The CRFB gives you Social Security choices. Hello, sucker.

The mouthpiece for the rich, the Committee for a Responsible Federal Budget, has a web site that says this:

Social Security provides vital income security to millions of beneficiaries but is on a road toward insolvency.

The Social Security program currently pays more in benefits than it collects in revenue, and under the latest official projections, its trust funds will run out in 2035.

At that point, all beneficiaries regardless of age and income will face an immediate 20 percent benefit cut.

CRFB’s “The Reformer” allows users to choose from a number of options to modify Social Security tax and benefit levels in order to close the program’s 75-year shortfall and keep it sustainable for future generations.

See how your choices stack up!

The truth: The federal government cannot become insolvent. SS is a federal agency. Like the government, SS can’t become insolvent unless Congress and the President want it to.

The so-called SS “trust funds” are not real trust funds. They are line items on balance sheets that the federal government can control at will. They can increase or decrease the balances just by pressing computer keys.

The non-issue of sustainability is to make you believe you have to give up benefits so that by comparison, the rich get richer.

Then, the CRFB gives you a little online game that shows you how much to cut your benefits so that the federal government won’t run out of dollars.

Of course, it’s all a lie. As you (and they, surely) know, our Monetarily Sovereign government, the creator of the dollar, cannot run out of the dollars it freely creates every minute of every day.

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

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

But the CRFB doesn’t provide that information. Instead, it provides the following choices, which ask you how much less you would like to receive from Social Security:

Increase (+) / Reduce (-) Initial Benefits
Slow Benefit Growth for Top 70% of Earners
Slow Benefit Growth for Top Half of Earners
Slow Benefit Growth for Top 20% Of Earners

Increase Retirement Age
Raise Age from 67 to 68
Index Age to Longevity After it Reaches 67
Raise Age to 69 then index to Longevity

Modify Cost of Living Adjustments (COLAs)
Index COLAs to “Chained CPI”
Index COLAs to “Chained CPI” and Means-Test Them
Index COLAs to “CPI-E”

Then, the CRFB asks how much more you would like to pay to our poor, destitute federal government:

Increase (+) / Reduce (-) Payroll Tax Rate by:
Increase Taxable Maximum
Subject All Wages to Payroll Tax
Subject 90% of Wages to Payroll Tax
Tax All Wages Above $400,000
Raise Additional Revenue
Cover Newly-Hired State & Local Workers
Apply the Payroll Tax to “Cafeteria Plans”
Increase Taxation of Benefits
Invest in the Stock Market
Diversify the Trust Fund to Increase Returns
Divert 2% of Payroll Tax to “Carve-Out” Accounts
Allow Contributions into “Add-on” Accounts
And some other ideas that pretend to “save” Social Security but really are to make you believe the U.S. federal government is running short of the dollars it originally created from thin air, and still creates from thin air.
The one alternative the CRFB doesn’t provide is the correct one:
Provide Social Security benefits to every man, woman, and child in America, paid for by the federal government which has the unlimited power to create dollars.
Don’t be fooled by the CRFB and others of their ilk. Neither America nor Social Security can become insolvent unless that is what Congress and the President want.
The U.S. federal government has the infinite ability to pay for things, which it has been proving since 1940, when the net total of federal deficits was just $40 billion.
Today, the net total of federal deficits is more than $25 TRILLION, and there still is zero insolvency on the horizon.
A government never can run short of its own currency.
If you believe the answers to America’s financial questions are more taxes or lower benefits, and you don’t know who the sucker is, you are the sucker.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

……………………………………………………………………..

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

MONETARY SOVEREIGNTY

The federal debt con on you

Here is what former Federal Reserve Chairmen said when they were being honest:

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

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

Ben Bernanke says he never expected interest rates to stay at zero for so long - MarketWatch
On 60 Minutes Ben Bernanke explained that federal tax money is not spent: Scott Pelley: “Is that tax money the Fed is spending?” Bernanke: “It’s not tax money . . . We simply use the computer to mark up the account.”

Get it? The U.S. government cannot run short of dollars unless it wants to.

Now mull that over and explain to yourself why the federal government, having the infinite ability to create dollars, should be concerned about the dollars it supposedly owes.

Read the following articles as you keep that infinite ability in mind:

Yellen says US is projected to hit debt ceiling on Jan. 19 by Aris Folley – 01/13/23 12:46 PM ET

Treasury Secretary Janet Yellen said the U.S. is projected to reach its roughly $31.4 trillion borrowing limit in less than a week.

The question, “Why does the U.S. government have a borrowing limit?” leads to two questions:

  1. Why does the U.S. government, which is Monetarily Sovereign (i.e., having that infinite ability to create its own sovereign currency), borrow dollars?Answer: The U.S. government never borrows dollars. It accepts deposits into Treasury Security accounts, the purpose of which is not to supply the government with its own dollars (The government never touches those deposits.)The purpose of T-bills, T-notes, and T-bonds is to provide a safe place for dollar users to store unused dollars. This helps stabilize the dollar.
  2. Why does the U.S. government limit acceptance of deposits into T-security accounts (aka “debt”).Answer: There is no rational financial reason. The con is to make the public believe falsely that federal finances are like personal finances, where spending must be limited to income.But federal finances are entirely different.The federal government cannot run short of dollars.The con goes something like this:Congress cannot control its spending, so to be “prudent,” a law that limits spending is needed. Unfortunately, this is all hogwash. Spending does not need to be controlled (as demonstrated by the repeated increases in the “debt limit)

    the debt limit law does not control spending. It controls paying for what already has been spent.

Yellen shared the estimate in a letter to Speaker Kevin McCarthy (R-Calif.) on Friday. She also warned the department would soon have to begin taking “extraordinary measures” to stave off a default to buy time for Congress to find a bipartisan solution.

Those measures include temporarily redeeming existing and suspending new investments of the Civil Service, Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund, as well as suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan.

We’ve accented the word “temporarily” to demonstrate that Yellen, Congress, and the world know the debt limit will be raised.

It will happen only after the Republican Representatives have had their chance to parade their fake thrift by giving speeches about spending cuts

Then, they will return to spending. It’s all a charade for the benefit of you, the voting public.

Yellen added that the funds would be “made whole” after the debt limit impasse has ended. 

“Impasse has ended” means the limit will be raised again after all the lies have been told.

How will the funds be made “whole?” The government will do what it always has done: It will create new dollars from thin air, to pay all its bills.

That is precisely what the government has done every year of the phony debt ceiling and will continue to do in the future.

While the secretary said it’s unlikely cash and extraordinary measures will run out before early June, she stressed the measures will only last for “a limited amount of time” and pressed for Congress to “act in a timely manner” to raise or suspend the ceiling.

The letter to McCarthy comes as a high-stakes fight over raising the debt ceiling looms over the further Congress after Republicans took back control of the lower chamber last week.

McCarthy has pressed for any action to address the debt ceiling to be tied to spending cuts sought by Republicans.

The “spending cuts sought by Republicans are cuts to social programs — Medicare, Social Security, poverty aids — whatever helps those who are not rich. Benefits to the rich will not be cut, as the rich are the main contributors to the Republican party.

Also, anything that will help grow the economy will be cut because, in advance of the next elections, the Republicans want the Biden administration to be blamed for a weak economy.

However, proposals for significant cuts are likely to find trouble in the Senate, where Democrats still hold control.

“If you’re going to ask for an increase in the limit, at some point in time, you’ve got to sit down and say why are we hitting the limit? Why are we maxing out the credit card?”

The “credit card” analogy often is used. It is a false analogy, and anyone using it is ignorant about federal finance, a liar, or both.

The federal government does not use anything even remotely resembling a credit card. It pays all its financial obligations the same way: It creates new dollars, ad hoc.

There is no credit card. There is no borrowing. In fact, the federal “debt” isn’t even a real debt.

The T-security accounts are mere dollar storage — similar to bank safe deposit boxes. The government never touches those dollars. It creates all the dollars it uses. The dollars remain the property of the depositors.

Just as your bank does not count what you have in your bank safe deposit box as “debt,” the federal government does not owe the contents of T-security accounts. To pay off this misnamed “debt,” the government merely returns the contents of those accounts.

This is not a burden on the government or on taxpayers or on T-security holders.

Previous Fed Chairmen have testified that the federal government cannot run short of dollars. Even if the government collected $0 in taxes, it still could continue spending forever.

It’s a little-known secret that federal taxes are unlike state/local government taxes. All taxes are paid with dollars from the M2 money supply measure, but when federal tax dollars hit the U.S. Treasury, they disappear from any money supply measure. They effectively are destroyed.

Yes, those tax dollars you work so hard to earn and you waste so much time and money calculating and paying are destroyed upon receipt by the federal government.

Never used, never needed, the purpose of federal taxes is not to fund federal spending. They help the government control the economy by punishing what the government doesn’t like and by rewarding, via tax breaks, what the government wishes to aid.

(By contrast, state/local tax dollars remain in the economy as part of one or more money supply measures.)

The entire “debt limit” scene is a kabuki play designed to impress you. The Republicans want to make the rich richer by widening the Gap between the rich and the rest.

The Gap is what makes the rich richer. Without the Gap, no one would be rich — we all would be the same — and the wider the Gap, the richer are the rich.

To widen the Gap, the Republicans try to cut benefits to the populace, all in the name of “prudence.”

The Democrats try to demonstrate their frugality chops by pushing the “debt limit” button, but only when they are out of office, so the Republicans can be blamed for a weakened economy.

This con has been running for your amusement since 1939 when the so-called debt was called a “ticking time bomb.” That bomb has been ticking for 84 years and presumably will continue ticking as long as liars are in Congress, i.e., forever.

Here is another article on the same subject:

Will the U.S. Ever Pay Off Its Debt? Ways to Reduce the National Debt By Kimberly Amadeo Updated on October 4, 2022 Reviewed by Robert C. Kelly Fact checked by Emily Ernsberger.

Congress has made many attempts to lower the national debt, but it hasn’t been able to reduce the growth of what the nation owes.

Yes, Congress has made many attempts to lower the federal debt.

For clarity, federal debt is not real debt. It is the net total of deposits into Treasury security accounts — T-bills, T-notes, T-bonds — since the nation’s founding. To pay off this “debt,” the government merely returns the accounts’ balances.

The national debt is a nonsensical figure that totals the above T-security accounts plus all U.S. private debt (mortgages, credit card debt, etc.) It’s something like adding water in the lakes to alcohol to find the total amount of liquid in America.

The U.S. debt is the outstanding obligation owed by the federal government.

Now, the author refers confusingly to “U.S. debt.” Presumably, she means federal debt, though it is not owed by the federal government any more than the contents of a bank safe deposit box are owed by the bank.

Those deposits are owned by the depositors and are merely held for security by the U.S. Treasury.

It exceeded $31 trillion in for the first time on Oct. 4, 2022, and it has increased by at least $1 trillion each year since 2016.1 

Federal debt is at its highest point in American history. Raising taxes and cutting spending are two of the most popular solutions for reducing debt, but politicians may be hesitant to do both.

The word “solutions” indicates that the writer believes the federal “debt” is a problem. It isn’t. The federal government quickly could pay off the entire federal “debt” today merely by returning all the dollars that exist in T-security accounts.

This would cost America and American taxpayers $0.

Sadly, the “solutions” for reducing the federal “debt” often involve reducing federal deficit growth or even running federal surpluses.

This is what happens when the government reduces deficit growth:

 

Reductions in federal deficit growth introduce recessions, which then must be cured by increases in deficit spending. The red line is federal deficit growth. Vertical gray bars are recessions.

This is what happens when the federal government reduces the federal “debt” by running 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.

When the federal government runs a surplus (taxes exceed spending), we usually have a depression.

The reason: Recessions and depressions are measured by decreases in Gross Domestic Product, which is:

GDP = Federal Spending + Non-federal spending + Net Exports

Federal spending decreases also cause non-federal spending decreases in an overall decrease in money creation. The economy shrinks and, in an endless feedback loop, will continue to shrink unless the federal government cures the depression or recession with a healthy dose of deficit spending.

The author posts this illustration that is utter nonsense:

Text reads: "4 ways the US can pay off its debt: cut government spending; raise taxes; drive economic growth at a faster rate; shift spending to areas that create the most jobs"

She begins with “Cut government spending” and “raise taxes,” i.e., reduce deficit growth — precisely what we see causes recessions.

Then she adds, “Drive economic growth at a faster rate,” but does not say how to do that when government spending falls and taxes rise.

Finally, she says, “Shift spending to areas that create the most jobs.”

Again, she doesn’t explain how that would be done with less spending and higher taxes, but spending in areas that have more jobs may not be efficient, economically.

Diverting spending from the military to other sectors may boost job growth, which could spur consumer spending and help the economy.

She doesn’t explain why diverting spending from the military boosts job growth. The military not only is a massive employer, but far more importantly is a massive consumer.

It purchases everything from weapons to research to all sorts of ancillary products and services, many of which transition to non-military use (think GPS, etc.)

And of course, the military defends us, but hey, when you’re cutting deficits, who cares about defense. Right?

What’s Stopping the U.S. From Paying Down Its Debt?

Most creditors don’t worry about a nation’s debt, also known as “sovereign debt,” until it’s more than 77% of gross domestic product (GDP).

That’s the point at which added debt cuts into annual economic growth, according to the World Bank.

When economists don’t know what they are talking about, it usually is because they don’t understand Monetary Sovereignty.

There is a vast, sometimes diametric, difference between a Monetarily Sovereign government and a monetarily non-sovereign government. Studies that lump the two usually come to wrong conclusions. It’s like lumping professional football and backyard croquet into a study of athletics on health.

The above-referenced World Bank study is a classic example:

“Finding The Tipping Point — When Sovereign Debt Turns Bad” Authors/Editors: Thomas Grennes, Mehmet Caner, Fritzi Koehler-Geib

Public debt has surged during the current global economic crisis and is expected to increase further. This development has raised concerns whether public debt is starting to hit levels where it might negatively affect economic growth.

Does such a tipping point in public debt exist? How severe would the impact of public debt be on growth beyond this threshold? What happens if debt stays above this threshold for an extended period of time?

The present study addresses these questions with the help of threshold estimations based on a yearly dataset of 101 developing and developed economies spanning a time period from 1980 to 2008. 

Of the “101 developing and developed economies” few would be massive, developed, Monetarily Sovereign. Perhaps, three or four, and none of those is like the United States.

It’s a phony study that ignores reality, namely the non-effect of the “Debt”/GDP ratio on GDP growth in America.

A comparison of GDP growth (red) vs. “debt”/GDP (blue). There is no evidence that high “debt/GDP levels adversely affect GDP growth.

In America at least, no evidence points to the assumption that a high “debt”/GDP ratio negatively affects GDP growth. It’s just a belief unfounded in data.

At the end of the second quarter of 2021, the U.S. debt-to-GDP ratio was 125%.3 That’s much higher than the tipping point and is a concern for many.

“Much higher than the (fake) tipping point and a concern for many (unsupported by data).

Over $22 trillion of that national debt is public debt, which is what the government owes to investors and taxpayers.

“Owed to investors” are the dollars deposited into T-security accounts, which the government could pay off tomorrow simply by returning those dollars.

“Owed to taxpayers” are tax overpayments, which the government could pay off tomorrow simply by creating dollars ad hoc.

Congress places a limit on public debt. It increased the limit by $2.5 trillion in December 2021 to nearly $31.4 million.

Why isn’t the U.S. eliminating its debt and paying people back? There are a few reasons.

U.S. economic growth has historically outpaced its debt. The U.S. debt was $258.68 billion in August 1945, but the economy outgrew that in a few years. GDP more than doubled by 1960. Congress believes that today’s debt will be dwarfed by tomorrow’s economic growth.

As always, remember that federal “debt” is the total of deposits into T-security accounts. Whether economic growth is greater or less than deposit growth says nothing about the economy’s health.

The federal government has the right to stop accepting deposits. This would not injure economic health.

Members of Congress have a lot to lose by cutting spending. They could lose their next election if they cut Social Security or Medicare benefits.

Yes, they could, and well deservedly so. Also, tarred and feathered might be appropriate because it would be an unnecessary penalty for the non-rich.

Raising taxes can be politically unpopular. Experts believe President George H.W. Bush lost reelection because he raised taxes after promising he wouldn’t at the 1988 Republican convention.

He raised taxes in 1990 to reduce the deficit, and voters remembered.

He lost because he broke his promise. But he should have lost because the federal government neither needs nor uses tax dollars. As described earlier, federal tax dollars (unlike state/local tax dollars) are destroyed upon receipt by the Treasury.

Bush unnecessarily impoverished the private sector (aka “the economy”). He deserved to lose his job.

There are two main themes in most discussions about paying off the national debt: cutting spending and raising taxes.

There are other options that might not enter most conversations but can aid in debt reduction, too.

The 2010 bipartisan Simpson-Bowles report is a good example of how the government could cut spending to reduce debt.

The report proposed balancing the budget through a mix of spending cuts and tax reform.

Congress didn’t adopt the complete plan, but the government did implement parts of it with some success. Note A 2015 report from the Committee for a Responsible Federal Budget indicated that although a piecemeal approach reduced debt, full-fledged adoption of the Simpson-Bowles plan may have produced a significantly lower debt-to-GDP ratio.

It also would have produced a depression, which we have discussed here: Hoover, Smoot and Hawley reincarnated as Obama, Bowles and Simpson and here: Erskine Bowles and Alan Simpson reveal why the nation is in trouble: Them.

Very simply, Simpson-Bowles suggested cutting Social Security and Medicare while increasing FICA in order to impoverish the working class at the behest of the rich.

And for what purpose? To reduce the so-called “debt” which as we repeatedly have seen has no adverse effects on the economy. None.

(The real purpose is to widen the Gap between the rich and the rest. Enriching the rich is what the bribed economists, media, and politicians are paid to do.)

Raising taxes can generate revenue that the government can use to pay down debt as well as invest in programs that support the economy.

But it can cut into tax revenue and hurt the economy if the government raises taxes too high.

Finding the correct balance is expressed by a concept known as the “Laffer Curve.”

Wrong on so many fronts. First, the government does not use taxes to pay down “debt,” i.e. deposits in T-security accounts. It merely returns the dollars already exisiting in those accounts.

Second, federal tax revenue is destroyed upon receipt.

Third, the Laffer Curve is a case of BBB (Bullsh*t baffles brains). You can click the above link to understand why, but it is telling that the author, Kimberly Amadeo, mentions this discredited hypothesis. It’s especially telling that she thinks the Laffer Curve finds “the correct balance,” which it absolutely does not do.

Increasing the GDP has a twofold benefit: It generates extra revenue to pay down debt, and it reduces the debt-to-GDP ratio if GDP growth outpaces debt growth.

Federal revenue does not pay down anything. All federal revenue is destroyed. All payments are made with newly created dollars.

The debt-to-GDP ratio is meaningless.

Driving economic growth is one way to reduce the national debt, but Congress tends to disagree on how to create that growth.

Most Democrats push increased spending, while most Republicans champion lower taxes.

Both are correct. Increased spending adds more growth dollars to the economy. Lower taxes remove fewer growth dollars from the economy.

However, unlimited growth is an unrealistic goal, so growth alone can’t solve the federal debt.

Spending Congress could shift spending from defense to job-creation areas like infrastructure and education. Almost 15% of government spending goes to the military. But past studies indicate that money spent on the military is less effective in creating jobs than money spent in other areas.

According to a report from the Political Economy Research Institute at the University of Massachusetts, Amherst, $1 billion in education and mass transit spending could produce more than twice the jobs created by military spending.

Job creation can help boost the GDP, which can help lower the nation’s debt-to-GDP ratio in many cases.

Job creation does not rely on reduced military spending. The federal government has the infinite ability to spend.

What is the U.S. debt limit? The debt ceiling is the limit on what the U.S. government can borrow to pay bills that have come due. Congress puts this limit in place each year.

The debt limit isn’t about future debt. Instead, it’s about paying for spending that Congress authorized in previous years. If Congress does not raise the federal debt as needed, then the U.S. government cannot pay its bills and will default.

The final paragraph further demonstrates the ridiculousness of the “debt ceiling.” Either it will be raised or it won’t.

If it’s raised, that merely proves it’s a sham. If it isn’t raised, the U.S. will become a deadbeat nation and the world’s financial systems will fall into chaos.

Given that those are its only two possible outcomes, which fool would like it to continue?

Rodger Malcolm Mitchell
Monetary Sovereignty

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

……………………………………………………………………..

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

MONETARY SOVEREIGNTY

 

New York Post tells it like it isn’t — ticking time bomb version

Readers of this blog are familiar with the “ticking time bomb” series; examples are here, here, here and elsewhere.

The point of this endless series is that since 1939, the media, politicians, and economists have been wringing their hands about the so-called federal debt, explicitly claiming it is a “ticking time bomb.”

That’s 84 years of “the-world-is-about-to-end” predictions that demonstrably have been wrong, and the predictors have learned nothing from their ongoing failures.

In 1939, the gross federal debt was $39 billion. Last year it was $27 TRILLION. If my math is correct, that’s a 30,000% increase, not even a firecracker.

Are the doomsday shouters embarrassed by failure? Nah. The New York Post just keeps vomiting up the garbage.

Worse yet, they combine that turd of ignorance by conflating the fake federal debt-that-isn’t-debt with real, private-sector debt.

Overview image
Stephen Moore

America’s ticking time bomb: $66 trillion in debt that could crash the economy
By Stephen Moore
December 4, 2022, 6:29pm Updated

The national debt is $31 trillion when including Social Security’s and Medicare’s unfunded liabilities.

Wake up, America.

That ticking sound you’re hearing is the American debt time bomb that with each passing day is getting precariously close to detonating and crashing the US economy.

The “national debt” is not the “federal debt.” It is Moore’s strange amalgam of all sorts of things he lumped under the word “debt,” perhaps to make them look huge.

Federal debt is deposits into Treasury Security accounts, similar to safe deposit boxes. The federal government never touches those dollars. It merely safeguards them.

And when the accounts mature, and depositors want their money, the government merely sends them the dollars from their accounts.

This return of dollars is not a burden on the government or taxpayers. It’s significantly different from the federal government’s paying for goods and services.

In that case, the federal government creates new dollars ad hoc, which it has the infinite ability to do.

The federal government is Monetarily Sovereign, meaning it made (and still creates) the laws that create U.S. dollars. Because it has the infinite ability to create rules, it has the endless ability to create dollars.

You can’t do it. I can’t do it. Businesses and local governments can’t do it. That is why it makes no sense to lump federal finances with non-federal finances. The two bear no relationship. But that fact doesn’t stop the NY Post writers.

Businesses, consumers, and especially the federal and state governments have become hooked on red ink as if it were crack cocaine.

The federal government has scant red ink. It pays all its bills by creating new dollars. It cannot run short of dollars unless some damn fool politician decides not to allow the federal government to pay its bills (i.e., the so-called “debt limit).

Two factors have fueled this borrowing binge: an era of low-interest rates (that’s coming to an end) and falling real wages thanks to the 15% rise in prices of Bidenflation.

In addition to merging two different situations into one make-believe situation, the Post writer falsely claims the federal government’s non-existent “debt” comes from borrowing.

The federal government never borrows dollars. Given the infinite ability to create dollars, why would it borrow dollars? The writer, a senior advisor to Donald Trump (of course), thinks T-bills, T-notes, and T-bonds, are like personal notes and bonds.

They aren’t. You, your business, and your local government borrow when you need dollars. Not only does the Monetarily Sovereign federal government never need dollars – – it creates them at will — but it never touches the dollars invested in T-securities.

As Fed Chair famously said, “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” 

Why would such a government need to borrow dollars?

Let’s review the borrowing up-escalator that accelerated during COVID but hasn’t subsided.

The King Kong of borrowing is Uncle Sam. The national debt is $31 trillion when including Social Security’s and Medicare’s unfunded liabilities.

No federal obligations are “unfunded.” All are funded by the U.S. federal government’s full faith and credit, which includes the infinite power to create dollars.

That’s getting close to 150% of our national gross domestic product of $22 trillion.

The “debt”/GDP ratio is meaningless. It has neither predictive nor evaluative worth. It tells you nothing about the financial health of a Monetarily Sovereign government.

“Debt” is a many years measure of deposits. GDP is a one-year measure of spending. The two comprise the ultimate in an apples/anvils comparison.

Some $5 trillion has been added in just the past three years. Balancing the budget seems like a pipe dream these days.

More confusion from the Trump writer. First, he talked about state governments. Now it’s unclear what he is talking about- federal or national finances?

In any event, balancing the federal budget would be a disaster for the U.S. economy. A growing economy (as measured by GDP) requires an increasing money supply. But “balancing the budget” implies no growth.

No growth is “recession,” and the word for no growth with population growth plus inflation is “depression.”

Next, add state and local government debt and unfunded liabilities. The American Legislative Exchange Council estimates that at just under $6 trillion.

State and local governments are part of the private sector, including businesses and people. When state and local governments levy taxes, one segment of the private sector ships dollars to another segment of the private sector.

There is no net money growth for economic growth. The sole source of net money growth is the federal government, which has the infinite ability to create dollars.

Now, what about American households? The latest estimate for consumer debt is $16.5 trillion, per the New York Federal Reserve. Most of that debt is mortgages, but increasingly Americans are taking on debt for routine expenses to pay monthly bills like groceries and gas at the pump. Thanks, President Biden.

The federal government easily could ameliorate private debt by enacting Social Security for All, Medicare for All, and other social benefits. Of course, Mr. Stephen Moore would hate that because . . . well, just because.

Then we have corporate America and small businesses. Their debt burden, according to the Federal Reserve Board, just surpassed $10 trillion for the first time. Business borrowing can be a good thing — indicating economic optimism. But we have to wonder how many more FTX-type bubbles are out there inflated by low-interest rates and all that helicopter money from Washington.

Then we have the National Enquireresque’s “we have to wonder” phrasing. He doesn’t know, so he wonders.

So add it all up, and American society now owes $66,000,000,000,000 of debt! That’s roughly three times our annual GDP.

You have just read perhaps the most misleading piece of nonsense you ever will encounter. Moore adds Treasury deposits to personal and business debt, most of which comprises the private sector owing the private sector.

What does he recommend? No mortgages? No business borrowing? If less, how much less?

If that phony “$66,000,000,000,000” is too much, what is the right amount? $0?

Moore never says because he is clueless about federal financing.

Another danger sign: With wages (5% growth) falling behind consumer price inflation (7.5% growth), American families are borrowing more just to maintain their current living standard. Americans on average have lost $4,000 in purchasing power and some $30,000 in 401(k) plans in the Biden era.

It’s not “the Biden era.” It’s the COVID era. Inflation is caused by COVID-related shortages. Prices go up when goods and services become scarce.

COVID, which Trump denied, caused scarcities of oil, food, transpiration, computer chips, and many other products. Staying home with COVID caused service shortages.

By far the biggest debtor has been Uncle Sam — which has created a national culture of living beyond our means.

An entity with infinite ability to create dollars has no “means” to live beyond. That national culture has existed for over 80 years, during good times and bad.

During COVID, President Donald Trump pumped $2 trillion of “stimulus” red ink into the country when the private economy was shut down. But then, in an act of near-criminal financial negligence, Biden entered office and shoveled out $4 trillion more in green-energy giveaways, state bailout funds, student loan bailouts and welfare handouts to families with no one working.

First, Moore complains about people having lost $4,000 in purchasing power and $30,000 in 401(k) plans. Then, incredibly, he complains about the government giving these people money to help with their finances.

That is the kind of idiocy one expects from a Trumpist graduate of the Heritage Foundation.

And now we come to Moore’s virtual admission that he knows nothing about economics.

A new-wave economic strategy called Modern Monetary Theory facilitated this borrowing blowout.

The loony idea is predicated on the notion that because the US dollar is the world reserve currency, we can run up the federal credit card by trillions and still feel good about ourselves in the morning.

Until that is, interest rates start to rise.

OMG! Modern Monetary Theory has nothing to do with the U.S. dollar being the most popular reserve currency. A reserve currency is a currency banks hold in reserve to facilitate trade among nations. It has nothing to do with U.S. borrowing.

While the dollar is the most commonly held reserve currency, other currencies also are held in reserve. The euro, the yen, the lira, and others are reserve currencies. Moore is clueless about this.

Further, using a credit card implies borrowing, which the federal government doesn’t do.

Finally, rising interest rates have nothing to do with the federal government’s ability to pay its bills. It has the infinite ability to pay bills, no matter how high interest rates go.

Consumers are now engaged in the same reckless monkey-see, monkey-do behavior. The latest Federal Reserve Bank of New York report says credit card debt has skyrocketed by 16% this year to above $1 trillion.

The Christmas season is witnessing even more debt to buy Yuletide gifts. Low-income Americans are taking on debt at the fastest pace of all. Come January, don’t be surprised if Americans look at their credit card debt and suffer severe buyers’ remorse.

People may be borrowing more, which could bite them, but it has nothing to do with the federal government spending more. Moore is just lashing in all directions at anything involving more money.

For now, defaults and delinquencies are low, but we should have learned financial seas can shift on a dime. Meanwhile, the feds keep feeding the debt surge by increasing taxpayer mortgage insurance for million-dollar homes.

There is no such thing as “taxpayer mortgage insurance.” Federal taxpayers do not fund anything. All federal tax dollars are destroyed upon receipt by the U.S. Treasury.

The purpose of taxes is not to fund federal spending. Taxes help the government control the economy by punishing what the government doesn’t like and rewarding (tax breaks) what the government wishes to encourage.

You pay your taxes with dollars in the M2 money supply, and when they hit the Treasury, they cease to be part of any money supply measure. They effectively cease to exist.

Debt isn’t necessarily a bad thing. It depends on what we’re getting for it. When we borrow for roads or factories or homes or to finance our military to win wars, borrowing can be necessary and appropriate.

If you know what this last paragraph is supposed to mean, please feel free to let me know.

Stephen Moore is a senior fellow at the Heritage Foundation. He served as a senior economic adviser to Donald Trump. His latest book is “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”

Quite a combination: Heritage Foundation + Donald Trump. That says it all.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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

MONETARY SOVEREIGNTY

Who are America’s most dangerous people?

Who are America’s most dangerous people? What’s your opinion?

You might be tempted to name the white supremacists who attacked Congress and attempted to overthrow the U.S. election. Had they succeeded, the America you know and love would be gone.

Or you might list the Trump Republicans who encouraged, then excused, the attempted coup and who still are in our government.

But I offer you another choice:

These are the leaders of an organization called “The Committee for a Responsible Federal Budget” (CRFB).”

They did not cause or join a riot. They did not crash Congress. They did not cry, “Hang Mike Pence.” They are far more clever and subtle.

And that subtlety is what, in my opinion, makes them so dangerous. Even the group’s name, including the words “Responsible federal budget,” makes them sound so . . . responsible.

But the pen is mightier than the sword, and therein lies the real danger.

The CRFB doesn’t march or attack. They write. They talk. They reason. They influence other influencers like politicians, economists, and the media.

The group speaks to the public’s ignorance of federal financing. It draws false parallels between federal funding and personal financing. It even draws false parallels between federal financing and state/local government financing.

The general public does not understand that the parallels are false. So, when the CRFB people say, in essence, “If you do this, the federal government should do it too,” that sounds reasonable to the uninformed mind.

“If you must live within your means, the federal government should live within its means.” “If you can’t afford to borrow, you don’t borrow. The federal government should do the same.” “You have to pay off your debts. So should the government.”

You can’t argue with such logic — unless you understand it’s all a lie. 

Federal financing is nothing like your financing, nothing like state/local government financing, and nothing like business financing. It is unique.

The Federal government is Monetarily Sovereign. It is the creator of the laws that created the U.S. dollar. It cannot run short of laws, so it cannot unintentionally run short of dollars. It can give the U.S. dollar any value it chooses.

No amount of federal spending is “unsustainable.” it does not need tax income or any income. Even if the federal government stopped collecting taxes, it could continue spending forever.

(The purpose of federal taxes is to control the economy by taxing what it wishes to limit and giving tax breaks to what it wishes to encourage.)

The government creates dollars ad hoc when it pays bills.

Even the language describing personal finances and federal finances can be different:

    • The federal government never borrows dollars (It accepts deposits into accounts, the contents of which are privately owned. The government never touches the contents — similar to safe deposit acounts.)
    • Federal debt is not a debt of the federal government. It is the total of the abovementioned accounts.
    • Add to the debt means to add money to the economy. To reduce the debt requires that money in the economy be destroyed.
    • A federal surplus is a deficit for the economy (aka “the private sector”). Similarly, a federal deficit is a surplus for the economy.
    • A trade deficit is money flowing out, with goods and services flowing in. Since trade is assumed to be an equal exchange, the trade deficit also could be called “goods/services income.” For a government having the infinite ability to create dollars, goods flowing in are more important than dollars flowing  out.
    • The notorious “debt limit” does not limit debt; it limits paying for existing debt. It is the equivalent of insolvency.
    • The federal government cannot unintentionally become insolvent. That means no federal government agency (Medicare, Social Security, the military, etc.) can become insolvent unless Congress and the President want it to.
    • Federal “trust funds” are not real trust funds. They merely are record-keeping lines on a balance sheet. They too cannot become insolvent unless Congress and the President want that result.

In any economy, scarcity leads to higher prices. Inflation is a general increase in prices caused by an increase in the scarcity of goods and services.

Most inflations boil down to a scarcity of oil. Today’s inflation has been caused by COVID-related scarcities of oil, food, lumber, steel, rare earths, supply chains, labor, etc.

Federal deficit spending (red) does not cause inflations (blue). The peaks and valleys do not correspond. Reduced deficit growth leads to recessions (vertical gray lines).
Inflation is caused by shortages of key goods and services, primarily shortages of oil (gray line), which translate into shortages of food, transportation, and virtually all other commodities.

Federal deficit spending does not cause inflation. In fact, it could cure inflation if the spending focused on obtaining and distributing scarce resources.

Keep in mind the above facts while you read what the CRFB says:

What Would It Take to Balance the Budget?

It’s encouraging that many in Congress are focusing more on our unsustainable fiscal situation and want a plan to improve the nation’s fiscal outlook.

At no time does the CRFB tell why the fiscal situation is “unsustainable.” The federal government has run a deficit (taxes lower than spending) almost every year since 1940.

The net total of those deficits approximates $25 trillion. The CRFB has been wrong every year of its existence, and neither it nor its followers have learned anything from these failures. Yet here we are. Sustaining.

Unfortunately, due to continued borrowing over the past several years, the desirable fiscal goal of budgetary balance has become much more difficult to reach, and it is doubtful it could be achieved in a decade or less, notably if revenue, defense, and other parts of the budget are excluded from the solution.

The federal government does not borrow money. Why would it, when it has the infinite ability to create the laws that create U.S. dollars? It can’t run out of laws or dollars.

What the CRFB incorrectly terms “borrowing” is the acceptance of deposits into T-bill, T-note, and T-bond accounts, which are owned by depositors, not by the government.

The government never touches those dollars. It “pays off” the so-called “debt” by returning the dollars to their owners, the depositors.

And why is budgetary balance a “fiscal goal” when it invariably causes recessions and depressions? (See the first graph above.)

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.

In order to achieve balance within a decade, all spending would need to be cut by roughly one-quarter and that the necessary cuts would grow to 85 percent if defense, veterans, Social Security, and Medicare spending were off the table.

Economic growth is measured by Gross Domestic Product (GDP), one formula for which is:

GDP = Federal Spending + Non-federal Spending + Net Exports

Your elementary school algebra should show you what happens to economic growth when federal spending declines. Growth declines.

RECESSION: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters

DEPRESSION: a prolonged and severe recession in an economy

By definition, the CRFB’s “fiscal goal” is a recession or a depression.

These cuts would be so large that it would require the equivalent of ending all nondefense appropriations and eliminating the entire Medicaid program just to get to balance.

And is that supposed to be a good thing?

Balancing the budget has become increasingly challenging over the past 15 years.

Efforts to show balance too often rely on unrealistically aggressive cuts, unspecified savings, rosy economic assumptions, and other budget gimmicks as a result.

Successful budget actions in recent years have come mainly from more targeted deficit reduction efforts than from trying to meet overly aggressive fiscal goals.

“Successful budget actions in recent years”? One is left to wonder what the CRFB considers “successful.” The only spending reduction in the past 80 years came in the 1998 – 2001 period, the reduction President Clinton is so proud  to boast about.

It caused the recession of 2001, which was cured by increased deficit spending.

President Clinton’s reduced deficit spending led to the recession of 2001, which was cured by increased deficit spending.

When the CRFB refers to “targeted deficit reduction,” they mean less money was spent on specific projects. The CRFB doesn’t explain how those mini-reductions were deemed “successful.”

And with deficits on course to reach $2.4 trillion (6.6 percent of GDP), balancing the budget is now harder than it has ever been.

Balancing the budget is problematic because it damages the economy. The CRFB is aware of this but pretends there is some way to cut Federal Spending while not cutting GDP — a mathematical impossibility.

The exact amount of savings needed for full budget balance is uncertain and will depend both on budget projections in the Congressional Budget Office’s forthcoming ten-year baseline as well as the path of any proposed policies.

In the recent CRFB Fiscal Blueprint for Reducing Debt and Inflation, we estimated achieving balance would require roughly $14.6 trillion of deficit reduction through 2032, including over $2 trillion of policy savings (and nearly $400 billion of interest savings) in 2032 alone.

To achieve these savings without more revenue, we estimate all spending in 2032 would need to be cut by 26 percent; this figure rises to 33 percent if defense and veterans spending is exempted from the cuts.

Cut all spending by “only” 26 or 33%? Think. How would that affect GDP? Then think of the definition of “depression.” The CRFB wants to cause a recession or depression as a “cure” for the non-existent evils of federal spending.

The true purpose is to make the rich richer by widening the Gap between the rich and the rest.

For a sense of magnitude, applying this cut across the board would mean reducing annual Social Security benefits for a typical new retiree by $10,000 to $13,000 in 2032.

It would also mean laying off 1.1 to 1.4 million federal employees (more than two-thirds of the civilian workforce if the military were exempted) and removing 20 to 25 million people from Medicaid eligibility.

Reducing Social Security and firing 1.1 to 1.4 million so that the federal government, which has infinite dollars, is not how to run an economy, though it is a great way to make the rich richer.

Excluding Social Security and Medicare from cuts would make the task of balance even more unrealistic. Without touching spending on defense, veterans, or Social Security, all other spending would need to be cut by 51 percent. Also, excluding Medicare would mean that the remaining spending would need to ultimately be cut by 85 percent.

It gets dumber and dumber, but the CRFB favors these draconian cuts to benefit the rich.

The figures above do not include additional savings that might be necessary if policymakers choose to extend $3 trillion worth of tax cuts that have expired or are set to expire in the coming years.

To give a sense of just how challenging achieving balance in 2032 by controlling spending is, it would require doing one of the following:

*Eliminating virtually all defense and nondefense discretionary spending programs;
*Cutting Medicaid spending in half while eliminating all other mandatory spending outside of Social Security and Medicare;
*Eliminating all nondefense discretionary spending and ending the entire Medicaid program;
*Repealing Medicare, all income security programs, and all refundable tax credits; or
*Discontinuing all Social Security retirement and survivors’ benefits.

Did you notice what is missing from the above list? Anything that would take from the rich. Because the CRFB is a tool of the rich, something like a 90% tax rate (which America had in 1941 is not even discussed. In 1941, in fact, Roosevelt proposed a 99.5 percent marginal rate on all incomes over $100,000. )

Wanting to balance the budget is an admirable and desirable goal.

No, it is a stupid goal. It would cause a recession if we are lucky, but most likely, a deep depression that only could be cured by massive federal deficit spending. The CRGB goal is based not on economic need but on making the rich richer. That is the CRFB mission.

The first step, of course, is to avoid actions that would worsen our already unsustainable fiscal situation.

The irony is palpable. Here are people recommending taking trillions from the private sector but claiming they want to “. . . avoid actions that would worsen our fiscal situation.” It would be laughable were it not so harmful.

We commend the adoption of a specific and realistic fiscal target.

The realistic target should be to narrow the Gap between the rich and the rest and to provide more human benefits to the populace. The federal government has all the tools it needs to create a paradise on earth, so long as these most dangerous people in America don’t hold sway:

Rodger Malcolm Mitchell
Monetary Sovereignty

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

……………………………………………………………………..

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

MONETARY SOVEREIGNTY