–Letter sent to National Public Radio re: “The U.S. is broke”

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Yesterday (11/9/10), I sent the following letter to the people at National Public Radio. I’ll let you know in the unlikely event they respond. Even this self-styled, independent, “open-minded” medium, funded primarily by private donation, simply cannot bring itself to consider the possibility that the federal debt is not too high, and in fact, is necessary for economic growth. If NPR can’t handle the facts, what hope is there the for-profit media, which solely are interested in ad dollars fueled by popular wisdom, will understand?

You pride yourself on balance, but there is one area in which you are completely out of balance. Day after day I hear your interviewers talking to people who claim the U.S. is “broke,” and the federal debt is “unsustainable” and needs to be reduced. Entire radio programs are devoted to debating about which spending initiative should be cut. Interviewees tell us whether payments to doctors should be reduced. Or Social Security cut. Or can we afford health care?

Day after day your programs tell listeners the government can’t afford this and can’t afford that. Today, on one of your programs, I heard someone say the federal budget for Public Radio should be eliminated — a delicious irony, since you helped bring this on yourself by never presenting the other side of the story.

In 1971, the end of the gold standard, the federal government became monetarily sovereign. This changed everything in economics. Suddenly, the federal government had the unlimited ability to create money and to service any size debt. It is 100% impossible for any monetarily sovereign nation to be “broke.” There is nothing the government cannot afford.

Additionally, in a monetarily sovereign nation, federal spending is not constrained by taxes or borrowing. If taxes and borrowing both fell to $0, this would not change by even one penny, the federal government’s ability to spend any amount on any initiative.

The only thing that constrains federal spending is inflation, and as you can see, we are nowhere near inflation; in fact, deflation is the current worry. Meanwhile, millions of Americans suffer for lack of federal spending on health care, Medicare, Social Security, roads, bridges, poverty, affordable housing, education, etc. — all because of the incorrect belief the government is “broke.”

I would be glad to present the other side of the story. It’s time your audience heard a balanced presentation of this critical issue. If it’s a debate, my first question will be, “If America is broke, as you say, exactly when did it become broke? After that, my questions will become harder.

It’s time for a little balance

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Ignorance at work: $14,300,000,000,000: Debt Limit Showdown Looming

The debt hawks are to economics as the creationists are to biology. They, who do not understand monetary sovereignty, do not understand economics.

Once again, Congress and the President will go through the meaningless debt limit dance. It truly is frightening how ignorant of economics these people can be.

First, it is Congress and the President who decide how much to spend and how much to tax. So presumably, the purpose of a debt limit is Congress’s way of preventing itself from spending too much or taxing too little. In short, by enacting a debt limit, Congress tells voters:

“We are too stupid and reckless to know that when we increase spending or reduce taxes, this will add to the debt, so we need to set a limit to tie our hands. Then after we debate for months, deciding exactly what to spend and what to tax, we can go back later and in a few days revise all the well-considered decisions we made earlier. Or we can close down the government. Even after we pass spending or taxing bills, they never can be relied upon, so no one can plan for the future. That’s how we geniuses run the economy.”

Second, and even more important, a monetarily sovereign nation should not set a “debt limit,” because that nation has no limits on its ability to service any debt of any size. So, here Congress tells voters:

“We are too stupid to understand, and too lazy to learn, what monetary sovereignty means. We think we still are pre-1971, when we were under a gold standard, and a limit on debt was necessary. We do not know why we eliminated the gold standard, and we don’t care. We’ll continue to act as though it still were in effect. Don’t blame us; we’re just politicians.”

When you read and hear all the debate about the debt limit, you will experience the ultimate of Congressional and Presidential prevarication. If anyone simply tells the truth — “The debt limit not only is unnecessary, but harmful” — it indeed will be a miracle.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

–1937 Redux: How our leaders have learned nothing from history

The debt hawks are to economics as the creationists are to biology. They, who do not understand monetary sovereignty, do not understand economics.

For those of you who don’t remember the Great Depression (almost everyone, now), it began in 1929, after several years of federal surpluses ( Item 3.), but by the early-1930’s we already were on our way to recovery – something like today. Then, the government decided to reduce the federal deficit with increased taxes and reduced spending — something like today. So we had four more years of depression (something like tomorrow?)

According to Wikipedia: “The Recession of 1937–1938, sometimes called the Roosevelt Recession, was a temporary reversal of the pre-war 1933 to 1941 economic recovery from the Great Depression in the United States. Economists disagree about the causes of this downturn. Keynesian economists tend to assign blame to cuts in Federal spending and increases in taxes at the insistence of the US Treasury, while monetarists, most notably Milton Friedman tended to assign blame to the Federal Reserve’s tightening of the money supply in 1936 and 1937.”.

Hmmm. Let’s think about that. “Cuts in federal spending . . . and increases in taxes” = federal deficit reduction. “Tightening of the money supply . . .” also = federal deficit reduction. So here you had two different schools of thought, both saying essentially the same thing. The 1937 recession was caused by what we today refer to as “austerity.”

So what do our political leaders favor, now that we are creeping out of the latest recession. Yes, that same austerity. Republicans hate federal spending. They stand ready with dozens of proposals to slash the federal budget. Reportedly, they want to cut $260 billion (25%) from the federal budget. Now that should be stimulative.

Republicans also do not believe their proposed cuts in education, Medicare, unemployment compensation and many other worthy federal projects will hurt anything or anyone.

The Democrats are no smarter. They have to be dragged kicking and screaming, to retain (not even cut, just retain) the Bush era tax levels. They do not believe taxes, which remove money from the economy, slow the recovery. They want to tax the “wealthy,” because . . . well, because that is what Democrats, with their eternal class warfare strategy, do.

Then we have the media. My hometown newspaper, the Chicago Tribune repeatedly rails against the federal debt. They never explain why. They don’t provide data. They just don’t like it. The Tribune is typical of the media, which almost universally hate the debt, and almost universally don’t provide data supporting their position.

And then there is Fed Chairman Bernanke, who feels we must “act to bring down long-term fiscal deficits.” He too, has no clue about why and never gives a coherent reason.

Finally, we have the mainstream economists – all those Nobel winners – none of whom seem to understand monetary sovereignty, and all of whom call for less deficit spending.

Put them all together and things look very bad for this fragile economy. With leaders like these, who needs enemies?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

–Read how the debt-hawks threaten to destroy Medicare.

Read how the debt-hawks threaten to destroy Medicare.

Washington Post, 11/2/10:

“Physicians face painful decision on Medicare

“While most people are focused on the midterm elections Tuesday, the American Medical Association is gearing up for the lame-duck congressional session scheduled to start Nov. 15. Unless Congress intervenes, payments to doctors for treating Medicare patients will be cut by 23 percent on Dec. 1 and another 6.5 percent on Jan. 1.

“Cecil B. Wilson, an internist from Winter Park, Fla., who became AMA president in June, is pressing for a 13-month patch that would prevent the Medicare physician cuts. In April, the Congressional Budget Office said that blocking the cuts until January 2012 would cost about $15 billion. A long-term formula fix, through 2020, would cost about $276 billion, it said.

[…]
“Four hundred physicians across the country were involved in a webinar, in which we talked to them about their options. The reality is between now and the end of December physicians have to make a decision about their status related to Medicare. So we are trying to provide information to [them] so they can make a wise decision. Our concern, of course, is that if Congress in the lame-duck session does not address this problem, or they address it in ways that are disruptive to physicians’ practices, more physicians are going to say, “You know, I’m just out of here. I cannot keep my doors open and provide care for other patients.”
[…]

“This is not about the AMA; this is about senior citizens who need care. I can just tell you from my own [experience in] Winter Park, Fla., the conversation in the grocery store lines [or] at the shopping mart is, “Do you know any physician who is still taking new Medicare patients?” And the answer is no.”

Why are payments to doctors liable to be cut? Because of the absolutely false belief the federal debt is too high, and must be paid by future taxpayers. This just one more example, out of hundreds, of the inexcusable damage debt-hawk ignorance causes us. And they call this “fiscal prudence.”

Hello, all you supporters of federal debt reduction. Thanks for nothing.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

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