Author: Rodger Malcolm Mitchell

MBA Northwestern, business turnaround expert, economist

What do we do when the enemy is in our ranks? The Jeffrey Sachs story.


It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.

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The other day I received a note from Stephanie Kelton, one of the very few economics professors who actually understands Monetary Sovereignty.

It was a form letter inviting me to support the Sanders Institute:

“Establishment economics won’t get us where we need to go. We need a bold policy agenda to take advantage of our vast capacity to build an economy that cares for our people and our planet in a way that makes us proud to call ourselves Americans.

“We know that another world is possible. We know that millions upon millions of everyday Americans believe in a world where everyone has a right to a decent job, healthcare, and the college education they want and need.

“We know that it will take powerful movements and bold ideas, working together, to make that vision real. And we know that The Sanders Institute can be an important place for that vital work to happen.”

The Institute is named after Bernie Sanders, who during the last election, had proposed a “Medicare for All” plan. Though his plan didn’t acknowledge the need for taxless federal funding, I once had hoped it was a start.

If you go to the Sanders Institute web page, you will see some of the Institute’s fellows, including Danny Glover and Harry Belafonte (Huh?), Professor Stephanie Kelton, and Professor Jeffrey Sachs, whom Time Magazine called, “the most important economist in the world.”

Seeing Sachs as an important member of the group tells me that Medicare for All is doomed.

Sachs is a human “false flag,” who claims concern for the less affluent, but whose recommendations support the belief that federal funding for health care must take away funding for other social needs.

Here is what Sachs wrote on the Sanders’ website:

Jeffrey Sachs: Americans can save $1 trillion and get better healthcare
by Prof. Jeffrey Sachs

US health care costs are out of sight, more than $10,000 per person per year, compared with around $5,000 per person in Canada, Germany and France. Obamacare expanded coverage without controlling costs.

Immediately, you can see that Sachs’s primary concern is cost. Yet, our medical care problem is not cost, but coverage.

Too many Americans either do not have health care insurance, or pay too much for the insurance they have. By contrast, the federal government can afford any cost, and in fact, higher federal payments to doctors and hospitals would:

–-Stimulate the economy
–Help hospitals modernize services and
–Incentivize young Americans to become doctors.

In short, Sachs follows the usual economic party line that claims federal deficit spending should be reduced.

The Republican plan would ruthlessly and cruelly limit coverage without controlling costs. Of the two options, Obamacare is vastly more just. The Republican plan is ghastly. But America has a much better choice: health for all at far lower costs.

This might seem like an out-of-reach goal or a political slogan, but it is neither. Every other rich country uses the same medical technology, gets the same or better health outcomes, and pays vastly lower sums.

Why the disparity? Health care in America is big business, and in America big business means big lobbying and big campaign contributions, the public interest be damned.

So far, so good.

Health care is our biggest economic sector, far ahead of the military, Wall Street and the auto and tech industries.

In line with its economic size, it ranks first in total lobbying, with a recorded $152 million in lobbying spending in 2017 and an estimated $273 million in federal campaign contributions in the 2016 election cycle, divided roughly equally between the parties.

Both parties have therefore ducked the hard work of countering the health care sector’s monopoly power.

Also true

Health care spending is now at $10,000 per person per year, roughly twice or more the total of other high-income countries, or a staggering $3.25 trillion a year.

We should aim to save at least $1 trillion in total annual outlays, roughly $3,000 per person per year, through a series of feasible, fair and reasonable measures to limit monopoly power.

And here is where Sach began to go off the rails. He talks about the supposed need to “save at least $1 trillion,” but why?

He says the reason is to “limit monopoly power.”

Are we to believe that paying hospitals, doctors, nurses, et al less, will “limit monopoly power”?

Here’s a 10-point plan Congress should consider.

First, move to capitation for Medicare, Medicaid and the tax-exempt private health insurance plans.

Under capitation, hospitals and physician groups receive an annual “global budget” based on their patient population, not reimbursement on a fee-for-service basis.

Capitation surely must be the worst idea imaginable.

It resembles the Republican “block-grant” plans for paying states to offer health care, thereby guaranteeing the poor will not receive health care.

The sole purpose of the GOP block grant and Sachs’s “capitation” is to save money for the federal government, an organization having the unlimited ability to pay any bills of any amount, forever.

Sachs’s “capitation” would guarantee that hospitals provide the minimum amount of service to patients. 

If hospitals are paid according to the number of patients, why would they improve service when they’re not paid to improve service?

For instance, why buy expensive CT and MRI scanners when a simple stethoscope will do?

Capitation also would guarantee that fewer young people would want to be doctors. Being a doctor is hard work: Years of difficult study followed by more years of difficult work.

The reward is not only the good feeling from helping sick people, but also the financial reward. Take away the latter and you reduce the number of interested people.

Second, limit the compensation of hospital CEOs and top managers. The pay of not-for-profit hospital CEOs and top managers, for example, could be capped at $1 million per year.

Limiting the compensation of hospital CEOs and top managers is as foolish as capitation. As long as we’re considering foolish ideas, why limit them to the health care industry. Why not limit the compensation of all top managers in all industries?

There are hundreds of thousands, perhaps millions, of CEOs in America. Shall we limit all their salaries? If not, why not?

Presumably, Sachs believes the health care industry does not need to attract the best managers, because as “everyone knows,” running a hospital is so easy. Right?

Third, require Medicare and other public providers to negotiate drug prices on a rational basis, taking account of research and development incentives and the manufacturing costs of the medicines.

Only an economist could come up with this idea.  Specifically, how would government bureaucrats “take account of” research and development incentives and manufacturing costs? Sachs has no idea.

Fourth, use emergency power to override patents (such as compulsory licensing of patent-protected drugs) to set maximum prices on drugs for public health emergencies (such as for HIV and hepatitis C).

Sachs wants the private sector to receive less money from the federal government. He wants our Monetarily Sovereign government — a government that has the unlimited ability to create dollars — to save money at the expense of business.

Economically, that makes no sense.

Fifth, radically simplify regulatory procedures for bringing quality generic drugs to the market, including through importation, by simplifying Food and Drug Administration procedures.

“Simplify” is easy to recommend, so long as one doesn’t have to be specific. Exactly which laws should be changed, and in what way?

That is as foolish as President Trump’s order that agencies eliminate 2 rules for every new one they create. Ignorant and childish.

Sixth, facilitate “task shifting” from doctors to lower-cost health workers for routine procedures, especially when new computer applications can support the decision process.

This is a good idea, which hospitals already are trying. That is why there are more than 50 types of nurses. Sachs doesn’t say what he means by “facilitate,” however.

Seven, in all public and private plans, cap the annual payment of deductibles and cost-sharing by households to a limited fraction of household income, as is done in many high-income countries.

This is a “take-from-the-hospitals,-doctors,-and pharmaceutical companies” plan.  Why tax (yes, it’s really a tax) households anything.

Much better to provide federally-paid, no-deductible Medicare for every man, woman, and child in America. 

Fully funded, federally funded Medicare for All would be the ultimate of simplicity. It  would include everyone, and federal spending would stimulate the entire nation.

The only ones who wouldn’t like it are the health insurance companies and their lobbyists (Don’t need them).

Eight, use part of the annual saving of $1 trillion to expand home visits for community-based health care to combat the epidemics of obesity, opioids, mental illness and others.

Here Sachs demonstrates total ignorance about Monetary Sovereignty. The federal government does not need to save $1 trillion or even $1 in order to expand health service.

It can provide everything without collecting a single dollar in taxes.

Nine, rein in the advertising and other marketing by the pharmaceutical and fast-food industries that has created, alone among the high-income world, a nation of addiction and obesity.

Government control over advertising and marketing dollars? Not only is this unnecessary in a Medicare-for-All world, but it likely would be found unconstitutional — and dangerous to a free nation. How could Sachs not understand that?

Ten, offer a public plan to meet these conditions to compete with private plans. Medicare-for-All is one such possibility.

Well, “duh,” as my grandchildren say. Medicare-for-All not only is one possibility; it eliminates the need for the first nine Sachs suggestions, so long as it is federally funded.

Visit the website of your local not-for-profit hospital system. There’s a good chance the CEO will be earning millions per year, sometimes $10 million or more.

Or go to treat your hepatitis C with Gilead drug Sofosbuvir. The pills list for $84,000 per 12-week dose, while their production cost is a little over $100, roughly one-thousandth of the list price.

Or go in for an MRI, and your hospital might have an $8,000 billable price for a procedure that costs $500 in a discount clinic outside your provider network.

All of these are examples of the vast market power of the health care industry. The sector is designed to squeeze consumers and the government for all they’re worth (and sometimes more, driving many into bankruptcy).

As a result, the sector is awash in profits and compensation levels, and the stock prices of the health care industry are soaring.

How much is a good hospital CEO worth? How much did it cost to invent Sofosbuvir? What was the cost of developing all the failures that never hit the market?

Are soaring stock prices and compensation levels a signal that a company should be punished?

If the federal government funded Medicare for All, all those “excessive” profits would go to the private sector, stimulating economic growth.

In the meantime, human and financial resources are pulled away from low-cost (but also low-profit) disease prevention, such as low-cost community health workers and wellness counselors who work within the community, including household visits.

There is no reason why the federal government cannot pay for disease prevention as part of Medicare-for-All.

The health care sector is a system of monopolies and oligopolies — that is, there are few producers in the marketplace and few limits on market power.

Many industries are like that. The armaments industry is one good example. And as with both the health care and armaments industries, the federal government has the unlimited ability to pay, and every dollar it pays goes into the economy, stimulating the economy.

Every other high-income country has solved this problem. Most hospitals are government-owned, while most of the rest are not for profit, but without allowing egregious salaries for top management.

Drug prices are regulated. Patents are respected, but drug prices are negotiated.

Sounds like communism, doesn’t it? I absolutely do not recommend government ownership of health care facilities. The federal government should pay your bills, not own your hospital.

None of this is rocket science. The problem is not our intelligence. The problem is our corrupt political system, which caters to the health care lobby, not to the needs of the people.

The real problem is ignorance of Monetary Sovereignty — the false belief that the federal government can’t afford to fund healthcare for American citizens, and that federal taxes are necessary.

People like Sachs promulgate this belief. If “the most important economist in the world” recommends 10 truly uninformed ideas based on ignorance of Monetary Sovereignty, what hope is there for health care in America?

Sachs may want to be a friend, and he may think he is a friend, but he is our enemy, parroting the debt Henny Pennys.

As for the Sanders Institute, its letter claimed we need “a bold policy agenda, powerful movements, and bold ideas.”

But if Jeffery Sach takes the lead, we will see the same old, misleading, limp, “Who’s gonna pay for it?” objections.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

More tax BS raining down on your head

Knowledge sets you free

.

It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.

 

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Today, we have the theater of the absurd. Congress prepares for the phony “debt ceiling” debates, exacerbated by the phony “tax cut” debates.  The debates will be based on two fundamental lies:Image result for umbrella in a rainstorm

Lie #1: Federal taxes fund federal spending.
Lie #2: Federal deficits and debt negatively impact economic growth

The truths are:

Truth #1: The federal government, unlike state and local governments, is Monetarily Sovereign. It does not use tax dollars. It creates brand new dollars, ad hoc, every time it pays a creditor. Even if all federal tax collections were $0, the federal government could continue spending forever.

Truth #2: Federal deficit spending stimulates economic growth by adding dollars to the economy. Federal debt is the total of deposits in T-security accounts, which receive economy-building interest from the federal government.

The previous post, “Examples of CNBC, Reuters, et al shoveling BS on your head,” ended with the following paragraph:

“Your politicians lie at the behest of the rich because they are bribed by the rich. The rich want you to believe the federal government can’t afford to give you such benefits as Medicare for All, Education for All,  poverty aids, lower taxes, and other help that would narrow the Gap between you and the rich.”

Politicians are not the only ones who lie at the behest of the rich. The media too, are bribed via advertising dollars and by ownership. Even the economists are bribed via university contributions and think-tank employment.

Then, there’s the Committee for a Responsible Federal Budget (CRFB). We’ve spoken of them before, and not in flattering terms. Here is their latest nonsense, designed to make you think your federal benefits should be cut:

Maya MacGuineas: Trump Tax Cuts Could Cost Your Kids Dearly 

President Donald Trump and the GOP Congress want to give America a tax cut, and no doubt most Americans want one. Who wouldn’t? But there is a math problem. It has to be paid for, or the tax cuts get added to our already record-high national debt.

No Maya, a tax cut doesn’t need to be “paid for.” The only thing taxpayers “pay for” is the taxes, themselves. Cut taxes and the public will pay less.

If you go to a store and find that prices have been cut, do ask to pay more for fear your children will have to “pay for” those cuts?

To bring down tax rates as much as the president wants would cost a huge amount — so huge, in fact, that politicians in Washington are having a hard time figuring out how to pay for what has been promised.

Here is how the federal governments pays for its spending: It 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 does as instructed, brand new dollars are created, and added to the nation’s money supply. The instructions then are cleared by the Federal Reserve. That is how federal deficit spending grows the economy.

So long as the federal government does not run short of instructions, it always will be able to pay for anything in dollars. No one in Washington needs to “figure out” how to pay for anything.

In recent weeks, the Trump administration and GOP leaders released an Initial tax “framework,” that we estimate could add upwards of $2.2 trillion to the debt. That is equal to $17,500 per U.S. household.

Federal deficit spending = private sector income. The CRFB actually admits that the budget would put $17,500 into the pockets of each U.S. household.

Unfortunately, this is an average. The details indicate that almost all the dollars would go to the very rich, with scant benefit to the lower- and middle-classes

Debt not only suppresses economic growth, it suppresses future wages.

You have just read two lies in one sentence. Federal debt is a bookkeeping consequence of federal deficits, which add dollars to the private sector. These additional dollars stimulate economic growth.

Further, there is no economic mechanism by which federal deficit spending “suppresses future wages.” Although there is no direct connection between federal debt (T-securities) and wages, if anything, federal deficit spending plus interest on T-securities adds dollars to the economy, which would stimulate wage growth.

Americans must ask themselves, is a $500 or $1,000 tax cut worth it if your kids are not only going to have to pick up the tab but also earn thousands less a year in income because of it?

Total manure.

You have not “picked up the tab” for past debt, and your kids will not “pick up the tab” for future debt. But you and your kids do pick up the tab for taxes, yesterday, today, and tomorrow.

When the federal government cuts taxes and/or increases federal spending (aka deficit spending), that puts money into the pockets of Americans.

But wait — there is hope. Tax reform that is paid for can bring down tax rates, simplify the tax code, and grow the economy — all without hurting our kids.

The above paragraph is insidious. Yes, tax reform can bring down tax rates, but didn’t the CRFB just tell us that collecting less tax (thereby adding to the deficit) will “suppress economic growth, and suppress future wages?

The CRFB talks on both sides of its mouth.

To pay for reform, politicians will have to fight back against some politically powerful special interests and end some popular breaks that are ingrained in the tax code.

These “tax expenditures” — various deductions, credits, exclusions, and exemptions — amount to nearly $1.6 trillion per year.

The CRFB and the rest of the debt Henny Pennys love to use the word “reform,” which implies improvement, whenever they talk about cutting benefits.

The “popular breaks” they want to eliminate are breaks received by you in the middle- and lower-income groups, among which are Social Security, Medicare, Medicaid, poverty aids, education aids, etc.

No cuts in benefits to the rich are being proposed. On the contrary, almost all the proposed benefits go to the rich.

The Senate is working on a budget now that will allow up to $1.5 trillion in unpaid for tax cuts based on the claim that the economy will grow enough to make up the difference. But those growth claims are wildly exaggerated and will ultimately lead to a much higher debt.

Translation: President Reagan claimed, with his trickle down economics, that tax rate cuts will grow the economy so much that more taxes will be collected. It didn’t prove to be true then, and it won’t be true now.

There is a difference between tax rate cuts and tax cuts. It’s not the rate cuts that stimulate the economy. It’s the cuts in actual tax collections that are stimulative.

“Paying for” rate cuts with higher future tax collections would be counterproductive.

Tax cuts do create economic growth but nowhere near dollar-for-dollar.

But wait. There is only one reason why tax cuts create economic growth: They increase the amount of money going into the private sector.

In short, tax cuts increase economic growth by increasing the deficit and debt.

To not add to the debt, most of the tax cut needs to be offset by broadening the tax base, raising other revenues, or cutting spending.

Here is where the CRFB reveals its true motive. “Broadening the tax base” means “charge the poor and middle more.” They are the tax base.

The Gap is what makes the rich rich. Without the Gap, no one would be rich; we all would be the same. And the wider the Gap, the richer they are. The CRFB is a tool of the very rich and powerful, whose primary motive is to widen the Gap between the rich and the rest.

The debt is at near-record levels, and we need to do everything we can to increase the pace at which our economy is growing. Coming up with a real plan for tax reform that will grow the economy but not the debt is worth the effort.

“Near-record levels” is a scare tactic. In 1960, the federal debt was $236 Billion. Today, the debt is $14 Trillion. In that 57 year period, there have been only 4 years in which the federal debt did not set a year-to-year record.

Yet, as the debt has grown the economy has grown. And with good reason. Federal deficit spending (i.e tax cuts and/or spending increases) create economic growth.

Every politician, virtually every news medium, and the vast majority of university and think-tank economists have been bribed by the very rich to tell you that the federal government uses tax dollars to fund spending, and that the federal debt hurts the economy.

It is a damnable lie.

While your state and local taxes do pay for state and local spending, your federal taxes pay for nothing. Your federal tax dollars cease to exist in any money supply measure, the instant they are received by the Treasury. They are destroyed upon receipt.

The sooner you begin to understand that basic economic fact, and see through the ongoing lies, the sooner you will be able to vote for closing the Gap and improving your economic life.

The rich pay people to steal your money, and they try to brainwash you into believing this is necessary.

The BS is raining down on you. Knowledge is your shelter.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

Examples of CNBC, Reuters, et al shoveling BS on your head. It’s Hollywood.

Searching for an honest man

.

It takes only two things to keep people in chains:
The ignorance of the oppressed and the
treachery of their leaders.

 

——————————————————————————————————————————————————————————————————————————————————————————–

Being Monetarily Sovereign, the U.S. government has the same money-creation powers as does the “Bank” in a game of Monopoly®. Neither can run short of their own sovereign currency.

Image result for Monopoly® money
If the Bank doesn’t have these . . .

If you open a Monopoly® box and discover there are no printed dollars inside, you still can play the game. The Bank simply could create an account ledger — on paper or electronic — and add new money to each player’s account whenever necessary.

Image result for four column chart
. . . it can create money from thin air with this.

The ledger could be something as simple as the piece of paper pictured at left, on which the Banker would tally a balance for each player.

Every time the Bank owed one of the players’ money  — for instance the $200 for passing “Go” — the Bank would add that amount to the player’s column.

In short, the Monopoly® Bank has the unlimited power to create new dollars from thin air — as does the U.S. government.

Both are Monetarily Sovereign.

The Bank never can be unable to pay its debts, unless the players wanted that to happen. To the Bank, no debt can be unsustainable.

You can play a full game of Monopoly® without having even one printed Monopoly® dollar in the box.

Similarly, the U.S. federal government never can run out of dollars. When it owes dollars to anyone, it simply marks up the creditor’s checking account. It has the same power to create dollars from thin air as does the Monopoly® Bank.

What then is the credit rating of the Monopoly® Bank and of the U.S. Treasury? Obviously, perfect — AAA+ or whatever the rating agency calls its highest level — a fact that makes the following CNBC/Reuters article so ridiculous.

YAHOO! Finance:
US to keep Aaa-rating after debt ceiling: Moody’s, Published 13 March 2017

Moody’s Investors Services said on Monday the United States will retain the rating agency’s top-notch debt rating as long as it meets its interest payments even if the government’s borrowing cap is reinstated on Thursday.

“While the periodic impasse over raising the debt ceiling is a credit negative feature of the country’s debt management, it has not affected the sovereign’s credit rating to date,” Moody’s analysts wrote in a research report published on Monday.

Like Moody’s, Fitch has kept its top AAA-rating on U.S. government debt.

However, Standard & Poor’s downgraded the U.S.’ rating by one notch to AA+ in August 2011.

It cited its high level of debt and uncertainty about the federal government’s ability to manage that debt load following a debt ceiling showdown.

S&P ranked the U.S. government lower than the highest rated corporation, conveniently neglecting the fact that if ever the U.S. government decided to default, the dollar would crash, and U.S. corporations would find themselves in serious financial difficulty.

The “borrowing cap” is a limit that Congress, in all its brilliance, has placed on the federal government’s ability to pay for what it already is obliged to pay.

The U.S. government does not borrow, in the usual sense. Like a bank, it accepts deposits. The so-called “debt” is the total of these deposits in T-security accounts.

The idea that the U.S. government arbitrarily, and for no reason, will decide not to pay its creditors is stupid or mendacious, even by normal Congressional standards of stupid mendacity.

If your Congressperson has voted for the “borrowing cap” (aka “debt ceiling”) you have ample proof that he or she either has a single digit IQ or is a liar. No other alternatives are possible.

As for S&P’s stated concern about “high level of debt” and “ability to manage that debt load,” one only can attribute this to duplicity approaching criminality.

While S&P may imagine a politically insane Congress spitefully refusing to pay its bills, a “high level of debt” is absolutely meaningless for an entity having the unlimited ability to add numbers to bank accounts.

The Treasury Department said last week it will embark “extraordinary measures” to meet its debt obligation if the debt ceiling goes into effect.

Year after year, the charade plays out like this:

  1. One party of Congress (Congress is a U.S. federal agency) pretends it is being frugal and prudent by enacting a debt limit, in a game of “chicken,” to prove the other party is composed of wastrels.
  2. The Treasury Department (another U.S. federal agency) goes along with the game by heroically embarking on “extraordinary measures” to keep America afloat. The “extraordinary measures” consist of rearranging payments and furloughing poor employees, while making sure that rich people and foreign nations are paid on time.
  3. The President (also a U.S. federal employee) will thunder outrage at those in the opposing party, for endangering America.
  4. Finally, when all other alternatives have been explored and rejected, the agencies of the U.S. federal government will halt the charade temporarily, by establishing a larger “debt limit,” as a prelude to a repeat of the charade the following year.

In short, the U.S. government agencies waste time and energy staging useless games among themselves. It’s all theater, to mystify an audience (you and me).

And that, folks, is why you pay Congress, the President, and the Secretary of the Treasury those high salaries and delicious perks — just like Hollywood actors.

U.S. Treasury Secretary Steven Mnuchin on Thursday called on Congress to raise the federal debt ceiling “at the first opportunity.” and announced the first of several likely cash management measures aimed at staving off a U.S. default.

Given his exalted position, Mnuchin should have said, “The ‘debt limit’ is a farce and should be ended forever.” He didn’t, nor did his predecessors. In politics, one keeps a job by going along with his bosses’ lies. Mnuchin is paid to read from the script.

Meanwhile, U.S. Senate majority leader Mitch McConnell told Politico on Thursday the United States will not default on its debt and will raise its debt limit in some fashion.

He too, should have admitted that the “debt limit,” which will require many hours of useless and senseless debate, must be eliminated. He didn’t, nor did his predecessors. He keeps his job by giving the electorate the lies they have been trained to demand.

The lies come at you from everywhere.  For instance, here is Mark Zandi, chief economist at Moody’s Analytics:

Moody’s Analytics chief economist: Why the Republican tax plan is set up to fail
Yahoo Finance, October 23, 2017
By: Mark Zandi

The Trump administration and Republican Congressional leadership want to go big on tax reform. They have proposed a broad set of changes to the corporate and personal income tax codes, including tax cuts and revenue raisers.

Remember, as you read the rest of these excerpts, that Zandi is the chief economist for Moody’s. (If he is the CHIEF ECONOMIST, one wonders what the subordinate economists are like.)

While the proposal is light on many important details, taken in total, it would not add significantly to economic growth, but it would add significantly to future budget deficits and the nation’s debt load.

The use of the words “debt load” tells you what Zandi wants you to believe: “Debt is bad.”

Never mind that the so-called “debt” merely is the total of deposits in T-security accounts, quite similar to bank savings accounts. 

Zandi wants you to believe these deposits are some sort of threat or burden. They are neither. They are deposits. Nothing more. You probably own some bank accounts. Banks love deposits. In days of yore, banks gave toasters to people who open accounts.

Businesses would be big beneficiaries of the Republican plan, enjoying an estimated net tax cut of $2.5 trillion over 10 years on a static basis—ignoring the impact of the tax cuts on the economy and thus tax revenues.

See that little phrase, “tax revenues.” Calling them “revenues” is part of the pretense that the federal government uses taxes to fund federal spending.

In business accounting, income is necessary to pay for outgo. In federal accounting, income pays for nothing. The federal government uniquely doesn’t use income.

Unlike state and local taxes, federal taxes cease to be part of any money supply measure. In short, federal tax dollars are destroyed upon receipt. The federal government creates brand new dollars, every time it pays a bill, just as the Monopoly® Bank can create brand new dollars to pay bills.

Neither the federal government nor the Monopoly® Bank needs tax dollars. Both can “play the game” with zero income.

The biggest corporate tax expense is the proposed reduction in the top marginal rate from 35% to 20% and repeal of the corporate alternative minimum tax.

Lowering the top tax rate on pass-through income and allowing businesses to reduce their tax bill by completely expensing their investment for at least five years are also costly.

To help pay for this largess, the plan eliminates business-related tax loopholes, although they are not spelled out, and even closing them all would not raise much revenue.

We’ve bolded the words “costly,” “pay for this largess,” “loopholes” and “revenue,” to demonstrate Zandi’s sly attempt to equate federal finances with state and local government, and personal, finances.

  1. Cutting federal taxes does not “cost” anyone anything — not you, not me, not the federal government. On the contrary, tax cuts put money into your pocket and mine. The federal government has no use of tax dollars. It destroys them.
  2. No one “pays for” tax cuts. Rather, we all “pay for” taxes. Reducing taxes reduces what taxpayers “pay for.”
  3. The word “largess” implies that you receive a generous gift from the government when they don’t pay taxes. The opposite is true. Tax dollars belong to you, the public, until they forcibly are taken by the federal government. If a thief fails to steal your money, you don’t consider that you have received “largess.”
  4. “Revenue” implies that the federal government has received something of value. But, in fact, while it is of value to you, it is of no value to the government. If you flush your dollars down the toilet, that is not considered “revenue” for your city sanitation department.

The big winners are the top 5% of taxpayers, with current incomes well over $300,000 per year. Taxpayers that make between $150,000 and $300,000 per year benefit the least, and would actually eventually pay more in taxes. Taxpayers making less than $150,000 will take home a modestly higher sum after-tax.

To help pay for these cuts, the plan eliminates personal exemptions except for mortgage interest and charitable giving along with most itemized deductions.

The big revenue raiser is the elimination of deductions for state and local income, sales tax and property taxes.

There are those misleading words, again: “Pay for” and “revenue.” Apparently, Zandi understands that repeating a lie makes it more believable.

Boosters of the Republican tax proposal argue that it will significantly increase economic growth,  this additional growth will generate roughly enough additional tax revenue for the plan to pay for itself.

That is, there would be large so-called supply-side effects from the tax cuts. So large that on a dynamic basis—after accounting for the bigger economy—the plan will not add to the nation’s deficits and debt.

The nation’s deficits are income for the nation’s people. Every dollar of deficit is a dollar that goes into the public’s pockets. Zandi, and others of his ilk, want you to believe that more dollars in your pocket is a bad thing.

They also want you to believe that your investments in your T-security account (aka “debt”), which the federal government easily could return to you today via money transfer,  (i.e. “pay off” the debt) are bad for you. Utter nonsense.

The plan will not meaningfully improve economic growth, at least not on a sustained basis.

Given that the economy is currently operating at full employment, however, stronger inflation and higher interest rates will result.

The higher rates wash out the economic benefit of the lower tax rates on investment, and the economy ends up no bigger than it would have been without the tax cuts.

These are widely promulgated misunderstandings.

  1. “Economic growth” most often is measured by Gross Domestic Product (GDP), the formula for which is: GDP=Federal Spending+Non-federal Spending+Net Exports. Tax cuts, which add to the gross money supply, increase GDP.  
  2. Inflation is not increased money supply. Inflation is the value of money (Money Demand/Supply) vs. the cost of goods and services (Goods & Services Demand/Supply). Many factors other than money supply and employment affect inflation, not the least of which are efficiency and productivity. With each passing day, labor has become a smaller inflationary factor. Thus, despite low unemployment and massive deficits, we currently have low inflation.  (See “Debt Henny Pennys.”)

We’ll conclude with a short article that appeared in The Week:

Trump rejects limiting before-tax 401(k) deductions to pay for tax cuts

President Trump on Monday rejected the possibility of raising money to pay for Republican tax cuts by reducing the pre-tax contributions Americans can make to their 401(k)s.

Trump’s position on the matter removes one option as Republicans rush to push through the legislation by the end of the year.

Republicans are looking for ways to help pay for more than $1 trillion in corporate and individual tax cuts, including eliminating the federal deduction for state and local taxes.

The notion that a federal tax increase can “pay for” a federal tax decrease is wrong, wrong, horribly wrong. While that can be true of state and local taxes, it simply is not true of our Monetarily Sovereign government’s federal taxes.

In the next few weeks, you will read and hear about Congress struggling mightily to cut taxes without increasing the debt or deficit.  It’s all performance art for your befuddlement — a comedy of errors that has run since at least 1940.

Deficits, i.e. cutting your taxes and giving you benefits, enrich you by putting dollars into your pocket. Federal deficits are the economy’s surpluses. Deficits grow the economy.

The so-called “debt” is just safe, interest-bearing deposits in T-securities accounts, similar to bank savings account deposits. The entire debt could be paid off tomorrow, without creating one new dollar, simply by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security owners.Image result for ocsar

Neither federal deficit nor federal debt is a threat, or a burden, or anything to be minimized.

Your politicians lie at the behest of the rich because they are bribed by the rich. The rich want you to believe the federal government can’t afford to give you such benefits as Medicare for All, Education for All,  poverty aids, lower taxes, and other help that would narrow the Gap between you and the rich.

It is a gigantic, ongoing con job. It’s all Hollywood.

Tell your Congressperson you aren’t fooled or amused.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

 

O.K., debt Henny Pennys, where’s the inflation? An irony disclosed.


It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.

——————————————————————————————————————————————————————————————————————————————————————————–

Henny Penny ran madly about screaming, “The sky is falling; the sky is falling.” For those of you whose early literacy was limited to “Goodnight Moon,” we provide this excerpt from Wikipedia:

Henny Penny is a folk tale about a chicken who, upon being hit on the head by an acorn, believes the world is coming to an end.

The phrase “The sky is falling!” features prominently in the story, and has passed into the English language as a common idiom indicating a hysterical or mistaken belief that disaster is imminent.

Today’s Henny Pennys are everywhere — in Congress, in the media, on blogs, among economists — most of whom have been bribed by our richest 1% (or even .1%) to tell you that the U.S. federal debt is “unsustainable,” and will cause a Weimar-style hyperinflation.

One Henny Penny is the Committee for a Responsible Federal Budget (CRFB),  whose leaders’ heads must have been hit by tons of acorns, because these esteemed dignitaries have preached the same “world-is-coming-to-an-end” garbage for more than 35 years.

But the CRFB is not the worst. We have documented Henny Pennys since 1940, all running in circles, screaming the same dire warning.

Yet, here we are.

The world has not ended. The debt has grown massively without hyperinflation. And the Henny Pennys seemingly have learned nothing.

Facts do not deter them, because they simply know, deep within their souls, that debt and deficit must be bad. After all, if you run a debt, that is a bad thing, so the same must be true for the U.S. government. Right?

Of course, wrong. The Federal government — unlike you, your state, your county, your city, and your business — is Monetarily Sovereign. It uniquely never can run short of its sovereign currency, the dollar.

The federal government can pay any bills of any size, without collecting even 1 cent in taxes, because it can create endless dollars. Send the government an invoice for $1 Million, or $1 Billion, or $1 Trillion, and the government could create the dollars to pay you tomorrow, with no difficulty and no tax collections.

Paying creditors is the federal government’s method for creating dollars.

“Aha,” scream the Henny Pennys, “but that will cause inflation, and not just inflation, but hyperinflation, like Weimar Germany and Zimbabwe, because as everyone knows, printing money causes inflation.”

That is the Henny Penny, “yes, but” end-of-world scenario (“Yes, the government can pay for anything — Medicare for All, Free Education for All, anti-poverty programs, etc., but that will cause hyperinflation.” )

Weimar Germany usually is given as the prime example of money “printing” causing hyperinflation. Except it is a false example.

Though money “printing” always is present during hyperinflations, the beginnings of a hyperinflation are some form of shortage.

Germany’s was a shortage of gold. Zimbabwe’s was a shortage of food. Shortages lead to higher prices, which governments are tempted to match with increased money supply.

The process is: Shortage of goods and services —> Inflation —> Government currency printing —> More Inflation —> More shortages —> More currency printing . . . and on and on to hyperinflation.

In summary, hyperinflations cause money “printing” rather than the other way around.

Here is a graph showing Debt growth (red line) and inflation growth. Despite the massive increase in Debt, average inflation has been modest because the U.S. did not experience serious shortages of goods and services.

Wired Magazine, 09.30.17
NO INFLATION? TECHNOLOGY MAY HAVE LEFT IT BACK IN THE 20TH CENTURY
By Zachary Karabell

During her speech to the National Association of Business Economics on Tuesday, Federal Reserve Chair Janet Yellen said inflation and wages are not rising as expected.

Nonetheless, she believes the Fed should continue on its path of raising interest rates, because diverging would risk inflation getting out of control once it starts to rise, as she believes it inevitably must.

To which the question should be: Really, must it?

What if the combined and continuing effects of technology and a globalized market of goods and labor are so altering commerce and prices that the 20th century script is as outmoded as an IBM Selectric typewriter?

Here, Mr. Karabell clarifies what should be basic and obvious, but amazingly seems to be opaque to mainstream economists: Excessive inflation begins with shortages.  PRICE = DEMAND/SUPPLY

Yellen is speaking to the fact that over the past eight years, economic output has picked up and employment has grown, but neither wages nor prices have risen much. Inflation has barely nudged 2% in the past decade.

The question is why. Yellen admirably admits that structural changes are invalidating past assumptions and patterns.

How long before we consider the possibility that (we’re in) a new normal? Unemployment has plunged from a high of 10% to the mid-4% range that is about as low as ever. But many of the newly created jobs pay less than their pre-2008 predecessors. Crucially, there’s still little growth in wages.

The absence of inflation doesn’t mean that everyone can afford basic necessities such as health care. But that reflects massive inefficiencies in how we deliver care as much as underlying cost trends.

Instead, the cost of most of life’s necessities, from food to clothing to shelter, has stabilized or dropped over the past two decades due to the deflationary effects of technology.

It isn’t just that you can get a large flat-screen TV for next to nada. You can get a car that uses less fuel and is far safer for less money (inflation adjusted) than a gas guzzler of yesteryear.

Thank, in part, composite materials, which also require less energy to produce than 20th century steel. You can get a smorgasbord of caloric abundance for a fraction of the cost of a much less varied diet in 1950; you can access new medicines to extend lives by years; and you can access for free on the Internet incalculable reams of data, costing you nothing but your time.

For some aspects of our lives, there is no apples-to-apples comparison with the past.

With Moore’s Law and the compression of data and power, today’s smartphones are the equivalent of yesterday’s supercomputer that cost 1,000 times as much, guzzled electricity and demanded expensive cooling systems.

Electrifying a grid that needed to fuel that and billions of incandescent bulbs was costly compared with the dollop of energy needed to power LEDs. That washing machine, with its smart chips monitoring the size of your load? That smart thermostat in your home dynamically adjusting heat and air-conditioning? They also reduce costs, and overall electric demand, even in their limited numbers so far.

And this doesn’t even begin to adjust for the possible efficiencies and benefits of the app economy that can connect buyers of goods and services with sellers with fewer frictional costs of middlemen scheduling and booking and coordinating.

Karabell continues with his examples, all of which demonstrate one basic truth: If the supply of goods and services grows as fast or faster than the supply of money (i.e Supply grows faster than Demand) prices will not rise.

Given that our computerized economy continues to produce more/better goods and services, and further reduces the need for labor, there is no scarcity factor to raise prices (or wages).

Similar changes are under way in the developing world, as labor gives way to robotics and basic goods become affordable and accessible to the planet’s billions.

Given those changes, why would 20th century models of prices and rates and money supply work as they used to work?

Kudos to Yellen and the Fed for at least having the humility to consider that the economic truths of the past may not be so true anymore.

They now need to make the next step, and consider what policy might look like if past patterns are indeed of the past. Otherwise we risk making policy geared toward a world that no longer exists, and it is hard to see that ending well.

Science has changed the world. We can grow more, create more, and ship more, all at less cost than ever. In our global economy, a shortage in country “A” quickly and cheaply can be filled by producers in country “B.”

In the past, businesses paid people, who labored for money to buy goods and services.  Today, businesses pay fewer people less, and these people can acquire better goods and services for less money.

Contrary to the belief of Modern Monetary Theory (MMT), that full employment is a prime goal, we are headed toward a world where full employment is an abomination — a world in which humans labor less and enjoy life more.

There is no magic to the 40-hour week. Why not a 20-hour week? Or less? Federal deficit spending can accomplish this.

And that is the irony promised to you in the title:

Federal deficit spending actually may help prevent excessive inflations, particularly if the deficit spending supports efficiency and productivity.

Consider the efficiency and productivity effect of federal deficit spending to fund scientific advances in cheaper, renewable energy — solar, wind, geothermal and others we’ve not yet thought of.

Consider the efficiency and productivity of federal deficit spending to support education, particularly STEM (Science, Technology, Engineering, Mathematics).

Consider the deficit spending that would result from reduced business taxes, thereby cutting the cost of producing virtually everything.

Federal support for the development of better seeds and better farming methods could eliminate food shortages, a key cause of inflation.

Sickness is inefficient; health is efficient. Deficit spending that supports health care would increase efficiency and productivity.

A wide Gap between the rich and the rest encourages poverty and discourages productivity. Deficit spending to reduce poverty and increase productivity would help reduce shortages.

Implementation of deficit spending for the Ten Steps to Prosperity (below) would help prevent excessive inflation.

That is something the debt Henny Pennys don’t want you to know.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY