Rick Scott shovels the myth

Senator Rick Scott is a Floridian. He is a Republican. And he is a Trumper.

Official Portrait of Senator Rick Scott (R-FL).jpg
Would this face lie to you?

He sent me a form letter telling me how he is going to improve my life:

(Republican) Senator Rick Scott led his colleagues in introducing the Federal Debt Emergency Control Act to rein in Washington’s out-of-control spending and provide a concrete path forward to tackle the nation’s nearly $30 trillion debt.

“Out-of-control” is a synonym for “Gosh, that’s a lot of money to waste on the poor.”

In fact, the “Out-of-control” spending is controlled by Congress, of which Republican Senator Rick Scott is a part.

This is the same Republican Congress that gave the rich a vast, over-budget tax reduction, without a whimper from Senator Rick Scott.

Suddenly, with a Democratic majority Congress and Presidency, the Republicans have re-discovered federal deficits. And they are “shocked, shocked I tell you.”

“Out of control” also is a synonym for “ticking time bomb,” about which we have written several times. It’s the bomb that for 80+ years, debt haters have been telling you is ready to explode.

Yet, here we are. No explosion. Economic growth. Decades of low inflation.

The Federal Debt Emergency Control Act requires the Office of Management and Budget to declare a “Federal Debt Emergency” in any fiscal year where the federal debt exceeds 100% of that year’s Gross Domestic Product (GDP).

Why the 100% figure? There’s no reason for it other than ignorance. The ratio of federal debt to GDP has absolutely no significance regarding the health of the U.S. economy.

It’s a useless, meaningless ratio that gets fire-breathed with alarm by those who either know nothing about economics, or worse, want you to know nothing about economics.

If (Republican) Senator Rick Scott is right, you would expect the sickest, weakest economies to have the highest Debt/GDP ratios, while the healthiest, weakest economics have the lowest Debt/GDP ratios.

But what do we find? Here are some examples:

Sample Nations: DEBT / GDP Ratios

Based on the above ratios, which nations would you say have the strongest, healthiest economies, and which have the weakest, sickest economies?

Right. The Debt/GDP ratio tells you exactly nothing about the health or strength of a nation’s economy.

But Republican Senator Rick Scott wants to cut federal spending as soon as our ratio hits the arbitrary and meaningless number: 100% (which it already did way back in the 4th qtr of 2012 — blue line).

And by the way, inflation (red line), the current Republican excuse for cutting benefits for the poor, has averaged below the Fed’s 2% target.


This emergency designation would trigger several provisions to help control and reduce the federal debt to levels below 100% of GDP, including:
Terminating any unobligated funding from the American Rescue Plan Act, and any previous stimulus bills, and sending it back to the Treasury General Fund immediately for deficit reduction.

He’s not specific about what should be cut. He just wants to cut “any unobligated funds,” no matter how vital to the economy and the people they may be.

Exactly what is supposed to happen in the Treasury General Fund for deficit reduction? What is the “it” he wants to send back? Which dollars are not to be spent?

The whole thing is financially senseless, but it is a classic right-wing approach.

The American Rescue Plan Act and the previous stimulus bills rescued America from the severe recession that was exacerbated by Donald Trump’s incompetent and deadly COVID denial along with his economically damaging trade duty war against China. Scott is silent about that.

Scott never says.

Why?

Because, being a Republican, he would cut all the spending that benefits the poor and middle classes, while falsely claiming that the rich are “job makers” who should be rewarded even more than they already are.

Requiring all legislation that increases the federal deficit, as determined by the Congressional Budget Office, to carry its own offsets.

This means running a balanced budget, perhaps the least intelligent idea ever to come out of any Congressperson’s mouth because:

A balanced federal budget is absolutely, positively guaranteed to cause a deep recession if we are lucky, or a deep depression if we are not lucky.

If you can find anyone on this planet who can demonstrate how running a balanced federal budget would allow for economic growth and/or prevent a depression, I would love to see the evidence.

Perhaps the same person also can prove that global warming is a Chinese myth, and that Donald Trump actually won the election — two equally nutsy claims coming from the GOP.

