Despite (or perhaps because of) our many sources of information, we Americans are ill-informed, often unable to separate truth from obvious fiction, and we make terrible decisions that negatively affect our lives.
Millions of us:
Refuse vaccination, despite the clear facts that refusal costs lives — the lives of the unvaccinated and the lives of those who contact the unvaccinated.
Believe the most recent Presidential election was stolen, despite massive evidence and at least 62 lawsuitsbefore Republican and Democratic judges showing that it was not.
Think the federal debt is “unsustainable,” the same claim being made 84 years ago when the debt was $40 Billion, and every year after that, with the debt now $30 Trillion.
Not understanding the difference between federal finance and personal finance, think a nation that created its sovereign currency from thin air, repeatedly created more of that currency and often changed the value of that currency somehow can run short of the currency it created unless taxes are increased.
Margaret SullivanWith democracy in the balance, the press must relay the crucial importance of this election and the dangers of a Trump win.
Thu 9 Nov 2023 06.11 EST
Whatever doubts you may have about public-opinion polls, one recent example should not be dismissed.
Yes, that poll – the one from Siena College and the New York Times that sent chills down many a spine. It showed Donald Trump winning the presidential election by significant margins over Joe Biden in several swing states, the places most likely to decide the presidential election next year.
The poll, of course, is only one snapshot and it has been criticized, but it still tells a cautionary tale – especially when paired with the certainty that Trump, if elected, will quickly move toward making the United States an authoritarian regime.
Add in Biden’s low approval ratings, despite his accomplishments, and you come to an unavoidable conclusion: the news media needs to do its job better.
The press must get across to American citizens the crucial importance of this election and the dangers of a Trump win. They don’t need to surrender their journalistic independence to do so or be “in the tank” for Biden or anyone else.
It’s now clearer than ever that Trump, if elected, will use the federal government to go after his political rivals and critics, even deploying the military toward that end. His allies are hatching plans to invoke the Insurrection Act on day one.
The US then “would resemble a banana republic”, a University of Virginia law professor told the Washington Post when it revealed these schemes. Almost as troubling, two New York Times stories outlined Trump’s autocratic plans to put loyal lawyers in key posts and limit the independence of federal agencies.
The press generally is not doing an adequate job of communicating those realities.
Instead, journalists have emphasized Joe Biden’s age and Trump’s “freewheeling” style. They blame the public’s attitudes on “polarization”, as if they themselves have no role. And, of course, they make the election about the horse race – rather than what would happen a few lengths after the finish line.
Here’s what must be hammered home: Trump cannot be re-elected if you want the United States to be a place where elections decide outcomes, where voting rights matter, and where politicians don’t baselessly prosecute their adversaries.
When Americans do understand how politics affects their lives, they vote accordingly. We have seen that play out with respect to abortion rights in Ohio, Virginia, Wisconsin and beyond. On that issue, voters clearly get that well-established rights have been ripped away, and they have reacted with force.
“Women don’t want to die for Mike Johnson’s religious beliefs,” as Vanity Fair’s Molly Jong-Fast said on MSNBC, referring to the theocratic House speaker.
Abortion rights is a visceral issue. It’s personal and immediate.
Trump’s threats to democracy? That’s a harder story to tell. Harder than “Joe Biden is old”. Harder than: “Gosh, America is so polarized.”
Journalists need to figure out a way to communicate it – clearly and memorably.
It was great to see the digging that went into that Washington Post story about Trump and his allies plotting a post-election power grab. But it was all too telling to see this wording in its subhead: “Critics have called the ideas under consideration dangerous and unconstitutional.”
So others think it’s fine, right? That suggests that both sides have a valid point of view on whether democracy matters.
Deploying the military to crush protests is radical. So is putting your cronies and yes men in charge of justice. These moves would sound a death knell for American democracy.They are not just another illustration of Trump’s “brash” personality.
We need a lot more stories like the ones the Post and the Times did – not just in these elite, paywalled outlets but on the nightly news, on cable TV, in local newspapers and on radio broadcasts. We need a lot less pussyfooting in the wording.
Every news organization should be reporting on this with far more vigor – and repetition – than they do about Biden being 80 years old.
It’s the media’s responsibility to grab American voters by the lapels, not just to nod to the topic politely from time to time.
Polls can be wrong, and it’s foolish to overstate their importance, especially a year away from the election, but if more citizens truly understood the stakes, there would be no real contest between these candidates.
The Guardian’s David Smith laid out the contrast: “Since Biden took office the US economy has added a record 14m jobs while his list of legislative accomplishments has earned comparisons with those of Franklin Roosevelt and Lyndon Johnson … Trump, meanwhile, is facing 91 criminal indictments in Atlanta, Miami, New York and Washington DC, some of which relate to an attempt to overthrow the US government.”
So what can the press do differently? Here are a few suggestions.
Report more – much more – about what Trump would do, post-election. Ask voters directly whether they are comfortable with those plans, and report on that. Display these stories prominently, and then do it again soon.
Use direct language, not couched in scaredy-cat false equivalence, about the dangers of a second Trump presidency.
Pin down Republicans about whether they support Trump’s lies and autocratic plans,as ABC News’s George Stephanopoulos did in grilling the House majority leader Steve Scalise about whether the 2020 election was stolen. He pushed relentlessly, finally saying: “I just want an answer to the question, yes or no?” When Scalise kept sidestepping, Stephanopoulos soon cut off the interview.
Those ideas are just a start. Newsroom leaders should be getting their staffs together to brainstorm how to do it. Right now.
With the election less than a year away, there’s no time to waste in getting the truth across.
Most Americans vote with their guts, not with their brains. They have neither the time nor the inclination to learn the facts, and instead grope blindly for a feeling. That is how the dictators of the world get elected.
They pose as strong saviors who will protect the nation from dangers, real or imagined. But once in office, they create new threats far worse than any that may have troubled the voting public.
Once the public allows the dictators to get a foot in the door, dictators, having rid the nation of those who tell the truth, are impossible to dislodge without massive bloodshed and destruction. This lesson has been given throughout history but seldom is learned.
For 200+ years, America was a remarkable exception.
But now, we are on the brink of making the same mistake so many nations, small and large, made and now endure. We are on the verge of allowing a dictator to rule us.
“It couldn’t happen here” has been replaced by, “It’s about to happen here.”
If you value an America ruled by law and not by a tyrant, please send Ms. Sullivan’s article to as many people as you can.
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.
Have you ever had a health care claim denied by your insurer? Ever tried to appeal it? Did you wind up confused, frustrated, exhausted, defeated?
I’ve been a healthcare reporter for more than 40 years. And when I tried to figure out how to appeal insurance denials, I wound up the same way. And I didn’t even try to file an actual appeal.
ProPublica came to me earlier this year with what might have seemed like a simple proposition. They wanted me to create an interactive appeals guide to help readers navigate their insurers’ maze. (ProPublica and The Capitol Forum reporters have been investigating how insurers deny health care payments.)
Over the next several weeks, I spoke with more than 50 insurance experts, patients, lawyers, physicians, and consumer advocates.
Nearly everyone said the same thing: Great idea. But almost impossible to do.
The insurance industry and its regulators have made it so complicated to file an appeal that only a tiny percentage of patients ever do.
For example, less than two-tenths of 1% of patients in Obamacare plans bothered to appeal claims denied in 2021.
The central problem: There are many kinds of insurance in the U.S., and they have different processes for appealing a denial.
And no lawmakers or regulators in state and federal governments have forced all insurers to follow one simple standard.
So that’s problem #1. Too many different kinds of healthcare insurance plans are available.
Why? The profit motive and government ignorance.
Private insurers are focused on two issues: Offering an attractive insurance product to the public and making that product as profitable as possible.
With the profit motive in mind, private companies offer different plans for young and old, male and female, various health degrees, job types, geography, and many other factors.
First, people have to know precisely what kind of insurance they have. You may think that UnitedHealthcare is your insurer because that’s the name on your insurance card, but that card doesn’t tell you what kind of plan you have.
Your real insurer may be your employer. Some 65% of workers who get their coverage through their employers are in what’s known as “self-funded plans,” according to KFF (formerly Kaiser Family Foundation).
That means the employer pays for medical costs, though it may hire an insurance company like UnitedHealthcare to administer claims.
Because no employer has the unlimited funds that the federal government has, the cost of employer-funded medical insurance must come from somewhere within the company. It comes from employee salaries.
If your employer provides healthcare insurance, the cost is figured into the salary he is willing to pay you. Thus, your salary could be higher if the federal government paid the insurance bill.
The other primary type of insurance companies provide for their workers is a “fully insured plan.”
The employer hires an insurer to take all the risk and pay the claims. With that kind of plan, the name on your card really is your insurer. Why does this difference matter?
Because the route you follow to challenge an insurance denial can differ based on whether it’s a fully insured plan or a self-funded one.
A government-funded Medicare for All would not need to consider these differences. You would have one source for all information and appeals — and probably less reason to appeal in the first place.
And we can’t forget about Medicaid and the Children’s Health Insurance Programs, which cover over a quarter of the U.S. population.
The federal government sets minimum standards that each state Medicaid program has to follow. Still, states can make things more complicated by requiring different appeal pathways for different types of health care.
So, the process can differ depending on the type of care that was denied, which can vary from state to state.
Having infinite money and no profit motive, a government-sponsored Medicare for All plan could provide total, no-deductible coverage for every situation.
President Obama’s health care law moved to standardize Medicaid requirements, expressly so any American making up to 133% of the poverty line could qualify.
But that provision was challenged and overturned by the Supreme Court. States could expand Medicaid, but they no longer had to.
Thirty-nine states (plus Washington, D.C.) did; 11 have not.
And eligibility across states varies since the Trump administration announced it would allow states to impose work requirements for low-income and needy Americans receiving Medicaid.
In other words, figuring out whether you qualify for Medicaid is even more challenging than before. Enter our state-by-state guide to Medicaid, which we’ll update as changes go into effect.
A comprehensive, no-deductible Medicare for every man, woman, and child in America would solve all the above problems.
To stop Medicare Advantage (MA) and Part D plan marketing agents from steering beneficiaries into plans that pay the agents the highest commissions — rather than the plans that best suit the patients’ needs — the Centers for Medicare & Medicaid Services (CMS) proposed a rule Monday that would limit the amount they’d receive on sales to $632 for the 2025 plan year.
Currently, agents can receive far more than the current national commission cap of $601, even as high as $1,300 on one sale for 1 year’s enrollment, because of “add-on” or “incentive fees,” according to a recent Senate committee hearing testimony. CMS called the practice “anti-competitive steering” since larger plans are usually paying the most, putting smaller, potentially better plans at a disadvantage.
The agency said it has seen web-based ads that offer agents and brokers “bonuses and perks (such as golf parties, trips, and extra cash) in exchange for enrollments.”
The payments are implemented in a way that allows the plan sponsor “to credibly account for these anti-competitive payments as ‘administrative’ rather than ‘compensation,’ and these payments are therefore not limited by the regulatory limits on compensation.”
Another provision in the proposed rule would require MA plans to demonstrate in their bids to Medicare that unique supplemental benefits for the chronically ill have a reasonable expectation of improving the health or overall function of enrollees with chronic illness.
Provisions would also require federal quality improvement organizations — instead of representatives of the MA plans — to review a fast-track appeal when the plan has decided to terminate services in a skilled nursing facility, comprehensive outpatient rehabilitation facility, or a home health agency.
Such fast-track review is now available to traditional Medicare beneficiaries in fee-for-service but not to those in MA plans.
The whole rationale for Medicare Advantage Plans is based on two problems with Medicare:
Medicare pays only 80% for most things, requiring people to purchase “Medicare Supplement” insurance to cover the balance.
Medicare doesn’t cover everything. Strangely, it omits dental, weight loss, long-term care, hearing aids, most vision care, hearing aids, cosmetic surgery, some foot care, adult diapers, and deductibles.
Why are these not covered? It’s the same old debt lie — the false belief that somehow the Monetarily Sovereign federal government can run short of its own sovereign currency, the U.S. dollar — so the public (which has limited funds) should pay.
The mere existence of the alternative to the original Medicare, Medicare Advantage, demonstrates the needless lies that form the basis for federal spending, or lack thereof.
SUMMARY
Healthcare is one of the government’s most essential functions, yet the U.S. government falls far short in its meager efforts.
Original Medicare has many shortcomings, all of which are based on the false beliefs that our Monetarily Sovereign federal government has limited funds and is supported by tax dollars.
Every shortcoming of Medicare could be solved by a comprehensive, no-deductible, federally funded Medicare for every man, woman, and child in America.
And no:
The U.S. federal government is not like state/local governments, not like euro governments, not like businesses, and not like you and me.
It uniquely is Monetarily Sovereign. It cannot, unwillingly, run short of its own sovereign currency, the U.S. dollar. As real experts have said:
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.”
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.”
Quote from 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.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
Press Conference: Mario Draghi, President of the Monetarily Sovereign ECB, 9 January 2014 Question: I am wondering: can the ECB ever run out of money? Mario Draghi: Technically, no. We cannot run out of money.
Periodically, we publish yet another shrieking claim that the U.S. federal debt is “unsustainable” and a “ticking time bomb.” This lie has been told to you every year (really, almost every day) since 1940, and that bomb never has exploded, nor ever will.
Rather than repeat the entire list of the thousands of lies to which you have been subject, I will list samples here as a reference, and add periodically, at the end, new “federal debt is a ticking time bomb” lies as I encounter them:
September 26, 1940, New York Times: The federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
By 1960: the debt was “threatening the country’s fiscal future,”said Secretary of Commerce, Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”
In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)
Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”
In 1987: Richmond Times-Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT’ TIME BOMB'”
Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”
In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS“
In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.“
Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”
In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB“
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”
In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.“
In 2010: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years.
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”
In 2011: Washington Post, Lori Montgomery:”. . . defuse the biggest budgetary time bombs that are set to explode.”
June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, By Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending. The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.”
On June 15, 2014: CBN News: “The United States of Debt: A Ticking Time Bomb“
On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.”
February 16, 2018 America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.
April 10, 2019,The National Debt: America’s Ticking Time Bomb. TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency, a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out.
SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN SPECIAL TO THE SUN SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse.
JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness. there’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes.
February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb! The national debt: A ticking time bomb?America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030
August 29, 2020, LOS ANGELES, California: America’s mountain of debt is a ticking time bomb The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the U.S. Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy?
April 16, 2021, NATIONAL POLICY: ECONOMY AND TAXES / MARK ALEXANDER / The National Debt Clock: A Ticking Time Bomb: At the moment, our national debt exceeds $28 TRILLION — about 80% held as public debt and the rest as intragovernmental debt. That is $225,000 per taxpayer. Federal annual spending this year is almost $8 trillion, and more than half of that is deficit spending — piling on the national debt.
June 17, 2022Time Bomb On National Debt Is Counting Down Faster Thanks To Fed’s Rate Hike, Tim Brown /We are now staring down the barrel of the end of the U.S. economy based on fiat money, printed out of thin air but charged back to the people at ridiculous interest rates. Now, the national debt is approaching $31 trillion,which is $12 trillion more than when Donald Trump took office in 2017 and more than half of that debt was tacked on in his final year. Then we’ve had the disastrous year and a half of Joe Biden. Now, the Fed is now hiking its rates and that spells even more trouble for the national debt and the economy at large.
December 4, 2022 America’s ticking time bomb: $66 trillion in debt that could crash the economy By Stephen Moore, The national debt is $31 trillion when including Social Security’s and Medicare’s unfunded liabilities. Wake up, America. That ticking sound you’re hearing is the American debt time bomb that with each passing day is getting precariously close to detonatingand crashing the US economy.
January 13, 2023.A ticking time bomb in the U.S. economy is running perilously close to detonation. Long considered a harbinger of bad luck, Friday, Jan. 13 came with a warning for Congress that the country could default on its debt as soon as June. With the U.S. reaching its debt limit of $31.4 trillion on Jan. 19, Treasury Secretary Janet Yellen urged lawmakers to increase or suspend the debt ceiling.
April 22, 2023The Debt Ceiling Debate Is About More Than Debt, Jim Tankersley, WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit,and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt. “Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.
November 3, 2023 The Fuse on America’s Debt Bomb Just Got Shorter,J Antoni Heritage Organization. The Treasury is now on track to borrow almost as much in just six months as it did in the previous 12 months. That’s nearly a doubling of the deficit. Because the federal debt is $33.7 trillion, just a 1 percent increase in yields adds $337 billion to the annual cost of servicing the debt over time. Absent spending reform, eventually no one will be willing to hold the bomb anymore, and the yields on U.S. debt will begin to resemble those in Argentina.
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If, year after year , you keep predicting something is imminent, yet it never happens, at what point do you reexamine your beliefs? Apparently never, for the debt heads. Truly pitiful.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps
J.D. Tuccille, the Libertarians, and surprisingly, the highly respected University of Pennsylvania’s Penn Wharton School may have set a world record for utter nonsense and wrongheaded scaremongering.
Moving on from the “ticking debt time bomb” that never explodes, we have arrived at “20 Years to Disaster.”
Don’t you love predictions of 20 years? They are so safe. You can’t be proved wrong. Twenty 20 years from now, the world will have changed many times, and anyway, no one will remember what you said.
Aside from the idiocy of making a 20-year economic prediction, the entire premise of the article is wrong.
20 Years to Disaster“The United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt.”J.D. TUCCILLE | 11.6.2023 7:00 AM
For decades, budgetary experts have warned that the U.S. federal government is backing itself—and the country—into a corner with expenditures that consistently exceed revenues, driving the national debt ever higher.
What Tuccille, the Libertarians, and the Wharton School seem not to understand is that federal deficits are absolutely necessary for economic growth.
You have seen this graph many times:
GRAPH IFederal “Deficits” (red) and Gross Domestic Product (blue) rise in parallel.
And this graph:
GRAPH II.Before every recession (vertical gray bars), federal deficits (blue) decline. Then, to cure the recession, the government increases federal deficit spending.
The latest red flag is raised by the University of Pennsylvania’s Penn WhartonBudget Model (PWBM), which says that the federal government has no more than 20 years to mend its ways. After this time, it will be too late to remedy the situation.
Every time the federal government “controls” (i.e. cuts) spending, we have recessions if we are lucky and depressions if we are not as fortunate:
U.S. depressions 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.
Having learned nothing from history, Tucille, the Libertarians, and Wharton continue the same old ignorance about federal deficit spending: They equate personal finances with our Monetarily Sovereign government’s finances, not recognizing the massive differences between the two.
While monetarily, non-sovereign entities like you and me need to run balanced budgets over the long term, or we’ll face bankruptcy, the federal government must never run a balanced budget and never will face bankruptcy.
20 Years to Control Spending
“Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaultingon its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation)” Jagadeesh Gokhale and Kent Smetters, authors of the October 6 Penn Wharton Budget Model brief, write in summarizing their findings.
“Unlike technical defaults where payments are merely delayed, this default would be much larger and reverberate across the U.S. and world economies.”
To say that the above is 100% bullshit would be to insult bullshit. Here’s why:
The federal government, being Monetarily Sovereign, has the infinite ability to create its sovereign currency, the U.S. dollar. It has infinite dollars with which to pay its bills. It never needs to default.
Despite concerns about “debt monetization” (aka “money printing’) causing inflation, this never has happened to any nation in world history. All inflations have been caused by shortages of crucial goods and services, most often oil and food.
Many years of massive U.S. federal deficits didn’t cause today’s inflation. Only when COVID causedshortages of oil, food, computer parts, shipping, metals, lumber, labor, etc., did inflation arise. Now, the government’s massive spending to prevent and cure recession continues while inflation ebbs. The massive federal spending has helped cure the shortages and thus cure the inflation.
The reason for worrying about accumulating deficits and the resulting growing debt, the authors explain, is that “government debt reduces economic activityby crowding out private capital formation and by requiring future tax increasesor spending cutsto accommodate future interest payments.”
1. The historical fact that increasing government deficit spending increases economic activity(See Graph I, above) seems lost on the Wharton authors.
Mathematically, GDP = Federal Spending + Nonfederal Spending + Net Exports
2. There is no historical example of “crowding out of capital formation.” In fact, the federal money added to the economy increases the funds availableto the private sector for capital formation.
3. Future tax increases are not necessary because federal taxes do not fund federal spending:
A. All federal tax dollars are destroyed upon receipt by the U.S. Treasury. The tax dollars come from the M2 money supply measure, but when they reach the Treasury, they become part of no money supply measure. The reason: The Treasury’s money supply, being infinite, cannot be measured.
B. Even if the federal government collected zero tax dollars, it could continue spending forever. It has the infinite ability to create spending dollars.
C. The purposes of federal taxes are not to fund federal spending but rather:
a. To control the economy by taxing what the government wishes to discourage and giving tax breaks to what the government wishes to reward.
b. To assure demand for and acceptance of the U.S. dollar by requiring taxes to be paid in dollars.
c. To fool the public(and presumably Wharton economists) into believing federal benefits require federal taxes. (This last purpose is promulgated by the rich to discourage the populace from demanding benefits that would narrow the Gap between the rich and the rest.)
If debt gets too big, lenders can’t be paid back, credibility is shot, the dollar loses value, and the economy tanks.
This is the oft-claimed “ticking time bomb” that never seems to explode. There never has been and never will be a time when the federal debt “gets too big” to be paid.
Again, the Wharton economists demonstrate they don’t understand the differences between a Monetarily Sovereign government and a monetarily non-sovereign government.
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.”
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.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.
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
“It would be an unfettered economic catastrophe,” economists Joseph Brusuelas and Tuan Nguyen predicted earlier this year of such a scenario. “Our model indicates that unemployment would surge above 12% in the first six months, the economy would contract by more than 10%, triggering a deep and lasting recession, and inflation would soar toward 11% over the next year.”
Strange how history says exactly the opposite. Following many years of massive federal spending, unemployment was at historical lows. The reason: Federal spending stimulated GDP growth, which required more labor.
So long as investors believe federal officials will eventually balance their books, you have a grace period as debt grows—that is until the debt burden is so enormous that it crushes economic activity.
History shows that balancing the federal books creates recessions and depressions.
The so-called “debt burden” is not debt, and it’s not a burden. It’s deposits into Treasury security bills, notes, and bond accounts which are owned by the depositors.
It’s not debt because the government never touches the dollars in those accounts. The government creates dollars at will. It has no need to borrow dollars, and indeed, the U.S. federal government never borrows dollars.
To “pay off” the debt (that isn’t debt), the government merely returns the dollars in the accounts to their owners. This is no burden at all.
The purpose of T-securities is not to provide spending money to the government but rather to give the world with a safe, interest-paying place to store unused dollars. This makes the dollar an attractive international medium of exchange.
“Even with the most favorable of assumptions for the United States, PWBM estimates that a maximum debt-GDP ratio of 200 percent can be sustained,” the authors add. “This 200 percent value is computed as an outer bound using various favorable assumptions: a more plausible value is closer to 175 percent, and, even then, it assumes that financial markets believe that the government will eventually implement an efficient closure rule.” (That’s a mix of tax and spending changes to curtail deficits and debt.)
As we have demonstrated numerous times, the Debt/GDP ratio is meaningless. It tells nothing about the current or future health of an economy. It predicts nothing; it evaluates nothing. It is 100% meaningless.
That is why economists who don’t understand the fundamentals of Monetary Sovereignty love to quote it.
The 20-year countdown assumes that investors remain optimistic about the willingness and ability of U.S. officials to bring spending in-line with tax revenues. “Once financial markets believe otherwise, financial markets can unravel at smaller debt-GDP ratios,” according to the PWBM analysis.
We suspect financial markets understand history better than the economists at Wharton. We suspect they know that when the federal government spends more, stock prices rise.
As federal deficit spending has increased, the value of corporate stock has risen.
As PWBM points out, “Financial markets demand a higher interest rate to purchase government debt as the supply of that debt increases… Forward-looking financial markets should demand an even higher return if they see debt increasing well into the future. Those higher borrowing rates, in turn, make debt grow even faster.”
That’s already happening.
Increasing Costs and a Looming Deadline“To finance trillions of dollars in spending beyond what incoming revenue can support, the US Treasury is now issuing more debt in the form of Treasury securities than global financial markets can readily absorb,” Yahoo! Finance’s Rick Newman wrote on October 30.
“That forces the borrower—the US government—to pay higher interest rates, which in turn pushes up borrowing costs for consumers and businesses in much of the Western world.”
Again, the Wharton experts misunderstand Monetary Sovereignty and the realities of federal financing.
The federal government does not finance spending by borrowing (“issuing debt.”) It finances spending by creating dollars, ad hoc.
It can allow as much or as little in T-security deposits as it wishes. If the public fails to invest as much as the Federal Reserve wishes (to stabilize the dollar), the Fed merely uses its infinite money creation ability to fill the gap.
Federal spending never is constrained by the public’s desire to own T-securities.
As for interest rates, the Fed sets them not to attract depositors but to control inflation. If the Fed smells inflation, it raises rates. If the inflation scare passes, the Fed lowers rates. This has nothing to do with any need for deposits into T-security accounts.
(Sadly, raising interest rates, far from moderating inflation, exacerbates it by raising prices. The only thing that moderates inflation is federal spending to ease shortages of critical goods and services.)
Just when the U.S. federal government hits that magic unsustainable debt-to-GDP ratio of between 175 and 200 percent depends on investor confidence and how much the markets charge to finance more borrowing. PWBM estimates it will happen between 2040 and 2045—if we’re lucky.
The notion of a “magic, unsustainable debt-to-GDP ratio” is utter nonsense. Japan already has exceeded that meaningless ratio.
The U.S. Treasury concedes that “since 2001, the federal government’s budget has run a deficit each year. Starting in 2016, increases in spending on Social Security, health care, and interest on federal debt have outpaced the growth of federal revenue.”
The 2001 Clinton surplus caused the 2001 recession. See Graph I.
Options for Fixing the MessIn September, PWBM explored three policy options to render fiscal policy less disastrous: increasing taxes on high incomes, reforms to Social Security and Medicare that reduce payouts and increase taxes, and a mix of tax increases and spending cuts.
Increasing taxes on high incomes would help narrow the Gap between the rich and the rest, which would be a good thing. It would do nothing to improve the federal government’s already infinite ability to pay its creditors.
“Reforms” to Social Security and Medicare (i.e. cuts to benefits paid to those who need them most, while increasing taxes on those who can afford them least) also would do nothing to improve the federal government’s bill-paying ability.
The “mix of tax increases and spending cuts” would take spending dollars from the private sector and cause a recession or depression. Remember this equation: GDP = Federal + Nonfederal Spending + Net Exports.
Spending cuts and tax increases would decrease Federal + Nonfederal Spending, which would reduce GDP, i.e. cause a recession or depression. Simple mathematics.
The authors predict entitlement reforms and a mix of tax increases and spending cuts would both stabilize the debt-to-GDP ratio, with entitlement reform allowing the greatest economic growth.
Hmmm. Giving the economy fewer Social Security and Medicare dollars and taking dollars from the economy by increasing taxes would “allow the greatest economic growth”???? Also, pouring water out of a bucket fills it??
The St. Louis Federal Reserve Bank has tax revenues hitting 19 percent of GDP last year—the highest share in two decades. The IRS may scream about a “tax gap” between what is owed and what it collects, and lawmakers may supercharge the tax agency with funds, but fixing the federal government’s spendthrift ways by squeezing taxpayers won’t just be unpopular—it’s a scheme that defies historical trends.
Spending cuts and entitlement reforms will also elicit resistance. But at least they’re within reach of lawmakers who could spend no more than they collect—or even to run surpluses to pay down debt.
Twenty years to fix the federal budget should be plenty of time. But brace yourself. The record so far suggests it won’t be enough.
The above is so staggeringly ignorant one scarcely can believe it was written by humans. Indeed, it must have been written by an Artificial Intelligence gone rogue. Cuts to federal spending and tax increases do the same: They take dollars out of the economy and cause recessions and depressions.
The Libertarian (aka anarchist) comments are not surprising. Anti-government ignorance is expected from them.
But, if this is the best to come out of Wharton, heaven help its students.
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 