Why are the Democrats so cowardly?

The Democrats have a great plan. They want to expand Medicare to cover everyone, which could be accomplished very simply by lowering the eligibility age of the current Medicare plan from 65 to 0.

The hard work already has been done. The process has been created. The government, the hospitals, and the doctors all know how to handle the paperwork. Everything is in place.

Just lower the eligibility age, cover everyone, and go.

No need for Medicaid, ACA, Medigap or Parts A, B, C, etc., etc. No deductibles. Just one simple plan for every man, woman, and child in America.

And certainly no need to tell everyone they will be forced to give up their current plans. Simply offer Medicare to everyone, and let nature take its course.

But no. The Democrats get all hung up trying to answer one simple question, “How will you pay for it?”

The correct answer, the honest answer, would be: “Federal deficit spending.”

1. Federal financing is not like state and local government financing. The federal government, unlike state and local governments, is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar.

The federal government never can run short of dollars. It could fund any Medicare for All plan with the push of a computer key.

2. Unlike state and local government deficits, the federal deficit and federal debt are not a burden on anyone. They do not burden the federal government; they do not burden taxpayers.

Unlike state and local taxes, which fund state and local government spending, federal taxes do not fund federal spending.

3. Contrary to a popular myth, federal deficit spending does not, and never has, caused inflation. Inflation, a general increase in prices, is not caused by too much money. Inflation is caused by shortages of food and/or fuel.

Those historical photos showing people carrying paper money certificates in wheelbarrows, fail to show the actual cause of the inflation: Food and fuel shortages. The printing of those certificates was an ineffectual response to inflation, not the cause.

One of the surest cures for any inflation is government deficit spending to acquire and distribute the scarce food and fuel.

Sadly, those Democrats who know all this to be true, are too cowardly to explain it to the public. Instead, they go along with ridiculous articles like the following:

The Democratic plan for a 42% national sales tax
Rick Newman, Senior Columnist, Yahoo Finance — October 28, 2019

If you’re a Democrat who supports “Medicare for All,” pick your poison.

You can ruin your political career and immolate your party by imposing a ruinous new sales tax, a gargantuan income tax hike or a surtax on corporate income that would wreck thousands of businesses.

This is the cost of bold plans.

Or better yet, you can tell the truth about federal financing, and tell everyone who will listen that Medicare for All will be financed the same way as “Military for All,” as well as Congress, the Supreme Court, and the White House.

They all are funded by federal deficit spending.

There is no FICA tax supposedly paying for the Military, the Congress, the Supreme Court, or the White House. There is no tax supposedly paying for Congressional health care, Congressional travel, and Congressional lunches.

The reason why there is no FICA tax, or any other tax, dedicated to paying for these expenses is very simple. Federal taxes pay for nothing. Those dollars deducted from your paycheck, and those dollars you “voluntarily” send to the U.S. Treasury are not needed or used for anything.

They do not fund Medicare. They do not fund Social Security. They do not fund the military, or the Congress, or the Supreme Court, or the White House, or any other of the myriad federal initiatives.

Federal taxes are destroyed upon receipt.

Here is the A-Z Index of U.S. Government Departments and Agencies. You don’t pay for any of them. Even if all federal tax collections totaled $0, the federal government could fund all these activities.

Supporters of Medicare for All, the huge, single-payer government health plan backed by Bernie Sanders, Elizabeth Warren and several other Democratic presidential candidates, say it’s time to think big and move to a health plan that covers everyone.

Getting there is a bit tricky, however. A variety of analyses estimate that Medicare for All would require at least $3 trillion in new spending.

That’s about as much tax revenue as the government brings in now. So if paid for through new taxes, federal taxation would have to roughly double.

Right. IF (big “if”) Medicare for All was paid for through new taxes, federal taxation would have to double.

That is exactly why Medicare for All should not be paid for by taxing people.

It should be paid for via federal deficit spending, which would cost you nothing. Yes, for a Monetarily Sovereign government, lunch really can be free.

Oh, are you worried that the so-called federal “debt” would be an unsustainable “ticking time bomb”? If so, you’re in bad company, for that is exactly what phony “experts” said way back in 1940, and they’ve been saying it every year thereafter.

In 1940, the federal debt was only $40 Billion, and it was a “ticking time bomb,” according to Robert M. Hanes, president of the American Bankers Association.

Today, the federal debt exceeds $22 Trillion, a gigantic 55,000% increase, and that time bomb still is ticking. And the country still is here. And the government still is sustaining.

The Committee for a Responsible Federal Budget (CRFB) spelled out what kinds of new taxes it would take to come up with that much money.

A 42% national sales tax (known as a valued-added tax) would generate about $3 trillion in revenue. But it would destroy the consumer spending that’s the backbone of the U.S. economy.

A tax of that magnitude would be like 42% inflation, wrecking consumer budgets and the many companies that depend on them.

Other options include a 32% payroll tax split between employers and workers or a 25% income surtax on everybody.

Or, the government could cut 80% of spending on everything but health care, which would include highways, airports and the Pentagon.

Or here’s a good one: Just borrow the money and quadruple Washington’s annual deficits.

Or do none of the above, and simply create the money by federal spending, just as the federal government has been doing since 1940, the year Robert M. Hanes had his meltdown.

We’ve written about the CRFB several times before. They are mouthpieces for the very rich, who, because of Gap Psychology, do not want the middle class to receive federal benefits.

The CRFB comes up with all sorts of scare tactics to make you believe federal financing is like state and local financing or personal financing. So they print big deficit numbers and say, in effect, “Oooohh. Look at these big numbers. Aren’t they big?

The best idea might be charging every enrollee in the new program $7,500 per year, so they’d be paying directly for the coverage they’re getting.

Some people pay more than that now for health care, by purchasing insurance outright or sacrificing pay raises in exchange for employer coverage.

It would still be a nifty trick to propose that to voters.

If by “best idea,” Mr. Newman means “another bad idea,” I’d agree. So would the voters.

It’s possible that Medicare for All would cover health care for more people at a lower total cost than we spend now, meaning the average cost per person would go down.

Yes, the cost would be lower, especially if the people are asked to pay nothing for health care, and it all was provided free by the government — and especially if we eliminated the useless, harmful FICA tax, the single, worst, most regressive, pays-for-nothing tax in America.

The problem is transitioning from what we have now to whatever Medicare for all would be.

And it’s a giant problem, like crossing the Mississippi River without a bridge or a boat. The other side might look great but you’ll die before you get there.

The author, Mr. Newman, wants you to believe that having created the entire Medicare program, now simply cutting the eligibility age from 65 to 0 is an insurmountable problem.

That’s like saying that after having built from scratch, a 5,000 square foot house, changing the knob on the front door is ” . . . a giant problem, like crossing the Mississippi River without a bridge or a boat.” Pulleeze.

Warren, Sanders and others tout the virtues of this magical health care program without explaining what it would cost.

Sanders has at least suggested some possible ways to pay for it, including premiums paid by enrollees, a wealth tax on millionaires and income tax rates as high as 52%.

Warren has been cagier, saying only that under her plan “costs” would go down for middle-class families. Under pressure to explain, Warren has pledged to come up with a financing plan soon.

Now, maybe she doesn’t have to.

So again I ask, why are Warren, Sanders, and the rest of the Democrats so cowardly? When all other options lead to failure, why not simply tell the truth?

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and 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 the rest.

 

18 thoughts on “Why are the Democrats so cowardly?

  1. Very well-said as usual, Rodger! The sheer obtuseness and/or cowardice among the otherwise more progressive candidates is truly astounding.

    To paraphrase a famous song, in politics these days we got “wimps to the left of me, crazies to the right, here I am, stuck in the middle with you”.

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  2. On a daily basis, we are unwittingly inundated with extreme nonsense; outright lies is a better way to put it, regarding federal spending. Politicians with the help of these so so-called “economists” and the media, craft tales of pure fantasy concerning federal deficit spending that always frightening, dismal and hopeless.

    The tales are then bound and published in the form of annual budgets. The resulting fiscal policy stance reverberates throughout the economy and society to be per ensconced within the collective mind of the public, left and right and those in between, as “common knowledge”. The so-called “common knowledge” is, in fact, common anti-knowledge purposefully constructed and disseminated to restructure both the economy and society for the benefit of the few who, over the last forty or so years, have been the greatest beneficiaries of federal deficit spending. It’s no conspiracy. It is just business and the wealthy is their influence to make the government to see things their way, just when we vote and our vote is influence. The only difference here is that for business and the wealthy, their money is more influential to politicians than our vote.

    Only the U.S Government has the authority to issue US dollars. It is where all US dollars come from.
    We must find a way to earn those dollars. From the moment that the market sold goods to the federal government. The U.S. Government became the price setter and the market operated using the US dollar subject to the currency-issuing and regulatory authority of the US Government is the sovereign to which the private sector is subject. The gold standard and Bretton-Woods are gone. When President Nixon ended the Bretton-Woods, the US dollar entered into a flexible “Fiat Currency arrangement.

    The national debt of the US-public debt is not a credit card. It is not the mortgaging of our nation’s future. It is nothing more than a bunch of savings accounts. It is every, single US dollar that the US Government has issued since the founding of the nation, that have not been taxed out of existence. All US dollars held in reserve accounts and the total equals the National Debt, to the very last penny. It is not mortgaging the nation’s future.

    How do we “pay for it”? When Congress authorizes the spending. The US Dollar is the monopoly product of the US Government. The federal government’s supply of US Dollars is always equal to infinity. It spends by simply crediting a bank account with numbers. “Money is not the issue here-real resources are. They are finite things. So the question is not, “How do we pay for it. The question is, are their enough resources.

    What is Fiscal Policy?. In simple terms, fiscal policy is when the representative body within a national government decides on things that it will fund, defund, who and what to tax, how much it will tax, which we ridiculously refer to as a “budget” when it comes to sovereign currency-issuing government. The word “budget” used in conjunction with the US Government is highly misleading really. It implies that the government’s finances are just like a household’s and so, it must budget its money. It would be far more honest of us if we cease using the term budget for our National Government and began using the term
    “Fiscal Agenda”-it implies how the government intends to manage the economy and the nation.

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  3. Perfect timing for Halloween tomorrow!

    Here’s the latest book hitting the market, Fear The Future, by Philip Klein of the Washington Examiner.

    It’s a classic example of everything Monetary Sovereignty is railing against: the ever present danger of mounting debt and socialism. The author can’t say exactly when the turning point of collapse will occur, even though there’s a graph of mounting “debt” on the cover. He only states that mounting psychological pressure “to be afraid” will reach a level that will cause people to lose confidence, withdraw their money and markets to collapse.

    A test tube of AIDS virus under my nose would scare me to hell. But if you told me it was filled with a trillion dollars of the Debt Virus I would laugh my butt off.

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    1. ” . . . cause people to lose confidence, withdraw their money and markets to collapse.” So-called debt has been growing for longer than the author has been alive. So has the American economy. You should write to Mr. Klein and welcome him to the Fools’ Club, no membership fees required.

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  4. I’ve been posting the following to some of the libertarian websites trying to elicit a challenge (w/o success). Am I saying anything here that’s wrong or not clear?

    MMT in a nutshell: GDP is the measure of our productive economy. GDP is the sum of household, business and government spending (and likewise the income of those sectors equals that spending, because ALL spending is someone else’s income).

    Our economy depends on household spending (2/3 of GDP). That spending is limited by household income (which comes only from those three sectors). Business provides that income to the extent demand (business opportunity) exists, and government provides the rest (by way of bookkeeping entries to household bank accounts).

    All that’s important to the economy is maintaining this flow, and with a fiat currency (whose value, by definition, depends ONLY on currency-users perception), there are no limits other than that perception.

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    1. Your comments essentially are correct, though the libertarians probably also would agree. Their main thesis is that government is inefficient and enslaving, and to my knowledge, ANY amount of government is too much for the libertarians.

      So while the flow of dollars is clear, as you have stated, government-hating libertarians will find any excuse to criticize federal spending, and this leads to misguided criticism of federal PAST spending (deficit and debt).

      The very rich are “semi-libertarians” in that they don’t hate government so much as they hate government REGULATIONS. The very rich do not want their power to be restricted in any way, though they don’t mind the power that bribed government gives them.

      BTW, I should mention that while this site agrees with MMT in many ways, it also differs in some, which is why we have named it Monetary Sovereignty (MS). Warren Mosler, Professor Stephanie Kelton, and Professor Randall Wray are among the MMTers who have made valuable contributions to my writings, even while I disagree with them on such issues as the Jobs Guarantee (JG) and the need for federal taxes.

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          1. I’ve read all your links & agree with all your criticisms of JG – & those are the very reason I worked thru my own version of such a program. We do have a disagreement in job availability. I believe we’re facing a shrinking paying-job market due to automation & globalization (for which I can post a 1-paragraph argument if of interest), so we may have a difference in perceived need for such a program.

            My approach is more “work” guarantee than “job”. It says local governments can make good use of the availability of free labor, that federal government can pay for that free labor (securely & efficiently with existing technology) & with existing technology, local governments can efficiently administer use of that labor without additional bureaucracy. At the time I wrote that, I did not feel comfortable adding a UBI option into the payment system (for those unable or unwilling to do such work). A later article by Peter Cooper (linked to in the Addenda following my writeup) relieved those concerns.

            I would appreciate your critique of that program.

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          2. People are not “labor.” They are people, with individual desires. Tacit within MMT’s JG and your JG are certain fundamental beliefs, which I do not share:
            1. The unemployed should be grateful to receive any job, no matter how distasteful it may be
            2. People should be required to work for money rather than receiving money without labor.
            3. People constitute “buffer stock,” which can be employed when times are bad and fired when times are good.

            With unemployment quite low, I do not see evidence of “a shrinking paying-job market due to automation & globalization.” This has been a false complaint since the beginning of the Industrial Age. And even if it were true, it easily could be solved in ways that do not require putting people into jobs they don’t want.

            Though you may “agree with all (my) criticisms,” I do not see how your program addresses them. It might help if you were to list each criticism and next to each, show how your program solves it.

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  5. 1 & 2) Under my proposal, people are not “required to work for money” – work is made available in the local community that people can avail themselves of if (& only if) they wish to. (My experience says most people have a real need for work they can feel accomplishment from – & only a small proportion have the capability of creating that work for themselves.)

    3) Unemployment is & always has been a “buffer stock” in our capitalist economy – just not acknowledged as such. But I don’t see my proposal as much buffer stock as a humane path to paying-job shrinkage – for which my argument:

    Human intelligence as a combination of memory, deductive reasoning and inductive reasoning. Computers have proven to be superior to humans in memory and deductive reasoning. Most paid work requires little inductive reasoning — and what little is required can be provided by one human in cooperation with multiple robotic entities. So it’s virtually certain we’re facing an irreversibly shrinking job market. A counter-argument is that the technology will produce new kinds of paid work (as it has in the past) — but in that case, the basic kinds of such work should be describable — and, most importantly, an explanation offered as to why this new work isn’t as susceptible to automation as was the old work. And to date, I’ve seen no one attempt that.

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  6. As you suggested, responses to your comments specifically from your “How the MMT Jobs Guarantee ignores humanity” article. If your reaction is “this isn’t Job Guarantee”, agreed – it isn’t – just serves the function in a humane way.

    1) A “living wage” is not, and never can be, “a national minimum wage” of any specific amount => Local government may negotiate their “living wage” upon entering the program OR a geographic cost-of-living adjustment can be made (similar or the same as that used by Medicare).

    2) Federal taxes do not fund federal spending. => True

    3) Exactly how will the government be able to “offer jobs where people live”? => Work (not jobs) are offered. The work offered is determined by local government on the basis of what it perceives to be beneficial to the local community.

    4) But workfare is exactly what JG is. => Participation by local government (& its people if it chooses to participate) is totally voluntary & no social benefits are provided.

    5) Who will do the training? => The only training provided is by local government managers, if/when/where they deem needed or helpful.

    6) Project implementation and management will be decentralized. => It is by local government control.

    7) Scale up existing projects? => Local managers can scale up or down as desired & cooperate with managers from other local governments on larger scale projects as desired.

    8) subsidize the wages of workers => No involvement with local businesses other than what local government deems beneficial to the community.

    9) Direct employment by the federal government => The only involvement of federal government is paying the bills.

    10) Inclusivity and experimentation should be encouraged => Work & communication experimentation is encouraged

    11, 12, 13) federal involvement => N/A

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    1. “Work not jobs” Huh? “Local government managers do the training? Yikes!

      Local government control? Local managers scale up or down? Work & communication experimentation is encouraged? And all those “if it chooses,” “they deem needed,” “local control,” “as desired,” “deems beneficial,” and “encouraged.”

      I can summarize your plan in 17 words: “Give the states lots of money and let them do whatever the hell they want with it.”

      Actually, that would be a good plan, except the state & local pols would steal it all.

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      1. “….state & local pols would steal it all….

        And after they steal it, replace it with the usual MS/MMT keystrokes, ad infinitum, until their thick skulls realize they can’t “break” the system and going “broke” is impossible!

        What MS and the job-based mmt folks have developed is an abundance model essentially w/o limit. However, MMT is locally job based, while MS is comprehensively non-restrictive. In either case, “how” to fund this or that and survive very well w/o calamity is too good to be true for the unknowing enemies of success.

        Let’s face it, a potentially successful economic model escapes, and ironically, threatens the ignorant and insecure who fear a change in their status. Thus the totally rediculous pushback and an eternal dilemma of their own making.

        ALL political theories, socialist or non-socialist, that hold to 18th century pre-industrial scarcity, are doomed to failure as evidenced by increasing social discord that may also erupt into bringing down the whole planet.

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  7. Commentator Thom Hartmann discusses the Republican Santa Claus strategy that cynically uses the national debt to reduce government spending, but only when Democrats are in office: https://www.opednews.com/articles/The-GOP-s-Most-Successful-by-Thom-Hartmann-Budget_Corporate_Credit_Debt-190104-794.html
    Basically, the idea is that when there is a Republican president, and even more so on those rare occasions when they control both houses, spend like crazy on the Military, subsidies for fossil fuel corporations, Big Pharma, and other right wing donators, and increase the debt through tax cuts. Then, when the Democrats are in power again, start screaming about the debt and how it will cause a collapse, and this will force the democrats to cut programs people actually want, like Social Security and Medicare. This is the anti-Santa Claus part. When people are fed up with that, they will vote Democrats out of office again. Rinse and repeat.
    Instead of spending time understanding economics, it might be better to understand politics and psychology that makes people continue to believe gov’t spending is debt-constrained when it isn’t. There have been a number of well founded studies and articles showing that even poor rural areas of the country are willing to vote in Republicans who will cut their services, over Democrats who will channel more money their way. People will vote against their own best interests to decrease a debt that in no way affects them. They would rather stay poor as long as they can feel they acted “responsibly.” The rich hardly have to do anything in that case, except get even richer.

    Liked by 1 person

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