Author: Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

GOP does the right thing for the wrong reasons. The Dems do the wrong thing for the right reasons.

Readers of this site know that federal tax dollars, unlike state/local tax dollars, do not fund anything. (See “Motley Fool spreads the bullshit about Social Security”)

Liars, Cheaters, and Thieves Continue to Increase the Federal Debt | The TNM
Your federal tax dollars are taken from the economy and are destroyed upon receipt.

Unlike state/local tax dollars, federal tax dollars are destroyed the second they are received by the government.

State/local governments, being monetarily non-sovereign, need tax dollars to support spending. The Monetarily Sovereign federal government does not.

Federal tax collections do nothing but take dollars from the U.S. economy and therefore are recessive. (State/local tax dollars remain in the economy.)

Thus, steps to reduce federal tax collections are economically stimulative because those steps keep money in the economy.

An article from the Wall Street Journal discusses the latest Republican steps to reduce federal tax collections — the right move for the wrong reasons.

GOP House Takes First Swipe at IRS Money
A bill expected to be first legislation from the new Republican majority would rescind billions in funding for tax agency

WASHINGTON—The new Republican-controlled House is poised to vote as soon as Monday to repeal tens of billions of dollars in Internal Revenue Service funding, taking up a bill that is unlikely to become law but that previews coming battles with Democrats over the tax agency’s expansion.

Initially, this repeal would be recessive. It would prevent the federal government from adding tens of billions of growth dollars to the economy.

However, if those dollars were to be used to increase the collection of taxes, repealing the added federal spending could be stimulative. 

The bill—expected to be the first legislation advanced by the Republican majority that took over the House last week—aims to erase a key policy priority of the Democrats, who used their control of the government to enact it last year.

Democrats, who still hold the Senate and White House, could block the legislation. But Republicans’ emphasis on clawing back IRS funding marks it as a top concern and demand for the House majority, one that could re-emerge when lawmakers turn to raising the debt ceiling or passing annual spending bills later this year.

The bill, sponsored by Rep. Adrian Smith (R., Neb.), would rescind almost all of the $80 billion in IRS funding that Congress approved in August in the climate, health, and tax law known as the Inflation Reduction Act.

In short, whether the Smith bill would be stimulative or recessive depends on whether the $80 billion would result in more or fewer federal tax dollars being collected.

If rescinding the $80 billion investment would prevent the collection of more than $80 billion tax dollars, the Republican bill would be stimulative. Until that point, however, rescinding the $80 billion investment would be recessive.

That’s just arithmetic.

The other consideration is why the Republicans wish to rescind this expenditure.

House Speaker Kevin McCarthy (R., Calif.) promised, “Our very first bill will repeal the funding for 87,000 new IRS agents. We believe government should be to help you, not go after you.”

The IRS would keep $3.2 billion for taxpayer services, which it started using to hire thousands of customer-service representatives to answer phone calls during the coming tax-filing season. In fiscal year 2022, the agency’s level of service—a measurement of how often phones are answered—was 17.4%, below its 30% target for that year, its 75.9% level from 2018, and the 85% target for this year.

The Republicans, the party of law and order — the party that is pro-police — tells America that added IRS “police” would “go after” the public. The Dems deny it.

The fact that the IRS would keep $3.2 billion is stimulative from the standpoint of dollars added to the economy. Using that money to improve customer service is stimulative in that it increases the efficient use of time. Increased efficiency is stimulative.

The IRS would also keep $4.8 billion for systems modernization, which the agency plans to use to update aging technology.

If updating aging technology would increase federal tax collections by more than $4.8 billion, the systems modernization would be recessive.

But tens of billions designated for enforcement, operations, the inspector general’s office, the U.S. Tax Court and the Treasury Department would be rescinded.

Democrats championed the $80 billion IRS expansion to bolster the agency, which had generally flat or declining budgets for much of the past decade. The IRS has shed staff and conducts audits less frequently than it did in the past.

Conducting audits less frequently is stimulative because it leaves more dollars in the private sector (i.e., the economy).

The biggest piece of the money went to enforcement, and administration officials say they want to focus on high-income taxpayers and large corporations. The Congressional Budget Office estimated that the $80 billion in spending would generate $180.4 billion in additional revenue.

If the Congressional Budget Office is correct, the Democrat’s bill would be $100 billion recessive. 

But then we come to the huge unknown, the key phrase, “. . . focus on high-income tax-payers and large corporations.”

To the degree that the $80 billion would focus on high-income taxpayers, the program would help narrow the income/wealth/power Gap between the rich and the rest. That Gap is currently too broad, and it is widening. Narrowing the Gap would help the economy.

But the effect of large corporations on the economy is primarily positive. On balance, large corporations can better provide efficient services than small businesses. 

While the economy needs small businesses’ creativity and employment power, using tax laws to punish large companies seems counter-productive.

The administration has said audit rates for taxpayers with incomes below $400,000 would stay around recent or historical levels. But the IRS hasn’t specified what those audit rates would be, and audit rates have fluctuated over time.

Democrats argued that removing the funding would offer comfort to tax cheats, making it harder for the IRS to find and penalize tax dodging.

Federal taxes are a significant drag on the economy, and tax laws exacerbate the Gap between the rich and the rest of us. So again, we have a split decision.

Tax dodging helps the economy by leaving more dollars in the private sector, but the rich are more able to do it, hurting the economy.

Perhaps, a vital issue is motive.

The Democrats wish to collect more taxes from the rich, using the false premise that those additional tax dollars would pay for more benefits given to the poor.

The GOP wishes to collect less tax from the rich because it, more than the Democrats, is ruled by the rich. As perhaps an overly broad generalization, the Republicans are the party of the rich, while the Democrats are the party of the rest — at least from a purely financial standpoint.

Race, religion, and country of origin affect that metric.

IN SUMMARY

Federal taxes are an unnecessary drag on the economy. They pay for nothing and are destroyed on receipt. Anything that reduces federal tax collections benefits the private sector (aka, “the economy”).

The sole function of federal taxes is to control the economy by punishing what the government wishes to discourage and by giving tax breaks to what the government wishes to encourage.

The economic drag could be eliminated if the government gave financial rewards to what it wishes to encourage, and simply didn’t reward what it wishes to discourage.

Federal taxes can and should be eliminated.

The Democrats wish to increase federal tax collections while promulgating the false notion that federal deficits are too high and federal taxes are necessary to minimize deficits while paying for benefits.

The Democrats correctly, wish to narrow the income/wealth/power Gap between the rich and the rest, but increasing federal taxes is a poor strategy for that purpose.

The Republicans wish to widen the Gap and enrich the rich by cutting tax collections from the rich. They promulgate the lie that the middle classes and the poor should pay more taxes to fund such benefits as Medicare, Medicaid, and Social Security, though federal taxes do not fund those benefits.

The GOP’s stated concern that additional IRS agents would attack the low-paid is camouflage for their genuine concern that additional agents would focus on the rich.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

……………………………………………………………………..

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

MONETARY SOVEREIGNTY

Motley Fool spreads the bullshit about Social Security

You probably know Motley Fool as a site that spreads reasonably accurate information about the stock market and individual stocks, along with buying suggestions.

I never have subscribed to that service for one main reason: If they knew what they were talking about, they could make a lot more money by following their own trading advice than by giving advice.

So why do they give advice?

A little more than two years ago, they proved to me that they didn’t know what they were talking about by publishing a scare story referencing Social Security’s financial troubles.

The article was titled 7 Reasons Social Security Is in Big Trouble By Sean Williams – Oct 3, 2020.

The article comes with this caveat: “You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services,” which seemingly means: “If you pay us, we’ll tell you what we really believe.”

Social Security: Reform or Runout – American Journal of Trial Advocacy
DO YOU BELIEVE THIS BIG LIE?

Here are some excerpts from that article.

Over the past eight-plus decades, we’ve watched Social Security grow into the most important social program in this country.
Today, nearly 65 million people receive a monthly payout from the program, with over 22 million of these folks pulled out of poverty thanks to their benefits. 
But the program is in big trouble. Every year since Social Security first began paying benefits (1940), the Social Security Board of Trustees has released a report that examines the short-term (10-year) and long-term (75-year) outlook for the program.
Since 1985, the OASDI Trustees’ report has cautioned that program outlays would exceed collected revenue over the long term.
Put another way, Social Security has unfunded obligations over the next 75 years.
More specifically, the latest Trustees report estimates that Social Security’s $2.9 trillion in asset reserves (i.e., its net cash surpluses built up since inception) would run out by 2035.

The above is nothing but bullshit.

“Collected revenue,” i.e., FICA taxes, do not fund Social Security or Medicare. Indeed, no federal tax pays for anything.

All federal taxes are destroyed upon receipt. The federal government has the infinite ability to create dollars from thin air. That is how it created the first dollars, and that is how it still creates dollars.

Unlike you, and me, and state/local governments, and businesses, the federal government pays all its bills by creating new dollars, ad hoc.

The dollars you pay to Social Security (actually, the Treasury) come from the M1 money supply measure. But when your dollars reach the Treasury, they cease to be part of any money supply measure.

Because the federal government has the infinite ability to create dollars, it has infinite dollars.

Adding your dollars to the Treasury’s infinite dollars does not change the number of dollars the Treasury has. Infinity plus any number = infinity.

When your dollars reach the Treasury, they cease to exist. Although the Treasury keeps records of dollars received and spent, these records are unlike private bookkeeping records.

They do not show “Dollars Available.” The Treasury has infinite dollars available.

To be clear: Social Security isn’t going bankrupt just yet.
It has two recurring sources of revenue — but if and when these asset reserves are depleted, an across-the-board benefit cut of up to 24% may await retired workers and survivor beneficiaries.

Bullshit.

Social Security, like every other federal agency, has just one source of revenue: The federal government.

Social Security has as many dollars as Congress, and the President want it to have.

In total, the 2020 Trustees report estimates that Social Security is facing $16.8 trillion in unfunded obligations between 2035 and 2094, which is $2.9 trillion higher than in the previous year.
How exactly does the nation’s top social program suddenly find itself on such poor financial footing? 

Bullshit.

Social Security has no unfunded obligations. All federal obligations are funded by the government’s full faith and credit.

The federal government promises to pay all its bills which it has done since its inception. It never can run short of dollars to pay its bills. Every financial obligation has been funded by money creation.

1. Baby boomers are retiring

I’m not a fan of blaming baby boomers simply for being born, but their exodus from the labor force is weighing down the worker-to-beneficiary ratio.

According to intermediate-cost model estimates from the Trustees report — which represent what’s most likely to happen — the number of retired workers receiving benefits should surge from 45.1 million in 2019 to 64.6 million by 2035.

Over that time, the worker-to-beneficiary ratio is expected to decline from 2.8-to-1 to 2.2-to-1. 

As a reminder, the payroll tax revenue collected from workers was responsible for $945 billion of the $1.06 trillion in revenue collected for Social Security in 2019. So, yes, the retirement of boomers is a big deal.

Bullshit.

This is the myth that Social Security is funded by FICA. It isn’t. Even if FICA collections totaled $0, the federal government could continue paying benefits forever.

2. We’re living longer than ever before

Another bittersweet concern is that we’re living longer. Between 1940 and 2020, the average life expectancy at birth for Americans jumped from north of 64 years to almost 79 years.

On the one hand, living longer is fantastic. We get to spend more time with our friends and family, and do what we love. But it’s not necessarily a great thing for the Social Security program.

According to data from the Social Security Administration, the average 65-year-old will live about 20 more years. Social Security was never designed to pay benefits for multiple decades.

Further, the full retirement age — i.e., the age at which retired workers can collect 100% of their monthly benefit, as determined by their birth year — will have only risen by two years through 2022. Meanwhile, life expectancies are up by more than 15 years since 1940.

Put simply, longer average life spans are straining the Social Security program.

Bullshit.

The federal government has the infinite ability to pay benefits. Even if FICA were eliminated, the federal government could supply full Social Security to every man, woman, and child of all ages.

President FD Roosevelt knew SS didn’t need FICA when he began it. He created FICA, not to fund SS, but to keep Congress from ending it.

He didn’t say, “We put payroll contributions in to pay for benefits.” He said,

“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions… With those taxes in there, no damn politician can ever scrap my Social Security program.”

Congress and subsequent Presidents still have found ways to cut the program by taxing benefits and by raising the qualifying age.

Ironically, they only were able to do this by using FDR’s logic falsely to convince the public that FICA funds SS.

3. Income inequality is on the rise

Social Security’s woes can also be partly blamed on rising levels of income inequality.

The 12.4% above payroll tax, which does the heavy lifting for Social Security, is applied to earned income (wages and salary, but not investment income) ranging between $0.01 and $137,700, as of 2020.

Approximately 94% of working Americans will earn less than $137,700 this year, meaning they’ll be paying into Social Security on every dollar they earn.

Earned income above $137,700 is exempt. Between 1983 and 2016, the amount of earned income escaping Social Security’s payroll tax roughly quadrupled from north of $300 billion to $1.2 trillion.

Additionally, the well-to-do have little or no financial constraints when paying for preventative medical care or prescription medicines.

The same can’t be said for everyone else. As a result, the rich are living notably longer than everyone else and collecting bigger monthly benefits in the process — further weighing down Social Security.

Donald Trump, who pays virtually no FICA taxes, collects the same Social Security you do.

The reason: Social Security benefits have nothing to do with FICA. The government pays for SS benefits just as it pays for every other financial obligation: By creating dollars from thin air.

Did you ever wonder why Social Security has a “trust fund” but the military has no “trust fund?” The SS trust fund is a fake. It is not a real trust fund at all.

All the phony rules related to the fake SS trust fund are arbitrary inventions to reduce the benefits paid to you. The whole process is a fraud on America.

There are no real federal trust funds. 

4. Net legal immigration levels have been halved

Immigration is also a serious problem, albeit not for the reasons you might have read about.

As a whole, immigration is a net positive for the Social Security program.Most legal migrants into the U.S. tend to be young, and are therefore going to spend decades in the labor force contributing via the payroll tax.

The Trustees’ intermediate-cost model assumes a net average of 1,261,000 legal migrants entering the U.S. every year over the long-term.

However, net immigration rates into the U.S. have been sinking for the past two decades. In the most recent rolling five-year measurement from the World Bank, a net average of 954,806 legal migrants entered the U.S. annually between the second half of 2012 and the second half of 2017.

Less legal (and undocumented) immigration will almost certainly weigh on the worker-to-beneficiary ratio. 

Bullshit.

The worker-to-beneficiary ratio is meaningless. Beneficiaries are paid in U.S. dollars. The federal government has the infinite ability to create U.S. dollars.

5. Birth rates are at all-time lows

Couples also bear part of the blame for Social Security’s woes.

The program counts on a steady or rising level of births each year to offset the number of older workers leaving the labor force.

The intermediate-cost model had been running with an assumption of 2 births per woman for years, but lowered this figure to 1.95 births per woman in 2020. This is a big reason we saw unfunded obligations jump by $2.9 trillion from the previous year.

In 2019, the U.S. birth rate hit an all-time low of 1.68 births per woman, below even the high-cost model estimate of 1.75 births per woman provided by the Trustees. Couples are waiting longer to get married and have children.

They’re having fewer unplanned pregnancies and have been discouraged from having children by the poor state of the U.S. economy. Without a quick turnaround in birth rates, the worker-to-beneficiary ratio will be negatively impacted. 

Bullshit.

Workers don’t pay for SS. The government does.

The government could pay double or triple the number of workers simply by doing what it always does for every government agency: Create dollars from thin air.

That is the process it has used since the inception of the dollar.

6. The Fed has crippled Social Security’s interest-earning capacity

Even the nation’s central bank gets a wag of the finger.

The Federal Reserve is tasked with controlling and influencing monetary policy.

It primarily does this by increasing or decreasing the federal funds rate, which is the overnight lending rate that banks charge one another. Moving this rate higher or lower causes ripples that influence interest rates.

With the U.S. economy currently in recession, and the Fed maintaining a predominantly dovish stance for much of the past decade, the federal funds rate is now at a record-tying low range of 0% to 0.25%.

This is great news for companies and individuals looking to borrow, but awful for anyone looking to generate interest income.

Social Security’s $2.9 trillion in asset reserves are required by law to be invested in special-issue bonds and, to a lesser extent, certificates of indebtedness.

The yields on newly issued bonds have been plummeting, with some yielding a meager 0.75%. In other words, the Fed’s dovish monetary policy means less interest-earning capacity for Social Security.

Obsolete bullshit now that interest rates are high.

But even if interest rates were triple or one-third of what they are now, this would not change, by even one penny, the federal government’s ability to fund Social Security.

Think of how nonsensical the notion is of the federal government not paying enough interest to an agency of the federal government (which is what the Motley Fool claims).

This is how ridiculous the Motley Fool argument has become. They are telling you: “If the federal government paid more interest. The federal government could afford to pay more benefits.”

Wow!

7. A Capitol Hill deadlock

Finally, point your finger at lawmakers on Capitol Hill.

Though lawmakers may be somewhat responsible for some of the issues described here, it’s really their inability to find common ground to fix Social Security that’s worthy of blame.

For every year that Congress doesn’t resolve Social Security’s cash shortfall, it usually widens. The longer lawmakers wait to act, the costlier the fix will be on working Americans who form the backbone of the Social Security program.

Democrats and Republicans have each offered plenty of solutions on how best to resolve Social Security’s shortcomings. But since both parties have solutions that work to strengthen the program, neither side feels compelled to find common ground with their opposition.

We can only hope that Congress finds a way to work together on a bipartisan solution sooner rather than.

Mostly bullshit with one small glimmer of truth in the final statement.

SS doesn’t have a “cash shortfall.” The word “shortfall” implies something unintentional.

But this “shortfall” is intentional.  It’s like claiming the federal government has a law shortfall.

The “fix” needn’t be costlier “on working Americans.” No working American would need to pay for the “fix.”

Congress quickly could solve the “problem” only when it admits that the real problem is the Big Lie that taxes fund federal spending.

That would result in a giant step toward “fixing” SS.  

 

 

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

American Democracy Teeters on the Edge

From April 19, 1775, through September 3, 1783, brave patriots — men, women, and even children — fought and died to achieve American freedom and democracy.

On January 6, 2021, armed traitors fought to undo the great American experiment of free elections. They attempted forcibly to install an election loser as President.

Only the bravery and patriotism of those who would not agree to the plot saved America. But it was as close as was the Civil War, to ending the American republic.

Today, having learned nothing from that near failure of America, millions of faux patriots remain in the thrall of demagoguery and hatred. They long for the days of banana dictatorships, where the few had absolute rule over the many.

Today, one political party lurches toward tyranny, completely ignoring all that made America unique in the world.

Read the shocking results from a YouGovAmerica poll:

The number of so-called “Americans” who disapproved of Trump supporters taking over the Capital has declined. Among Republicans, that number has declined to less than half! 

Think of it. Half of Republicans now favor armed traitors taking over Congress.

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Less than half of Republicans believe Donald Trump has any responsibility for the Jan 6 attack. Have these people been living in a cave or are they completely brainless? 

Or is their hatred of Jews, Muslims, blacks, browns, yellows, reds, gays, foreigners, and women so complete that they are willing to see democracy fail just to protect one proven liar and criminal.

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More than half of Republicans disapprove of Congress referring Trump for criminal indictment. Even among independents, only 38% approve and a whopping 30% are not sure. 

NOT SURE? Did they not watch the televised hearings? Do they not read newspapers and mazazines? Did they not pay any attention at all to Trump’s plea to “find” thousands of votes, his do-nothing for hours while the riot raged, his praise for the rioters, his proven false claims of a stolen election?

Do these self-anointed “independents” get their news only from Fox News and QAnon?

Traitors have been sentenced to death for offenses with less evidence than exists against Trump. How can any intelligent person be “not sure”?

If this research truly represents the opinions of the American people, our nation is in deep trouble. The Republican party as a major political force, has lost all sense of morality. It has become the political arm of white supremacy in America.

There was a time when we thought the Ku Klux Klan would forever be banished to the loony fringe. We were wrong. It’s philosophy of hatred permeates the entire GOP.

Hate is easy. Any numbskull can wave a flag and spew hatred of others. Love and compassion are difficult. They require the wisdom to respect those who differ from you.

That is why there are so many dictatorships and so few democracies.

Any idiot can march mindlessly with a tyrant, but only the intelligent understand the meaning of democracy.

Sadly, America is being co-opted by drooling idiots. Hatred has become the norm. Bigotry has become the new patriotism. Extremism is the new center, the more outrageous, the better.

We see power acceded to the whims of such hate-mongers as Donald Trump, Tucker Carlson, Andrew Clyde, Alex Jones, Clarence Thomas, Lauren Boebert, Matt Gaetz, Ted Cruz, Ron Johnson, Marco Rubio, Paul Gosar, Josh Hawley, Greg Abbott, Rudy Giuliani, Marjorie Taylor Greene, Sean Hannity, Steve King, Rick Scott, Ron de Santis, Kevin McCarthy, and all the other white-supremacist apologists.

They came into power because they received votes — from the public, from peers — and now they wish to disavow or pervert America’s voting system. 

And amazingly, it all comes down to one man, Donald Trump, a con artist, whose sole talent is to foment our basest instincts and to turn us against ourselves.

The Republican Party preaches religion and patriotism while practicing anti-religion and anti-patriotism.

One day, Trump will be dead, and his followers will look around and wonder, “What did we do? How could we ever have followed him?”

Let us pray America can survive the meanwhile.

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

How can the federal government possibly service $30 trillion in deficits.

Three measures of federal “debt,” none of which are debt in the usual sense of the word.

THINK: Depending on how you count it, the federal government’s “debt” totals about $30 trillion.

That means it has to pay interest on and pay back $30 trillion worth of deficits. (So-called “debt” is the net total of all previous deficits.)

How can it possibly service that amount?

Taxes can’t do it because if taxes could do it, there would be no deficits (which are defined as spending minus taxing).

Borrowing can’t do it. Who has $30 trillion dollars they are willing to lend to a “deadbeat” government — a government that continues to run growing trillion-dollar deficits year after year?

Where does the money come from?

There are all sorts of lies: Big lies, small lies, white lies, obvious lies, humorous lies, political lies, and “no-one-would-believe-that” lies. You encounter them all almost every day.

For example, despite what you have read, the IRS does not plan to hire 87,000 more agents to look over your shoulder.

Here is an excerpt from a Time Magazine article published in August 2022:

A Treasury Department report from May 2021 estimated that (the Inflation Reduction Act) would enable the agency to hire roughly 87,000 employees by 2031.

But most of those hires would not be Internal Revenue agents and wouldn’t be new positions.

Despite all the political huffing and puffing about agents coming after you, the entire rumor is a QAnon-style invention designed to inflame the naïve MAGA group, who have proven they will believe anything, no matter how outrageous (or especially outrageous).

Although the whole 87,000 IRS agents story is a load of right-wing, scare-monger poppycock, it is related to two facts that should get you angry enough to eat nails.

Fact #1. You shouldn’t have to pay any federal tax, because federal taxes pay for nothing.

Forget about how many IRS agents there are; focus on the real issue: Why are there any IRS agents at all?

Since the day of your birth, you have been immersed in the same belief: The federal government collects taxes to pay for the goods and services it buys. And because you have heard it again and again, you will find it very difficult to unlearn.

But it’s all a lie — A Big Lie.

The U.S. federal government is unique. It is not like state and local governments. It also is not like businesses, you, or me. The federal government uniquely is Monetarily Sovereign.

It is sovereign over its own sovereign currency, the U.S. dollar. It can create as many dollars as it wants, merely by touching a computer key. And it can give those dollars any value it wishes.

The federal government never unintentionally can run short of dollars.

Former Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Even if the U.S. federal government didn’t collect a penny in taxes, it could continue spending, forever.

The whole tax collection scheme, the IRS, the federal tax laws, tax evasion laws — everything to do with federal taxes — all are part of a performance to convince you that the federal government needs or uses your tax money to pay its bills.

And it simply is not true.

There’s the debt-limit fight that comes up ever few months. It’s the one where the political party out of power threatens the party in power that nothing will get done unless spending is reduced.

It’s all a charade. A lie. A Big Lie.

And they prove it’s a lie by simply agreeing to keep spending. The misnamed “debt” isn’t reduced or even limited.

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.”

The handwringing over the federal “debt” (that isn’t a real debt) and the threatened demise of Social Security and Medicare “trust funds” (that aren’t real trust funds) — there is not an ounce of truth in any of it.

The federal government could (and should) eliminate the FICA tax while continuing to pay Social Security and Medicare benefits, forever. It even could double or triple those benefits, and still not ask you for a penny in taxes.

Quote from the 60 Minutes TV show: 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.

The federal government is lying to you. The politicians are lying to you. The economics professors and newspaper writers, virtually everyone who tells you anything about federal taxes either is lying to you or doesn’t understand reality.

While state and local taxes do fund state and local government spending, federal taxes do not fund federal spending. Period. 

The federal government being Monetarily Sovereign, is unique. The sole purpose of federal taxes is to help the government control the economy by taxing what it wishes to discourage and by giving tax breaks to what it wishes to encourage.

Unlike state and local governments, the federal government (specifically, the U.S. Treasury) destroys all the tax dollars it receives. Those tax dollars, nearly all of which are part of the M1 money supply measure, cease to be part of any money supply measure when they are received.

Not being part of any money supply measure, they effectively cease to exist. (I know an economist who claims that the purpose of federal taxes is to give value to money. Utter beeswax. Has he never heard of bitcoin? No taxes there.

No, the sole function of federal taxes is economic control.) Federal taxes simply are a whip to beat you if you get out of line, and to refrain from beating you if you obey the government’s wishes.

Rather than using tax punishment to discourage, the government can use rewards to encourage. While taxes weaken the economy by removing dollars from your pockets, rewards would strengthen the economy by adding dollars.

The above are the absolute facts, and you probably believe none of them. You would need remarkable mental strength to ignore the false indoctrination you have received from so many trusted sources for so many years.

At first hearing, Monetary Sovereignty might seem complicated and hard to understand, yet it is the simplest idea possible. It can be expressed in one short sentence:

The federal government has the unlimited ability to create dollars.

Dollars are not found in nature. They are created by laws. The U.S. dollar exists because of U.S. laws.

Laws created the first dollar and all subsequent dollars. So long as the U.S. government has the unlimited ability to create laws, it has the same unlimited ability to create dollars. 

You have no trouble visualizing that the government can create all the laws it wants. So, you just as easily should be able to visualize the government creating all the dollars it wants.

Think of the board game, Monopoly. The Monopoly dollars exist because of Monopoly rules, which are written by people.

Current rules dictate that the Monopoly Bank cannot run short of dollars. If during a game, it would run short of paper dollars, you simply cut some paper and create new dollars.

So it is with the U.S. government. It always can create new dollars.

Remember that the next time someone tells you the federal government “can’t afford” something, or the government should run a balanced budget, or the federal debt is a burden on the government or on taxpayers. Or the Social Security trust fund is going bankrupt. All lies.

Here is the federal government taking billions, no trillions, from the economy, all for naught. It is the single biggest money scam in all of human history, and it is based on the Big Lie.

Imagine what that Big Lie has cost us: Healthcare, food, education, poverty, progress in every form, research, millions of great things that could have been done were it not for the falsely perceived shortages of money — the most expensive lie, ever.

Fact #2: The overriding goal of the Republican Party is to make the rich, richer.

The rich become richer, not just when they make more money, but rather when the income/wealth/power Gap between them and the middle widens. The goal of the Republican party is to widen the Gap, i.e., to make the rich richer.

They truly are the party of the rich. They proved it when they gave tax breaks to the rich. They proved it when they repeatedly tried to destroy Obamacare.

They prove it when they refuse to expand Medicare. They prove it when they refuse to support gun control (It’s mostly poorer Americans who die from gun killings).

They prove it when they cry crocodile tears about federal spending coming from taxpayer pockets (which it doesn’t.) They proved it when they voted against the veterans’ health bill, expanding other veterans’ benefits, paid family leave, and most other benefits for the poor.

Why the focus on the Republicans? Because they are the primary debt complainers. They are the ones who most want to cut federal spending. And here is where that spending goes:

While the rich receive the most lucrative tax breaks, the “not-rich” receive most of the spending. So, the focus of the GOP always is on spending cuts, which come from middle-class wallets.

The rich seldom want to cut the tax breaks that allow people like billionaire Donald Trump to pay far less in federal taxes than you do.

The rich love to pretend the federal government can’t afford to provide Americans with healthcare, retirement funds, free transportation, school lunches, good housing, education and other benefits that rich people accept as their due in life.

In Summary, the broad populace suffers because of economics ignorance. They believe the federal “debt” is a real debt when it merely is the total of deposits into privately owned accounts resembling safe deposit boxes.

The government doesn’t owe the debt any more than it owes the contents of those boxes. It merely returns the debt to the owners.

The populace believes the Social Security and Medicare “trust funds” are real trust funds. They believe the Big Lie that federal spending must be paid for by federal taxes.

These beliefs make them passive about paying for things that should be free, while the rich avoid paying.

False beliefs make the people accept the notion that the rich are concerned about those 87,000 IRS agents going after the poor and middle classes, when their real concern is that more agents would check on the rich.

If you are one of the people who believes federal taxes are necessary to pay for your federal benefits than you will go to your grave ignorant about your own complicity in cheating . . . YOU.

I understand why you believe the lies. Everyone around you has been spouting them for decades. But it’s time for you to use your own brain. Ask yourself this:

“How could the federal government service $30 trillion in deficits, unless it had the unlimited ability to create dollars?”

The answer: It couldn’t. No amount of clever bookkeeping could service deficits of that magnitude — unless the government had infinite dollars at its disposal.

And that is the answer to the title question.

The federal government created the first U.S. dollar from thin air and gave it an arbitrary value, by creating laws from thin air.

Ever since, the government has been doing that same thing. It can continue, forever. No taxes necessary. Just laws.

You have been conned your entire lifetime and will be conned until you understand the facts, and then protest.

 

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