The Big Lie in economics is, “Federal taxes fund federal spending.”
While state and local taxes fund state and local spending, federal taxes do not fund federal spending. The difference is that state and local governments are monetarily non-sovereign, while the federal government is Monetarily Sovereign.
Either the authors of the following article and the entire Congress of the United States are lying, or they really don’t understand the differences between monetary non-sovereignty and Monetary Sovereignty. Both possibilities are disgraceful.
The differences are described in detail here, but fundamentally, a Monetarily Sovereign government is the creator and issuer of its own sovereign currency, in this case, the U.S. dollar.
The U.S. is Monetarily Sovereign because it created the U.S. dollar from thin air by passing laws from thin air. Just as it never can run short of laws, the federal government never can run short of its dollars.
Even if the federal government collected zero taxes, it could continue spending forever because it has the infinite ability to create its own sovereign currency.
By contrast, state and local governments did not create the U.S. dollar.
They, like you and me, simply are users of the dollar. And unlike the federal government, they and we all can run short of dollars.
These differences mean that federal government financing is nothing at all like personal or state/local government financing, but the purpose of the Big Lie is to make you believe federal financing and personal financing are similar.
Just one of the dozens of examples: While state/local governments use tax dollars for spending, the federal government destroys tax dollars upon receipt.
Here’s what’s in the bipartisan infrastructure package
By Katie Lobosco and Tami Luhby, CNN, November 15, 2021
It will deliver $550 billion of new federal investments in America’s infrastructure over five years, touching everything from bridges and roads to the nation’s broadband, water and energy systems.
Experts say the money is sorely needed to ensure safe travel, as well as the efficient transport of goods and produce across the country. The nation’s infrastructure system earned a C- score from the American Society of Civil Engineers earlier this year.
Democrats claim the legislation pays for itself through a multitude of measures and without raising taxes.
The legislation cannot “pay for itself,” nor can spending cuts pay for the legislation, nor can tax increases pay for the legislation.
The legislation will be paid for the same way all federal legislation is paid for:
- The involved federal agencies will send instructions, in the form of checks or wires, to the federal government’s creditors’ banks, instructing these banks to increase the balances in the creditor’s checking accounts.
- At the instant the banks obey those instructions, new dollars are created, deposited in checking accounts, and added to the M1 money supply.
- To balance their books, the banks then clear these deposits through the Federal Reserve which debits the federal government’s infinite supply of dollars. Thus federal deficit spending adds growth dollars to the economy.
- Had the federal government levied an equal amount of taxes, these tax dollars would not have “paid for” what was owed — the instructions already paid for it — but the taxes would have removed growth dollars from the economy.
The Congressional Budget Office brushed aside several of those pay-for provisions, ultimately finding the package would add $256 billion to the deficit over the next 10 years.
Translation: The package would have added 256 billion growth dollars to the economy at no cost to anyone — no cost to taxpayers, no cost to our children and grandchildren, no cost to anyone. The dollars would have been created by the banks obeying federal instructions.
The legislation calls for investing $110 billion for roads, bridges and major infrastructure projects. That’s significantly less than the $159 billion that Biden initially requested in the American Jobs Plan.
Translation: But for the Big Lie, an additional $49 billion could have been used to grow the economy,
Included is $40 billion for bridge repair, replacement and rehabilitation, $16 billion for major projects that would be too large or complex for traditional funding programs, $11 billion for transportation safety, $1 billion to reconnect communities, and $39 billion to modernize public transit, according to the text.
That’s less than the $85 billion that Biden initially wanted to invest in modernizing transit systems and help them expand to meet rider demand.
That’s $46 billion in growth that will not happen because of the Big Lie.
The legislation provides a $65 billion investment in improving the nation’s broadband infrastructure, according to the text. Biden initially wanted to invest $100 billion in broadband.
Translation: 35 billion new growth dollars will not enter the economy.
And now we come to a flat-out statement of the Big Lie:
How Congress will pay for it
The legislation includes a multitude of measures to pay for the proposal — none of which would raise taxes.
But while lawmakers claim the package pays for itself, the CBO score found it would instead add billions of dollars to the deficit over 10 years and that many of the pay-for provisions would not raise as much money as Democrats said they would.
No federal spending can “pay for itself.” The federal government pays for everything by issuing instructions, which it has the unlimited ability to do.
The bottom line is that the legislation would directly add roughly $350 billion to the deficit, when taking into account $90 billion of spending in new contract authority, said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan group that tracks federal spending.
Translation: The legislation would directly add roughly 350 billion growth dollars to the economy.
The Committee for a Responsible Federal Budget (CRFB) is a group that is paid by wealthy people to promulgate the Big Lie. The primary purpose of the Big Lie is to prevent the general public from asking for federal benefits. The goal is to widen the Gap between the rich and the rest, thus making the rich richer.
According to the text and a 57-page summary of the legislation, lawmakers leaned heavily on repurposing unused Covid-19 relief funds to pay for the legislation.
Translation: Rather than creating 22 billion growth dollars for COVID relief, those growth dollars will instead supposedly be used to “pay for” Biden’s programs.
Another item in the text is $53 billion that stems in part from states opting to terminate the pandemic unemployment benefits early in hopes of pushing the jobless to return to work. Some 24 states stopped at least one of the federal unemployment programs before they officially ended in early September.
Translation: Rather than giving the $53 to the lower-income people as unemployment benefits, Congress has decided to starve these people into submission, so in desperation, they will go to poorly paying and/or unpleasant jobs they otherwise would have avoided.
This way, the rich factory owners can rule with iron hands over needy workers.
The agency also found that the Federal Communications Commission’s spectrum auctions would generate far less than the $87 billion originally claimed by lawmakers.
Translation: The agency also found that the Federal Communications Commission’s spectrum auctions would take far fewer dollars from the economy than the $87 billion originally claimed by lawmakers.
The CBO also said that the legislation will raise about $50 billion by imposing new Superfund fees and changing the tax reporting requirements for cryptocurrencies, among other measures.
Translation: $50 billion unnecessarily will be taken from the public for fees and taxes.
The package leaves out Biden’s proposal to spend $400 billion to bolster caregiving for aging and disabled Americans — the second largest measure in the American Jobs Plan.
Translation: $400 billion would have grown the economy, but why should the aged and disabled poor receive dollars when the rich have tax loopholes to exploit?
His proposal would have expanded access to long-term care services under Medicaid, eliminating the wait list for hundreds of thousands of people. It would have provided more opportunity for people to receive care at homethrough community-based services or from family members.
It would also have improved the wages of home health workers, who now make approximately $12 an hour, and would have put in place an infrastructure to give caregiving workers the opportunity to join a union.
None of the above were included because they don’t benefit the rich.
Also left on the sideline: $100 billion for workforce development, which would have helped dislocated workers, assisted underserved groups and put students on career paths before they graduate high school.
Translation: 100 billion growth dollars would have stimulated the economy, but we really don’t care about dislocated workers, underserved groups, and students.
The legislation also leaves out the $18 billion Biden proposed to modernize Veterans Affairs hospitals, which are on average 47 years older than private-sector hospitals.
Translation: There goes another 18 billion economic growth dollars, and really, why worry about our hospitalized veterans? Do they vote much?
What’s also out is a slew of corporate tax hikes that Biden wanted to use to pay for the American Jobs Plan.
Biden’s original proposal called for raising the corporate income tax rate to 28%, up from the 21% rate set by Republicans’ 2017 tax cut act, as well as increasing the minimum tax on US corporations to 21% and calculating it on a country-by-country basis to deter companies from sheltering profits in international tax havens.
Sorry Joe, but taxes don’t fund federal spending. The federal government could continue spending forever, even if it collected $0 in taxes.
CNN’s Manu Raju contributed to this report.
Apparently, CNN’s Manu Raju knows as little about economics as do Katie Lobosco and Tami Luhby.
Not only is the Big Lie eliminating many billions of growth dollars from the economy, but a great many worthwhile projects and people will go unfunded.
Because the rich take advantage of the public’s ignorance about economics, they win and you lose. They manage to widen the Gap, while you lose the growth benefits of federal spending along with the specific benefits that spending could have funded.
Ignorance has its penalties.
Rodger Malcolm Mitchell
Facebook: Rodger Malcolm Mitchell
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- 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:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- 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.