If it does not, the legislation shall be considered out of order and will require at least two-thirds of all Senators to vote to increase federal debt before even being able to consider the bill.

Wait! What if two-thirds of all Senators were, by some miracle, to vote to increase the federal debt, would that mean it then becomes OK? Suddenly it would be within the government’s “means”?

And, don’t we already have the ridiculous federal “debt limit,” that not only does the same thing, but is raised every time it’s reached?

And why is the debt limit always raised?

Because, Congress is well aware that limiting federal debt would destroy the U.S. economy.

Fast-tracking any legislation that would reduce the federal deficit by at least 5 percent over ten years.

Where did that 5% number come from? It surely wasn’t derived by any scientific method. Scott apparently thinks it’s a nice number, so he uses it.

It reminds one of dearly departed Herman Cain’s meaningless “9-9-9” tax plan. Just numbers with no real reason.

And where is the math that says reducing the federal deficit would benefit the economy in some way? Non-existent.

Senator Rick Scott said, “America is in a debt crisis. Our nation is barreling toward $30 trillion in debt – an unimaginable $233,000 in debt for every family in America.

It’s not that families owe that debt. The government does. But Scott tries to imply, falsely, that your family will have to pay for that debt.

It’s a crisis caused by decades of wasteful and reckless spending by Washington politicians.

Now, President Biden is continuing this way of governing by pushing for trillions in wasteful spending, raising the U.S. federal debt by 60% to $39 trillion and the debt-to-GDP ratio to 117% in 2030, the highest level ever recorded in American history.

And what has been the result of all this “wasteful and reckless spending? Taxes are down and GDP is up.

But Scott wants to fix that, by raising taxes and/or reducing GDP.

Spending beyond our means has consequences.

The federal government, being Monetarily Sovereign, has no “means.”

We’re already seeing rising inflation, which disproportionately hurts the poorest families, like mine growing up.

The “rising inflation,” which for decades has been below Federal goals, is the result of the pandemic, not the result of federal spending. It was the pandemic, and Trump’s atrocious handling of it, that led to the shortages of goods and services, that resulted in a thoroughly predictable inflation.

Someone, please ask Sen. Scott, “Where was the inflation last year and the year before, and the decades before, when deficit spending was massive?”

And yes, we caught that “I grew up poor” disgusting attempt at ingratiating yourself with the people you are trying to screw.

But hey, as long as you’re talking about your history, let’s get into where your calculations might have come from:

In 1987, after serving in the United States Navy and becoming a law firm partner, Scott co-founded Columbia Hospital Corporation.

Columbia later merged with another corporation to form Columbia/HCA, which eventually became the nation’s largest private for-profit health care company.

Scott was pressured to resign as chief executive of Columbia/HCA in 1997.

During his tenure as chief executive, the company defrauded Medicare, Medicaid and other federal programs.

The Department of Justice ultimately fined the company $1.7 billion in what was at the time the largest health care fraud settlement in U.S. history.

And this fraudster is the guy who suddenly has become so concerned about the federal government’s “means” and its ability to pay its bills.

No wonder this criminal is a Trumper. “Birds of a feather,” as they say. He must have envied Trump University.

I look forward to every fiscally responsible Republican and Democrat working with me to quickly pass the Federal Debt Emergency Control Act.”

Yes, do vote for good old “fiscally responsible” Rick Scott, who can hardly wait to cut benefits to the poor, while driving the economy into a depression, thus allowing his rich backers to buy up property and businesses at discount prices, while paying workers depression-era wages.

And, there are people who actually believe this guy! Strange.

Fortunately, with a currently Democratic Congress and President, this idiotic ploy has no chance to pass, and least not in the near future.

And it wasn’t meant to pass.

There isn’t a new idea in the entire proposal. It’s a rehash of all the discredited nonsense that has been floated by populists for decades.  It was assembled in a half-hour as a political stunt to show how fiscally sound is the do-nothing, historically crooked Senator from Columbia/HCA.

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

 

 

What is “inflation”? Not what you might think. How to ignore the facts in plain sight.

Lately, we’ve been hearing and reading a great deal about inflation, and how it’s either nothing to worry about or it’s the end of the world, depending on the motive of the author.

Currently, the Republicans are all atwitter about inflation, because they ascribe it to federal benefits for the not-rich, which they loathe — both the not-rich and the benefits for them.

The Democrats pooh-pooh inflation as nothing-to-worry-about because they want to put more dollars into the pockets of the poor while buying votes.

But what exactly is “inflation”? Surely, the science of economics can provide the answer to so basic a question.

For your confusion, I turn you to “The Definition of Inflation” by Ludwig von Mises.

No, not really.

It’s nonsense. I mention it, not as a reference, but as a reference to the confused nature of economics.

“Inflation,” as most people (except von Mises) think of it, is a general increase in prices. That might seem simple enough on its face, but dig below and it becomes rather muddled.

According to Investopedia:

PCE Price Index (PCEPI) vs. Consumer Price Index (CPI)
The CPI is the most well-known economic indicator and usually gets a lot more attention from the media. But the Federal Reserve prefers to use the PCE Price Index when gauging inflation and the overall economic stability of the United States.

There are other indicators that are used to measure inflation, including the Producer Price Index and the GDP Price Index.

So why does the Fed prefer the PCE Price Index? That’s because this metric is composed of a broad range of expenditures.

The PCE Price Index is also weighted by data acquired through business surveys, which tend to be more reliable than the consumer surveys used by the CPI.

The CPI, on the other hand, provides more granular transparency in its monthly reporting. As such, economists can more clearly see categories like cereal, fruit, apparel, and vehicles.

Another difference between the PCE Price Index and CPI is that the PCE Price Index uses a formula that allows for changes in consumer behavior and changes that occur in the short term. These adjustments are not made in the CPI formula.

These factors result in a more comprehensive metric for measuring inflation. The Federal Reserve depends on the nuances that the PCE Price Index reveals because even minimal inflation can be considered an indicator of a growing and healthy economy.

In reading the above you might conclude that each measures inflation in a slightly different way, but overall, the results should be similar, differing only in detail. Right?

Well, here they are:


The above graph shows each measure on the index: November, 1970 = 100.

Hmmm . . . Three of the four are similar, but the blue line, Personal Consumption Expenditures (PCE), the one the “Federal Reserve prefers to use,” shows massively different inflation.

So, how much has been the “general increase in prices”? Has there been a lot of inflation? A little? Economists can’t tell you.

Let’s look at exactly the same basic data, but instead show Annual Percentage Change from the Year Ago:

The prior graph indicated that inflation at some unknown level, has existed for many years, though measurements differ significantly.

The second graph shows that year-to-year inflation changes generally have trended down. The outlier continues to be the Fed’s preference, PCE, while GDP Price Index and Consumer Price Index move in lockstep, as would be expected.

Now, we’ll include federal deficit spending, the great bugaboo of the right-wing (except when the deficits favor the rich):

We find no relationship between deficits and any commonly-used measure of inflation.

Look closely, and you will see that the maroon line (Federal Debt Held By The Public), the measure of federal deficit spending, does not move in concert with any measure of inflation.

There simply is no evidence to support the commonly held notion that inflation is caused by federal deficit spending. The belief in the monetary cause of inflation simply is wrong, though that belief is a primary source of federal debt fear.

Here is the “logic,” as expressed by Investopedia:

Financing a Deficit
All deficits need to be financed. This is initially done through the sale of government securities, such as Treasury bonds (T-bonds).

Wrong. Treasury securities do not finance anything.

They merely are deposits into T-security accounts, the money in which is not touched by the federal government.

Like the money in safe deposit boxes, the dollars just sit in the T-security accounts, gathering interest until maturity, at which time the contents of those accounts are returned to the owners.

Federal deficit spending is financed by federal money creation, not by borrowing.

Individuals, businesses, and other governments purchase Treasury bonds and lend money to the government with the promise of future payment.

No “lending” is involved. The federal government has no need for, nor use of, the dollars residing in Treasury Security accounts.

To pay for its deficit spending, the federal government sends instructions (not dollars) to each creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

The instant the bank does as instructed, new dollars are created and added to the money measure known as M1.

The bank then clears the transaction through the Federal Reserve, a federal government agency, and the circle is closed. The government simply creates its own laws and approves its own money creation.

The clear, initial impact of government borrowing is that it reduces the pool of available funds to be lent to or invested in other businesses.

As noted earlier, the U.S. federal government, being Monetarily Sovereign, has the unlimited ability to create U.S. dollars. So it does not borrow dollars.

The so-called “borrowing” (i.e. deposits into T-security accounts) would “reduce the pool of available funds to be lent to or invested in other businesses,” but for three facts:

  1. Federal deficit spending adds dollars to the economy, which increases the pool of available funds
  2. The deposits earn interest dollars created ad hoc, by the federal government, which also increases the pool of available funds.
  3. Upon maturity, the dollars in the T-security accounts are returned to M1, which again adds to the pool of available funds.

This is necessarily true: an individual who lends $5,000 to the government cannot use that same $5,000 to purchase the stocks or bonds of a private company.

But some other individual, the individual who sold the $5,000 worth of goods and services to the federal government, has received newly-created $5,000 that can be used “to purchase the stocks or bonds of a private company.”

Thus, all deficits have the effect of reducing the potential capital stock in the economy.

Wrong. All federal deficits have the effect of increasing the potential capital stock in the economy, which why, as federal debt has increased, there is more capital stock in the economy today than there was in prior years.

This would differ if the Federal Reserve monetized the debt entirely; the danger would be inflation rather than capital reduction.

The so-called federal debt already is monetized by the money-creation involved in the federal government paying for goods and services.

Additionally, the sale of government securities used to finance the deficit has a direct impact on interest rates.

It isn’t the sale of T-securities that impacts interest rates. It’s the existence of T-securities that gives the Fed a platform for controlling interest rates.

Accepting an extra billion or trillion dollars in T-security deposits doesn’t change that fact.

Federal Limits on Deficits

Even though deficits seem to grow with abandon and the total debt liabilities on the federal ledger have risen to astronomical proportions, there are practical, legal, theoretical and political limitations on just how far into the red the government’s balance sheet can run, even if those limits aren’t nearly as low as many would like.

As a practical matter, the U.S. government cannot fund its deficits without attracting borrowers.

False. They probably mean, without attracting lenders, but that too would be false.

Deficits are the difference between tax collections and federal spending, which already is funded by federal money creation.

Deficits are not funded. It is the spending that is funded. And there are no financial limits to federal spending.

Backed only by the full faith and credit of the federal government, U.S. bonds and Treasury bills (T-bills) are purchased by individuals, businesses, and other governments on the market, all of whom are agreeing to lend money to the government.

True that U.S. Treasury securities are backed only by the full faith and credit of the U.S. government.

But the federal government does not borrow U.S. dollars. Even if the U.S. government didn’t offer a single T-bill, T-note, or T-bond, it could continue deficit spending forever.

No one lends money to a government that has, via its own laws, given itself the unlimited ability to create its own sovereign currency.

The U.S. federal government never unwillingly can run short of laws, and it never unwillingly can run short of dollars.

The Federal Reserve also purchases bonds as part of its monetary policy procedures. Should the government ever run out of willing borrowers, there is a genuine sense that deficits would be limited and default would become a possibility.

That may be the “general sense,”  but it is wrong. The debt-worriers have been making the same “default” claim for more than 80 years, while the federal debt has risen 5,500%.

If interest payments on the debt ever become untenable through normal tax-and-borrow revenue streams, the government faces three options.

They can cut spending and sell assets to make payments, they can print money to cover the shortfall, or the country can default on loan obligations.

The second of these options, an overly aggressive expansion of the money supply, could lead to high levels of inflation, effectively (though inexactly) capping the use of this strategy.

The author has no understanding of the financial differences between monetary non-sovereignty (you, me, cities, counties, states, businesses) vs. Monetary Sovereignty (the federal government).

Neither taxing nor borrowing supplies dollars to the federal government. Tax dollars are destroyed upon receipt. And the federal government (unlike state and local governments) does not borrow.

The purpose of federal taxes (unlike state/local taxes) is not to provide spending money to the government. The purpose of federal taxes is to:

  1. Help the government control the economy by taxing what it wishes to discourage and by giving tax-breaks to what it wishes to encourage, and
  2. To make the populace believe that benefits are limited, a myth promulgated by the very rich in order to widen the Gap between the rich and the rest.

The federal government always creates new dollars to pay for interest, and this never leads to inflation.

The Bottom Line
Deficits are seen in a largely negative light.

By those who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty.

While macroeconomic proposals under the Keynesian school argue that deficits are sometimes necessary to stimulate aggregate demand, other economists argue that deficits crowd out private borrowing and distort the marketplace.

Deficits always are necessary to stimulate demand. When deficits are lacking, or even too small, the economy falls into recession or depression.

A growing economy requires a growing supply of money, and this is created via federal deficit spending.

Recessions (vertical gray bars) are preceded by reductions in deficit growth, and are cured by increases in deficit growth.

U.S. depressions tend to come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Since deficit spending adds dollars to the economy, it is senseless to claim that deficits crowd out private borrowing. Deficits have grown massively over the years, and there has been no “crowding out” of private borrowing.

Still, other economists suggest that borrowing money today necessitates higher taxes in the future, which unfairly punishes future generations of taxpayers to service the needs of (or purchase the votes of) current beneficiaries.

If it becomes politically unprofitable to run higher deficits, there is a sense that the democratic process might enforce a limit on current account deficits.

And yet, there has been no relationship between tax levels and federal deficits. No future generations have been punished.  And the democratic process has not enforced a limit on federal deficits.

All of the above demonstrates the “science” of economics’s uncanny ability to ignore the facts in plain sight, and instead promulgate unproven and unprovable hypotheses.

.
IN BRIEF:
Many people expect the Federal Reserve to control inflation. But inflation is not a financial problem. Inflation is a scarcity problem that only Congress can fix.

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

INFLATION! No, no, it isn’t the stimulus.

INFLATION! You can hear it now, can’t you? The sound of hands wringing in concert.

The GOP is owned by the very rich. And the rich are terrified that you ever-so-slightly will narrow the Gap between you and them.

So their GOP flunkees, having already given a huge tax deduction to their rich patrons, now will tell you that the Democrats’ stimulus packages are wrecking the economy and causing not just inflation, but hyperinflation.

It’s all a great big fat lie, a repeated myth designed to calm your requests for more stimulus dollars to flow to your benefit.

It goes like this:

  1. Because the unemployment benefits are too generous, people won’t come back to work. So the GOP solution is to cut benefits, thereby starving people into working for low pay at unpleasant jobs.
  2. The inflation theory is that increasing the supply of dollars when the demand for dollars remains constant, reduces the value of the dollar, and that reduction is known as “inflation.”

    Whip Whipping Hand - Free vector graphic on Pixabay
    The GOP solution to inflation and unemployment.

Nice hypotheses, except:

  1. There is a way to pay people good wages and also encourage work, and
  2. The value of dollars does not decrease just because the supply increases.

Dollars are not like oranges, oil, or opera tickets. Money is a unique commodity. Increase the supply and people want still more.

Give a person a million or a billion, and he will want yet another million or billion. Ask Jeff Bezos, Elon Musk, Mark Zuckerberg, or Warren Buffet. They all still work — for money.

The one thing that affects the demand for money is the reward for owning money, i.e. interest rates, and that effect is modest. So, though interest rates today are quite low, the demand for dollars remains high.

As I have demonstrated in previous posts, inflations have not been caused by federal deficits. Nor have hyperinflations. All have been caused by shortages.

Inflations are caused by shortages, not by money supply.

If deficit spending (red line) caused inflations (blue line) you would expect to see the two lines reasonably parallel. But there seems to be no relationship between the lines. Cuts in deficit spending lead to recessions (gray bars).

The shortages that most likely to lead to inflations involve food, energy, and personnel.

 Consumer prices surge again, rising 5% over the past year
By Martin Crutsinger Associated Press
WASHINGTON — American consumers absorbed another surge in prices in May — a 0.6% increase over April and 5% over the past year, the biggest 12-month inflation spike since 2008.

The May rise in consumer prices that the Labor Department reported Thursday reflected a range of goods and services now in growing demand as people increasingly shop, travel, dine out and attend entertainment events in a rapidly reopening economy.

The increased consumer appetite is bumping up against a shortage of components, from lumber and steel to chemicals and semiconductors, that supply such key products as autos and computer equipment, all of which has forced up prices.

And as consumers increasingly venture away from home, demandhas spread from manufactured goods to services — airline fares, for example, along with restaurant meals and hotel prices — raising inflation in those areas, too.

Among specific items in May, prices for used vehicles, which had surged by a record 10% in April, shot up an additional 7.3% and accounted for one-third of May’s overall price jump. The price of new cars, too, rose 1.6% — the largest one-month increase since 2009.

The jump in new and used vehicle prices reflects supply chain problems that have caused a shortage of semiconductors.

The lack of computer chips has limited production of new cars, which, in turn, has reduced the supply of used cars. As demand for vehicles has risen, prices have followed.

But higher prices were evident in a wide variety of categories in May, including household furnishings, which rose 0.9%, driven by a record jump in the price of floor coverings. Airline fares rose 7% after having increased 10.2% in April. Food prices rose 0.4%, with beef prices jumping 2.3%. Energy costs, though unchanged in May, are still up 56.2% in the past year.

The problem isn’t excessive money. Furnishings, floor coverings, airline tickets, beef, and oil prices all reflect the lack of production or availability, which in turn reflects the lack of demand during COVID-19.

Only now, is supply beginning to grow to meet demand.

From the cereal maker General Mills to Chipotle Mexican Grill to the paint maker Sherwin-Williams, a range of companies have been raising prices or plan to do so, in some cases to make up for higher wages they’re now paying to keep or attract workers.

The GOP’s solution to the shortage of workers is to stop paying unemployment compensation.

For the benefit of the rich, the GOP wishes to starve the people until they are forced to return to low wages and poor working conditions.

That “solution” is a disgusting, medieval approach when a modern solution is available.

The solution is not for the federal government to pay the unemployed instead of salaries, but rather for the government to pay everyone in addition to salaries.

Don’t compensate people for staying home. Compensate people for being people. Institute Social Security for all.

That way, there would be no temptation to stay home (when salaries are lower than the unemployment pay), and the public would be enriched, which means the entire economy would be enriched.

This week, for example, Chipotle Mexican Grill announced it was boosting menu prices by roughly 4% to cover the cost of raising its workers’ wages. In May, Chipotle had said that it would raise wages for its restaurant workers to reach an average of $15 an hour by the end of June.

Andrew Hunter, a senior U.S. economist at Capital Economics, noted that the price category that covers restaurant meals jumped 0.6% last month. He took that as evidence that labor shortages at restaurants, hotels and other service sector companies are beginning to fuel wage and price increases.

The best cure for inflation, i.e. the best cure for shortages, is for the federal government to spend more either to obtain and distribute the scarce goods or to encourage the production of the scarce goods.

Rather than paying people to be unemployed, let employment serve as the marginal reward for labor.

And finally, the purpose of federal taxes is not to supply money to the federal government, which already has the unlimited ability to create money.

The purpose of federal taxes is to discourage what the government doesn’t want by taxing it, and to encourage what the government does want by giving tax breaks.

So why does the federal government tax businesses? To discourage the profits that pay salaries? It makes no sense.

Rather than discouraging business profits by taxing, encourage business profits and salaries by eliminating business taxes.

Punishing the poor to send them back to work, is a solution only in the eyes of the rich and the GOP.

SUMMARY

  1. Federal deficit spending does not cause inflations. Shortages of goods and services cause inflations.
  2. Cuts in federal deficit spending lead to recessions and depressions.
  3. A Monetarily Sovereign federal government can prevent/cure inflations by more spending to cure shortages
  4. Paying people not to work (unemployment compensation) should be eliminated in favor of Social Security for All.
  5. The purpose of federal taxes is not to provide the government with spending money, but rather to discourage what the federal government wishes to limit.
  6. Federal taxes on businesses should be eliminated

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY