Many federal programs, for instance, poverty aid, foreign aid, global warming prevention, immigration, education, etc., are unaffordable and unsustainable.
How many of these beliefs do you have? Every one of them is wrong, proven wrong by readily available data (here, here, here, here, and elsewhere in this blog).
Yet most people strongly defend one or more of these wrong beliefs, even without any evidence to support them.
Here is an example of the widespread belief that immigrants harm our economy, and our way of life.
Immigration fuels US economic growth while politicians rage.Augusta Saraiva and Enda Curran, Bloomberg NewsWhile the rising number of immigrants in the U.S. has sowed division among politicians across the country — and stoked angst among a swath of voters — there’s one place where almost everyone seems on the same, upbeat page: Wall Street.
Last month, the nonpartisan Congressional Budget Office (CBO) calculated that immigration will generate a $7 trillion boost to gross domestic product over the next decade. The agency came to that conclusion after incorporating the recent surge in immigration.
The CBO release spurred a flurry of fresh number-crunching among investment bank economists to account for the boost those newcomers are giving to the labor force and consumer spending. Goldman Sachs Group Inc. revised up its near-term economic growth forecasts Sunday.
JPMorgan Chase & Co. and BNP Paribas SA were among banks that acknowledged the economic impact from surging immigration in recent weeks.
We’ll pause to remind you that Gross Domestic Product (the most common measure of our economy) = Federal Spending + Non-federal Spending + Net Exports.
Inflation-Adjusted, Per Capita, Gross Domestic Product
Spending by immigrants increases per capita (including yours and mine) inflation-adjusted GDP. In short, immigrants make us all wealthier by working, paying local taxes, and creating and buying stuff.
That is what immigrants have done for decades, and it is what has made America prosperous.
“Immigration is not just a highly charged social and political issue, it is also a big macroeconomic one,” Janet Henry, global chief economist at HSBC Holdings Plc, wrote in a note to clients Tuesday.
No advanced economy benefits from immigration quite like the U.S., and “the impact of migration has been an important part of the U.S. growth story over the past two years.”
“Two years”? More like two hundred years.
Morgan Stanley economists Sam Coffin and Ellen Zentner noted this month that faster population growth fueled by immigration leads to stronger employment and population estimates than initially thought, though they added that the full effect might not be captured by official data.
It’s hard to pin down the exact scale of the inflows of foreign-born people, thanks to many entering without visas or other documentation. But CBO statisticians incorporated data from U.S. Customs and Border Patrol to come up with their higher projected net immigration, according to Morgan Stanley analysis.
Goldman estimates that immigration was around 2.5 million in 2023, a figure that is far above the 1.6 million implied by the change in the foreign-born population in the official household survey from the Census Bureau.
The positive tone among economists contradicts that seen on the campaign trail, as a surge in the number of undocumented immigrants entering the U.S. through the southern border stokes political strife.
The share of Americans who see immigration as the most important problem facing the U.S. is now matching a record high in data going back four decades, according to a recent Gallup poll.
The recent boost from immigration is the result of both more legal immigrants as the U.S. goes through unprecedented visa backlogs and the surge in illegal border crossings.
The nation’s 32.5 million immigrant workers now account for roughly one in five U.S. workers, a record-high in government data going back almost two decades.
They not only are working, but their buying creates jobs. They aren’t stealing jobs as America’s xenophobes often claim. The proof: Unemployment is low “despite” (because of?) massive immigration:
Red line is federal deficits. Blue line is Unemployment. Vertical gray bars are recessions.
This interesting graph reveals several facts:
When federal deficit spending declines, we have recessions.
The recessions are cured by increases in federal deficit spending.
The recessions cause unemployment.
The unemployment, which is caused by decreases in federal deficit spending is cured by increased federal deficit spending.
Thus, unemployment is not caused by immigrants taking jobs. Quite the opposite. Unemployment and recessions have the same cause: Insufficient federal deficit spending, exactly what the conservatives want us to do.
To be sure, the connection between the higher influx of foreign workers and the rapid post-pandemic recovery has been noted by economists and policymakers alike for some time now.
The Trump GOP’s main election focus is to deport undocumented immigrants, the people who help grow America’s economy.
Federal Reserve Chair Jerome Powell has repeatedly cited immigration as one of the reasons behind strong economic growth.
In a reference to the role being played by higher labor supply, Powell pointed on Wednesday to “a strong pace” of immigration as helping on that front.
“The overall picture is a strong labor market — the extreme imbalances we saw in the early parts of the pandemic recovery have mostly been resolved, you’re seeing high job growth, you’re seeing big increases in supply,” Powell said in his press conference Wednesday.
Fed policymakers lifted their growth forecast for this year to 2.1% from 1.4%, their median estimate showed.
Businesses are ramping up calls for changes to bring in more workers through legal channels.
Almost 9 million positions are open across the economy, equal to 1.4 jobs for every job-seeker. Foreign-born workers made up a record 18.6% of the civilian workforce in 2023 and the U.S. approved a record number of work authorizations in the fiscal year through last September.
Immigration is “very policy sensitive,” Feroli cautioned, advising against extrapolating out bigger numbers beyond the end of this year. After all, policy could change after the November election, he noted.
Why does Trump and his GOP harp on immigration as America’s biggest “problem”? His success is as a fear-mongering hate-mongerer.
When he preaches hatred toward Muslims, Mexicans, gays, blacks, people from “shithole” countries — when he lies that they bring crime, drugs to America, he is preaching to people he has frightened with his bigotry. He creates scapegoats, and then claims he will deal with them.
Hitler did it. All dictators do it.
The facts are:
False beliefs, especially those repeated for months and years, are difficult to dislodge with facts. But ultimately, that is all you can do.
Just as a lie gains strength the more it is repeated, so does the truth. Learn the truths and repeat them again and again. It’s the only way to defeat the Hitlers of the world.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
The problem with Libertarians like Eric Boehm . . . where do I begin? They have so many issues.
First, they don’t understand this equation: Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports.
Gross Domestic Product (GDP) is the most commonly used measure of the economy. The equation tells you that the more the federal government spends, the more the economy grows. But Libertarians don’t like government spending.
How does one reason with such people? Mainly, how does one acquaint them with Monetary Sovereignty, which says, “Federal financing is different from non-federal financing.”
If they can’t understand, or more accurately, refuse to understand, those two concepts—GDP and Monetary Sovereignty—how can their opinions be respected?
Here is the latest “Boehmism,” which, remarkably, may exceed all his previous work in ignorance and/or deception (It’s hard to know which:
The National Debt Is a National Security IssueThe growing debt will “slow economic growth, drive up interest payments,” and “heighten the risk of a fiscal crisis,” the CBO warns.ERIC BOEHM | 3.21.2024 1:50 PM
It’s a dangerously addictive habit that threatens to ruin our children’s lives and undermine America’s national security—and this week, Congress finally acknowledged as much. However, it remains unclear if lawmakers have the guts to do anything substantial.
No, I’m not talking about TikTok. I’m talking about the $34.6 trillion national debt.
The Senate unanimously approved a resolution on Wednesday calling the debt “a threat to the national security of the United States” and calling expected future budget deficits “unsustainable, irresponsible, and dangerous.”
1940 “Debt” was called a “ticking time bomb.”
The Senate votes to please voters, and sadly, most voters believe anything called “debt” should not be large. They don’t understand that federal “Debt” is not federal and it isn’t debt.
“We have more than doubled our national debt in just ten years,” said Sen. Mike Braun (R–Ind.), who sponsored the resolution.
“America is moving down a dangerous and unsustainable path of reckless spending, and the federal government has yet to take it seriously.”
“Unsustainable” is the Libertarian’s favorite word when describing the so-called national (or federal) debt, which is neither national, federal, nor debt.
They use that word because it has no specific meaning. They don’t say precisely what is “unsustainable” about it. The federal government, being uniquely Monetarily Sovereign (Libertarians don’t understand that concept, either), can pay any debt denominated in U.S. dollars.
1950 “Debt” was called a “ticking time bomb.”
Whether a debt is $100 or $100 trillion, the federal government could pay it instantly by pressing computer keys.
The federal government pays all its debts the same way. It creates new dollars ad hoc.
To pay any creditor, the government sends instructions, not dollars, to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
Those instructions are electronic or paper (a check), saying, “Pay to the order of _____. ” The instant the bank does as instructed, new dollars are created and added to the M2 money supply measure.
Alan Greenspan: “A government cannot become insolvent concerning obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
That is how the federal government creates dollars and pays its bills. There is no limit to the government’s ability to send instructions, and thus no limit to the government’s ability to create dollars. No debt is “unsustainable.”
1960 “Debt” was called a “ticking time bomb.“
The passage of a nonbinding resolution on the Senate floor is several steps short of addressing the federal government’s addiction to borrowing—but, as they say, recognizing that you have a problem is the first step toward solving it.
The federal (or national) debt is not a debt because the federal government does not borrow.Why would it? Given its infinite ability to create dollars, why would the federal government borrow dollars?
It wouldn’t, and it doesn’t.
Those things called T-bills, T-notes, and T-bonds do not represent borrowing. Although “notes” and “bonds” are evidence of borrowing in the private sector, federal finance is different.
1970 “Debt” was called a “ticking time bomb.“
T-securities are evidence of deposits into savings accounts at the Federal Reserve, the contents of which are wholly owned by the depositors. The government neither needs nor uses those deposits. It merely holds them in safekeeping for the depositors.
The federal government’s main purpose in offering T-security accounts is to provide the public and other nations with a safe, interest-paying place to store unused dollars, which helps stabilize the dollars.
By paying interest, these accounts help the federal government control interest rates.
1980 “Debt” was called a “ticking time bomb.“
The government does not owe the dollars deposited in T-security accounts. The government merely stores them for the depositors.
Upon maturity of any T-security, the government merely gives the dollars, that never had left the account, back to their owner, the depositor.
It’s not a federal debt, just as the contents of a bank safe deposit box are not a bank debt.
And the approval of that resolution was timely. Later on Wednesday, the Congressional Budget Office (CBO) published its latest long-term budget projections. The report shows that annual budget deficits are on pace to grow from an expected $1.6 trillion this year to $2.6 trillion in 2034, $4.4 trillion in 2044, and $7.3 trillion in 2054.
A federal budget deficit is much different from a personal budget deficit.
1990 “Debt” was called a “ticking time bomb.“
If you or I were to run a budget deficit, we would have to obtain the money to pay our bills, either by borrowing or from our income or savings.
The federal deficit merely is the bookkeeping difference between taxes and spending. The spending has already been paid for by money creation.
Here again, one must understand Monetary Sovereignty. State and local taxes do fund state and local taxes. The state and local governments are monetarily non-sovereign, like you and me.
2000 “Debt” was called a “ticking time bomb.“
So what is the purpose of federal taxes, if not to fund federal spending?
To help the federal government control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward/
To assure demand for the U.S. dollar by requiring federal taxes to be paid in dollars.
To make the public believe that federal benefits are limited by tax receipts or borrowing. (This last is at the behest of the very rich, who get wealthier by widening the income/power Gap between them and the rest of us.)
As a result of those rising budget deficits, the national debt will continue to accelerate upward.
The misnamed “national debt” is not a threat or a burden on anyone- not the government or taxpayers. Even if the “debt” were hundreds of trillions of dollars, the federal government could continue paying its bills without collecting a penny more in taxes, nor borrowing a single dollar.
2010 “Debt” was called a “ticking time bomb.“
The CBO projects that the federal government’s debt will total $114 trillion by 2054. The debt is already roughly the size of the nation’s economy and is expected to surpass the all-time high of 106.4 percent of gross domestic product (GDP) by 2028.
By the end of the 30-year projection, the debt is estimated to reach 166 percent of GDP.
The oft-mentioned “Debt”/GDP ratio is meaningless for several reasons:
The government does not owe or pay the “debt.”
GDP does not owe or pay the “Debt.”
The ratio says nothing about the health of the U.S. economy.
The ratio says nothing about the federal government’s ability to pay its bills.
“Such large and growing debt would have significant economic and financial consequences,” the CBO warns. “
Among its other effects, it would slow economic growth, drive up interest payments to foreign holders of U.S. debt, heighten the risk of a fiscal crisis, increase the likelihood of other adverse outcomes, and make the nation’s fiscal position more vulnerable to an increase in interest rates.”
The above paragraph is wrong in every respect:
2220 “Debt” was called a “ticking time bomb.“
A large and growing “Debt” merely means our Monetarily Sovereign federal government is pumping more growth dollars into the economy. The larger the “Debt,” the more growth dollars and the faster the economic growth. Remember: GDP = Federal Spending + Non-federal Spending + Net Exports. Federal Spending even increases Non-federal Spending
Our Monetarily Sovereign U.S. federal government has the infinite ability to create the dollars that pay foreign holders of U.S. debt. Paying dollars to foreign nations increases foreigners’ ability to purchase our goods and services (Net Exports).
No “fiscal crisis” has been or can be caused by the growing federal debt. The federal government always will be able to pay all its bills.
The large and growing “Debt” causes no “other adverse outcomes. The Debt/GDP ratio is fiscally meaningless for a Monetarily Sovereign nation.
Our Monetarily Sovereign government’s fiscal position is vulnerable only to the ignorance of those who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty. The government can pay any amount of interest simply by pressing computer keys.
In 1940, the federal “Debt” was only $43 billion. Those who are ignorant about federal finances called it a “ticking time bomb.”
Today, the “Debt” totals more than $33 trillion, and that phony time bomb is still a dud—and always will be.
Higher interest rates are already significantly affecting the federal budget. This year, payments on the existing debt will total an estimated $870 billion, which is more than the Pentagon’s budget. Thanks to higher interest rates and a larger debt load, debt payments have jumped by 32 percent since 2023.
Interest payments have indeed had an effect on the federal budget. They have forced the federal government to spend more, which pumps more growth dollars into the economy and increases GDP.
Again, the Libertarians seem to have forgotten: GDP = Federal Spending + Non-federal Spending + Net Exports. Not only does Federal Spending directly lift GDP, but it also lifts Non-federal Spending, which, in turn, lifts GDP
As federal “Debt” has grown, so has the economy (GDP).As federal spending has grown, so has the economy (GDP).
There seems to be no sign that federal spending or federal “Debt” is “unsustainable,” “slows economic growth,” “heightens the risk of a fiscal crisis,” “causes other adverse outcomes,” or makes the nation’s fiscal position more vulnerable to an interest rate increase.”
On the contrary, increases in federal “Debt,” yield all positive outcomes, while decreases in debt cause depressions and recessions:
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.
Deficit reductions (purple line) lead to recessions (vertical gray bars) which are cured by deficit increases.
GDP = Federal Spending + Non-federal Spending + Net Exports. Not only does Federal Spending increase GDP directly, but it also increases Non-federal Spending by providing the private sector with money.
The new CBO report shows that debt payments will be one of the fastest-growing parts of the budget for the foreseeable future, along with the twin old-age entitlement programs of Social Security and Medicare.
By 2051, interest payments will be the single largest line item in the federal budget.
If there’s a sliver of good news to be found in the new CBO projections, it is that the situation looks slightly less dire than it did last year. That improvement is due to higher expected levels of immigration and stronger estimates of future economic growth—not because of anything that policy makers in Washington have done.
(If anything, they seem determined to prevent those improvements from coming to pass, whether by limiting immigration or regulating the economy more strictly.)
This is the ultimate of ignorance. The data stare him in the face, but instead of reevaluating his position, he claims the good news comes despitethe data. In essence, Boehm has two conclusions:
If the data support his belief, he calls attention to that.
If the data do not support his belief, he ignores the data.
Thus, he is incapable of learning.
We should also keep in mind the usual caveats here: The CBO does not account for the possibility of recessions, natural disasters, wars, or other unpredictable events that could cause the federal government to borrow more heavily than current law expects.
The past 30 years have included 9/11, the war on terror, the Great Recession, and the COVID-19 pandemic, so it seems pretty likely that the next three decades will include at least a few emergencies that drive deficits higher.
Boehm doesn’t stop to think about why emergencies drive deficits higher: Emergencies, in of themselves, tend to impede economic growth, so the government increases deficit spending to save the troubled economy.
Why does the government need to wait for emergencies before it stimulates economic growth. Why not stimulate growth during non-emergency times, too?
This is a question the Libertarians and the right wing never asks, because the answer goes against their beliefs.
“There is no way to look at these eye-popping numbers without realizing we need to make a change,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for lower deficits, said in a statement about the CBO report.
“And yet we have lawmakers promising what they won’t do: I won’t raise taxes, I won’t fix Social Security, I won’t pay for all the things I do want to do. And so we continue on this dangerous path.”
MacGuineas has been president of the CRFB for many years. She and her group are bought and paid for by the rich, so they espouse beliefs that would make the rich righer by widening the Gap between the rich and the rest.
“I won’t raise taxes.” That is a good thing. Federal taxes remove growth dollars from the economy.
“I won’t fix Social Security.” To MacGuineas, “fix” means cut benefits or raise taxes, both of which are unnecessary and harmful to the economy. The federal government has infinite money to pay for Social Security.
“I won’t pay for all the things I want to do.” The government is perfectly capable of paying for anything and everything. It’s people like Boehm and MacGuimeas who hinder the government from doing what it was created to do: Protect and improve the lives of the people.
Indeed, on Thursday, Speaker of the House Mike Johnson (R–La.) told reporters that he supports plans for a so-called “fiscal commission”—which could propose some solutions to Congress’ budgeting problems—but only if the agency could not suggest tax increases or cuts to entitlement programs.
Obama had a “fiscal commission.” Its “increase- taxes, cut-spending” recommendations would have sent the economy into a depression. Fortunately, Congress didn’t listen.
That approach guarantees that the federal government will have to continue borrowing heavily to make ends meet.
Again, the U.S. government never borrows its own sovereign currency. Boehm does not recognize the differences between a Monetarily Sovereign entity and a monetarily non-sovereign entity. Either he is paid to act ignorant or he does it without pay.
Despite the Senate’s declaration that the national debt is a national security risk and the CBO’s attempts to sound the alarm about the federal government’s fiscal trajectory, there’s still a major shortage of elected officials who want to take the problem seriously.
He is correct that there’s “a major shortage of elected officials who want to take the problem seriously.” Without that shortage, the government could fund such benefits to America as:
Comprehensive, no-deductible healthcare insurance or every American.
More medical personnel at all levels, plus more hospitals with advanced equipment
Social Security for Americans of all ages.
The reduction of poverty and homelessness in America
With the reduction of poverty, there would be a significant reduction in crime.
A greater ability to accept fully vetted immigrants, whose work and intelligence would help America grow.
Education, including advanced degrees, for all those who want it.
More scientific innovation in disease prevention and cure.
More efforts to reduce global warming.
A dramatic reduction in federal taxes, which do nothing but remove growth dollars from the economy.
Pay students a salary so that families would not need to favor dropping out of school to help support the family.
The government can pay for all of it, without taxes and without inflation. Anyone not want it?
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
Because the populace has been pumped with wrong information about Monetary Sovereignty (MS), what should be easily understood is widely misunderstood. Does even the great Warren Buffett not get it?
He understands federal finance and strongly favors Social Security, yet does even he not know how that program is financed?
We have tried to make the simple even simpler with such posts as:
Airlines are sovereign over their mileage points. They cannot run short of points and can give them any value they choose. They are in “points debt” because they issue more points than they receive back from customers.
At its core, Monetary Sovereignty is dead simple. It merely says:
The U.S. federal government created an arbitrary number of dollars and gave them an arbitrary value by passing laws.
The government retains the power to pass infinite laws, create infinite dollars, and give dollars any values it chooses.
Because of these powers, the government cannot run short of dollars. It pays all its obligations with newly created dollars and does not need tax dollars.
Even if the federal government didn’t collect a penny in taxes, it could continue spending forever. No payment, however large, is a burden on the federal government or on federal taxpayers.
The posts gave examples of Monetary Sovereignty with airline mileage points, Monopoly dollars, and store coupons.
In each case, the issuer cannot run short of the points/dollars/coupons because all are numbers on computers typed at the creator’s whim.
Warren Buffett
Yet, despite that simplicity, even great financial brains seem confused:
Social Security has long been a subject of intense discussion in America, but investing legend Warren Buffett’s position on the issue is unmistakably clear.
During Buffett’s company, Berkshire Hathaway’s annual shareholders meeting in 2005, an audience member posed a blunt question: “I’m asking for your opinion on Social Security. Shall we call it the government-sponsored Ponzi scheme for retirees?”
Buffett’s answer was wrong.
He explained that, while it was proposed as insurance because that was “the only way [President Franklin] Roosevelt could get it passed,” Social Security is essentially a “transfer payment by the people who are in their productive years to the people who are past their productive years.”
And Buffett liked that mechanism.
“I think that the obligation for the people who do well in this society is to provide a reasonable level of sustenance for those beyond their productive years,” he said.
No, no, no. Social Security is nothing like “a transfer payment from people in their productive years to people past their productive years.”
And while he may imply there is a moral obligation for the productive people to aid those past productive years, that is not how Social Security operates.
Target is sovereign over its coupons. It cannot run short of coupons; it makes all the rules re. its coupons, and it runs “coupon deficits” (receives fewer coupons than it issues) and is in “coupon debt” (the total coupons issued is more than the coupons received.)
If it did, two things would be necessary:
1. Social Security would have to be supported by more affluent people, which it is not. Even the FICA tax, which ostensibly supports SS, is collected mostly from medium-to-lower salariedpeople — and only from the first $160K of salary.
I wonder whether Mr. Buffett collects any salary at all. If he obtains all his income via stock gains, dividends, interest, and other non-salary sources, he doesn’t pay FICA. No “transfer” there.
2. More importantly, and contrary to popular belief, FICA does not fund Social Security (or Medicare.) All federal spending is funded by newly created dollars.
Tax dollars, which begin, in the M2 money supply measure, suddenly disappear from anymoney supply measure when they hit the U.S. Treasury. They effectively are destroyed.
Ask yourself , “How much money can the federal government spend in any given year? Given that the government has the infinite ability to create dollars, how many dollars can it spend?
Right, it can spend infinite dollars. It never can run short.
What is any number added to infinity? Infinity. Those FICA dollars disappear into an infinite dollar hole, never heard from again.
The fake Social Security and Medicare Trust Funds, which supposedly receive FICA dollars and spend those dollars on benefits, do no such thing. In fact, they aren’t even trust funds.
They are bookkeeping mechanisms that only record inflows and outflows. They aren’t “trust funds” if the federal government can add to them, take from them, or revise them in any way and at any time it chooses?
If you go to any federal finance website, you will see how the government implies or even states outright that federal taxes fund federal spending. Yet, clearly, this isn’t true. Even if the federal government collected zero taxes, it could continue spending forever.
That is the reality of all large Monetarily Sovereign entities.
Consider the European Union, which is sovereign over the euro:
The federal government is sovereign over its “coupons,” aka dollars. It cannot run short of dollars; it makes all the rules re. its dollars, and it runs “dollar deficits” (receives fewer dollars than it issues) and is in ” debt” (the total dollars issued is more than the dollars received.)
No large Monetarily Sovereign nation can run short of its own sovereign currency — unless it wants to.
Why would it want to? To foster the false belief that benefits to the middle- and lower-income groups are unaffordable and unsustainable without benefit cuts or tax increases.
That is the basis for the Big Lie: “Social Security and Medicare can’t continue unless we cut your benefits or increase your taxes.”
Who benefits from the Big Lie: The rich who run America. They are rich because of a wide financial Gapbetween them and the rest of us. The wider the Gap, the richer they are.
There are two ways the rich widen the Gap:
They increase their net income with tax dodges for which they bribe politicians.
They reduce your net income by falsely claiming that benefits are unaffordable and unsustainable. They bribe the media and politicians to tell that lie.
Although Mr. Buffett seems to try to claim the high ground by “complaining” that his secretary pays a higher tax rate than he does, it’s hard to believe he doesn’t understand the realities of Monetary Sovereignty.
Therefore, I believe he intentionally lies about Social Security being a “transfer payment by the people who are in their productive years to the people who are past their productive years.”
Sadly, you receive the Big Lie from three groups the rich bribe: Politicians, news media, and educators. And there are the lies coming from the rich, themselves.
That Niagara Falls of false information drowns out the truth, which is why the simplicity of Monetary Sovereignty is so difficult for many people to understand.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
Some economists, politicians, and media talking heads might tell you it means the airlines are seriously in debt.
OK, that “3 trillion” is not dollars; it’s miles or points. But there is a point (pun intended) to be made.
Frequent flyers, consider yourselves warned: Sitting on a pile of unused airline miles could cost you.
Liabilities tied to the five most valuable airline-loyalty programs in the U.S. soared almost 12% to $27.5 billion last year, according to new analysis by LendingTree Inc.’s consumer-finance website ValuePenguin.
Airlines looking to shore up their balance sheets could reduce the value of those rewards or reinstate policies that allow miles or points to expire, the firm warned.
If the airlines wanted to reduce their mileage “debt,” they arbitrarily could reduce the value of their mileage reward points or allow miles to expire.
They are mileage-points sovereign.As the issuer of mileage points, the airlines can do anything they wish with those points. They can issue as many as they wish, increase or reduce the value, or void them simply by pressing computer keys.
If the Airlines felt generous, they could give you a few million mileage points. Or if they felt stingy, they could “tax” you points by reducing their value. Suddenly, flying to your favorite city would cost you double the number of points you thought. Effectively, that would be a 50% “wealth” tax on your point holdings.
Or they could tell you to use all your points by December 31st at which time the points would be worthless. The effect would be like a tax on you.
The airlines are to mileage points as the U.S. federal government is to U.S. dollars. By giving out more points than they receive, the airlines run “points deficits”; cumulatively, the airlines have “points debt.”
The airlines create points by pressing computer keys. Nothing prevents the airlines from pressing keys, forever. The U.S. government creates dollars by pressing computer keys. nothing stops the U.S. government from pressing keys, forever.
Being points sovereign, the airlines never can run short of mileage points. The U.S. government, being Monetarily Sovereign, never can run short of dollars.
The airlines never borrow points. The government borrows dollars.
“Especially in a time where airlines have gone through such financial issues, it would be easy to see that they would look at some sort of devaluation of the miles and points as a way to make up a little bit of financial ground,” Matt Schulz, LendingTree’s chief credit analyst, said in an interview.
“I would suspect we might see something like that going forward.”
This demonstrates the total control a Monetarily Sovereign entity has over its currency, whether airline points or dollars. The airlines create all the rules re. points. The government creates all the rules (i.e. laws) regarding dollars.
At the height of the Covid-19 pandemic, Delta, American, and United pledged their loyalty programs as collateral for bonds as the virus and resulting government restrictions sapped travel demand. Such deals could prevent any material changes to the programs, said Joe DeNardi, an analyst with Stifel Financial Corp., who follows airline loyalty programs closely.
United, for its part, doesn’t see currency devaluation as a handy tool to lower that accounting liability, said Michael Covey, managing director of the loyalty program at the airline.
Yes, it’s an accountingliability, but not a real liability because the airlines have total control over its value. They arbitrarily can create points by pushing computer keys, or they could eliminate the points altogether. Goodbye, “points debt.”
Does an airline owe someone a billion points? No problem. They can just type 1,000,000,000 into a computer and Voila! Here are the billion points.
Does the federal government owe someone a billion dollars? No problem. Just type the number into a computer and the dollars come into existence.
Think about that the next time someone tells you that Medicare or Social Security are running short of money.
A decade ago, revenue-based airline programs (rather than mileage-based) were fairly uncommon in the U.S. JetBlue was one of the first U.S. airlines to launch a revenue-based program when it revamped its program in 2009. Southwest followed with a program “enhancement” in 2011.
Then, the big airlines jumped on the bandwagon. Delta transitioned to a revenue-based system in 2015, and American Airlines and United quickly followed suit. Now, almost all major U.S. airlines operate a revenue-based program.
There again is that total control a monetary sovereign has over its currency. The airlines arbitrarily went from awarding mileage points to awarding revenue points.
However, programs differ a bit in how they award miles.
For better or worse, the three biggest U.S. airlines have similar mileage earning systems. General members earn 5 miles per dollar of eligible spending on travel with the airline.
Elite members earn a bonus on this base earning, with all three programs topping out at 11 miles per dollar for top-tier elites.
On Dec. 9, 2021, Delta became the first domestic airline to make basic economy fares ineligible for mileage earning. Basic economy flyers will no longer earn SkyMiles or Elite Qualifying Miles, Dollars, or Segments.
Again, the above demonstrates the total control by a monetary sovereign. Delta simply made the change by fiat. The federal government can, and often has, arbitrarily changed the value of the U.S. dollar.
The “Nixon shock” was an arbitrary move by President Nixon to end the convertibility of dollars into gold. Suddenly, the dollar was no longer worth 1/35th of an ounce of gold.
If airlines made the same kind of change, suddenly airline points would no longer be worth 1 cent or 1.5 cents each. The “problem” of the “points debt” would disappear.
Selling frequent-flyer points to banksAirlines make money from loyalty programs by selling frequent-flyer points to banks, which then award them to credit card holders as purchase rewards.
The banks pay airlines 1 to 1.5 cents per mile, plus a bonus when new customers sign up for their branded credit card.
By selling their loyalty program frequent flyer miles to banks, credit card companies, car rental firms, hotels, and supermarkets, the airlines have found an almost guaranteed way to make a profit from their tickets.
In effect, most major airlines have a business model which is more like a bank than a transport company.
No, it’s not more like a bank. It’s more like a Monetarily Sovereignnation— Canada, Mexico, the UK, Australia, Japan, China, and yes, the United States — all of whom can create andvprice their currencies at will (unlike monetarily non-sovereign entities like cities, counties, states, euro nations, businesses, you, and me.)
This is the airline profitability program:
The airlines create points from thin air. They create as many points as they wish at virtually no cost.
Of course, airlines have to offer travel in exchange for points, so that is a cost of the program, but:
Airlines control how many points each flight costs passengers. So, high-demand days cost far more points than other days. This way, the airlines dissuade passengers from using points on those days when they can sell seats for dollars.
This shows you that Monetary Sovereignty is everywhere, though the public is kept in the dark. (See: “The genius of the board game, Monopoly.”)
When a retailer issues coupons, they essentially issue money in lieu of a price reduction. The retailer is sovereign over the coupons and can issue as many coupons as he wishes and make them any value he wishes.
All outstanding coupons could be counted as retailers’ “debt” – -i.e., the value of outstanding coupons—except customers pay for the coupons when they buy the products.
Imagine an airline saying, “We are going to raise the price of a seat from 100 points to 200 points because we are running short of points.”
You would think that’s crazy. How could an airline run short its points, points it creates at will, by clicking computer keys?
But that is exactly what the federal government says when it claims Medicare and Social Security are short on dollars.
You should ask the same question. How can the U.S. federal government run short of its own dollars, dollars it creates at will by clicking computer keys?
The reason you don’t ask is simple. No one questions the airlines’ ability to create their points at will, but your information sources tell you the U.S. government can’t create its dollars at will.
They tell you the federal debt (that neither is federal nor debt) is “unsustainable.” They tell you the government should “ive within its means.” They tell you your taxes must be increased and/or your benefits reduced.
All these statements are deceptive, based on the hope that you don’t understand Monetary Sovereignty. The lie that the federal government can run short is dollars is told so that the rich can become richer while the rest survive in ignorance.
It’s that sort of ignorance someone like Eric Boehm promulgates when he writes an article like this:
The article pretends that the federal government is not Monetarily Sovereign, can’t create dollars at will, needs tax dollars to pay its bills, and in some unexplained way actually could run out of U.S. dollars.
It’s a monstrous lie, aimed at keeping you down and the rich up by widening the income/wealth Gap between the rich and you.
If you ever feel like protesting something, this is what you should protest. The Big Lie in economicsthat the federal government can’t afford to provide certain benefits and/or that taxpayers fund federal spending.
The lie claims the U.S. “debt” is a “ticking time bomb,” to scare you. (It’s a “bomb” that has been “ticking” since 1940, and still no explosion.)
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
#Monetary Sovereignty - Mitchell 