Stated simply, the Big Lie in economics is: “Federal taxes fund federal spending.” Suckers believe it.
The Big Truth in economics is: Federal taxes don’t fund a damn thing. In fact, they are destroyed upon receipt at the Treasury.
No federal tax dollars are spent. The federal government creates new dollars, ad hoc, to pay all its bills.
The federal government never can run short of dollars. It has infinite dollars. Even if the federal government didn’t collect a penny in taxes, it could continue to spend, forever.
To the federal government, which created the first US dollars from thin air, dollars are not physical things. They simply are numbers on balance sheets, and the government controls the balance sheets.
The government can put any numbers it wishes on those balance sheets. In short:
- The government never can run short of numbers
- The government never can run short of laws.
- The government never can run short of dollars.
If you sent $100 trillion dollars to the federal government, it wouldn’t help to pay for anything, not even one little bit.
In the letter, dated Monday, the governors wrote that they “fundamentally oppose (Biden’s) plan to force American taxpayers to pay off the student loan debt of an elite few.”
Calm down, fellow taxpayers; we won’t pay any of that student loan debt.
So why does the GOP claim it? Because they want you to help them widen the Gap between the rich and the rest of us
Note the words “elite few” in their letter? That’s part of the GOP con job. The party that gave a giant tax break to the rich wants you to believe they are all for the poor.
No, they don’t want the poor and middle classes to be able to afford college at all. They want the only people to afford college to be the “elite few.”
They create a phony culture war to make you believe the federal government can’t afford to pay for your benefits.
The rich falsely claim Social Security is going broke; Medicare is growing broke; the government can’t afford food stamps and other anti-poverty measures — and it’s all crap to widen the Gap.
Why widen the Gap? Because it’s the Gap that makes the rich rich. Without the Gap, no one would be rich, and the wider the Gap, the richer they are. Widening the Gap is a way for the rich to become richer.
The Republicans, including Texas Gov. Greg Abbott and Florida Gov. Ron DeSantis, also claimed that Biden’s plan would harm low-income families – writing, “hourly workers will pay off the master’s and doctorate degrees of high salaried lawyers, doctors, and professors. … Simply put, your plan rewards the rich and punishes the poor.”
What an ironic sham. Essentially, they say, “Federal aid to the middle and poor harms the middle and poor.” And people believe it!!
White House spokesperson Abdullah Hasan said, “These same Republican governors didn’t seem to object when their Republican colleagues in Congress passed a $2 trillion tax giveaway for the rich or had hundreds of thousands of dollars of their own small business loans forgiven.”
“While Republican elected officials try to keep working middle-class Americans in mountains of debt, President Biden is committed to delivering relief to the borrowers who need it most,” Hasan wrote in an email sent to USA TODAY Wednesday afternoon.
Hasan is absolutely correct. But so long as people believe the Big Lie that federal finances are like state and local government finances, and specifically, that federal taxes fund federal spending, the BIG LIE will continue to be told.
Federal taxes have three purposes:
- To help control the economy by discouraging what the government wishes to limit and by encouraging what the government wishes to increase.
- To provide demand value to the US dollar by required taxes to be paid with dollars.
- And the most important one: To help the rich become richer by providing tax breaks available only to the rich. (which is how billionaire Donald Trump paid less taxes than you did.)
Hey, it works. The rich keep getting richer, and the suckers keep voting against federal spending that would help them.
Rodger Mitchell
#Monetary Sovereignty - Mitchell 
Democrats and so-called progressives aid and abet conservatives by perpetuating the tax to spend lie.
LikeLike
Sadly, true, Robin. They too have rich campaign contributors
LikeLike
So what’s Robert Reich’s excuse?
The following is an old article, but it seems like almost every post of his on social media is about taxing billionaires to fund this that and the other. So tired of it.
http://neweconomicperspectives.org/2013/04/robert-reich-has-a-good-heart-but-an-inadequate-grasp-of-economics.html
LikeLike
Marshall Auerback understands Monetary Sovereignty, though he doesn’t use that name. Sadly, even with all the experience of the 90+ years 1929 through 2022, the federal government doesn’t admit and the populace doesn’t understand that:
1. Federal taxes do not fund federal spending.
2, The federal government cannot run short of dollars.
3. Federal deficit spending does not cause inflation.
4. Economic growth requires continually higher levels of federal deficit spending.
These are absolutes. They are economic truths as unavoidable as the 2nd Law of Thermodynamics. So-called “economists who do not understand those four truths are — how can I put this kindly — idiots who should be dragged through the street and pelted with stones. (Kind enough?)
Currently, Congress again thinks it can break the law with no adverse repercussions. But, if we continue on the current “raise interest rates and cut deficit spending” plan, we absolutely, positively will have a recession if we are lucky and a depression if we are not lucky.
Then, to cure the recession/depression, the government will embark on a hasty deficit spending binge, which will cure the recession. Upon seeing that deficit spending causes economic growth, Congress and the public will learn — NOTHING.
And people like me will continue to author articles that will be disbelieved, and so on and so on and so on.
Every day I feel more like Dr. Ignaz Semmelweis. Unfortunately, he eventually went mad. I am deciding whether to go that route.
LikeLike
I hear you. Going mad would be an appropriate response to their insanity. But please continue to be a voice of reason. Many of us depend on it.
Btw, Bill Black wrote that article. Not sure why you mentioned Marshall Auerback.
LikeLike
You’re right. It was Black, but he said Auerback wrote a summary, and that put the name in my mind. I have corresponded with both of them. They understand Monetary Sovereignty.
LikeLike
Revisiting the Budget Plague https://neweconomicperspectives.org/2013/04/revisiting-the-budget-plague.html
“Deficit spending by the government is merely the counterpart of private sector saving. What government deficit spending does is to permit the private sector to achieve its level of desired saving.” Does Jerome Powell understand that? Full steam ahead for the Deficit Reduction Act of 2022.
LikeLike
It continues to astound me that our political leaders show more concern for the federal government’s money supply than for the economy’s money supply. The government has infinite money. The economy has limited money.
Inflation is based on supply and demand. Increasing the supply reduces prices. Cutting demand causes recessions. The government should focus its efforts on increasing supply, not on cutting demand.
This is so basic one must conclude the current idiocy is an intentional effort to widen the Gap between the rich and the rest. There is no other answer.
LikeLike
Looking after the Gap: https://mobile.twitter.com/TonyHussein4/status/1570837801448656896/photo/1
LikeLike
This is a perfect expression of Gap Psychology. https://mythfighter.com/2020/01/11/why-do-you-want-to-starve-the-poor-the-gap-psychology-of-the-rich/
LikeLike
“As today, the problem back then was no one of political consequence understood the monetary system” https://neweconomicperspectives.org/2013/04/and-the-last-shall-be-first-it-was-the-peanut-farmer-not-the-tall-guy-or-the-iron-lady.html
“Overlooked was that President Jimmy Carter had allowed the deregulation of natural gas in 1978, triggering a massive increase in supply, with our electric utilities shifting from oil to nat gas.
OPEC desperately cut production by maybe 15 million barrels/day in what turned out to be an unsuccessful effort to hold the price above $30, as the supply shock was too large for them. They drowned in the flood of no longer needed oil, with prices falling to maybe the $10 range where they stayed for almost 20 years, until climbing demand again put the Saudis in the catbird seat.
Meanwhile, Greenspan got credit for that goldilocks period that again was the product of stable oil prices, not the Fed (at least in my story.)”
“So back to the 70′s, and continuous oil price hikes by a foreign monopolist. All nations experienced pretty much the same inflation. And it all ended at about the same time as well when the price of crude fell.
The ‘heroes’ were coincidental. In fact, my take is they actually made it worse than it needed to be, but it did ‘get better’ and they of course were in the right place at the right time to get credit for that.”
“It was decided the inflation was caused by unions trying to keep up or stay ahead of things for their members, for example.
It was forgotten that the power of unions was a derivative of price power of their companies. As companies lost pricing power to foreign competition, unions lost bargaining power just as fast.
And somehow a recession and high unemployment/lost output was the medicine needed for a foreign monopolist to stop hiking prices???
And there was Ford’s ‘whip inflation now’ buttons for his inflation fighting proposal, and Carter with his hostage thing adding to the feeling of vulnerability. And the nat gas dereg of 1978, the thing that actually did break the inflation two years later, hardly got a notice, before or after, and to this day.”
LikeLike
I think in general you could talk about the cost of health insurance and how it hinders economic growth at the business level and it is definitely a cost passed on to employees in the sense that it makes raises harder to implement.
LikeLike
Could you expand upon your point that US currency was created from thin air?
Perhaps, I’m misunderstanding you, but it was originally backed by silver that could be exchanged back and forth at a stable rate. I wouldn’t call that thin air.
LikeLike
Thanks Vivian, think of the process.
For billions of years there were no dollars. Then, in early 1780’s, some men came together and said, “Let’s create dollars, and let’s make those dollars equal in value to a certain amount of silver.”
So, they wrote some laws (which they created from thin air) and those laws created the dollars (from thin air_, and gave those dollars an arbitrary exchange rate (vs. silver) all from thin air, and also from thin air gave the dollars an arbitrary exchange rate vs. gold.
Later, other men would change that exchange value many times by creating new laws, from thin air. In 1972, President Nixon wrote the latest laws (from thin air), eliminating the exchange value (vs. silver or gold) entirely.
This all was arbitrary, based on laws created from thin air by men.
Today, dollars exist at the pleasure of Congress and the President. They could decide on a whim, to give the dollars any value they choose.
The notion that silver or gold “backed” the dollar is false. Ultimately, the value of a dollar (i.e. the dollar is backed by) is based on acceptance, which in turn is based on the full faith and credit of the United States Government. That is the only backing for the U.S. dollar.
You accept the dollar because you trust the U.S. government’s full faith and credit. (see: https://mythfighter.com/2010/02/23/understanding-federal-debt/)
If you wished, you too could create money from thin air. Today, from thin air, you could create “Vivians” and arbitrarily give them any exchange value you choose. However, the acceptance of those Vivians would be based on your full faith and credit.
These days, manufacturers create coupons from thin air and arbitrarily give them some exchange value. The acceptance of those coupons by retailers is based on the full faith and credit of the manufacturer.
LikeLike