Three Current Articles Demonstrate Ignorance in the News

Here are three current articles that demonstrate the economic ignorance of the American public. We’ll begin with an article that reflects American’s beliefs about immigration:

According to a Pew Research Center survey conducted from January 16 to 21, 2024, 78% of Americans believe that the large number of migrants seeking entry into the United States at the U.S.-Mexico border is either a crisis (45%) or a major problem (32%).

Republicans are more likely to describe it as a “crisis” (70%) than Democrats (22%), who mostly view it as a “major problem” (44%) or a “minor problem” (26%).

Concerns raised by respondents include economic burdens associated with the migrant influx and issues related to how migrants are cared for and the overall immigration system.

Additionally, in a nationwide poll conducted in late March, 83% of respondents expressed support for a complete cessation of immigration across the U.S.-Mexico border.

Furthermore, a Rasmussen Reports survey found that even among Hispanics, 55.8% supported closing the border.

A majority of Americans believe immigrants are an economic burden on America. Compare that with these facts:

Immigrants boost job growth
The labor shortage has employers pinning hopes on arrivals, By Paul Wiseman, Gisela Salomon, and Christopher Rugaber Associated Press.

The millions of jobs that new immigrant arrivals have been filling in the United States appear to solve a riddle that has confounded economists for at least a year: How has the economy managed to prosper, adding hundreds of thousands of jobs, month after month, at a time when the Federal Reserve has aggressively raised interest rates to fight inflation — usually a recipe for a recession?

The answer appears to be immigrants. The influx of foreign-born adults vastly raised the supply of available workers after a U.S. labor shortage had left many companies unable to fill jobs.

More workers filling more jobs and spending more money has helped drive economic growth and create still more job openings.

Immigrants have

Helped solve a severe labor shortage
Reduced inflation
Driven economic growth
Prevented a recession
Created more job availabilities.

“There’s been something of a mystery — how are we continuing to get such extraordinary strong job growth with inflation still continuing to come down?” said Heidi Shierholz, president of the Economic Policy Institute. “The immigration numbers being higher than what we had thought — that really does pretty much solve that puzzle.”

While helping fuel economic growth, immigrants also lie at the heart of an incendiary election-year debate over the control of the nation’s southern border.

In his bid to return to the White House, Donald Trump has vowed to finish building a border wall and to launch the “largest domestic deportation operation in American history.”

They live near San Diego. Migrants pass through their backyards almost nightly | CNN — **This is the image being planted in your mind.**

Millions of Americans think that is a great idea.

Whether he or President Joe Biden wins the election could determine whether the influx of immigrants, and their crucial role in propelling the economy, will endure.

The immigration boom was a surprise.

In 2019, the Congressional Budget Office estimated that net immigration—arrivals minus departures—would equal about 1 million in 2023.

The actual number, the CBO said in a January update, was 3.3 million.

That’s 3.3 million workers and consumers helping to build our nation.

Thousands of employers desperately needed the new arrivals. The number of native-born Americans in their prime working years — ages 25 to 54 — was dropping because so many of them had aged out of that category and were nearing or entering retirement.

Their numbers had shrunk by 770,000 since February 2020, just before COVID-19 slammed the economy.

Filling the gap has been a wave of immigrants. Over the past four years, the number of prime-age workers who either have a job or are looking for one has surged by 2.8 million.

And nearly all those newcomers — 2.7 million, or 96% of them — were born outside the United States.

As older people leave the work force, young immigrants enter, the ideal situation for our economy, given our reduced birth rate.

(The nationwide birth rate fell significantly between 2007 and 2022, dropping from 14.3 births per 1,000 people to 11.1, or nearly 23%, per new CDC data.)

Where else will we find new, young workers to fill the voids left by older retiring for dying workers, if not from immigrants? But Trump wants to force “the largest domestic deportation operation in American history.”

34,700+ Family Shopping Clothes Stock Photos, Pictures & Royalty-Free Images - iStock | Young family shopping clothes — **Immigrants are people like you, just trying to make a better life.**

It makes no sense.

A study by Wendy Edelberg and Tara Watson of the Brookings Institution found that new immigrants raised the economy’s supply of workers and allowed the United States to generate jobs without overheating and accelerating inflation.

Trump has repeatedly attacked Biden’s immigration policy over the surge in migrants at the southern border.

Only 27% of the 3.3 million foreigners who entered the United States last year did so as “lawful permanent residents” or on temporary visas, according to Edelberg and Watson’s analysis.

Many economists suggest that immigrants benefit the U.S. economy. They take low-paying but essential jobs that most U.S.-born Americans won’t, like caring for the sick and the elderly.

And they can make the country more innovative because they are more likely to start businesses and obtain patents.

Ernie Tedeschi, a visiting fellow at Georgetown University’s Psaros Center and a former Biden economic adviser, calculates that the burst of immigration has accounted for about a fifth of the economy’s growth over the past four years.

Think of the Hitleresque realities. To fulfill his “largest domestic deportation operation in American history.” promise, Trump would need to:

Hire, pay, and occupy the time of tens of thousands of police and/or National Guard
Have them search house to house, millions of dwellings, from attic to basement
Kick down doors if necessary
Drag from their homes screaming men, women and children
Put them on trains (cattle cars?) and ship them to the border
Disregard the fact that many immigrants will have spent years in America building lives and contributing to our nation
Split families, some of which will have had children born here and by law, are citizens.
Turn millions of Americans into Gestapo-like spies, encouraged to rat out their neighbors, which will rip apart American society, changing our nation in ways we would regret, forever.

And why do this to America? Because one man, Donald Trump, has appealed to the ignorant, bigoted and haters in his base, convincing them that immigrants are not people, and that logic and compassion are not American virtues.

America needs to spend on better systems for vetting and assimilating immigrants, not on spending for higher walls and forced deportations.

=================================================

Immigration is not the only “problem” about which we have been lied by the politicians and some of the media. Consider inflation:

Elevated inflation will likely hinder rate cuts this year, Powell says
WASHINGTON — Federal Reserve Chair Jerome Powell on Tuesday cautioned that persistently elevated inflation will likely delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.

“Recent data have clearly not given us greater confidence” that inflation is coming fully under control and “instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said during a panel discussion at the Wilson Center.

“If higher inflation does persist, we can maintain the current level of (interest rates) for as long as needed.”

The Fed chair’s comments suggested that without further evidence that inflation is falling, the central bank may carry out fewer than the three quarter-point reductions its officials had forecast during their most recent meeting in March.

For years, interest rates (blue) were near zero and inflation (red) remained low. Then, came the **COVID-related shortages**, and inflation zoomed.

We’ve discussed this previously, here and here and elsewhere, so I’ll just summarize for you:

Inflation is a general increase in prices.

Higher interest rates increase the prices of everything, because interest costs are added to nearly everything you buy.

Therefore, the Fed wants to fight inflation by raising the prices of everything!

In short, the Fed is applying leeches to fight anemia.

Prices go up when things are in short supply. Supply problems arise not because interest rates are too low but because of other economic factors.

America’s most recent inflation was caused by COVID-related shortages of oil, food, steel, paper, computer chips, lumber, shipping, labor and other goods and services.

The cure for inflation is not to raise prices further by raising interest rates, but instead increase government spending to acquire and distribute the scarce goods and services — exactly the opposite of the “cut-spending, raise-interest-rate” proclivity of the Fed.

In the past several weeks, government data has shown that inflation remains stubbornly above the Fed’s 2% target and that the economy is still growing robustly.

Year-over-year inflation rose to 3.5% in March, from 3.2% in February.

And a closely watched gauge of “core” prices, which exclude volatile food and energy, rose sharply for a third consecutive month.

The irony is that good economic news is bad news for the Fed, which raises interest prices in response to increased prices.

In summary, inflation is caused by shortages of critical goods and services, not by low interest rates or federal spending.

Despite the Fed’s “best” (actually worst) efforts, inflation has fallen because the federal government has subsidized industry to create more of the scarce products.

===================================

AdvancED: The Institute for the Advancement of Higher Education | Vanderbilt University — **Vanderbilt University. Some students will pay $100,000 tuition. Athletes won’t.**

The third article demonstrating the ignorance-forcing, false statements by the politicians and the media has to do with student loans.

The original American colonies, recognizing the vital need for education, set up schooling, initially teaching the reading of the bible.

Boston Latin became the first American public high school in 1820, and in 1827, the state of Massachusetts opened all public schools free to all students.

And we have hardly progressed from there.

Today’s more literate world competition demands more than a high school education, with college and beyond being ever more needed for economic and scientific growth.

America should be doing everything in its power to provide free education to young minds. Yet we remain stuck in the 1800’s, with state and local taxpayers funding K-12, plus some lower-level community colleges.

Rich kids go to the best schools; poor kids go to work. The implicit assumption is that poor kids aren’t smart enough to warrant the best education. That thinking creates a terrible waste of brainpower.

The federal government should take the education burden off taxpayers by funding all levels of education, including university and beyond. Being Monetarily Sovereign, the government does not spend taxpayer dollars. Its spending costs taxpayers nothing.

Yet, rather than providing free education, America puts its best students into debt by lending, rather than giving, them education dollars. Senseless.

And when someone tries to help students come out of debt, they meet objections based on ignorance.

Student loan plan: President Joe Biden’s latest plan for student loan cancellation is moving forward as a proposed regulation, offering him a fresh chance to deliver on a campaign promise and energize young voters ahead of the November election.

The Education Department on Tuesday filed paperwork for a new regulation that would deliver the cancellation that Biden announced last week.

It still has to go through a 30-day public comment period and another review before it can be finalized.

It’s a more targeted proposal than the one the U.S. Supreme Court struck down last year. The new plan uses a different legal basis and seeks to cancel or reduce loans for more than 25 million Americans.

Conservative opponents, who see it as an unfair burden for taxpayers who didn’t attend college, have threatened to challenge it in court.

In this regard, we meet ignorance in its various disguises:

1. The false belief that taxpayers fund federal spending. While taxpayers do fund state and local government spending (those governments are monetarily non-sovereign) taxpayers do not fund Monetarily Sovereign federal spending.

The federal government creates new dollars, ad hoc, to pay for all its spending. Even if the federal government collected $0 taxes, it could continue spending forever.

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

The purposes of federal taxes are not to provide spending money to the government, but:

A. To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward

B. To assure demand for the U.S. dollar, by requiring taxes be paid with dollars.

Taxpayers would not pay for federal funding of education just as taxpayers don’t fund tax breaks for mortgage interest, long-term capital gains, or any other tax benefits to the rich.

2. The false belief the federal government can’t afford more deficit spending. The federal government has the infinite ability to create its own sovereign currency, the U.S. dollar. It never can run short of dollars and can pay any bill of any size, without taxing or borrowing.

Those who complain about the size of the federal “debt” (that really isn’t federal or debt), demonstrate ignorance about federal financing.

3. The “If-I-didn’t-get-it,-he-shouldn’t-get-it” envy. This idea precludes any new government benefits, because benefits have to begin somewhere, and there always will be people who didn’t receive a benefit before it began.

4. The rich, who run America, don’t want the income/wealth/power Gap to narrow. Without the Gap, no one would be rich, and when the Gap, widens, the rich grow richer.

Giving free education to the average American would narrow the Gap and make the rich less rich. So, they spread the misinformation that while it’s OK for state/local government taxpayers to fund K-12, it’s not OK for the federal government to fund K-16+, with no help from taxpayers.

It makes no sense, but that is what you’re being taught.

Why do we treat grades K-12 differently from grades 13+?

Grades K-12 are free to students who don’t opt for private schools, paid for by taxpayers, and are mandatory to certain ages.

Grades 13+ are costly to students or funded by taxpayers and are optional. Entrance is based on merit (as judged by the school) and on affordability.

Why the cutoff at grade 13? Why don’t we treat all education levels the same? And if education is important for America’s international competitiveness, wellbeing and economic strength, why doesn’t the federal government fund it?

Why does America force our students into debt poverty, when America needs them?

IN SUMMARY

Ignorance is expensive.

Ignorance about immigration costs America valuable workers and their beneficial output, while converting the search for the American dream to a nightmare of immoral selfishness and cruelty.

Ignorance about inflation dooms us to ideas that perpetuate inflation while costing us the products whose scarcity causes the inflation.

Ignorance about federal Monetary Sovereignty and schooling costs America the brainpower benefits millions of middle-to-lower income young people could provide.

Only two things keep people in chains: The ignorance of the oppressed and the treachery of their leaders.

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

Don’t let your Congressperson get away with cheating you out of your benefits.

There are two primary ways in which U.S. dollars are created. The rhyming pneumonic is: Bank lending and federal spending.

580+ Adding To Pile Stock Illustrations, Royalty-Free Vector Graphics & Clip Art - iStock | Top up — Bank lending adds new dollars to the money supply.

1. Contrary to popular myth, when a bank lends, it does not lend depositors’ funds. It creates new dollars by increasing the borrower’s bank account balance. For example, when you take out a mortgage, your bank simply increases the balance in your checking account. That adds dollars to the M2 money supply measure. Your bank can’t do this endlessly. It is limited in its ability to create dollars by its reserves and its capital. The reserve limitation is termed “fractional reserve lending,” which means your bank must keep a fraction of its lending (often 10%) in reserve to handle a bank run. However, this is not a real limit because banks can borrow reserves from the Federal Reserve. The real limit to bank lending is its capital. This is discussed in more detail here. Rather than the common “fractional reserve lending” term, the more correct limit should be called “fractional capital lending.” 2. Contrary to popular myth, the federal government does not spend tax dollars. Instead, it creates new dollars by spending.

920+ Shredding Money Stock Photos, Pictures & Royalty-Free Images - iStock | Lose money, Wasting money, Flushing money — You pay taxes with M2 money supply dollars. When they are received by the Treasury, he ceases to be part of any money supply measure.

Even if the federal government didn’t collect a penny in taxes, it could spend infinite amounts forever. Most people are amazed to learn that the federal government (unlike state/local governments) destroys all tax dollars upon receipt. When you pay taxes, you take dollars that are part of the M2 money supply measure and send them to the Treasury, where they instantly become part of no money supply measure. In effect, they cease to exist. (Treasury dollar holdings are not part of any money supply measure because the Treasury has the infinite ability to create dollars. Its supply is endless.) The sole purposes of federal taxes are not to provide spending money to the federal government but to:

A. Control the economy by taxing what the government wishes to discourage and giving tax breaks to what the government wishes to reward

B. Assure demand for the U.S. dollar by requiring taxes to be paid in dollars.

Unlike state and local government taxes, which do fund state and local government spending, federal taxes do not fund federal spending. The difference is that state and local governments are monetarily non-sovereign, while the federal government is Monetarily Sovereign. As the original creator of the U.S. dollar, the federal government rules over all aspects of the dollar, its supply, and its value. To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, telling the bank to increase the balance in the creditor’s checking account. When the bank does as instructed, new dollars are created and added to the M2 money supply measure. The bank can do this because it clears that money creation through the Federal Reserve, a federal government agency. In short the federal government approves its own instructions for the bank to create dollars. All of the above substantiates one simple point: The U.S. federal government has infinite dollars available to spend. If it wished, it could pay a creditor a trillion dollars or a hundred trillion dollars today at the touch of a computer key. Unlike state and local governments, the federal government is not burdened by debt and cannot be insolvent. All those worries you read, about the size of the federal debt, are misguided. It’s like worrying about whether the sun has enough light to cure the night’s darkness. Keep that in mind as you read an example of the Big Lie in economics:

Lawmakers Might Increase Social Security’s Full Retirement Age to Avoid Benefit Cuts. Here’s How That Could Hurt Today’s Workers Big Time

Story by Maurie Backman, The Motley Fool

Social Security is not in the best financial shape. The program gets the bulk of its funding from payroll taxes.

But in the coming years, that revenue stream is expected to shrink as baby boomers exit the workforce in droves.

Wrong. Payroll tax dollars, which come from the M2 money supply measure, cease to be part of any money supply measure when they reach the U.S. Treasury. Thus, payroll tax dollars are destroyed upon receipt. The federal government always creates new dollars to pay its financial obligations. Social Security is an agency of the Monetarily Sovereign U.S. federal government, which has the infinite ability to create its sovereign currency, the U.S. dollar. It never can run short of dollars. Therefore, no federal government agency can run short of dollars unless Congress and the president want that.

Alan Greenspan: “A government cannot become insolvent with respect to 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.”

There is nothing to prevent the U.S. government from creating and adding as many dollars as are needed to keep Social Security Solvent without collecting a penny in taxes:

Quote from former Fed Chairman Ben Bernanke when he was on 60 Minutes: Scott Pelley: Is that tax money that the Fed is spending? Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

Social Security can tap its trust funds to keep up with scheduled benefits for a period of time. But once those trust funds run dry, benefit cuts may have to happen. And recent projections call for a trust fund depletion date of 2034, which isn’t so far away.

The so-called “trust funds” are fake. They simply are line items on balance sheets that can be increased or reduced by the federal government whenever it wishes to.

Peter G. Peterson Foundation:

Federal trust funds bear little resemblance to their private-sector counterparts; therefore, the name can be misleading.

A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism used to track inflows and outflows for specific programs.

In private-sector trust funds, receipts are deposited, and assets are held and invested by trustees on behalf of the stated beneficiaries. In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.

Rather, the receipts are recorded as accounting credits in the trust funds and then combined with other receipts that the Treasury collects and spends.

Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.

Of course, it’s in lawmakers’ best interest to try to avoid benefit cuts and the senior poverty crisis they have the potential to cause. To that end, several solutions have been proposed to prevent that unwanted scenario.

Balance Scale Graphic Images – Browse 248,135 Stock Photos, Vectors, and Video | Adobe Stock — “Rich” is a comparative term. If you have $1,000, you are rich if everyone else has $10, but you are poor if everyone else has $10,000. Taking benefits from the poor makes the rich richer.

If it were in the “lawmakers’ best interest,” there would be no funding crises. Congress would simply vote to add dollars to Social Security. That is how Congress, the President, and all other federal agencies are funded. Congress votes and dollars are created from thin air. However, lawmakers have a different “best interest” from the masses. The very rich bribe lawmakers to widen the Gap between the rich and the rest. Since “rich” is a comparative term, widening the Gap makes the rich richer. Yes, that’s right. Making you poorer actually makes the rich richer. The “best interest” of the lawmakers is to receive dollars from wealthy supporters.

One idea that’s been gaining traction is increasing Social Security’s full retirement age (FRA), which is the age at which seniors can claim their monthly benefits in full without a reduction.

For workers born in 1960 or later, FRA is 67. However, some lawmakers suggest increasing FRA to 68 to 69 so that Social Security has more time before fully paying those benefits.

This is unnecessary and only makes the people poorer—more years without Social Security support. (Watch for attempts to do the same thing to Medicare—more years without healthcare insurance.)

It’s an idea that could potentially prevent benefit cuts.

But that is precisely what it is — a benefit cut. It’s more years without a benefit.

But it’s also an idea that might hurt workers in a very notable way. Here are some consequences that might ensue if the FRA for Social Security is raised by a year or two.

1. You may have to work longer

It’s possible to claim Social Security before reaching FRA. You can take benefits once you turn 62. But for each month you claim them ahead of FRA, they get reduced permanently.

Due to a lack of retirement savings, you may be unable to afford a cut to your Social Security income.

But if FRA is raised, you’ll have to wait longer to get your full monthly benefit without a reduction. That means you may have to work longer, which you may not want to do—especially if your job is stressful or harmful to your health.

In other words, it’s an unnecessary benefit cut.

2. You may have less opportunity to earn delayed retirement credits

Right now, seniors who postpone their Social Security claims past FRA get to accrue delayed retirement credits.

Those credits boost benefits by 8% a year so that someone with an FRA of 67 who files at 70 gets to snag a permanent 24% increase to their monthly Social Security check.

Currently, delayed retirement credits stop accruing at age 70. However, unless the rules change, if FRA is increased, today’s workers will be left with less opportunity to grow their Social Security benefits.

Another unnecessary benefit cut.

3. You may be subject to an earnings-test limit for longer

You’re allowed to work and collect Social Security at the same time. And once FRA arrives, you can earn any money without risking having benefits withheld.

However, the current rules dictate that Social Security recipients who work and have not reached FRA are subject to an earnings-test limit.

Earnings beyond that limit result in withheld Social Security income. If FRA is raised to help prevent Social Security cuts, workers could be subject to an earnings-test limit for longer.

This unnecessary benefit cut will hurt those who are not rich. Notice there is no call for ending tax breaks given to the rich. The federal government seems to have plenty of money for those tax gifts to the rich but, strangely, not enough to support Social Security and Medicare.

All told, increasing FRA for Social Security has some serious drawbacks. Lawmakers must weigh the pros and cons to determine whether pushing FRA to 68 or 69 is a good idea.

Rather than engaging in theatrical “struggles” to make less money to cover more people, the federal government could and should:

Eliminate FICA. Those dollars do not increase the government’s ability to fund Social Security (and ability that is infinite)
Provide Social Security benefits to every man, woman, and child in America, regardless of age, income, or wealth.

The rich bribe the lawmakers to make you believe federal taxes fund federal spending and give you benefits; taxes must be increased. This is the Big Lie in economics. The federal government has the financial power to provide:

Social Security payments to you and every man, woman, and child in America.
Comprehensive, no-deductible Medicare for you and every man, woman, and child in America
Free college education for you and every American who wanted one.
An end to poverty and hunger in America.
An end to homelessness in America
New roads and bridges wherever needed
Financial support for every scientific research and development project imaginable.

In short, money is no object for the federal government. We need to understand that fact and then have the imagination and desire to use the money to build a better world. It you believe it sounds too good to be true, it’s because the rich have been successful in indoctrinating you with the Big Lie. 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

Is the cost of the White House unsustainable?

The federal government has more than a thousand departments and agencies, including The White House, the House of Representatives, the Senate, the Supreme Court, the Central Intelligence Agency (CIA), Medicare (CMS), and the Social Security Administration (SSA). Contrary to popular myth, all federal agencies and departments are funded in precisely the same way: Congress votes, and dollars are created from thin air. A few agencies are associated with so-called “trust funds.” According to the Peter G. Peterson Foundation:

A federal trust fund is an accounting mechanism the federal government uses to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.

The largest and best-known trust funds finance Social Security, portions of Medicare, highways and mass transit, and pensions for government employees.

Federal trust funds bear little resemblance to private-sector counterparts; therefore, the name can be misleading.

A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism that tracks inflows and outflows for specific programs.

In private-sector trust funds, receipts are deposited, and assets are held and invested by trustees on behalf of the stated beneficiaries.

In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.

Instead, the receipts are recorded as accounting credits in the trust funds and combined with other receipts that the Treasury collects and spends.

Further, the federal government owns the accounts and can, by changing the law, unilaterally alter their purposes and raise or lower collections and expenditures.

Read that last sentence carefully, for it is the heart of this discussion. It consists of three truths:

The federal government owns the accounts
The government can change the law and unilaterally change the purposes of the accounts.
The government unilaterally can raise or lower collections and expenditures.

This all adds up to a powerful but little-understood fact. The so-called federal “trust funds” operate entirely at the whim of Congress and the President. These “trust funds were created and operated according to the laws the Congress and the President control. By adjusting laws, Congress and the President can determine how much money each “trust fund” collects, has, and spends. Congress and the President arbitrarily can decide that any trust fund has $1, or $1 trillion, or $1,000 trillion, merely by passing laws. There is no limit to what laws Congress and the President pass, nor what those laws say regarding money in the “trust funds.” Keep this total control in mind as you read excerpts from this article, also by the Peter G. Peterson Foundation:

SOCIAL SECURITY REFORM: SHOULD WE RAISE THE RETIREMENT AGE? In their 2022 Annual Report, the Social Security trustees estimate that the program’s primary trust fund — Old Age and Survivors Insurance (OASI) — will spend more on payments to beneficiaries than it collects yearly until it is depleted in 2034.

At that time, an estimated 70 million beneficiaries would see a substantial reduction in their benefits. OASI would only be able to distribute as much in benefits as it collects in annual revenues.

Driving that impending depletion are the dual demographic trends of retiring baby boomers and lengthening life expectancies, which together have placed considerable strain on Social Security’s finances.

Many options exist to shore up OASI’s solvency, including increasing revenues dedicated to the program, raising the full retirement age, and decreasing the program’s benefits.

A balanced approach that combined components from each option would likely provide the fairest, most lasting, and least painful adjustment for the future.

Translation: The primary “trust fund” will spend more than it collects –according to current law, which Congress and the President can change at will, but the only law changes being considered are:

Higher taxes
Raising the retirement age, and
Reduced dollar benefits

But here is another, even better approach: Congress and the President should simply vote to give Social Security more money, precisely as they do for the other thousand federal departments and agencies. There is no need to increase taxes. In fact, FICA should be eliminated. It is unnecessary and a double tax in that it is not deductible, but part of Social Security is taxed. It also punishes lower-income people. There also is no need to raise the retirement age. Social Security payments can and should be given to every man, woman, and child in America, Finally, there is no need to reduce dollar benefits. We should even end the faux “trust funds” and simply pay for Social Security the same way the federal government pays for nearly all of its other agencies: By recreating dollars from thin air.

The normal retirement age for receiving full Social Security benefits depends on the year of birth

The U.S. federal government is Monetarily Sovereign. It cannot run short of its own sovereign currency. To pay for your Social Security benefits, the federal government sends instructions (in the form of a wire or check) to your bank or you, instructing your bank to increase the dollar balance in your checking account. When your bank does as instructed, the balance in your account increases, creating new dollars and adding them to the M2 money supply measure, growing the economy. Sending instructions to banks is the primary way the federal government creates dollars. The federal government, being Monetarily Sovereign, has the infinite ability to send and clear instructions, thus, the endless ability to create dollars. (By contrast, everyone who writes a check or sends a wire can send instructions but not clear them. Checks that don’t clear are said to “bounce.”) Your bank then clears the transaction through the Federal Reserve, another federal agency. Thus, the federal government clears its own money-creation transactions, giving it the infinite power to create dollars.

Nearly half of all retirees in 2021 began collecting Social Security benefits before full retirement age

The government also has the infinite power to change Social Security laws, as demonstrated by the 12 benefit changes shown in this chart. More than half of all Social Security recipients take benefits before the official retirement age when benefits are reduced. This demonstrates an early need for benefits by those in lower-income groups.

WHAT EFFECT COULD RAISING THE FULL RETIREMENT AGE HAVE ON SOCIAL SECURITY’S LONG-TERM SOLVENCY? Given that more retirees are beginning to collect Social Security benefits earlier in their retirement and that overall life expectancy continues to increase, many policymakers have called for a modification to the program, wherein the full retirement age is gradually raised and ultimately pegged to average life expectancy.

According to an analysis from the Committee for a Responsible Federal Budget (CRFB), gradually increasing the full retirement age by two months per year until it reaches 69 and then indexing it for changes in overall life expectancy would save $90 billion over 10 years, but much more in future decades; CRFB estimates that the change would close over half of the structural mismatch between Social Security’s revenues and spending in the long run.

The above two paragraphs indicate ignorance of the difference between Monetary Sovereignty and monetary non-sovereignty. If Social Security were private insurance (i.e., monetarily non-sovereign), pegging benefits to life expectancy would be appropriate, even necessary. However, there are zero reasons for the federal government to do this. There is no fiscal reason why the federal government should try to extract $90 billion from the private sector. If one wishes to grow the U.S. economy, it is the worst possible course of action. This is what happens when the federal government “closes the mismatch between revenues and spending“(i.e., runs a surplus). Federal surpluses extract dollars from the economy, causing depression or 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.

Even without surpluses, just reducing federal deficits leads to recessions:

**Reduced federal deficits (red line) lead to recessions (vertical gray bars). Recessions are cured by increased federal deficits.**

Economic growth requires the federal government to spend more dollars into the economy than it extracts via taxes and fees (i.e., run deficits). Without federal deficits, we have depressions and recessions.

**As federal deficits (spending and taxes) increase, the Gross Domestic Product increases—and that includes real (inflation-adjusted) Gross Domestic Product.**

Those who argue against federal deficit spending may admit it grows the economy but sometimes claim it causes inflation. However, as the above graph indicates, the economy grows, even when adjusted for inflation. All evidence indicates that inflation is caused not by federal spending but by scarcities of critical goods and services. Inflation usually is cured by federal spending to obtain and distribute the scarcities that caused the inflation. Federal taxes reduce non-federal spending (mostly private sector spending). Thus, no matter how one calculates it, increasing FICA and/or decreasing Social Security benefits will reduce economic growth. And it’s all unnecessary; the federal government has infinite money. It cannot become insolvent. Not understanding the differences between a Monetarily Sovereign government and the monetarily non-sovereign state/local governments, businesses and individuals is the single most significant cause of economic misery and self-defeating government spending decisions. In summary, if the White House, Congress, the Supreme Court, and hundreds of other federal agencies and departments are financially sustainable, so is Social Security and Medicare. There is no need for benefit cuts. There is no need for FICA tax increases. There is no need for FICA at all. The federal government can provide all its agencies and departments with every dollar they need at the touch of a computer key. Why Don’t They? Question: If the government can fund all its agencies and departments without taxes, why doesn’t it just do it? Answer: The very rich, who run the government, want you to believe the government can’t afford to give you benefits. “Rich” is a comparative term. A person having $1,000 would be rich if everyone else had only $100. But that person would be poor if everyone else had $10,000. You can grow richer if the income/wealth/power Gap below you widens and the Gap above you narrows. So, one major goal of the rich is to narrow the Gap below them, which requires limiting the benefits you receive from the government. To keep you from screaming about that, the rich bribe your sources of information — the media, the politicians, and the university economists — to convince you of the Big Lie that federal spending is funded by federal taxes. It’s a Big Lie because the federal government, being Monetarily Sovereign, creates all the money it uses. The only true purposes of federal taxes are to:

Control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward and
Assure demand for the U.S. dollar by requiring taxes to be paid in dollars.

That’s it. Federal taxes don’t fund anything. In fact, your precious tax dollars are destroyed the moment they are received by the U.S. Treasury. You pay with dollars that are part of the M2 money-supply measure. When your dollars reach the Treasury, they cease to be part of any money-supply measure and are effectively destroyed. Because the government has the infinite ability to create dollars, there is no point in trying to measure the government’s supply of dollars. Suppose you are made to believe the federal government is like monetarily non-sovereign state governments, relying on taxes. In that case, you won’t complain when your Social Security, Medicare, poverty aids, college tuition aids, etc. are cut for lack of money. The less you receive from the government, the richer are the rich. The rich still receive their federal benefits in the form of tax breaks. There never is a complaint about benefits for the rich being “unsustainable,” “unaffordable,” etc. Those terms are reserved for your benefits. When you read articles telling you the Social Security age requirement must be raised, benefits must be decreased, or the FICA tax must increase, know this: It’s all part of the Big Lie fostered by the rich to make themselves richer. 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

Debt fear monger speaks takes opposite sides of the same issue

In the previous post (“They feed you garbage to improve your health), we addressed some of the usual false claims about the so-called “federal debt.” We showed why “federal debt”:

Isn’t “federal,” and it isn’t “debt.” (It’s non-federal deposits.)
Isn’t “unsustainable.” (It’s infinitely sustainable.)
Isn’t a burden on the federal government or on taxpayers. (Neither are liable.)
Doesn’t indicate financial irresponsibility. (It’s financially necessary for economic health.)
Doesn’t put financial markets or federal credit ratings at risk. (There is zero market risk involved in “federal debt.”)
Doesn’t indicate the federal government is borrowing or spending beyond its “means.” (The federal government never borrows and has infinite “means.”
Doesn’t slow economic growth. (The lack of federal spending slows growth.)
Doesn’t cause inflation, recession, or depression (the lack of federal deficit spending causes those events. Federal deficit spending cures them.)
Doesn’t cause high interest rates.

Also, we showed that high interest rates:

Are not a burden on the government.
Are a burden on the public because they add to inflationary pricing, but.
Add to GDP growth.

Finally, we showed that the Debt/Gross Domestic Product ratio:

Doesn’t indicate a Monetarily Sovereign government’s solvency.
Doesn’t consider the differences between a Monetarily Sovereign government vs. a monetarily non-sovereign government.

The much-feared Debt/GDP ratio shows a repeated pattern: It declines because debt fear mongers (like J.D. Tuccille) complain about it until it reaches a low point. Then, we have a recession, which is cured by an increase in the ratio, after which the fear-mongers again begin their complaints.

If you are unfamiliar with the above facts, you may wish to read the previous post and rid yourself of the nonsense that J.D. Tuccille spouts in the opening paragraphs of the following article.

J.D. Tuccille - Contributing Editor, | J.D. Tuccille — **J.D. Tuccille**

First, his rehash of the old, familiar, wrongheaded, fact-free stuff:

With Rising Debt, the U.S. Federal Government Is in Bad Company. Governments worldwide have been on a borrowing spree, and prosperity has suffered. J.D. TUCCILLE | 4.3.2024 7:00 AM

Misery loves company, as they say. But does financial irresponsibility also enjoy spending a little quality time with friends? If so, it’s quite a party.

While the U.S. government is famously running up debt to stratospheric levels, governments worldwide have been spending beyond their means and borrowing to make ends meet.

The likely result: financial markets put at risk by over-extended governments and slow economic growth for pretty much everybody.

“Public debt as a fraction of gross domestic product has increased significantly in recent decades, across advanced, emerging, and middle-income economies,” write Tobias Adrian, Vitor Gaspar, and Pierre-Olivier Gourinchas for the International Monetary Fund (IMF).

“It is expected to reach 120 percent and 80 percent of output respectively by 2028.”

Public debt—money borrowed by governments—has steadily risen, they add, because years of very low interest rates “reduced the pressure for fiscal consolidation and allowed public deficits and public debt to drift upwards.” Then, COVID-19 disrupted the global economy, and governments responded by funding “large emergency support packages” on credit.

Now, with interest rates rising, the cost of servicing debt is going up, too. But governments continue to borrow as if nothing has changed. Of course, riskier governments have to pay higher interest rates.

“On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European economies,” United Nations Secretary-General António Guterres cautioned last summer with the release of A World of Debt: A Growing Burden to Global Prosperity. “A total of 52 countries – almost 40 percent of the developing world – are in serious debt trouble.”

As of 2022, that report revealed, global public debt stood at $92 trillion and rising. Interest payments displaced other expenditures in a growing number of nations, especially developing countries. High public debt crowds out financial room for everything else, including the ability of private parties to borrow to start or expand businesses that create jobs and build wealth.

Then we come to a criticism we didn’t remember to address in the previous post:

Public Debt Crowds Out Private Investment “Households who buy government debt reduce their savings in productive private investments,” Kent Smetters and Marcos Dinerstein wrote in 2021 for the Penn Wharton Budget Model. As the spending is unproductive, the economy is poorer, and total savings are lower due to capital crowding out.”

At first blush, that sounds reasonable. Putting your dollars into a T-security account seems to remove them (temporarily) from the economy.

If you had bought stock or private sector bonds, the dollars would have remained in the economy — except for three facts:

1. You still own those dollars. They are part of your wealth. You can sell them or use them as collateral for loans. Your ownership allows you to borrow more at lower rates than if you didn’t own them. This ability is economically stimulative.

2. They earn net additional dollars in interest. While stock dividends and private-sector bond interest increase your wealth, those dollars come from the private sector.

They do not earn net dollars. They are mere dollar transfers within the private sector. By contrast, federal interest comprises new dollars that add to the private sector’s money supply.

3. That so-called “reduction in savings” is offset by the federal government’s spending into the economy. The dollars you deposit into a T-bill, T-note, or T-bond were derived from the federal government’s deficit spending.

Federal total net deficit spending = Total T-security deposits.

Thus, Tuccille doesn’t realize he is taking both sides of the issue. He dislikes federal deficits, which add dollars to the economy, but criticizes deposits into T-security accounts for taking dollars from the economy.

“Government spending redirects real resources in the economy and can crowd out private capital formation,” they add. “An additional $1 trillion debt this year could decrease GDP by as much as 0.28 percent in 2050.”

How does federal spending crowd out capital formation? Does the government paying your Medical bills crowd out anything? No.

Does paying your Social Security crowd out anything? No.

Does paying private contractors to build a road, bridge, or dam crowd out anything? No.

Does even paying federal employees crowd out anything? No.

Every dollar the federal government spends is a newly created dollar that winds up in the U.S. economy or other nations’ economies. Nothing is crowded out. Capital formation is a result of federal deficit spending.

If you take that insight and apply it to a world of governments on a collective borrowing spree, you end up with a hobbled global economy where prosperity becomes increasingly elusive.

Except for a tiny reality. Prosperity has not become increasingly elusive for the Monetarily Sovereign nations and even for most of the monetarily non-sovereign nations.

The reason: U.S. deficit spending pumps new inflation-adjusted dollars into the world’s economies. We are net importers, meaning we export more dollars than we import. We help the world (and ourselves) become richer.

“Medium-term growth rates are projected to continue declining on the back of mediocre productivity growth, weaker demographics, feeble investment and continued scarring from the pandemic,” note IMF’s Adrian, Gaspar, and Gourinchas.

“Projections for growth five years ahead have fallen to the lowest level in decades.”

First, these are IMF projections, which notoriously are suspect. These folks don’t even say how or whether they include Monetary Sovereignty in their analyses.

Second, it is not reasonable to make a general statement about “medium-term growth rates” without specifying the term and the difference between Monetarily Sovereign nations and monetarily non-sovereign nations.

It is like predicting the growth rate of the world’s children, without specifying their diet and living conditions.

Heavy government borrowing also creates risk for the financial sector by putting banks at the mercy of massive debtors of uncertain creditworthiness.

“The more banks hold of their countries’ sovereign debt, the more exposed their balance sheet is to the sovereign’s fiscal fragility,” note the IMF analysts.

The article supposedly is about U.S. federal debt being too high. But Tuccille drifts off into non-sequiturs.

The U.S. government does not borrow. It creates every dollar it needs ad hoc. This is the process:

1. To pay a bill, the federal government creates instructions (checks, bank wires, currency), not dollars.

2. It sends those instructions (“Pay to the order of . . . ) to each creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.

3. At the instant the creditor’s bank does as instructed, dollars are created and added to the M2 money supply measure.

4. The bank then clears its action through the Federal Reserve, a federal agency. One branch of the federal government approves another branch’s instructions.

Thus, in a literal sense, banks create dollars. The notion that banks are “at the mercy of governments” is absolutely true because governments make all the rules by which banks must live.

And yes, banks are at the mercy of a government’s fiscal fragility.

But that begs the question, “Is the U.S. federal government fiscally fragile? The answer is a resounding “No”! (unless Congress, in a moment of MAGA insanity, insists on not paying bills.

Heavily indebted governments also reduce their ability to act as backstops in a financial crisis as they become the likeliest causes of future crises.

As they continue to borrow, they reduce the likelihood that productive private economic activity will grow them out of their financial problems.

Here, Tuccille demonstrates abject ignorance about the difference between Monetary Sovereignty and monetary non-sovereignty. The U.S. federal government is not “heavily indebted” because it could if it chose to, pay all its current and even future bills today.

It simply could send instructions to every creditor’s bank, instructing all those banks to increase the balances in the creditors’ checking accounts. Instantly, all debt, current and future, would disappear.

“Higher government debt implies more state interference in the economy and higher taxes in the future,” The Economist points out in its interactive overview of global government debt.

One would think that a publication titled “The Economist” would understand that while state/local taxes fund state/local spending, federal taxes do not fund federal spending. Even if the federal government didn’t collect a penny in taxes, it could continue spending forever.

The purpose of federal taxes is to:

Control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward, and
Assure demand for the U.S. dollar by requiring the dollar to be used for tax payments.
To make the populace wrongly believe that federal benefits are unaffordable without tax increases, thus reducing the clamor for more benefits.

Also, add the editors, rising debt “creates a recurring popularity test for individual governments,” which often goes poorly regarding fiscal responsibility because paying outstanding bills isn’t popular with voters.

Paying outstand bills isn’t unpopular. It’s collecting taxes that ostensibly are necessary; that’s the unpopular part.

Higher Debt Leads to Lost Prosperity

Well, isn’t that cheerful? It’s also extraordinarily unfortunate. After thousands of years of grindingly slow progress, recent decades saw the human race escaping poverty.

According to the World Bank, even as populations increased, the number of people living below the poverty line, adjusted for inflation, plummeted from 2.01 billion in 1990 to 689 million in 2019.

In 2016, the economist Deirdre N. McCloskey attributed improving prospects for many of the world’s people to “liberalism, in the free-market European sense.”

But that progress reversed in recent years, with poverty blipping back up (712 million people in 2022) amidst slower economic growth and after drastic government interventions during the pandemic.

A future of stumbling economies hobbled by debt-ridden governments that crowd out private investment is one in which more people are poorer than they would have been if the world had stuck with free markets and implemented a modicum of financial responsibility.

Again, Tuccille was supposedly talking about the U.S. government, except he is mixing some monetarily nonsovereign governments into his comments.

The U.S. “federal debt” has grown from $40 billion in 1940 to $30 trillion in 2024. Where is the crowding out and the poverty he is wringing his hands about? Certainly, not in the U.S., the supposed subject of his article.

I can’t say whether Tuccille is incompetent or dishonest. You decide. Either way, he is wrong, wrong, wrong.

As concerned as the U.N. is about rising public debt, its proposed “solutions” are pretty much what you would expect from that organization. A lot of verbiage about a “more inclusive” system providing “increased liquidity” and “affordable long-term financing” boils down to letting the riskiest governments have a greater say in offering themselves cheap financing. What could possibly go wrong?

The IMF analysts, on the other hand, propose “durable fiscal consolidation” while “financial conditions remain relatively accommodative and labor markets robust.”

I take that as a gentle suggestion that governments need to start paying down their debt to sustainable levels before interest rates and economic conditions deprive them of any options in the matter.

There is only one way for the U.S. government to “pay down its debt.” It has to run surpluses, i.e., to take dollars out of the economy.

That is the worst idea since investing money with Bernie Madoff. Here is what happens every time the federal government pays down its “debt.”

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.

**Recessions (vertical gray bars) are preceded by declines in federal deficits and cured by increases in federal deficits.**

It’s not just deficits, but deficit increases that are necessary for economic growth.

Would someone please tell Mr. Tuccille that taking money out of the economy causes recessions if we are lucky and depressions if we aren’t. Remind him that GDP = Federal Spending + Non-federal Spending + Net Exports.

Gentle suggestion or not, governments need to get their fiscal affairs in order before they take us all down with them.

Heavily indebted governments result in burdened economies, leading to a poorer world for everybody.

With its irresponsible borrow-and-spend ways, the U.S. government is, unfortunately, not alone. Most, if not all, world governments are hanging out in very bad company.

Wrong in every regard. Not just wrong but diametrically wrong, pitifully wrong, harmfully wrong.

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

Share this:

Share this:

Share this:

Share this: