we don’t use their tax dollars.

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. 

Sadly, the following two articles tell why the madness and stupidity will not easily be solved.

Sanders, Progressives Unveil Bill To Cancel Student Debt
THE ASSOCIATED PRESS — BY LAURIE KELLMAN AND ELANA SCHOR

WASHINGTON (AP) — Days before the first Democratic presidential debates, Sen. Bernie Sanders and House progressives are unveiling legislation cancelling all student debt, going further than a signature proposal by Sen. Elizabeth Warren as the two jockey for support from the party’s liberal base.

Excellent idea. We absolutely should cancel student debt. We should take the millstones from the necks of our future social, economic and political leaders. See: Student debt, the intentional crisis.

By canceling all student loans, Sanders says the proposal addresses an economic burden for 45 million Americans.

The key difference is that Warren’s plan considers the income of the borrowers, canceling $50,000 in debt for those earning less than $100,000 per year and affecting an estimated 42 million people in the U.S.

There is no economic reason to consider the income of borrowers. Warren’s plan is based on the false idea that federal spending is financially limited and is paid for by taxpayers.

I’m sure Warren knows that the federal government has the unlimited ability to spend, and that federal taxpayers do not fund federal spending. (The federal government, being Monetarily Sovereign, does not use tax dollars.

Instead, each time it pays an invoice, it creates new dollars, ad hoc.)

Sadly, Warren seems to lack the courage to tell voters the truth.

Questions face both candidates about how to pay for all of that plus their proposals for free tuition at public colleges and universities.

Sanders’ effort at one-upsmanship on student loans, named the College For All Act, would cancel $1.6 trillion of debt and save the average borrower about $3,000 a year, according to materials obtained by The Associated Press.

The result would be a stimulus that allows millennials in particular to invest in homes and cars that they wouldn’t otherwise be able to afford.

Yes, not only would the elimination of student loans benefit students, but the additional dollars in the economy would grow the economy.

But here is where the excellent idea goes sour:

It would cost $2.2 billion and be paid for — and then some — by a series of taxes on such things as stock trades, bonds and derivatives, according to the proposal.

Absolutely wrong. Unlike state and local taxes, federal taxes do not pay for anything. In fact, they are destroyed the instant they reach the U.S. Treasury.

Thus, Warren guarantees her plan will be rejected by the rich (who actually run America):

Warren’s plan, which she has suggested in published reports will be introduced as legislation, would be paid for by imposing a 2% fee on fortunes greater than $50 million, a wealth tax designed to target the nation’s top 0.1% of households.

Not only will this idea be dead on arrival at the U.S. Senate, but it also will prove to be uncollectable. The rich always find ways to duck taxes.

Warren projects the levy would raise $2.75 trillion over 10 years, enough to pay for a universal child-care plan, free tuition at public colleges and universities, and student loan debt forgiveness for an estimated 42 million Americans — with revenue left over.

Even if the economy operated the way Warren seems to think, she is proposing that the federal government take $2.75 trillion from the economy, and because there would be “revenue left over,” return less than $2.75 trillion to the economy — a net loss for the economy.

But if the free college and student debt relief advocates don’t hit their revenue goals, they could simply add to the deficit — as President Donald Trump and congressional Republicans have by passing more than $1 trillion in tax cuts without paying for them.

Exactly right. And just like the tax cuts and everything else that takes dollars from the federal government and gives them to the private sector, the student debt relief would stimulate the economy.

Here’s one more example of economic ignorance, ironically titled, “Bernie Sanders doesn’t have a clue about Economics 101 (and that’s scary)”
By Andy Puzder | Fox News

The Mercatus Center, a think tank at George Mason University, “conservatively” found that Sanders’ “Medicare-for-All” would cost taxpayers $32.6 trillion over a 10 year period, or an average of about $3.26 trillion per year after associated cost saving.

The question is where would Sanders find the additional $3.26 trillion in revenue to cover these costs?

Mercatus found that “doubling of all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan.”

That makes sense as the federal government’s total revenue  from all sources for fiscal year 2018 was $3.3 trillion, or about the $3.26 trillion annual cost of Sanders’ proposed healthcare plan.

If the plan had been proposed for a city government, a county government, or a state government, the above would be correct. Those governments are monetarily non-sovereign. They do need to use tax dollars for spending.

But the federal government’s finances are unique — nothing at all like state and local government finances. The Monetarily Sovereign federal government has the unlimited ability to create its own sovereign currency, the U.S. dollar.

The federal government never can run short of dollars.  Even if all federal tax collections were $0, the federal government could continue spending, forever.

Puzdner’s  article ends with this ignorant nonsense:

Should we ever enact Sanders’ economic policies we would end up with higher taxes — on everyone — declining growth, fewer jobs, vastly more borrowing and massive underfunded programs(some new, some old) unable to meet the expectations of everyone who wants to take advantage of them — because their costs will grossly exceed our revenue.

All of which will last until, as Margaret Thatcher once said, the government “runs out of other peoples’ money.”

Absolute tripe. Our Monetarily Sovereign government can go on forever with “costs that grossly exceed revenue,” simply because the U.S. federal government has no use for revenue.

I pray for the day when the populace finally learns the differences between Monetary Sovereignty and monetary non-sovereignty. Then, the politicians, magazine writers, and economists will claim in Trumpian fashion, “Hey, we knew it all the time.”

Meanwhile, the elimination of student debt is an excellent idea, soon to be ruined.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

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

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

 

17 thoughts on “An excellent idea, soon to be ruined

    1. How true. I’ve asked her about this. It seems to be a political decision based on the belief the electorate is too difficult to educate — a surprising conclusion by a guy who calls himself a democratic socialist.

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    2. What’s even more disturbing is that Bernie had Stephanie (and other notable MMT economists) on his ‘dream team’ starting in 2011 and might have begun ‘the conversation’ from his seat in the Senate long before his 2016 run. Imo, that he has chosen to perpetuate neoliberal economic lies tells you everything you need to know about him.
      http://www.sanders.senate.gov/newsroom/press-releases/top-economists-to-advise-sanders-on-fed-reform

      Liked by 1 person

      1. Every hear of “too many cooks”? Stephanie Kelton, Randy Wray, Bill Black, James Galbraith, and perhaps others, understand Monetary Sovereignty. By contrast, Joseph Stiglitz and others, do not. Perhaps, Bernie listened to the wrong people.

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  1. You are correct as usual Rodger. Such a debt jubilee, as well as free college for all going forward, can easily be financed by keystroking the money into existence (and thus the debt into non-existence), period, no tax dollars necessary.

    I think financial transactions taxes, especially the Universal Exchange Tax (UET), are a great idea, but NOT for the specious and utterly spurious reason of “paying for” any sort of plan at the federal level. Rather, I support them on Pigouvian grounds.

    Such financial transactions taxes, though small enough to be mistaken for a rounding error for the average person, it would really help tame the Wall Street casino with its externality-generating activities of speculation and high-frequency automated trading with bots, and would make money laundering more difficult and expensive as well. It’s like how reasonable alcohol taxes are barely even noticeable by light to moderate drinkers, but hit heavier drinkers the hardest, as they should since they generate the most negative externalities.

    Also, a financial transactions tax would be a great replacement for most state and local taxes (especially highly regressive taxes like sales and property taxes), and having a federal one will make it easier for state and local governments to piggyback on it by adding their own.

    As for Warren putting an arbitrary and artificial (and unnecessary) limit on the amount on the amount forgiven, that may simply be a tactic to increase popular support for the program, given our culture’s fear of “moral hazard”. Americans’ old Puritanical background apparently still looms large with its outdated moral codes along with our atavistic gold-standard psychology, and she is probably appealing to that.

    When a person’s debt (college or otherwise) seems “outrageous”, “stupid”, and “their own fault” to the average person, the story of the Ant and the Grasshopper apparently comes to mind. Of course, moral hazard does not really apply in this case, and ever since we bailed out the big banks in 2008, that genie is kind of out of the bottle at this point.

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  2. ” … It seems to be a political decision based on the belief the electorate is too difficult to educate…”

    You can’t know unless you try. But therein lies the rub. If you come out in favor of MS, then you FEAR your “students” will think you a nut job as well as your political competition. Bernie folded as will any politician that fears loss.

    Gays “came out “; fear lost and truth won. The 1950’s “communists” came out and Sen. McCarthy lost.

    Liars and their fear lose, but time is running thin for The People V. Universal Debt.

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    1. The irony is that Bernie stupidly calls himself a “Democratic Socialist” (whatever that means), which guarantees he will be called a Socialist, thereby losing the majority of the country. Courage often is rewarded. Stupidity, not as much.

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      1. The only way to defeat fear and stupidity is with the truth. Bernie should simply state that there is no socialism in the USA. Socialism means business is owned and run by the State.

        But our federal government does INDIRECTLY insure “capitalism’s” success by way of bail outs, loans, military contracts, tax breaks and subsidies galore. Capitalism could not make it without the public sector even though capitalists likes to complain and appear independent of government.

        Bernie needs to acknowledge capitalism’s trickery and facade, then go full steam ahead with the reality of MS and let the chips fall where they may.

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        1. To be fair, Senator Sanders has already explained his conception of Democratic Socialism as essentially just a revival of FDR’s policies :

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          1. I don’t know what he believes but the concept’s definition can be fluid. In the video, Senator Sanders offers us his definition.

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      2. Indeed, if I was Bernie’s advisor (economic or otherwise) the very first thing I would tell him is that he needs to jettison the words “socialism”, “socialist”, and all permutations thereof, from his vocabulary, stat! Same goes for AOC as well. Call yourself progressive, liberal, leftist, mutualist, or even post-capitalist, but NOT socialist! Even the European “social democrat” sounds a bit suspect on this side of the proverbial pond these days.

        Liked by 1 person

  3. Really old problem with a simple solution as far as knee jerk reactions go. Witness retarded is special needs, War Dept = defense department, Negros > Blacks > people of color.

    We like ice cream socials and socializing, but put an -ism on it and you cut your throat.

    We don’t educate people according to truth, rather to scary stereotype reactions. The truth is when scarcity is dominant it’s best to use the profit motive, individual incentive and capitalism to get an economy going full blast. But once you reach the abundance stage of a developed economy, socialism (New Deal) becomes the better means of returning wealth to the people and saving capitalism’s reputation.

    This is why everyone wants “in” on the early ground floor for the big buck opportunity and, simultaneously, push good, but scarce, ideas/inventions into mass production. Once mass abundance and market saturation is achieved, corporations start looking for government ( indirect socialism) to help keep them afloat. Witness the big bailouts of the Eighties, such as Chrysler and the huge no bid military contracts for other Blue chippers.

    Most people don’t understand today’s realities; that they’re being hoodwinked and kept in the dark by Established instutions, the Media’s evening “news,” schools from kindergarten to college who want you to specialize, i.e. not see the whole picture– let the politicians handle that! Just mind your own business and nose to the grind stone. Pay no attention to that man behind the curtain!!

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