Like that ol’ man river of song, some things just keep rollin’ along.
Some lies do, too, especially The Big Lie in economics.
The Big Lie ranks as the most significant lie because it affects virtually everything Congress does — every bill, every speech, every vote, every proposal, every crooked backroom deal.
The Big Lie is the biggest because it adversely affects every man, woman, and child in America, plus many men, women, and children in the rest of the world.
The Big Lie rains on us all.
The Big Lie is the biggest because it is so clearly and obviously wrong, on the same level of truth as claiming that the stars are pinholes in a black, velvet sky.
The Big Lie in economics is: Federal taxes fund federal spending.
There are only two types who promulgate the Big Lie:
- Those who do not understand economics. That includes you unfortunate souls who wasted years of your lives obtaining economics degrees at prestigious schools like the U. of Chicago. You could have learned the facts at less prestigious, but far better economics schools, like UMKC.
- Those liars who do not give a gnat’s behind about the people of America and the world., and are interested only in power.
The next time you hear or read of someone expressing The Big Lie, you can decide which of the two he/she is.
Here’s today’s expression of The Big Lie as seen in the South Florida Sun-Sentinel.
Dems work to revive economic bill
Boosted taxes on some would extend Medicare’s solvency
Senate Majority Leader Chuck Schumer, D-N.Y., is working on a revised economic legislative package. J. Scott Applewhite/AP
By Alan Fram Associated Press
WASHINGTON — Senate Democrats want to boost taxes on some high earners and use the money to extend the solvency of Medicare, the latest step in the party’s election-year attempt to craft a scaled-back version of the economic package that collapsed last year, Democratic aides said.
The sentence above expresses The Big Lie in all its glory.
Medicare is a federal agency. It is part of the federal government.
The federal government and its agencies cannot run short of dollars unless that is what Congress and the President want. That is why federal taxes do not fund federal spending.
The federal government is an infinite cornucopia that never runs dry.
“Boosted taxes” would not extend Medicare’s solvency.
Today, the U.S. Treasury does not have the money to extend the solvency of any federal agency.
Instead, the government creates the necessary dollars, by the act of paying bills.
Even if all federal tax collections were $0, the federal government could continue spending, forever.
The U.S. federal government is unlike state and local governments, businesses, euro nations, you, and me. The U.S. federal government uniquely is Monetarily Sovereign.
I’m sorry to tell you that you are not Monetarily Sovereign. You can run short of dollars. You can be unable to pay for some things. You can be insolvent.
The federal government and its agencies cannot.
The government passed the laws that created the very first dollars. The government passed as many laws as it needed.
Those laws created as many dollars as the government wanted and gave those dollars the value the government wished.
At its whim, the federal government repeatedly revalued the dollar according to various gold standards and silver standards.
Finally, in 1971, President Richard Nixon unilaterally ordered the cancellation of the direct convertibility of the United States dollar to gold.
This allowed the federal government to create infinite dollars at any time and for any purpose, merely by passing laws.
Former Federal Reserve Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”
Because the U.S. government cannot become insolvent, no agency of the U.S. government can become insolvent unless Congress and the President want it to become insolvent.
This applies to all federal agencies, from the AbilityOne Commission to the Women’s Bureau. There are hundreds of federal agencies, none of which can become insolvent unless that is what Congress and the President want.
Each of those hundreds of federal agencies is funded by federal money creation. Yet, for political reasons that have nothing to do with reality, just a few agencies are limited by fake “trust funds.”
According to the Peter G. Peterson Foundation:
“The largest and best-known trust funds finance Social Security, portions of Medicare, highways, mass transit, and pensions for government employees.
“Federal trust funds bear little resemblance to their private-sector counterparts, and therefore the name can be misleading.
“A ‘trust fund’ implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism used to track inflows and outflows for specific programs.
“In private-sector trust funds, receipts are deposited and assets are held and invested by trustees on behalf of the stated beneficiaries. In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.
“Rather, the receipts are recorded as accounting credits in the trust funds and then combined with other receipts that the Treasury collects and spends.
“Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.”
In short, Congress and the President can do anything they damn well please with the “trust funds.” They can add dollars, subtract dollars, or eliminate the “trust funds” altogether.
The government doesn’t need to search for U.S. dollars. It creates U.S. dollars.
As for Medicare, only Part A is related to a trust fund. Part B is funded the same way virtually all other agencies are funded — the same way the military, Congress, SCOTUS, the White House, et al. are funded — via payment from the federal government’s General Fund.
And in no case do federal taxes pay for anything.
Former Federal Reserve Chairman 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.”
There are various measures of the money supply:
In the United States, the money supply is categorized by various monetary aggregates, including M0, M1, and M2.
The monetary base, or M0, equals coin currency, physical paper, and central bank reserves.
M1, typically the most commonly used aggregate, covers M0 in addition to demand deposits and travelers’ cheques.
M2 covers M1 in addition to savings deposits and money market shares.
When you pay your federal taxes, you take M1 dollars from your checking account and send them to the U.S. Treasury. Dollars held by the Treasury are not counted in any money-supply measure because the Treasury has access to infinite dollars.
Adding dollars to infinite dollars is still infinite dollars. Thus, the Treasury effectively destroys your federal tax dollars upon receipt. They are not used for anything.
To pay its bills, the Monetarily Sovereign federal government creates new dollars ad hoc. When it approves an invoice for payment, the government (or the appropriate agency) sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
The instant the bank obeys those instructions, new dollars are added to the M1 money supply. Tax dollars are destroyed, and new dollars are created. That is the federal government’s method for creating dollars, which is why federal taxes do not fund federal spending.
(State and local governments, being monetarily non-sovereign, operate differently. Their tax dollars remain in the economy by being deposited into private banks. Those same tax dollars are used for invoice payment.)
Continuing with the Sun-Sentinel article:
Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., could be edging toward a compromise the party hopes to push through Congress this summer over solid Republican opposition. Manchin scuttled last year’s bill.
Under the latest proposal, people earning more than $400,000 a year and couples making more than $500,000 would have to pay a 3.8% tax on their earnings from tax-advantaged businesses called pass throughs. Until now, many of them have been using a loophole to avoid paying that levy.
That would raise an estimated $203 billion over a decade, which Democrats say would go to delay until 2031 a shortfall in the Medicare trust fund that pays for hospital care.
That fund is currently projected to start running out of money in 2028.
And it’s all a lie, The Big Lie.
Manchin “scuttled” last year’s bill because, through ignorance or maliciousness, he claimed it would cost too much and/or increase the deficit too much.
But “cost” is meaningless for an entity with the infinite ability to create dollars, and the “deficit” adds growth dollars to the economy.
Deficits are so crucial to economic growth that we have recessions when deficits don’t grow enough.
Continuing the article:
Most U.S. businesses are pass-throughs, which include partnerships and sole proprietorships and range from one-person law practices to some large companies.
Owners count the profits as income when they pay individual income taxes, but such companies do not pay corporate taxes — meaning they avoid paying two levels of taxation.
Translation: Because of The Big Lie, Schumer and Manchin have devised a plan whereby $203 Billion growth dollars would be removed from the private sector.
Contrary to what The Big Lie tells you, those dollars will not pay for anything. They simply will be destroyed.
Presumably, new dollars will be created to delay a fictional shortfall in a non-existent “trust fund.”
Democrats this week also sent the parliamentarian a separate 190-page piece of the emerging Schumer-Manchin compromise aimed at lowering prescription drug costs for patients and the government.
Provisions include requiring Medicare to negotiate drug prices, limiting beneficiaries’ out-of-pocket costs to $2,000 annually and increasing federal subsidies for copays and premiums for some low-income people.
There are both bad and good in the above. The bad part is “negotiate drug prices,” which means the government would pay the private sector (“the economy) less for drugs. Reducing federal payments is recessionary.
The good part is “increasing federal subsidies,” which is stimulative.
Democrats say both plans will show voters they are battling to curb health care costs and protect Medicare, positions they say will be dangerous for Republicans to oppose.
The government should “battle health care costs” by creating a generous, comprehensive, no-deductible Medicare for All program, not by taking money from the economy.)
Former Fed Chairman Ben Bernanke when he was on 60 Minutes:
Scott Pelley: Is that tax money that the Fed is spending?
Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Schumer and Manchin have been bargaining privately for weeks on a package aides say could include around $500 billion in spending and tax credits, more than paid for with about $1 trillion in revenue and other savings.
Translation: “More than paid for” means the federal government, which has infinite money, unnecessarily will take 1 trillion growth dollars out of the economy, which has limited money.
The suggestions of progress were emerging seven months after Manchin derailed a roughly $2 trillion, 10-year social and environment bill, dealing a stunning blow to a cornerstone of Biden’s domestic agenda.
That’s 2 trillion potential stimulus dollars that are denied the economy.
And now we come to the other phase of The Big Lie. Call it “The Big Lie II,” the claim that federal deficit spending causes inflation.
This one has been an article of faith in most economics classes — the notion that inflation is “too many dollars chasing too few goods.” It’s memorable, even poetic in its rhythm, but it isn’t factual.
Inflation is caused by shortages. Today, the primary cause of inflation is the oil shortage, while other critical goods and services shortages contribute.
Those essential goods and services include lumber, computer chips, shipping, foods, housing, labor, and other commodities too numerous to list.
And no, those shortages were not caused by “too much money.” Too much money did not cause you to eat, build, ship, or live in more houses.
All of those shortages resulted from less production and/or supply. In fact, most shortages can be cured by more federal spending to increase supply and availability.
Additional deficit spending, not less, and certainly not the Fed’s interest rate increases, will cure the oil shortage and inflation. All inflations are supply-shortage problems, not excessive-demand problems.
The Fed cannot cure the shortage problems by manipulating interest rates.
The Democratic-run House approved the measure in November, but Manchin abruptly withdrew his support because of its cost and worries that it would fuel inflation.
That is what Manchin said. If he really believed it, he is a victim of The Big Lie. If he didn’t believe it, he is a liar.
Polls show widespread public alarm over recent months’ historically high inflation rates, supply chain problems, and other economic issues that, along with President Joe Biden’s dismal popularity ratings, are pushing voters toward Republicans, the GOP says.
And then, for one last statement of The Big Lie II:
Asked for comment, a spokesperson for Senate Minority Leader Mitch McConnell said the Kentucky Republican told constituents this week that Democrats would make inflation “considerably worse” by reviving their economic bill.
McConnell is terrified that the Democrats would be able to revive their economic bill because that would stimulate the economy just before the elections, the last thing the GOP wants.
[Taxation: No rational person would take dollars from the economy and give them to a federal government that has the infinite ability to create dollars.]
Rodger Malcolm Mitchell
Twitter: @rodgermitchell Search #monetarysovereignty
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.