The Dumb-dumb Continues

  • The U.S. federal government, unlike state and local governments, is Monetarily Sovereign. Its sovereign currency is the U.S. dollar.
Create meme "to be swimming in money pictures, a rich man , dude with the  money" - Pictures -
The federal government never can run short of dollars. So what is the purpose of federal taxes?

The federal government never can run short of dollars. So what is the purpose of federal taxes?

  • It created the very first dollars out of thin air. The government arbitrarily gave each dollar a value, and continues to do the same, even now.
  • It does all this by arbitrarily passing laws. The federal government never can run short of dollars.
  • It pays all its bills by creating new dollars, ad hoc. Even if the federal government collected $0 taxes, it could continue spending forever.
  • Misnamed federal “debt” actually is the total of deposits in T-security accounts, which resemble interest-paying, safe deposit boxes.The federal government never touches those dollars, and upon maturity, the government “pays off” the debt (deposits) simply by returning the dollars in those accounts. No tax dollars are used.

All federal tax collections are destroyed upon receipt by the Treasury. They cease to exist in any money-supply measure.With the above in mind, let us examine the following article from the Washington Post:

THE FIX By Peter W. Stevenson President Biden’s White House is in the process of putting together a proposal for an enormous infrastructure and jobs bill — a bill that seems as though it could lead to the Democrats’ second use of the reconciliation process to pass a piece of major legislation without any Republican votes in the Senate. Biden’s team first dreamed up a bill that calls for about $3 trillion in new spending.

The first iteration of the plan would have been offset by about $1 trillion in new taxes. 

But, The Washington Post’s Jeff Stein reports, the team second-guessed itself, worrying that simply left too big a spending deficit, which could, in turn, cause economic mayhem.

Why is the federal deficit “too big”? The net total of all deficits is about $25 trillion. The economy is doing very nicely, thank you, and 2021 promises to be excellent.

So what exactly makes the deficit “too big”? You will not find an answer to that question, at least not a truthful one. 

Because the federal government is Monetarily Sovereign, it can support infinite deficits. In fact, federal deficits pump growth dollars into the economy. When deficits are too small, we have recessions and depressions, which are cured by — you guessed it — running deficits.

Unlike you and me, and the state and local governments, and businesses, the federal government never can run short of dollars. While state and local taxes do “offset” state and local spending, federal taxes offset nothing. Federal finances are nothing like state/local government finances.  

So again, what is the problem with deficits? Ask your political representatives to answer that question. I assure you, they either won’t answer or will answer with a lie. The only problem with deficits is when they are too small to support economic growth.

The second version of the bill, expected to be unveiled this week, more than triples the taxes, to about $3 trillion — and boosts spending up to $4 trillion, Stein reports. 

The revision is an acknowledgment of the limits of new spending, even for Democrats, who are eager to pass more signature legislation while they still control both houses of Congress.

There is no reason for taxes to rise. In fact, the sole purpose of federal taxes is to control the economy by taxing what the government wants to discourage and by giving tax breaks to what the government wants to encourage. 

The purpose of federal taxes is not to provide the federal government with dollars. It already has the infinite ability to create dollars.

But will Congress be able to swallow tax hikes that big? The tax increases would affect businesses, investors and wealthy Americans, starting with a higher tax rate for corporations. 

Biden has said that tax increases for individuals would not affect anyone making less than $400,000 per year. And in a move likely to please his supporters, those changes would come in part by largely reversing President Donald Trump’s 2017 tax cuts.

All federal taxes take dollars from the private sector (aka “the economy”) and destroy them. All taxes negatively affect businesses, investors, wealthy Americans, and not-wealthy Americans.

You can’t drain water from only one end of a bathtub. When tax dollars are taken from anywhere in the economy, everyone is affected. 

Taxes on the rich are levied, not to acquire spending dollars, but rather to narrow the Gap between the rich and the rest of us.

Republicans are already signaling opposition. “The idea we should agree to some huge economy-crushing tax increase so the government can go on yet another spending binge is a nonstarter for me,” said Sen. Patrick J. Toomey (R-Pa.).

Toomey is correct about taxes; they do crush the economy. But he also would vote against a Democratic plan that didn’t include tax increases, because that would increase the deficit.

In short, Toomey opposes all things proposed by Democrats.

“As long as it’s paid for,” Sen. Joe Manchin III (D-W.Va.) said of the bill’s price tag. “This country needs to rebuild itself.”

Manchin simply does not know what he is talking about.

The federal government always has “paid for” all its purchases. No creditor has been cheated. But by “paid for,” Manchin really means “Taxed by an amount equal to spending.”

If, however, the government takes as many dollars out of the economy as it puts in, we will have a recession. And if it keeps taking dollars out, we will have a depression.

Yes, the country needs to “rebuild itself,” and that requires adding federal dollars. A growing economy requires a growing supply of money, and federal deficit spending is an important source of new dollars.

With comments by Biden, Toomey, and Manchin, the dumb-dumb continues.

Rodger Malcolm Mitchell Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereignty Facebook: Rodger Malcolm Mitchell 


  • Monetary Sovereignty describes money creation and destruction.
  • 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:

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


5 thoughts on “The Dumb-dumb Continues

  1. “There is no reason for taxes to rise. In fact, the sole purpose of federal taxes is to control the economy by taxing what the government wants to encourage and by giving tax breaks to what the government wants to discourage.“ – Shouldn’t this be the other way?
    Government taxes what it wants to discourage and gives tax breaks to what they want to encourage?


  2. “There is no reason for taxes to rise. In fact, the sole purpose of federal taxes is to control the economy by taxing what the government wants to encourage and by giving tax breaks to what the government wants to discourage.“ – Shouldn’t this be reverse? Government taxes what it wants to discourage and gives tax breaks to what the government wants to encourage?


  3. Congratulations on your longevity.

    Looks like you changed the formatting of your web site; I think it’s a great improvement. It’s cleaner and easier to read.

    I take issue with your comment after the first block quote above from The Fix. The economy is NOT doing very nicely for anyone except the top 10% or so. Everyone else is suffering from the effects of the pandemic and the lack of adequate government support (spending) over the past several decades.

    And, although the year-to-year growth figures may look impressive over the next few months that’s only because the comparisons will be made with the severely suppressed economy at the beginning of the pandemic.

    There are other serious problems that are yet to come, such as the tsunami of evictions that have been held off by the various moratoriums that keep being extended (thankfully). Once those are lifted you’re going to see a huge increase in homelessness, crimes of desperation, e.g., robbery and theft, and more deaths of despair (suicide, drug overdose, etc.).

    It’s going to take a lot more than a $4 trillion infrastructure plan to get the working class to a place where it’s “doing nicely”.


    1. I agree with your comments. I was too flippant with the “doing nicely” comment, being overly influenced by the S&P and the GDP.

      I’m afraid, however, that according to your definitions, we never shall see the economy “doing nicely.” Do you think you will live long enough to see the end of “poverty, homelessness, robberies, thefts, suicides, drug overdoses, etc.?”

      At what point will you say the economy is “doing nicely.”


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