How to lose an election by being too smart.

I like Elizabeth Warren.

I like her tireless energy. I like her desire to narrow the Gap between the rich and the rest. I like her compassion and her morality. I like her intelligence.

What a refreshing difference between her and the current occupant of the White House.

But it may be her high intelligence that costs her the election.

Consider these headlines:

Elizabeth Warren Wants To Pay for Medicare for All With a $9 Trillion Tax That Will Hit the Middle Class
Warren says it’s not a tax. But what else would you call a requirement that employers send money to the federal government to finance a public program?
And:
Elizabeth Warren’s Medicare for All Dilemma
And:
Elizabeth Warren’s Tax-Hike Evasion
And:
How Warren’s Medicare for All plan could impact the middle class financially
By Tami Luhby, CNN

Sen. Elizabeth Warren has promised that she won’t raise taxes on the middle class “by one penny” to finance “Medicare for All.”

The Massachusetts Democrat’s funding proposal, now key to her 2020 platform, is chock full of new levies on employers, corporations, the wealthy and financial firms.

She highlights that people would save $11 trillion that they would have spent on premiums, deductibles and co-pays over the next decade — but that benefit isn’t completely tax-free. Americans of all incomes would fork over $1.4 trillion more in taxes over 10 years.

Buried in the footnotes of the proposal is the assumption that earnings would be taxed at higher marginal income tax rates due to the full repeal of the 2017 Republican tax cuts. The proposal assumes marginal tax rates would rise by 2.3 percentage points.

Warren has two problems:

  1. She has a tax plan to solve the “How will you pay for it” non-problem, and
  2. Her tax plan is so complex and convoluted, few people can understand it, and fewer yet agree with its calculations.

So this mysterious, dark cave of data not only steals attention away from her plan’s coverage benefits, but it also inserts suspicion that she is using fiscal sleight-of-hand to hide something.

This is a bad sign for the passage of a program that actually will use zero tax dollars (because unlike state and local taxes, federal taxes do not fund anything).

The U.S. federal government uniquely is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar.

When Warren is asked, “How will you pay for it,” her response should be:

“We’ll pay for it the same way we are paying for the GOP’s increases in military spending and tax cuts for the rich. We’ll pay for it the same way we pay for White House lawn mowing and Air Force 1, Congressional travel and meals, and Supreme Court robes:

The federal government simply will push a computer key.”

Then she can quote:

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

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.” 

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.”

The federal government creates dollars, ad hoc, every time it spends dollars. Unlike states, counties, cities, businesses, you, and me, the federal government needs no income.

The government creates new dollars, ad hoc, every time it spends dollars. It neither needs nor uses tax dollars, nor does it borrow.

Why does the government levy taxes? Two reasons, both having to do with control:

  1. To control the economy, it taxes what it wishes to limit, and gives tax breaks to what it wishes to encourage.
  2. To control you by making you believe dollars are scarce so you will not demand free benefits. By impoverishing taxpayers, and then doling out dollars as it sees fit, the federal government exerts powerful control over the lives of taxpayers.

Tami Luhby’s article continues:

Warren’s campaign told CNN that she only supports repealing the tax cuts for the wealthy and big corporations — not middle-class families — and doing so would have no material effect on the revenue estimate.

Tax cuts for corporations benefit the economy by leaving more growth dollars in the economy, and by helping businesses grow. Eliminating those tax cuts is anti-growth.

Warren proposes an anti-growth solution to the “How will you pay for it” non-problem.

Another provision of Warren’s plan — which calls on employers to foot a large share of the bill — could also affect the middle class in an indirect way, say some economic experts and opponents.

Under her proposal, employers would no longer pay premiums to private insurers, which on average cost them more than $14,500 annually, on average, for family coverage.

Instead, companies would write a check to the federal government for 98% of their current health insurance tab to foot nearly half bill for Medicare for All.

She calls this $8.8 trillion levy an “employer Medicare contribution.”

When employers pay premiums to private insurers, the growth dollars stay in the economy, but when employers pay taxes to the federal government, those dollars disappear from the economy.

Here, again, Warren’s plan is anti-growth.

Workers typically receive lower wages because companies factor tax free health insurance costs into their total compensation. So if employers no longer had to pay for health coverage, they would use some of the savings to boost taxable salaries.

“She has found a clever way to make middle-income people finance a portion of government health insurance without paying a direct tax,” Gleckman said. “But make no mistake, they still will be paying.”

This isn’t exactly true. Both salaries and healthcare costs are tax-deductible to corporations. So from that standpoint, the plan is a wash.

But salaries require (unnecessarily) FICA payments from employers and from employees. So employers and employees both would pay more FICA tax to the government, and this represents a net dollar loss to the economy.

Former Vice President Joe Biden, in particular, has attacked her on this point. His campaign calls this provision “a new tax of nearly $9 trillion that will fall on American workers.”

Other experts, however, counter that the employer Medicare contribution would not prompt companies to further diminish workers’ wages.

“Employers are already paying this in the form of premium contributions to employer plans,” tweeted Topher Spiro, vice president for health policy at the Center for American Progress, which supports a universal coverage model that would retain an employer-based insurance option.

“This is just redirecting the premiums to Medicare.”

Redirecting premiums from private insurers to Medicare removes growth dollars from the economy.

Warren and Sanders insist on eliminating the employer-based option. The byzantine tax maze plus the unexplained elimination of private insurance are together enough to make taxpayers throw up their hands and say, “Forget it.”

Smart people may not understand how less intelligent people “don’t get it.” Perhaps her brilliance has made Warren forget the adage, “KISS. Keep It Simple, Stupid.”

Or, perhaps she believes the populace is too stupid to understand the simple, Monetary Sovereignty truth that the federal government can pay for Medicare, without taxes and without inflation.  

Because Donald Trump is a low-IQ con-artist, he is most adept at keeping things simple — by lying in simplistic terms rather than by explaining the more complex reality.

Drain the swamp,” “Build the wall,” “Make America great again,” “Fake news” all are designed to appeal even to the intellectually impoverished.

Those who serve Trump report that he has difficulty comprehending even one complete paragraph. That being the case, he creates his communications to fit Twitter — something brief enough even he and the voters can understand.

To communicate with the voters, and win the election, Warren should attempt this bit of simplicity by saying: “We’ll eliminate FICA, and give you free, no-deductible Medicare and long-term disability.”

Or better yet:No FICA; Free Medicare”, and produce some baseball caps with the letters, “NFFM.”

Or, she can keep turning herself inside out, and look dishonest trying to “prove” she can pay for a trillion-dollar program without federal deficit spending or tax increases.

I hope her honesty will prevail.

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.

MONETARY SOVEREIGNTY

5 thoughts on “How to lose an election by being too smart.

  1. Yeah, I suspect the real issue is her (and Sanders’) timidity about simply telling the truth. Frankly I have no respect for anyone who uses lies to pander to an uninformed electorate, all political considerations and good intentions notwithstanding. Some claim ‘well, after he gets elected he can do xyz with Stephanie as his advisor or in a cabinet position’. My response to that is: how well has that worked out so far? Not to mention that both Liz and Bernie are in Congress and might have begun the economic reality conversation at some point in between campaign seasons (if ‘in between campaign seasons’ even exists anymore).

    Liked by 1 person

  2. When an earlier Medicare for All bill sponsored by the late John Conyers was being proposed, I came up with my own plan, called Sammycare, because Uncle Sam would pay for it directly with government (Treasury) issued money.

    I used the actual example of U.S. Notes issued by president Lincoln which increased the GDP (at least of the North) by 40%, to pay for the Civil War. I justified this expense not just by the federal government’s ABILITY to pay, but also by desirability of the federal government to make investments that grow the economy, citing an article that showed up to $1.80 in healthcare spending is produced for every $1.00 spent by government (in this case, the study was on Medicaid, but results should be similar for Medicare).

    Money spent by government is not “lost” to the economy, though it may be spent in ways that grow the economy, or not (years ago, I read that only 70 cents of every dollar spent on the military returns to the economy, because weapons sit idle, are blown up, or become obsolete).

    You can read more about it here: http://bit.ly/2o2de0n and a petition for it here: http://bit.ly/Sammycare

    Unlike either Warren’s or Sander’s plans, FICA would not be needed, and its repeal would instantly lift the amount employers could pay employees. Whether they would, or would pocket the tax reduction themselves has to do with competitive forces outside the scope of the plan, and points to another reason to impose taxes just to discourage rent-seeking and monopoly.

    Without something like Sammycare, Warrencare, or Sanderscare, might go the way of Conyerscare.

    The problem though is still how to convince people that government can spend without taxing. Even the old Kings – the ultimate Sovereigns – raised money through taxes. We are still stuck in that intrinsic value way of thinking of money, based on gold, or oil, or something tangible. It’s psychologically very hard to convince people otherwise. That’s why I use the real example of Lincoln and the Civil War.

    Like

    1. Everything eventually sits idle, is blown up, or becomes obsolete. But the dollars continue to circulate.

      Lincoln is a good example. So is pre-war Germany, that often is used as an example of hyperinflation, but really should be used as an example of post-hyperinflation, when the German economy grew massively.

      I use the game of Monopoly Bank as an example of spending without taxing.

      Like

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