Two of the most important economic realities are Monetary Sovereignty and Gap Psychology. Together these realities rule the U.S. government’s control of America’s economy — or they should rule if voters understood them.

1. Monetary Sovereignty tells you that the federal government has infinite power over its own sovereign currency. It makes all the laws that control dollar creation and dollar value.

At its whim, the government can create, destroy, and revalue dollars, so it needs neither taxing, borrowing, nor income of any kind to spend whatever it wishes and to set inflation at whatever level it deems.

It makes all the decisions concerning dollars.

2. Gap Psychology tells you that most people wish to distance themselves from those whose income/wealth/power is low and to come nearer to those whose income/wealth/power is excellent.

Because “rich” is a relative term, becoming richer requires that a person find ways to widen the income/wealth/power Gap below and to narrow the Gap above.

This is accomplished by gaining more for oneself and/or by forcing others to have less. Thus, impoverishing those below or above makes one richer, while enriching those below and/or above makes one poorer.

The rich in America, and in most countries, control the flow of information and America’s laws by financing the media (via advertising dollars and ownership), the economists (via university contributions and promises of employment), and politicians (via campaign contributions and promises of future employment.)

The voting public is subject to misinformation and disinformation regarding Monetary Sovereignty and the realities of Gap Psychology.

The public is told that Monetary Sovereignty is the same as monetary non-sovereignty, which would mean that the federal government would not control the currency it created from thin air.

The result of this disinformation campaign: Voting against one’s better interests has become the norm.

People falsely have been told that federal spending to narrow Gaps is unaffordable, unsustainable, and causes inflation. As an easily avoidable result, poverty, hunger, homelessness, lack of education, and Gap widening continue.

Here are examples of newspaper articles promulgating the myths that bind us to failure:

March 8, 2023
Biden plans new taxes on the rich to help save Medicare
Justin Sink and Josh Wingrove, Bloomberg News

Federal taxes do not fund federal spending. Money creation does. Therefore, new taxes on the rich will not “save Medicare.”

The government already has the infinite power to fund a comprehensive, no-deductible Medicare for every man, woman, and child in America. No federal taxes are needed or used.

By positioning the plan as requiring increased taxes on the rich, Biden dooms it to pushback from the most powerful influencers in America.

WASHINGTON — President Joe Biden’s budget will propose hiking payroll taxes on Americans making over $400,000 per year and allowing the government new power to negotiate drug prices as part of an effort the White House says will extend the solvency of a key Medicare program for another quarter century.

Both “hiking payroll taxes” and “negotiating drug prices” would unnecessarily take dollars from the private sector (aka “the economy.”) Biden’s proposal, though perhaps well-meaning, is recessionary. It also is unlikely to pass Congress.

Because the U.S. government is infinitely solvent, every agency of the government is as solvent as Congress and the President want them to be.

Medicare, a government agency, is as solvent as Congress and the President want it, just as other agencies — the military, SCOTUS, Congress, and the White House — are as solvent as our leaders wish them to be.

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

“The budget I am releasing this week will make the Medicare trust fund solvent beyond 2050 without cutting a penny in benefits,” Biden said Tuesday in an op-ed published in the New York Times shortly before the announcement. “

In fact, we can get better value, making sure Americans receive better care for the money they pay into Medicare.”

Every dollar paid into the Medicare “trust fund” is destroyed upon receipt.

All those dollars come from the M2 money supply measure and when they reach the Treasury, they instantly disappear from any money supply measure. Thus, they functionally are destroyed.

The Medicare “trust fund” is not a real trust fund. A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism used ent does not set aside the receipts or invest them in private ato track inflows and outflows.

ssets.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 governm

Rather, the receipts merely 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.

At the touch of a computer key, the U.S. federal government could double or triple the number of dollars in the Medicare “trust fund,” without collecting a penny in taxes.

The crocodile tears for the impending “insolvency” of the trust fund are mere stage performance for the uninformed voters.

At this point, it’s appropriate to mention that despite disinformation to the contrary, federal deficit spending is not “socialism.” Socialism is government ownership of production and distribution, not mere spending.

The word “socialism” is used as an epithet to convince the naive public not to ask for federal benefits.

The president’s budget, which will be released Thursday, proposes raising Medicare taxes from 3.8% to 5% on annual income above $400,000, and eliminating a loophole business owners and higher-earners can exploit to avoid additional taxes, according to a White House fact sheet.

The sole benefit, and it is a theoretical benefit if the dollars actually are collected, would be to narrow the Gap between the rich and the rest, while impoverishing the economy.

But the rich will find loopholes to exploit, so the whole proposal is a combination of misinformation and naivety.

Biden’s plan would also help bolster Medicare reserves through some $200 billion in prescription drug reforms over the next decade by allowing the insurance program to negotiate costs on more medications and sooner after they come to market.

To the extent the federal government successfully cuts prescription costs, fewer dollars will flow from the Monetarily Sovereign U.S. government to the monetarily non-sovereign private sector, a recessionary effect.

The moves are part of a concerted effort by the White House ahead of looming negotiations over the debt ceiling and government funding, where Republicans vow to seek deep cuts to federal spending.

The debt ceiling is an anachronism based on ignorance. It does nothing to eliminate future spending, but risks punishing legitimate creditors to the federal government, a potentially earth-shattering event.

Though the Republicans claim to want “deep cuts in federal spending,” they have madeo proposals about where to make those cuts.

The Republicans never wish to cut Defense because defence contractors are big, powerful providers of campaign cash.

Republicans would love to cut Education, Health Care, Welfare, or Pensions, but that might cost them votes, and they already have enough election problems with their stance on abortion.

Interest is untouchable because of their legal commitment and false narrative that the high rates fight inflation.

By subscribing to myths, the Republicans have backed themselves into a corner.

The only sensible and honest step would be to:

1. Eliminate the debt ceiling.
2. Acknowledge the fact that a Monetarily Sovereign government neither needs nor uses tax dollars or borrowing, because it pays all its dollar obligations by creating new dollars, ad hoc.
3. Acknowledge the fact that inflations are caused not by federal spending but rather by scarcities of key goods and services (energy, food, construction materials, electronic parts, labor, etc.) and that these scarcities can be cured by federal deficit spending to obtain and distribute the scarce items.

Unfortunately, the government has devoted so much time and money to promulgating myths, it now is unable or unwilling to promulgate the facts.

House Speaker Kevin McCarthy has vowed the GOP won’t touch Medicare or Social Security, programs that share bipartisan support, particularly among elderly voters.

But Democrats, including Biden, have repeatedly highlighted past GOP efforts to overhaul the entitlement programs by reducing eligibility or benefits.

Ahead of the budget release, White House officials have challenged McCarthy to specify where he would pursue cuts.

It is likely that the Republicans will settle for either or all of three demands:

1. Demand cuts to Healthcare by cutting Obamare and increasing deductibles and age-requirements for Medicare and/or
2. Demand cuts to poverty aids and/or
3. Demand cuts to Social Security via increases in age requirements.

All of those would increase the Gap between the rich, to whom the Republicans are beholden, and the rest of America, but would cause a backlash from voters.

Democrats are hoping Biden’s budget, which would reduce the deficit by $2 trillion over the next 10 years, will provide a political advantage by keeping benefits intact, with higher taxes on the wealthy helping to offset rising costs.

Because federal taxes are destroyed upon receipt, they would offset nothing. But, in the unlikely event taxes are properly administrated, they would help narrow the Gap between the rich and the rest.

That is why the Republicans will not allow them, but rather might risk opting for the 1-3 (above) penalties against the “not-rich.”

Medicare’s Hospital Insurance Trust Fund, also known as Part A, pays for hospital stays, nursing facilities, and hospices.

It is currently projected to reach insolvency as soon as 2028, according to the most recent Medicare Trustees report.

“This modest increase in Medicare contributions from those with the highest incomes will help keep the Medicare program strong for decades to come.

My budget will make sure the money goes directly into the Medicare trust fund, protecting taxpayers’ investment and the future of the program,” Biden said in his op-ed.

Neither the federal government nor any federal agency can be insolvent unless that is what Congress and the President want. Tax dollars do not go anywhere. They are destroyed. The “trust fund” is replenished at the whim of Congress, by passing laws.

Notice there is no pretense that Medicare Part B (or the military) is funded by special taxes, but rather is clearly funded by federal spending. All of Medicare could be funded that way, but for the interference of a fake “trust fund.”

Proposed changes to Medicare’s ability to negotiate prescription drugs would also benefit seniors on Medicare by lowering their out-of-pocket costs, the White House says.

Biden’s budget will specifically propose capping the cost of certain generic drugs, like those used to treat hypertension and high cholesterol, to $2 per prescription per month.

The budget also eliminates the fee patients have to pay on up to three mental or behavioral health visits per year.

The negotiation of prescription drug prices accomplishes nothing for the government and impoverishes drug manufacturers and the private sector. The federal government has the infinite ability to pay for drugs, whatever their prices.

Sending fewer dollars to the health care industry will cut economic growth.

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Biden to offer deficit reduction plan
Tax proposals are aimed at trimming $3T over 10 years
By Jim Tankersley The New York Times

WASHINGTON — President Joe Biden on Thursday will propose policies aimed at trimming federal budget deficits by $3 trillion over the next 10 years as his administration embraces the politics of debt reduction amid a fight with Republicans over raising the nation’s borrowing

Trimming $3 trillion from the federal budget is identical to taking $3 trillion from the private sector, which unnecessarily will reduce Gross Domestic Product growth and usually causes a recession.

As always, ignorance about Monetary Sovereignty will lead to economic hardship. That is the usual effect of ignorance.

House Republicans have refused to raise the nation’s debt limit, which caps how much money the federal government can borrow, unless Biden agrees to steep cuts in federal spending.

To help increase federal revenues and reduce the nation’s reliance on borrowed money, Biden is expected to announce a new tax on American households worth more than $100 million that would apply to both their earned income and the unrealized gains in the value of their liquid assets, like stocks.

The voting public does not understand that it makes no sense to take dollars from the economy, which relies on dollars for growth, and give those dollars to the federal government, which has the infinite ability to create dollars.

Taking federal taxes from the private sector is like pumping water from an oasis and pouring it into the sea.

The federal government has run deficits every year since 2000, spending more money than it receives in tax revenue.

Translation: The economy has received more dollars from the government than it has sent to the government. This is necessary for economic growth.

The deficit ballooned under President Donald Trump after the onset of the pandemic recession, which spurred Congress to approve trillions of dollars in relief for individuals, businesses and state and local governments.

It remained elevated in 2021 under Biden, who signed a $1.9 trillion economic aid package he signed soon after taking office, but declined last year.

The deficit spending under Trump and Biden prevented recessions that otherwise would have been caused by COVID shortages.

Federal deficit spending grows the economy. The lack of federal deficit spending causes recessions. This lesson has not been acknowledged by Congress and the President, or by the voting public.

The nonpartisan Congressional Budget Office projects the deficit will grow slightly this fiscal year, to $1.41 trillion from $1.375 trillion, then continue to rise for the course of the decade, topping $2 trillion in 2032.

Translation: The federal government is projected to pump 1.41 trillion to three trillion growth dollars into the economy.

From 2024 to 2033, the budget office projects, deficits will total more than $20 trillion, driving gross federal debt to nearly $52 trillion.

Translation: The budget office projects the Monetarily Sovereign US government will have pumped a net total of fifty-two trillion growth dollars into the economy, at no cost to taxpayers (Taxes don’t fund spending.).

Through laws he has signed and executive actions he has issued, Biden has approved policies that would add about $5 trillion to the national debt over a decade, according to estimates by the Committee for a Responsible Federal Budget in Washington.

Translation: The CRFB projects $5 trillion will be added to Treasury Security deposits in the next ten years.

Summary

Monetary Sovereignty and Gap Psychology are two of the most important realities of the U.S. economy. Because the public has not been given the facts about these realities, voters have voted against their own best interests.

The current budget stalemate between the Republicans and Democrats is a manifestation of the misinformation/disinformation campaigns so detrimental to the U.S. economy and especially to Americans who are not rich.

Ignorance is expensive.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY