How the Big Lie in economics seriously impacts your life, today and will again, tomorrow.

The Big Lie in economics is: Federal taxes fund federal spending.
The Big Lie sometimes is stated, “Our children and grandchildren will have to pay for today’s federal deficits and debt.”

The Big Lie is told, and believed, for one simple reason: Most people do not understand the differences between federal government (Monetarily Sovereign) finances and all other (monetarily non-sovereign) finances.

You, your business, your state, county, and city all are monetarily non-sovereign.

When you want to spend, you need a source of money, which for local governments mostly is taxes and borrowing.

By contrast, the federal government is Monetarily Sovereign.

When it wants to spend, it neither needs nor uses any source of money.

It creates new money by paying creditors, exactly the opposite of what you personally are accustomed to.

Although the federal government collects tax dollars, it no longer needs to.

That change occurred in August, 1971, when President Richard Nixon, in the greatest act of his Presidency, took us off a gold standard.

The purpose of that change was to remove limits on the federal government’s ability to create money. Since that date, the federal government has not used tax dollars to pay for anything.

Contrary to popular wisdom, federal taxpayers are not “on the hook” for federal deficits (which in fact are private sector surpluses) or for federal debt (which is nothing more than deposits in accounts at the Federal Reserve Bank).

You or your grandchildren do not owe the federal deficit or debt, and you never will pay for them. Period.

The sole purpose of tax dollars has been to regulate the economy, by taxing what the government wants to limit and by giving tax breaks to what the government wants to encourage. The federal government could eliminate all federal tax collections, and still continue spending, forever.

That said, please read the following excerpts from an article that appeared in the March 18, 2021 edition of the Chicago Tribune:

We don’t need Biden’s infrastructure binge
Steve Chapman, a member of the Tribune Editorial Board

Donald Trump did many bad things as president, but he deserves a smidgen of credit for what he didn’t do: go on an infrastructure spending binge.

He vowed that under him, our roads, bridges and waterways would be “the envy of the world.” He said that in 2016 and was still saying it in 2020. But his main achievement was to make “infrastructure week” a source of hilarity.

Now President Joe Biden is hoping to do what Trump didn’t do, and he has support from such divergent groups as the AFL-CIO and the U.S. Chamber of Commerce.

During his campaign, he made gaudy promises to “transform” our transportation networks, “revolutionize” railroads and urban transit, and upgrade water systems, broadband, bike lanes, home weatherization and just about anything else you could think of. Biden could make the Pledge of Allegiance an infrastructure issue.

His price tag for all this? Two trillion dollars. His plan to pay for it? Unspecified.

The two trillion dollars would be created by the federal government, then distributed as growth dollars to the private sector.

Biden would pay for it exactly the same way the federal government pays for everything: It creates dollars, ad hoc.

Specifically, to pay any bill:

The federal government creates instructions from thin air, then sends those instructions (in the form of a check or wire transfer) to the creditor’s bank, instructing the bank to increase the creditor’s checking account balance by a specified amount (“Pay to the order of _______“)

When the bank clicks a computer key to increase the numbers in the creditor’s checking account, this instantly creates brand new dollars that are added to the nation’s money supply, in a segment known as “M1.”

The bank then balances its books by clearing the instructions through the Federal Reserve, which always approves federal instructions.

By formula, increases to the nation’s money supply increase economic growth (Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports). Federal government spending increases the nation’s money supply. State and local government spending does not.

No tax dollars are involved at any point in this transaction. The whole process is paid for by newly created dollars.

The White House has indicated a preference for tax increases on the wealthy and corporations. When asked recently how she and her fellow Republicans would react to that idea, Sen. Susan Collins reportedly “burst out laughing.”

Sadly, Biden and his minions disseminate the Big Lie that federal taxes fund federal spending.

Why? The real purpose of the Big Lie is to convince you, the public, that the federal government’s ability to provide benefits to you is limited. This is to keep you from asking for free Medicare for All, free College for All, support for local governments to cut local taxes — indeed for any benefit to the not-rich.

The very rich, who run America, are motivated by “Gap Psychology, the desire to get richer by distancing oneself from those who have less wealth. The rich pay politicians (via political contributions and promises of jobs afterward), university economists (via lucrative jobs and contributions to universities), and the media (via ownership and advertising dollars) to disseminate the Big Lie.

We are told that our highways and bridges are falling apart from lack of investment and that upgrading them will not only create jobs but boost our economic productivity.

But the Reason Foundation, which issues a detailed report each year on the nation’s highways, found that the percentage of urban interstates rated in poor condition was lower in 2018 than a decade earlier.

Likewise with rural interstates. For other major rural highways, just 1.23% were in bad shape in 2018.

The foundation’s most recent report found that “the general quality and safety of the nation’s highways has incrementally improved as spending on state-owned roads increased by 9%, up to $151.8 billion” compared with the previous year.

The Reason Foundation is a libertarian organization that opposes virtually all government spending. Their research results tend to be slanted in that  direction.

Nevertheless, even the possibility that our roads and highways may be in less bad condition, does not indicate the federal government should not improve them. Americans live longer today than they did years ago. So should the government not have paid for the CORONA virus vaccine?

And what about those jobs infrastructure work creates?

Bridges? Notes Brown University economist Matthew A. Turner in The Milken Institute Review, “There were more bridges in good condition and fewer crumbling bridges in 2017 than in 1992.” Mass transit? The average age of public transit buses has declined during that period. 

As always with the Big Lie, one simple point is missed. When the states fix roads and bridges, state taxpayers must take dollars from their pockets to pay for these repairs.

When the federal government pays, it puts new dollars into the private sector.

Then we come to the faux moral excuse for the Big Lie:

Even if the United States needs more investment in particular areas, that doesn’t mean the federal government should pick up the tab. The great majority of infrastructure assets are owned by state and local governments, and it’s their constituents who would gain the most from resurfacing roads or bolstering bridges.

If they are going to reap the economic benefits of such investments, shouldn’t they be willing to pay for them?

Yes, shame on you for wanting the federal government, which has infinite money, to pay, when you, who have limited money should want to pay, that is, if you are a good person. Right?

The purpose of that kind of reasoning is to pit one part of the public against the other with a “Why should I pay for his roads?” kind of reasoning.

In fact, they seem to be unwilling. The Center on Budget and Policy Priorities reports, “State and local infrastructure spending as a share of gross domestic product is at its lowest point since the early 1980s.”

Apparently, the author believes state and local taxes are too low. After all, the only place the state governments can find the money for infrastructure repair is via taxes, so when states are “unwilling,” it merely means their taxes are too low.

But the fact that these governments don’t want to use their own money doesn’t mean they won’t be happy to use cash that falls out of the sky.

That’s the political beauty of federal infrastructure packages: The benefits are obvious to people getting new projects, but the costs are invisible.

The author doesn’t realize it, but his “falls out of the sky” intended pejorative, actually comes close to the truth. The federal government, creates dollars from nothing, as it always has — just as it created the very first dollars, when America began.

Where does the author think the first dollars came from? In the late 1770s, there existed zero dollars. Ten years later, there were millions. Where did they come from if not from “out of the sky,” i.e. created from thin air by laws (which also are created from thin air) passed by the federal government?

The timing of this push is also awkward, because the COVID-19 catastrophe creates so much uncertainty about how we will live, work and travel going forward.

“I’m not sure that at this time we want to be pouring concrete or buying equipment until we see how much of this shakes out for a year or two,” University of Chicago economist Allen Sanderson told me.

“Shakes out”? Does Sanderson believe roads will not need to be fixed? Does he believe public transportation will become obsolete? And how long is this “shake-out” period? Will we know something more next year, so don’t fix roads for a year?

Or will we have to wait a decade to learn what our long-term needs will be?

Of course, the University of Chicago economists are notorious for not understanding the differences between Monetary Sovereignty and monetary non-sovereignty, so Sanderson’s remarks, though totally wrong, are not unexpected.

Under Trump, “infrastructure week” went nowhere, time after time. But it could be that one thing worse than an infrastructure push that fails is an infrastructure push that succeeds?

No, Mr. Chapman, the one thing worse than an infrastructure push that fails is a columnist who, knowing nothing about Monetary Sovereignty, always tells his readers, “Now is not the time to spend.”

But if not now, when? Ever?

Steve Chapman blogs at http://www.chicagotribune.com/chapman.
schapman@chicagotribune.com, Twitter: @SteveChapman13

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.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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 To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

Social Security and Medicare Funds Face Insolvency, Report Finds

It’s old news, fake news, and a lie — a “Big Lie.” But it demonstrates why the public is so confused and misinformed about federal financing.

Image result for national enquirer fox newsThis following came from the venerable and venerated New York Times, but the article is as accurate as an article in Breitbart, Fox News, or the National Enquirer.

Social Security and Medicare Funds Face Insolvency, Report Finds By Alan Rappeport, economic policy reporter, who covers the Treasury Department and writes about taxes, trade and fiscal matters, April 22, 2019

WASHINGTON — The financial outlook for Medicare and Social Security, two of the nation’s most important social safety net programs, remains precarious, threatening to diminish retirement payments and increase health care costs for Americans in old age, the Trump administration said on Monday.

An annual government report on the status of the programs painted a dire portrait of their solvency that will saddle the United States with more debt at a time when the economy is starting to cool and taxes have just been cut.

Let’s get this straight. The NY Times incredibly is being as honest as Breitbart, Fox News,  and the National Enquirer.

But, the U.S. federal government cannot become insolvent. That is 100% impossible.

Who says so? How about:

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

Image result for greenspan
Greenspan

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.”
St. Louis Federal Reserve: “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.

Since the U.S. federal government cannot become insolvent, no agency of the federal government can become insolvent, unless the federal government wishes it.

Social Security and Medicare are agencies of the federal government. Therefore, neither Social Security nor Medicare can become insolvent unless the federal government wishes it.

And as far as “saddling the United States with more debt,” the scare-mongers have been shoveling this manure for at least 80 years (See: “It is 2019, and the phony federal debt “time bomb” still is ticking.“)

Neither the United States nor U.S. taxpayers are “saddled” with even one cent of federal “debt.” The misnamed “debt” is nothing more than the total of deposits into Treasury security accounts. These accounts are paid off, not with federal tax dollars, but rather by simply returning the contents of those accounts to the account holders. No “saddle” there.

The NY Times editors surely know this. So why do they scare-monger a lie? Why did they publish the “Big Lie”? There is a reason, which we will discuss.

According to the report, the cost of Social Security, the federal retirement program, will exceed its income in 2020 for the first time since 1982. The program’s reserve fund is projected to be depleted in 16 years, at which time recipients will get smaller payments than they are scheduled to receive if Congress does not act.

Meanwhile, Medicare’s hospital insurance fund is expected to be depleted in 2026 — the same date that was projected a year ago. At that point, doctors, hospitals and nursing homes would not receive their full compensation from the program and patients could face more of the financial burden.

The so-called “reserve fund” is an accounting fiction. It is not a fund and it is not held in reserve. It merely is a record showing the difference between FICA and spending. It’s just a piece of information about the difference in two numbers; it does not reveal anything about the government’s ability to pay for things.

The U.S. government is Monetarily Sovereign, and so has the unlimited ability to create its own sovereign currency, the U.S. dollar. Even if all FICA collections totaled $0, the federal government could pay infinite Social Security benefits, forever.

An infinite account cannot be “depleted.”

The article continues:

“Lawmakers should address these financial challenges as soon as possible,” the trustees of the program wrote.

“Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”

There are no trustees because there is no trust. It is just an accounting record, that has none of the qualities of a trust. (See: Fake federal trust funds and fake concerns)

The above makes the naive and false assumption that federal (Monetarily Sovereign) financing is the same as personal (monetarily non-sovereign) financing.

For the federal government, there are no “financial challenges” that need “solutions.” And while the author of the article claims benefits will need to be cut or taxes increased, the public should not be prompted to “prepare” for those unnecessary changes.

It is all the “Big Lie.

Some Republicans sought to take credit on Monday for the fact that the news was not worse while also calling for changes to the programs.

“Following historic reforms to America’s tax code, this strong economy has strengthened these important programs, but today’s reports remind us of a fact we have known for far too long: Medicare is going broke and Social Security is not solvent,” Representative Kevin Brady, Republican of Texas, said in a statement.

Either Rep. Brady either is incredibly ignorant about economics, or he is an incredible liar. Pick one. There are no other alternatives.

The United States will not become insolvent, and for the same reasons, neither Medicare nor Social Security will go broke, unless a bribed Congress forces that to happen. 

Lawmakers have been struggling to come to grips with a solution for the country’s eroding entitlement programs, which have for years been at the center of a political tug of war between Republicans and Democrats.

No. Lawmakers have been struggling to find more ways to continue fooling the public. It’s been a struggle because arguing against plain facts always is difficult.

Mr. Trump was initially resistant to calling for cuts to the programs, but his budget proposal last month did just that. The request, which is being ignored by Congress, proposed shaving $818 billion from projected spending on Medicare over 10 years.

Completely unnecessary.

It also called for $26 billion less on Social Security programs, including a $10 billion cut to Social Security Disability Insurance, which provides benefits to disabled workers.

Well, of course, Mr. Trump wanted to cut Social Security and Medicare, two programs that benefit the middle classes and the poor. Isn’t that what the GOP always wants to do?

And of course, the GOP Congress passed tax cuts that mostly benefitted the rich. Isn’t that also what the GOP always wants to do?

The problem is not that the GOP, the party of the rich, wants unnecessarily to gut programs that benefit the non-rich. The problem is that the Democrats, supposedly the party of the middle- and lower-income groups, go along with the fiction of federal insolvency. 

“That fact that we now can’t guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget.

“Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs.”

She added that “now isn’t the time for partisan bickering — we need solutions.”

Just as Wayne LaPierre, of the National Rifle Association (NRA) is a mouthpiece for gun manufacturers, Maya MacGuineas, of the Committee for a Responsible Federal Budget (CRFB) is a mouthpiece for the very rich.

The rich in America, and all over the world, for that matter, never are satisfied. They want to become richer and richer. To become richer, you must widen the income/wealth/power Gap between you and those below you on any economic scale.

It isn’t sufficient that your income increases if the incomes of those below you increase even more. Without the Gap, no one would be rich; we all would be the same.

It is the Gap that makes you rich, and the wider the Gap, the richer you are.

This is known a “Gap Psychology,” the desire to distance yourself from those below and to approach those above.

So the rich bribe your three main economic information sources — the media,  the politicians, and the economics professors — to tell you the Big Lie, that federal spending is funded by federal taxes rather than by money creation.

–The rich bribe the media via advertising dollars and media ownership.
–The rich bribe the politicians via political contributions and promises of lucrative employment after they leave office.
–The rich bribe the economics professors via contributions to universities and with jobs at think “tanks.”

The public accepts the Big Lie because it equates to personal experience, where personal spending is funded by personal income.

One day, perhaps within your lifetime, the general public will learn that federal taxes do not fund federal spending, that the federal government and its agencies cannot become insolvent, and that social programs can and should be funded for the benefit of all America.

It will have to begin with a moral billionaire, a moral politician, or a moral economist who has both the money and the influence to promulgate the truth, and to have it accepted.

Waiting.

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

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The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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 To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

How you can change the world with just two words

All creation involves destruction.

This fundamental truth requires no great insight. Visualize anything that has been created — a painting, a building, a song, a poem, an idea, a theory — and you will see that what preceded it was wholly, or partly, destroyed in its making.Related image

The blank canvas, the random pile of bricks, the notes and the spaces between those notes, the meanings of words, the false beliefs, the earlier truths — all are destroyed by creation.

War is destruction and is one of the most creative of all human endeavors. No fields of the creative arts and sciences are unrelated to war.

This is not to claim that destruction, in of itself, is creative or beneficial. Rather, that beneficial creativity requires some measure of destruction.

With this as background, I suggest that the world can be changed, massively and irretrievably, by the two-word destruction: End FICA.

FICA, otherwise known as the Federal Insurance Contributions Act, supposedly funds Social Security and Medicare. Even its title, which includes the words “insurance contributions” is a lie.

Image result for high rise constructionFICA is a federal tax. Like all federal taxes, it funds nothing. (See: Does the U.S. Treasury really destroy your tax dollars?FICA has nothing to do with insurance or with contributions to insurance.

You wrongly have been told that Medicare, for instance, is funded through trust funds. But these so-called “trust funds” are not anything like private trust funds.

These “trust funds” are fictional accounts that are debited and credited arbitrarily by the federal government. The Supplementary Medical Insurance (SMI) Trust Fund, which “pays for” Medicare Parts B and D, receives whatever funds Congress authorizes. 

There are no limits on what Congress can authorize. This “trust fund” can run short of dollars only if Congress wants it to run short. This financing has nothing to do with tax collections. It all is strictly arbitrary.

You never had been told that fact.

The elimination of FICA would immediately accomplish one great thing. It would reduce the needless, harmful destruction of private sector dollars, that currently are sent to the U.S. Treasury, where they are destroyed.

Yes, every one of your federal tax dollars that you send to the U.S. Treasury is destroyed upon receipt. It is not saved somewhere for future use. It is destroyed.

By definition, large economies have more money than do small economies. Thus, a growing economy requires a growing supply of dollars. Taking dollars from the U.S. economy restricts economic growth, and even can lead to recessions an depressions.

U.S. depressions tend to come on the heels of federal surpluses, which remove dollars from the economy .

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

Unlike you and me, and unlike businesses, and state and local governments, the U.S. federal government uniquely is Monetarily Sovereign. (See: Monetary Sovereignty, the key to understanding economics.)Image result for planets colliding

As such, the federal government does not save tax dollars in order to pay bills. Instead, the federal government creates brand new dollars, ad hoc, every time it pays a creditor. (See: Have you ever played Monopoly?)

In this regard, no one can answer the question, “How much money does the federal government own?” Retaining the unlimited ability to create dollars at will, the federal government can be said to “own” infinite dollars — or no dollars at all.

Those FICA tax dollars, that are destroyed by the U.S. Treasury, were taken from the salaried class, the very people upon whom economic growth most urgently relies.

More importantly, FICA is resoundingly regressive. It is a tax that widens the income/wealth/power Gap between the rich and the rest. (See: Gap Psychology.)

All of the above-referenced benefits of FICA elimination pale in comparison to the real benefit. The destruction of FICA would open the way toward the understanding of one great economic truth: Monetary Sovereignty — the unlimited power that a money creator has over its own sovereign currency.

The very existence of FICA lends credence to “The Big Lie,” the false belief that federal taxes fund federal spending.

The Big Lie itself encompasses several sub-lies, such as:

  1. Federal debt is an unsustainable burden on the federal government and on federal taxpayers.
  2. Federal finances are similar to state and local government finances and similar to personal finances.
  3. Social Security, Medicare, and many other federal agencies are in danger of becoming insolvent.
  4. Federal wasteful spending is a burden on federal taxpayers.
  5. Federal deficit spending leads to inflations and hyperinflations.
  6. Federal social spending (incorrectly termed “socialism”) is unaffordable and unsustainable.
  7. Cuts to federal deficit spending (aka “austerity) are financially prudent.

In science, one fact begets another. Many decades after Relativity and Quantum Mechanics first were proposed, discoveries still are being made based on these two great theories. They have shown light on many dark corners of physics.

So too, does Monetary Sovereignty shine a light on the dark corners of economics.

The elimination of FICA would require the open discussion of Monetary Sovereignty, because the immediate question would emerge,  “Who will pay for it?”

Answering that question requires understanding the realities of federal economics, i.e. the realities of Monetary Sovereignty.

Every knowledgable and honest economist understands two truths:

  • The U.S. federal government created an arbitrary number of the original U.S. dollars from thin air and gave them an arbitrary value.
  • The U.S. federal government continues to create U.S. dollars from thin air and retains the power to give them an arbitrary value.

Thus, it functionally is impossible for the federal government to run short of its own sovereign currency, a power it has demonstrated for the entire 240 years of its existence.

And because the federal government cannot run short of dollars, no agency of the federal government can run short of U.S. dollars unless that is what Congress and the President want.

Social Security, Medicare, Medicaid, poverty aids, roads, bridges, education, et al — all federal agencies — cannot become insolvent unless that is what Congress and the President decide, FICA or other tax collections notwithstanding.

The question, “Who will pay for it?” answers itself.  Eliminating FICA will force the federal government to admit that the federal government will pay for goods and services the same way it always has — by creating dollars, ad hoc.

Eliminating FICA will force a rational conversation about Monetary Sovereignty, from which the public finally learns that federal taxes pay for nothing.

(This is unlike state and local governments, which are monetarily non-sovereign, and in which taxes do pay for state and local government spending.)

Further, the U.S. federal government has the unlimited power to give its sovereign currency, the U.S. dollar, any value it chooses.

It is a power the federal government has demonstrated many times with respect to silver and gold, and other currencies, most recently in 1971, when the government arbitrarily decided the value of the dollar would float freely on world currency markets.

The federal government retains the power to change that decision, and so, can control and prevent inflation, at will.

Question: What is a U.S. dollar worth? Answer: Whatever the U.S. government says it is worth. The government is sovereign over the dollar.

No doubt, you have been told that federal deficit spending will lead to a Zimbabwe-like hyper-inflation. Yet, no hyper-inflations have been caused by money “printing.”

Inflations are general increases in prices. They always are caused by shortages of goods and services (usually food), with government currency printing being an ignorant government reaction.

Even cursory logic demonstrates the facts. If the price of milk rises, what is the cause? Government money printing? No, the cause is a shortage of milk. That is true of all price increases, including general price increases.

Prices increase when there is insufficient product or services to meet demand. Inflation = shortages.

The cure for inflations, including hyperinflations, always is the same: Increase the availability of whatever products are in short supply, most often, food.

The elimination of FICA will force illuminating discussions of these basic facts.

Finally, you might ask,

“If Monetary Sovereignty is so straightforward, logical and factual, why would the politicians, the media and the economics professors not want you, the public, to know the truth?”

The fundamental reason has to do with Gap Psychology, the human desire to widen the income/wealth/power Gap below, and to narrow it above.

Image result for bernanke and greenspan
It’s our little secret. Don’t tell the people we don’t use their tax dollars.

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

Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “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.

The very rich, who run America and the world, want to become richer. That is the heart of Gap Psychology.

“Rich” is not an absolute; it is a comparative. So there are two ways for the rich to become richer: Either acquire more for themselves or allow you to have less.

The best way to allow you to have less is to prevent the government from giving you more. The rich do not want you to understand that you can have free medical care, free education, free housing and food, free clothing, and all the other things the rich can afford but you can’t.

The rich want to widen the Gaps between themselves and you. So they bribe the sources of information to tell you these things cannot be given to you.

They bribe the politicians via campaign contributions and promises of lucrative employment, later.

They bribe the media via ownership and advertising dollars.

They bribe the university economics professors via university contributions and jobs at think tanks.

Thus all the misinformation you receive regarding Social Security “insolvency,” and federal debt “unsustainability” and the need for FICA and other federal taxes, etc. originates with the bribes from the rich.

They spend billions to convince you that federal deficits are a danger to you and your children, and the good things in life are unaffordable to the government, and there is no such thing as a free lunch, etc., etc. etc.

It’s called “brainwashing.”

And it works. You undoubtedly have been brainwashed.

Do you know a college professor, or a politician, or a media writer? Ask him or her, “Why exactly is FICA necessary?” If the answer is, “To pay for Social Security,” you will know for certain that he or she has been brainwashed or has been bribed.

Then ask, “Is federal financing the same as state and local government financing?”  and listen for the double-talk.

The federal government, being Monetarily Sovereign, has the unlimited ability to create U.S. dollars, so does not use tax dollars to pay for anything.

This is different from state and local governments, which are monetarily non-sovereign, and which do use tax dollars to pay creditors.

The rich have it all. There is no reason why you too cannot have it all. The rich don’t want that, but you can have it if you don’t fall for the brainwashing.

Think. It’s in your power to change the world.

Begin by demanding the end of FICA. Destroy this harmful tax and along with it, the Big Lies about limits to federal financing.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

Duck! The sky is falling and the “debt” is rising!

Here we go again: The same old story — the same old lie — we have documented since 1940. Nothing has changed and nothing has been learned.

National debt tops $22 trillion for the first time as experts warn of ripple effects by Michael Collins, USA TODAY Feb. 12, 2019

WASHINGTON – The national debt surpassed $22 trillion for the first time on Tuesday, a milestone that experts warned is further proof the country is on an unsustainable financial path that could jeopardize the economic security of every American.

Yes, way, way back in 1940, 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. Image result for time bomb

Every year since then, the self-proclaimed experts have told you the federal debt either is a “ticking time bomb,” “unsustainable,” “a threat to the economic security of every American,” or some other bit of scare nonsense.

In 1940, the so-called “debt” (It actually is “deposits,” but why be accurate when you want to fool the public?) was only $40 Billion. Today, it is about $17 Trillion, a gigantic 45,000% increase.

(The $22 Trillion figure includes internal debt, money one department of the government owes another department of the government — left pocket owes the right pocket. The debt scare-mongers use the larger number so as to scare you more.)

Despite that massive debt increase in the past 80 years, where is the “threat to economic security?” Why has that “ticking time bomb” not exploded? Eighty years is a long time to keep ticking and nothing happens.

The Treasury Department reported the debt hit $22.012 trillion, a jump of more than $30 billion in just this month.

The national debt has been rising at a faster rate following the passage of President Donald Trump’s $1.5 trillion tax-cut package a little more than a year ago and as the result of congressional efforts to increase spending on domestic and military programs.

The nation has added more than $1 trillion in debt in the last 11 months alone.

“Reaching this unfortunate milestone so rapidly is the latest sign that our fiscal situation is not only unsustainable but accelerating,” said Michael A. Peterson, chief executive officer of the Peter G. Peterson Foundation, a nonpartisan organization working to address the country’s long-term fiscal challenges.

Here is all you need to know about the Peter G. Peterson Foundation, an organization devoted to spreading the “Big Lie,” that the federal government’s finances are like state and local government finances, and the debt is “a ticking time bomb,” etc., etc., etc.

These folks never seem to be embarrassed about being wrong, wrong, and wrong yet again, year after year. They just keep on making those wrong predictions as though reality means nothing.

The “unfortunate milestone” is the kind of milestone banks boast about: An increase in total deposits.

For Americans, the growing debt should be a concern, experts said, because over time it can push up interest rates for consumers and businesses.

The higher rates can ripple through the economy, nudging up rates for mortgages, corporate bonds and other types of consumer and business loans.

The above two paragraphs are so far out of touch with reality, they are laughable.

First, if the growing debt could “push up interest rates,” why hasn’t the 45,000% increase in debt already pushed up interest rates, which today remain quite low?

Second, the Fed controls interest rates by fiat. When the Fed wants low rates, it mandates low rates. When it wants high rates, it mandates high rates.

If it wants to issue T-securities at a certain rate, and the public doesn’t buy them, the Fed simply can buy the T-securities, itself.

Being Monetarily Sovereign, i.e. sovereign over the dollar, the government can do anything it wishes with the dollar.

Third, higher interest rates actually grow the economy by increasing the number of interest dollars the government pumps into the economy.

The most common measure of the economy is Gross Domestic Product. GDP = Federal Spending + Non-federal Spending + Net Exports. Notice the words “Spending”? They include interest.

Fourth, private interest does not inhibit an economy; it merely circulates dollars. The borrower pays interest to the lender. It’s a cost to one, and income for the other. The total of dollars stays essentially the same.

Then, we come to the biggest lie of all:

A big national debt can also make it harder for the government to increase spending to combat the next recession or devote more money to retraining workers and helping the poor, among other programs.

Here, Peterson confuses federal finances with monetarily non-sovereign state and local finances.

The number of dollars deposited into T-security accounts has no effect on the government’s ability to spend. The government doesn’t touch the dollars in T-security accounts.

When the federal government spends, it sends instructions (not dollars) to a supplier’s bank, instructing the bank to increase the balance in the creditor’s checking account.

When the creditor’s bank does as instructed, brand new dollars are created and added to the money supply measure, M1.

Peterson attributed the growing national debt to “a structural mismatch between spending and revenues.”

The biggest drivers are the aging population, high healthcare costs, and growing interest payments, combined with a tax code that fails to generate sufficient revenue, he said.

“Structural mismatch” is Peterson-speak meaning more dollars are spend than are received in taxes.

But this has no effect on the federal government’s ability to spend. Because the federal government creates brand new dollars, every time it pays a bill, it could continue spending forever, even if total tax collections were $0.

In fact, tax dollars are destroyed immediately upon receipt by the U.S. Treasury.

The debt eclipsing $22 trillion “is another sad reminder of the inexcusable tab our nation’s leaders continue to run up and will leave for the next generation,” said Judd Gregg and Edward Rendell, co-chairmen of the nonpartisan Campaign to Fix the Debt, a project of the nonpartisan Committee for a Responsible Federal Budget.

Let us dispense with the “next generation” nonsense. The “next generation” didn’t pay for the $40 Billion debt of 1940. The “next generation” didn’t pay for the $3 Trillion debt of 1992. And today’s generation is not paying for any past debt.Image result for the end is near

Taxpayers do not fund federal debt. The deposits themselves are returned upon maturity, and the interest on those deposits is paid by new dollars created by the federal government.

No tax dollars involved. They are destroyed.

Also, let us dispense with this “nonpartisan” nonsence. These guys are rabidly partisan. The root for the rich and against the poor.

They want taxes on the rich cut, and benefits for the poor cut. How much more partisan can you get.

With deficits rising and gross debt scheduled to jump by more than $1 trillion annually, Congress must take action to put the country on a more sustainable path, Gregg and Rendell said.

“The fiscal recklessness over the past years has been shocking, with few willing to step up with a real plan,” they said. “We need responsible leadership to fix the debt, not a worsening of partisanship.”

And that is exactly what the debt fear-mongers have been saying for the past 80 years.

Pretending federal finances are like state and local government finances, or like personal finances, is designed to fool the public.

Because few people understand the basics of economics, the plot seems to have worked.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. Eliminate FICA

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY