Are you planning to vote for the end of Medicare and Social Security? These people are.

The Libertarians (also known as the Republican Party) want to cancel Medicare and Social Security under the guise of fiscal prudence and courage.

The right wing has created a fake “debt crisis” and then invented a non-solution that requires exactly what they deny they want: The end of Medicare and Social Security. (See: Congressional Republicans Want Big Cuts to Social Security)

Although Congress is accustomed to misleading statements and outright lies, nowhere are the lies piled deeper than the discussions of Medicare’s and Social Security’s impending “insolvency.”

Let’s get something straight. The US government, being Monetarily Sovereign, cannot become insolvent. It has the infinite ability to create U.S. dollars.

This means no agency of the U.S. government can become insolvent unless Congress and the President vote for insolvency.

Look at this list of federal departments and agencies that cannot run short of money unless Congress and the President vote for insolvency.

The list runs alphabetically from the U.S. AbilityOne Commission to the Woodrow Wilson International Center for Scholars.

There are 15 executive departments in the United States federal government, each of which is headed by a Cabinet member appointed by the President. The following is a list of the 15 executive departments:

Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Department of Veterans Affairs

In addition to these departments, there are over 430 federal agencies in the United States, including 9 executive offices, 259 executive department sub-agencies and bureaus, 66 independent agencies, 42 boards, commissions, and committees, and 11 quasi-official agencies.

Not one of the departments, agencies, executive offices, sub-agencies, bureaus, boards, commissions, committees, and quasi-official agencies can or will run short of dollars unless that is what Congress and the President want.

Who says so? How about:

Former Federal Reserve Chairman Alan Greenspan said: “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.

Not many people realize that while state/local taxes pay for state/local spending, federal taxes pay for nothing.

Rather than funding federal spending, the sole purposes of federal taxes are:

To control the economy by taxing what the federal government wishes to discourage and by giving tax breaks to what the federal government wishes to reward,
To assure demand for the U.S. dollar by requiring dollars to be used in paying taxes and
To fool the public into believing some benefits are unsustainable unless taxes are raised, which reduces benefits.

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.”

Anyone who claims a federal “debt crisis” is ignorant about, or lying about, federal finances. There is no federal debt crisis.

The Libertarians and their alter egos, the Republicans, are doing their best to provide you with false information. Here is a Libertarian article that could have been written by the Republicans:

Congress Is Trying To Avoid Taking Responsibility for the Debt Crisis It Created
A fiscal commission might be a good idea, but it’s also the ultimate expression of Congress’ irresponsibility.
ERIC BOEHM | 11.29.2023 2:30 PM

It’s inaccurate to say that no one in Congress wants to talk about the national debt and the federal government’s deteriorating fiscal condition.

How can the federal government, which as you’ve just read, has the infinite ability to create dollars, have a “deteriorating fiscal condition”? It can’t.

It’s like claiming the world’s oceans have a deteriorating liquid condition, or the universe has a deteriorating atomic condition.

The lie about “deteriorating fiscal condition” forms the basis for the rest of the lies.

Indeed, during Wednesday morning’s meeting of the House Budget Committee, there was a lot of talk about exactly that.

“Runaway deficit-spending and our unsustainable national debt threatens not only our economy, but our national security, our way of life, our leadership in the world, and everything good about America’s influence,” said Rep. Jodey Arrington (R–Texas), the committee’s chairman.

Rep. Jodey Arrington either is stupendously ignorant or stupendously lying. The phrase “unsustainable national debt” consists of three words, all three of which are lies.

“Unsustainable”: Interestingly, this word never is explained by those who use it incessantly. I suspect it means something like this: Federal finances are like personal finances. If your expenses are larger than your income, eventually, you won’t be able to pay your bills, so your debt will be “unsustainable.”The problem is that the federal government is Monetarily Sovereign while you are monetarily non-sovereign, which is totally different. You can run short of money. The federal government cannot.
“National” This has to do with Treasury Securities, which indeed are national or federal. The federal government is the sole authority to issue T-bills, T-notes, and T-bonds. However, the owner of those T-bills, T-notes, and T-bonds is not the federal government. When someone or some nation buys a T-security, their dollars go into their T-security account. Those dollars remain the property of the buyer.They never are owned by the federal government. When the T-security reaches maturity, the dollars are returned to their owner. Think of a bank safe-deposit box. The bank never owns the contents. It holds them for safekeeping and returns the contents to the owner. The government’s storage of unused dollars for safekeeping, stabilizes the dollar.
“Debt” relates to the mistaken claim that T-securities represent borrowing. But our Monetarily Sovereign government, with its infinite ability to create dollars, never borrows dollars. The only dollars the federal government ever owes are the dollars it uses to pay for things. Those dollars are paid in a timely fashion by a government that has the infinite ability to create dollars. There is no long-term buildup of federal “debt.”

He pointed to the Congressional Budget Office (CBO) projections showing that America’s debt, as a share of the size of the nation’s economy, is now as large as it was at the end of the Second World War—and that interest payments on the debt will soon cost more than the entire military budget.

The above paragraph refers to the infamous and much-misunderstood Debt/GDP ratio. It is a meaningless ratio that tells nothing and predicts nothing about a Monetarily Sovereign nation’s finances.

A high or low ratio does not indicate solvency, growth, or any other financial factor. It is entirely useless.

The so-called “Debt” (that isn’t a real debt) is the net total of all T-securities purchased and still outstanding for the past 10 years. They are not a burden on the federal government, which merely returns the dollars it holds for the owners when the security matures.

By contrast, GDP is a one-year (or less) total of America’s (not just the federal government’s) spending. The formula for GDP is:

GDP = Federal Spending + Non-federal Spending + Net Exports

Comparing federal “Debt” to GDP is worse than comparing your 10-year income to the federal government’s spending this week: It is meaningless.

The sole purpose of this comparison is to fool you into believing the federal government is running short of the dollars it has the infinite ability to create.

What’s missing, however, is any sense that Congress is willing to turn those words into action. Just look at the premise of Wednesday’s hearing: “Examining the need for a fiscal commission.”

Yes, it was a meeting about possibly forming a committee to discuss perhaps doing something to address the problem. In fact, it was the second such committee hearing in front of the House Budget Committee within the past few weeks.

It seems like there ought to be a more direct way to address this. , say, if a committee already existed within Congress was charged with handling budgetary issues. A House Budget Committee, perhaps.

But instead of using Wednesday’s meeting to seek consensus on how to solve the federal government’s budgetary problems, lawmakers debated a series of bills that aim to let Congress offload that responsibility to a special commission.

Unlike you, me, local governments, and businesses, the federal government’s only true “budgetary problem” is to decide where it wishes to spend its infinite hoard of dollars.

While you et al. must worry about the availability of dollars, the federal government has no such constraints. It creates dollars by spending dollars.

This is the process:

When the federal government buys something and receives an invoice, it sends to the seller’s bank instructions (not dollars), instructing the bank to increase the balance in the seller’s checking account.
When the bank does as instructed, new dollars are created and added to the M2 money supply measure.
The instructions then are approved by the Federal Reserve, an agency of the federal government.

In short, the federal government creates dollars by spending dollars, and this creation is approved by the Federal Reserve, an agency of the federal government.

The federal government creates the laws that approve its money-creation process. Being Monetarily Sovereign, the federal government can create any money-related laws it wishes, which is why no federal agency can run short of dollars unless the federal government wants it to run short.

Federal agencies are not supported by federal taxes; they are supported by federal money creation.

Medicare and Social Security can run short of dollars only if that is what Congress and the President want.

What that commission would look like and how its recommendations would be handled will depend on which proposal (if any of them) eventually becomes law—and even that seems somewhat unlikely, with Democrats voicing their opposition to the idea throughout Wednesday’s hearing.

To be fair, there are plenty of good arguments for why a fiscal commission might be the best way for Congress to fix the mess that it has made. It is an idea that’s certainly worthy of being considered, even if the whole exercise seems a little bit over-engineered.

All this blah, blah, blah is meant to disguise one simple fact: The rich, who run the U.S. government, want to cut benefits for the middle and lower-income groups. Here is why:

“Rich” is a comparative. A man owning a million dollars is rich if everyone else has a thousand dollars. But a man owning a million dollars is poor if everyone else has a hundred million dollars. During the Great Depression, anyone earning $20,000 a year was rich. Today, that salary would mark him as poor.
To become richer requires widening the income/wealth/power Gap below you and narrowing the Gap above you.
The rich always want to be richer, i.e., to widen the Gap below them.
Because Social Security, Medicare, Obamacare, and all aid to the poor help narrow the Gap between the rich and the rest, the rich repeatedly try to eliminate all such benefits (while giving tax loopholes to the rich).
Under the guise of fiscal responsibility, the right-wing makes unending efforts to cut the federal deficit spending that benefits those who are not rich (while continuing to run deficits that benefit the rich).

Romina Boccia, director of budget and entitlement policy at the Cato Institute, argues persuasively in her Substack that a fiscal commission is the best way to overcome the political hurdles that prevent Congress from taking meaningful action on borrowing and entitlement costs (which are driving a sizable portion of future deficits).

And there it is, the true purpose of a “fiscal commission” is to cut spending on so-called “entitlements” (i.e. Medicare and Social Security.)

All the lies about Social Security and Medicare “trust funds” running short of dollars are to make you compliant with the Republican effort to make you poorer and the rich, richer.

What you may not realize, these so called “trust funds” aren’t even trust funds.

To quote from the Peter G. Peterson Foundation web site:

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

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

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

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

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

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

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

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

Thus, the federal government can do whatever it wishes with the “trust funds.” It can add to them, subtract from them, or change them from the wrongly presumed mission of supporting federal expenditures.

At the click of a computer key or the passage of a law, the balance in the federal “trust funds” could be changed to $100 trillion or $0, and neither would affect taxpayers.

Thus, the notion that any federal “trust funds” are, as the right wing claims, “in trouble,” is a lie, unless “trouble” comes from those who don’t wish you to understand the differences between the private sector’s real trust funds vs. the federal government’s phony “trust funds.”

Boccia’s preferred solution would allow the commission’s proposals to be “self-executing unless Congress objects,” meaning that legislators would have the “political cover to vocally object to reforms that will create inevitable winners and losers, without re-election concerns undermining an outcome that’s in the best interest of the nation.”

This would be the Republican’s way of saying, “Don’t blame us for cutting your Social Security. It was the commission that did it.”

It’s probably true that Congress itself is the biggest hurdle to managing the federal government’s fiscal situation. Unfortunately, that’s also the biggest reason to be skeptical: any decisions made by a fiscal commission will only be as good as Congress’ willingness to abide by them.

President Obama, of all people, tried this with the notorious Simpson/Bowles Commission, which made exactly the recommendations expected of it. Fortunately, America learned the plot, and the commission’s recommendations never were implemented.

The commission’s recommendations included increasing the Social Security retirement age, cuts to military, benefit, and domestic spending, restricting or eliminating certain tax credits and deductions, and increasing the federal gasoline tax.

The Simpson-Bowles proposal would have cut entitlement and social safety net programs, including Social Security and Medicare, which was opposed by critics on the left, such as Democratic Representative Jan Schakowsky (a Commission member) and economist Paul Krugman.

There’s no secret knowledge about reducing deficits that will only be unlocked by bringing together a collection of legislators and private sector experts, which is what most of the bills to create a commission propose doing.

Federal deficit spending is necessary for economic growth. Deficit reduction leads to recessions, which then are cured by deficit increases.

**When federal deficits decline (red line). We have recessions (vertical gray bars), which are cured by increases in federal deficits.**

One would think that repeatedly seeing the same effect — nine consecutive recessions caused by deficit reduction, 9 successive recessions cured by deficit increases — our leaders eventually would realize that far from being a bad thing, federal deficits are necessary.

The ignorant have been claiming for more than 80 years that the federal budget is “unsustainable” and a “ticking time bomb.” Read a list of some such claims here.

In all those years, much to the consternation of the ignorant, the ticking time bomb never has exploded.

Congress should hold hearings, invite experts to share their views, draft proposals, vet those ideas through the committee process, and then put the resulting bills on the House floor for a full vote.

Shielding Congress from the electoral consequences of making poor fiscal decisions doesn’t seem to improve budget-making quality. We need Congress to be held more accountable for this mess.

No, we need our leaders to be held accountable for disseminating the lie that federal deficits are harmful. Here is what happens when we ignore the fundamental truth that federal deficits are a blessing, not a curse:

Every depression in U.S. history began with a reversal of federal deficit creation:

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.

Here is what should be done:

Step 1. Call it what it really is. Rather than talking about a federal “debt,” we should talk about the economy’s income. The misnamed “debt” is income for the economy. It’s money flowing from the infinitely wealthy federal government into the economy that needs and uses the money for growth.

Step 2. Rather than instituting a commission to cut private sector income, thus causing recessions and depressions, America should create a plan to improve the lives of our people. Use the infinite money-creation power of the federal government to:

Fund public education about the benefits of Monetary Sovereignty
Fund a comprehensive, no-deductible Medicare for every man, woman, and child in America.
for the homeless
Fund college for everyone in America who wants an advanced degree.
Fund Social Security benefits for every man, woman, and child in America.
Eliminate FICA, which funds nothing but is America’s most regressive tax.
Fund various research projects, including medical, physical, psychological, and environmental.
Fund long-term care
Fund housing
Fund childcare for working families.

And fund all the other projects that would benefit the public and narrow the Gap between the rich and the rest.

A $33 trillion national debt didn’t come crashing out of the sky like an asteroid that couldn’t be avoided.

“No responsible leader can look at the rapid deterioration of our balance sheet, the CBO projection of these unsustainable deficits, and the long-term unfunded liabilities of our nation and not feel compelled to intervene and change course,” Arrington said Wednesday.

He’s right, but that only draws a line under the contradiction. A responsible Congress would be working on a serious plan to get the deficit under control. Instead, the Budget Committee is working on proposals to avoid doing that.

The article ends with ignorance and lies. Contrary to the above statements, the facts are:

The federal government’s balance sheet is not “deteriorating.”
Deficits are necessary, not “unsustainable.”
All federal liabilities are funded by the federal government’s infinite ability to create sovereign currency.

Finally, if you vote for the right-wing here is a letter you may wish to send to your children and grandchildren:

Dear Loved Ones

I sincerely apologize for electing people who fouled your water, your earth, and your air, cut Social Security, cut Medicare, cut Obamacare, increased your taxes, lied about COVID and vaccinations, and did nothing to improve the lives of all (except the rich, who were well rewarded).

I also apologize for electing a Hitler clone who admitted he would arrest everyone disagreeing with him and give all the nation’s wealth to those who already are wealthy.

I could claim ignorance, but to be honest, I was warned about what would happen. I guess I yielded to my hatred of blacks, browns, yellows, reds, Jews, Muslims, women, the poor, immigrants, and gays.

I should have learned about Monetary Sovereignty, but I was so busy denying the danger of guns and the attempted coup I had neither the time nor the inclination to learn anything.

Perhaps you will be wiser.

I hope you will forgive me for the miserable, ignorant, hate-filled world I have left for you.

But at least the very rich are very happy.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

……………………………………………………………………..

The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

When facts don’t matter. The right wing’s refusal to understand Monetary Sovereignty

Libertarians are Republicans in disguise.

Both begin with the tacit (or not-so-tacit) assumption that government is harmful, and that people should be allowed to do what they darn well please.

The only significant difference between Libertarians and Republicans is the latter’s belief that only the rich should be allowed to do what they please, the rest of us being too lazy and too ignorant to know what is best.

Well, on reconsideration, that’s what they both believe, so perhaps there’s no difference at all.

Let us explore what the omniscient and omnipotent rich believe:

After Moody’s Warning, Federal Officials Continue to Ignore Fiscal Reality

Moody’s calculates that interest payments on the national debt will consume over a quarter of federal tax revenue by 2033, up from just 9 percent last year. ERIC BOEHM | 11.14.2023 4:15 PM

The “national debt” doesn’t “consume” anything. The so-called “debt” is two things, related by law and size, but not by function, neither of which is debt. The national debt is the:

Total of federal deficits — the difference between federal tax collections and federal spending, which by law equal the:
Net total of deposits into Treasury Security (T-bill, T-note. T-bond) accounts.

The government never touches the dollars in T-security accounts. Those dollars belong to the depositors.

Neither 1. nor 2. consumes federal tax revenue, which is destroyed upon receipt by the Treasury.

Two weeks ago, Treasury Secretary Janet Yellen caused some eyebrows to tilt when she told reporters that rising bond yields were “an important reflection of the stronger economy.”

That’s contrary to the, let’s say, traditional view of how government-issued bonds work.

A bond’s yield—that is, the return an investor expects to be paid at the end of the bond’s term—is the result of buyers pricing their risk into the purchase.

That is true of privately issued bonds, but far less so of federal bonds, which are risk-free (or close to it, depending on what Congress does regarding the useless and infantile “debt ceiling.”)

Interest rates on federal bonds evolve from the basic T-bill interest rate the Federal Reserve creates by fiat in its attempts to fight inflation.

The Fed has no need to make rates attractive because it has no financial need to accept deposits in T-security accounts. The accounts resemble bank safe deposit boxes. The government holds and protects the contents but doesn’t take ownership of them.

Being Monetarily Sovereign, the federal government can create all the dollars it wants simply by stroking computer keys.

Former Fed Chairman 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.”

Contrary to popular wisdom, the federal government does not borrow its own sovereign currency. That confuses people who should (and probably do) know better.

What are treasury bills? Definition and meaning - Market Business News — To “pay off” these bills, notes, and bonds, the federal government merely returns the dollars from accounts that are wholly owned by depositors. The government never uses those dollars; it merely stores them, meaning it did not borrow the money.

Treasury bonds have historically been some of the most reliable investments out there and, as a result, have typically carried low yields.

In other words: Because you can be very confident that the U.S. government will pay you back at the end of the term, you know that your investment is safe, but you also don’t stand to make much on the risk.

And while U.S. Treasury bonds remain very safe investments, the traditional view would say that the recent uptick in yields means investors are pricing just a bit more risk into those purchases.

It really means:

The Fed arbitrarily has raised the prime interest rate and/or
Other investments carry low enough risk and/or are profitable enough to warrant switching over and/or
A potential investor wishes to make a sale and retrieve so many dollars the private markets couldn’t handle without causing significant price movement (This can be true of government purchases).
Or, a significant depositor (like China et al.) has decided to switch investments.

For example, the yield on 10-year Treasury bonds—a key benchmark that helps determine the rates of mortgages, student loans, and more—hit a 16-year-high of 5 percent late in October, though it has fallen a bit since then.

By no coincidence, the prime rate was last reconsidered on November 1, 2023. The Federal Open Market Committee voted to keep the target range for the fed funds rate at 5.25% – 5.50%. Therefore, the United States Prime Rate remains at 8.50%.

In short: Buyers will demand higher yields to make riskier investments.

That’s why the 10-year U.S. Treasury bond yield peaked at 5 percent, while a 10-year Russian bond comes with a yield north of 12 percent. (As an aside, there’s something cool and quite libertarian about all this: Governments must answer to the market.

It costs the Russian government more to borrow funds simply because investors are less confident that Russia won’t stiff them a decade from now.)

The U.S. government does not “answer to the market” the way a private bond issuer must.

The government arbitrarily sets the prime rate at any place it pleases, usually with an eye toward inflation.

Because the federal government is Monetarily Sovereign, it doesn’t need to set interest rates for its own financial reasons. It can pay any interest rate with equal ease.

Eric Boehm, the author of the article, seems ignorant of a Monetarily Sovereign government’s bonds from a private sector bond issuer.

Sadly, you can go on government websites that will tell you the government borrows and taxes to fund spending. This is wrong and results from ignorance and/or intent to deceive. Unlike you and me, the federal government has no need for any sort of income.

Why would a government, that has the infinite ability to create dollars, borrow dollars? It wouldn’t. As for taxes, the federal purpose is not to acquire spending funds but to:

Control the economy by taxing what the government wishes to discourage and by giving tax breaks to whom the government wishes to reward
Create assured demand by requiring taxes to be paid in dollars.
At the direction of the rich, to fool the populace into accepting cuts to benefits and tax increases. both of which widen the income/wealth/power Gap between the rich and the rest. This is one way the rich become richer.

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

So, what could be causing investors to price higher risk into U.S. Treasury bonds right now? Yellen says it results from a strong economy and the sense that interest rates will remain higher for a longer-than-expected period.

But that seems to ignore the 300-pound gorilla in the room—or, rather, the $33 trillion mountain of IOUs threatening to bury the Treasury building and the U.S. economy.

Nonsense. That $33 Trillion is the most recent culmination of 84 years’ worth of deficits, beginning with a federal “debt” of $40 Billion in 1939.

Not once, in all those 84 years, has the misnamed “debt” buried the Treasury building or the U.S. economy.

On the contrary, deficits add growth dollars to the economy while the lack of deficits leads to recessions.

**Declining deficits lead to recessions (vertical gray bars), which are cured by increasing deficits.**

It seems more likely that investors are looking at the trajectory of federal budget deficits and the national debt and are now hedging their bets ever so slightly to account for the possibility of a first-ever federal default.

If there ever is a default, it will not be because the infinitely survivable federal “debt” is so large, but rather because an infinitely ignorant Congress arbitrarily has decided to enforce the infinitely stupid debt ceiling.

Moody’s, one of the world’s “big three” credit rating services, added a significant data point in favor of that conclusion on Friday when it lowered the federal government’s credit outlook from “stable” to “negative.”

As long as boobs like Marjorie Taylor Greene and Mike Johnson run the House of Representatives, I would put the risk of something stupid at nearly 100%

The change reflects Moody’s belief that “downside risks to the nation’s fiscal strength have increased ‘and may no longer be fully offset by the sovereign’s unique credit strengths,'” The Wall Street Journal reported.

Moody’s calculates that interest payments on the national debt will consume over a quarter of federal tax revenue by 2033, up from just 9 percent last year.

The “national debt” consumes nothing.

Unlike private sector (including state/local government) interest payments, federal interest payments do not burden our Monetarily Sovereign government. It could pay any amount of interest simply by tapping computer keys.

Need to make a $1 Billion interest payment? No problem for the federal government. What about a $100 Trillion payment? Still no problem.

The only thing that exceeds the government’s infinite ability to pay any financial obligation is the infinite ignorance of those who don’t understand Monetary Sovereignty.

The announcement from Moody’s comes just three months after another of the primary credit rating services downgraded the federal government’s rating from “AAA” to “AA+” in August.

The change made Friday by Moody’s is not a rating downgrade but signals that one could be coming soon.

Rating downgrades never came during significant deficit growth but only when Congress politically debated whether it wished to pay its bills.

The political party that doesn’t hold the Presidency always tries to prevent economic growth by cutting the federal spending that grows the economy, all in the name of “fiscal prudence.”

That way, they can criticize the President for lack of economic growth and hope to fool a naive voting public.

Moody’s could hardly be clearer in saying how America’s mix of political dysfunction and its increasingly unwieldy debt could trigger that future downgrade.

Forget the “unwieldy pile of debt. The downgrade is 100% based on the debt ceiling and Congress’s willingness (not ability) to pay.

“Without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’s fiscal deficits will remain very large, significantly weakening debt affordability,” Moody’s said in Friday’s announcement.

The above sentence is wrong. The so-called “debt” (that is not a debt of the U.S. government) is infinitely affordable.

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

“Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”

The polarization is entirely political. It has nothing to do with “debt affordability.” I suspect Eric Boehm knows this and simply is being paid to spread the bullsh*t.

Yet, in Washington, that announcement was greeted by a chorus of federal officials (and their mouthpieces) denying reality yet again.

White House Press Secretary Karine Jean-Pierre said in a statement that the outlook change from Moody’s was “yet another consequence of congressional Republican extremism and dysfunction.”

True.

Yellen, on Monday, said she “disagrees” with Moody’s decision and claimed the Biden administration is “completely committed to a credible and sustainable fiscal path.”

I don’t know what “credible” means in this context, but the fiscal path is infinitely sustainable.

That’s even though the federal budget deficit doubled over the past year. That’s despite the White House’s request for more spending—which would require more borrowing—in ongoing budget negotiations.

More bullsh*t from Boehm. The federal government, unlike state/local governments, never borrows dollars. It creates all its spending dollars, ad hoc.

Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

And now, we finally come to the real reason for all the lies.

And that’s despite President Joe Biden’s utter unwillingness to engage with the problems facing America’s entitlement programs, drive much of the unsustainable future deficits.

There it is, where the Libertarians and the Republicans agree: Cut benefits to those who are not rich.

Both parties have sold their souls to the rich. You’ll notice no mention of raising taxes on the rich and no mention of eliminating the tax loopholes that allow billionaires like Donald Trump to pay less in taxes than you do.

No, the Libertarians and the Republicans want the money to come from the elderly on Social Security and from the sick on Medicare and Medicaid.

They claim it’s those poor lazy freeloaders who are taking all the money.

In Yellen’s view, then, increased bond yields do not reflect increasing concern from investors about the fiscal state of the federal government, and growing federal budget deficits are a “sustainable fiscal path.”

Neither claim makes much sense.

On the Fence - Girlicity Girlicity — Boehm says Janet Yellen **“may turn out to be right”** about a statement that **“makes no sense.”**

Wrong, Eric. Both claims are correct.

She may turn out to be right, but this comes off as a lot of politically motivated gaslighting.

Huh? “Neither claim makes much sense,” but “She may turn out to be right”?

Poor Eric, he stands firmly with his legs planted on both sides of the fence.

Americans would be wise to keep in mind that the sky is still blue and gravity still pulls you toward the center of the Earth, no matter how many federal officials might claim otherwise.

Americans would be wiser to keep in mind that 84 years of politically motivated bullsh*t warnings about our “unsustainable” federal debt, have proven wrong, wrong, wrong.

Sadly, that has not stopped Boehm et al from taking paychecks to spread it thick and wide.

If you wish to contact Boehm, you can write to his employer at: Reason Foundation, 1630 Connecticut Ave NW, Suite 600, Washington, DC 20009, or call them at (202) 986-0916, or even tweet him at @EricBoehm87.

Couldn’t hurt. Might help.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY

Free Minds, Free Markets, Free Ignorance.

Reason.com - Free Minds and Free Markets This is the masthead for the online Libertarian magazine, Reason.

These folks boast about having “free minds,” which one might assume means they are open to learning and not locked into a rigid belief.

Sure, they are.

I find it ironic that perhaps the most stone-headed political-economics group in America could claim freedom of mind.

These are anarchists in thin disguise who have no idea how federal financing works, and day after day, they publish proofs of their determined ignorance.

Here is just one of a seemingly endless supply of misinformation and disinformation from the “free minds.”

Rand Paul Asked Senators To Balance the Budget. Only 28 Agreed. Rising interest rates will only make it harder to balance the budget in future years. Eric Boehm 6.16.2022

Right off the top, we encounter ignorance. Rand Paul is a hopeless purveyor of nonsense, while Boehm and his fellow Libertarians are clueless about the differences between federal financing vs. state & local government financing, business financing, and personal financing.

The federal government is the creator of the dollar, which is why knowledgeable people say things like this:

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

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.”

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

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.”

The federal government “cannot become insolvent,” can “produce as many U.S. dollars as it wishes,” does not spend tax money or any other form of income, and does not borrow (i.e., “depend on credit markets”).

In short, the federal government uniquely is Monetarily Sovereign. All the others mentioned above are monetarily non-sovereign.You and I can become insolvent. You and I cannot produce dollars at will. We do rely on income. And we do borrow. Vast difference that Paul, Boehm and the Libertarians don’t seem to get.

The Libertarians essentially think the sun and the moon are the same because, hey, they both are in the sky, aren’t they.

Boehm’s mind seemingly is closed to the fundamental difference between Monetary Sovereignty and monetary non-sovereignty. So he wants to balance the budget as though the federal government was just like you and me.

Here is what happens when the government simply reduces deficit spending growth (not even going so far as to balance the budget; just reduce the growth).

**The Red line shows the annual increases and decreases in federal deficit spending. Vertical gray bars are recessions.**

We have recessions when the federal deficits increase less than the previous year. Those recessions are cured when federal deficits increase more than the previous year.

The graph shows deficits increase almost yearly, but we have recessions when they don’t grow enough. Now let’s take a closer look at what happens during those rare times when the federal government runs a surplus.

**In the 3rd quarter of 1955, the government began to run a surplus, which led to a recession in 1957. The recession was cured when we started to run a deficit in 1958.**

**Deficit growth declined until the middle of 1969 we fell into a surplus, which led to a recession. The recession was cured after deficits returned in 1970.**

**Deficit growth declined until the 3rd quarter of 1998 until we fell into a surplus, which led to the recession of 2001. That recession was cured when we climbed back into deficit growth.**

Here are more historical data showing what happens when the federal government runs surpluses:

Paul Rand, Eric Boehm, all the Libertarians, and many others do not understand a simple mathematical truth: A growing economy requires a growing supply of money.

A standard measure of the economy is Gross Domestic Product (GDP) which consists of Federal Spending + Non-federal Spending – Net Imports.

GDP can increase only if the net total of those three money measures increases. That’s arithmetic. Further, because Net Exports usually decrease, the burden is on Federal Spending to increase enough to overcome that money loss.

Thus, simple arithmetic demonstrates that for real GDP to grow, the money supply must grow and that money supply growth relies on federal deficits to exceed Imports and inflation.

That is why a balanced budget or a surplus invariably leads to recessions and depressions.

Continuing with the Reason article:

As he pitched his Senate colleagues on a plan to balance the federal budget in 2018, Sen. Rand Paul (R–Ky.) warned that rising inflation would be one of the consequences of a failure to bring deficit spending under control.

Wrong. There is no relationship between deficit spending and inflation.

Changes in federal debt (blue) do not parallel changes in inflation (red).

But, changes in oil prices (green) do parallel inflation (red). Inflation is caused by critical goods and services shortages, generally energy and specifically oil.

**The graphs are clear. Oil prices, not federal spending, determine inflation.**

Oil price changes are closely related to changes in oil supply, which is determined by changes in oil production.

Here is a graph of total world energy production:

Here is the data in millions of barrels:

This image has an empty alt attribute; its file name is image-4.png — **Oil production in 2020 and 2021 was lower than in 2014, the purpose being to work off inventories that had become too high during the COVID years.**

As the world’s economies began to recover from COVID-19’s reduced oil usage, renewed oil production did not keep pace. This lack of oil production, not low-interest rates or “excessive spending,” caused today’s inflation.

Today’s critical shortages are food, housing, computer chips, shipping, baby formula, lumber, labor, and other goods. Today’s shortages are not caused by increased demand. Mothers did not suddenly begin to demand more baby formula. The number of people needing shelter did not mysteriously increase.

As with most ailments, you must fix the cause to cure the symptom. Shortages are the cause; inflation is the symptom.

To cure inflation, we must cure the shortages.

Reduced availability of goods and services primarily was due to COVID, global warming, and the Russia – Ukraine war. That is what caused the shortages.

Starving the economy of money, which Paul, Boehm, and the rest of the Libertarians wish to do, does not reduce shortages of oil and other vital goods. Neither does increasing interest rates.

Shortage-caused inflations can be cured only by treating the shortages.

This can be accomplished counterintuitively by increased government spending to improve the cost-availability of scarce goods and services.

At the time, Paul was pushing a bill that would have required a spending cut equal to one penny out of every dollar in the federal budget.

The so-called “Penny Plan” would have balanced the federal budget by 2023, Paul claimed at the time, without requiring serious cuts to any specific programs.

Paul exerted senatorial privilege to force a vote on the package; it failed 21–76.

Taking dollars out of the private sector accomplishes only one thing: Recession if we are lucky, depression if we are not.

Had Paul succeeded, we would have experienced a deep recession or a depression, together with inflation which would have been exacerbated by the Fed’s interest rate cuts.

That was before the federal government borrowed trillions of dollars in the name of combatting the COVID-19 pandemic.

Here again, Boehm reveals his ignorance of federal finance. The U.S. federal government never borrows dollars.

Think, Mr. Boehm: Why would an entity having the unlimited ability to create dollars ever borrow them? It wouldn’t, and it doesn’t.

Boehm is confused by the misleading word, “debt.” He assumes that T-bills, notes, and bonds are loans. They are not. Nor are they owed by the federal government.

T-bills, notes, and bonds are deposits into privately-owned accounts at the Federal Reserve. If you ever bought a T-bill, you owned such an account, which was similar to a safe-deposit box. You put your dollars into your own account. You did not give them to the government.

As with a safe-deposit box, the federal government never used the dollars in your T-security account. To pay you off, the federal government merely returns your dollars to you. No taxes or government dollars are involved.

It simply is a money transfer, similar to transferring dollars from your safe-deposit box to your checking account.

(Unlike borrowing, the purpose of T-securities is not to provide spending money for the government. T-securities provide a safe, interest-paying parking place for unused dollars. That’s why China et al has them. This helps the Fed stabilize the dollar.)

It was before President Joe Biden’s $1 trillion infrastructure package. It was before four more years of bulging federal budgets authorized by a Congress that’s increasingly blithe about borrowing.

“Bulging,” “blithe,” and “borrowing” are words meant to frighten or anger the innocent, but they only reveal ignorance. The budgets do not “bulge.” Congress is not “blithe.” And the government does not “borrow.”

In October 1971, in the greatest act of his administration, Richard Nixon took us off the last gold standard, thus freeing Congress to spend stimulus dollars, which no longer were limited by gold reserves.

With inflation now running seemingly out of control and trillion-dollar deficits being the new norm in Washington, Paul was back on the Senate floor Wednesday to offer another bill to balance the budget in five years.

This time around, however, it would require cutting six cents for every budgetary dollar.

The proposal failed, 29–67.

Thank goodness. Had it succeeded, we would have slipped into a severe depression. We still may if we rely on interest rate increases to cure inflation.

“Washington’s addiction to spending is hurting our economy and depleting our currency. Inflation is stealing every American’s purchasing power and financial security,” Paul said in a statement after the vote.

Paul should have said, “Washington’s spending adds growth dollars to the economy, without which the U.S. would suffer a depression. Spending does not cause inflation. Shortages do. Spending cures inflation when it cures shortages.”

“All this plan does is return to 2019 spending levels. If the federal government spent at 2019 levels this year, we would have a $388 billion surplus.”

That $388 billion federal surplus would have been a $388 billion deficit for the economy.

We have seen what results from federal surpluses. No knowledgeable person takes dollars from the economy and gives them to a federal government that has the infinite ability to create dollars.

The purpose of federal taxes is not to provide the government with spending money. Unlike state and local taxes, which remain in the economy, federal tax dollars are destroyed upon receipt.

They cease to be part of the private sector (aka “the economy”) and disappear into the federal government’s infinite supply of dollars. Add anything to infinity and it remains infinity.

The purpose of federal taxes is to help the government control the economy by rewarding what the government wishes to encourage and by penalizing what the government wishes to discourage.

Indeed, about the only thing that’s changed in the four years since Paul offered the Penny Plan is the size of the numbers involved.

America has piled up an incredible $11 trillion of debt since 2018—that’s more than one-third of the nation’s total credit card bill—as annual budget deficits surged even before emergency pandemic borrowing blew them through the roof.

More non-scientific street language from Boehm, who has yet to provide actual data to prove his point. Why? No data exists to demonstrate that deficit spending causes inflation or harms the economy in any way.

President Donald Trump oversaw an expansion of debt-fueled government spending during his term in office, and Biden has followed suit.

In his first year in office, Biden has added $2.4 trillion to the nation’s long-term deficit—despite the White House’s best efforts to hide that fact.

The White House would not hide adding growth dollars to the economy. It wanted to add even more growth dollars, with its “Build Back Better” proposal but was stymied by a GOP that feared BBB would grow the economy, reduce shortages, eliminate inflation, and assure Biden of a second term.

In the face of this unsustainable fiscal situation, an across-the-board cut of six pennies per every dollar to balance the budget seems like a pretty good deal.

“Unsustainable” is the favorite nonsense word of the budget cutters. That and “ticking time bomb” substitute for data. The “debt” has grown from $400 Billion in 1940 to $30 trillion today, and the government still is “sustaining.” No federal check has bounced.

And what would have been cut? Social Security, Medicare and other benefits for the middle- and lower-income groups.

And things are rapidly spiraling. The Federal Reserve announced a 0.75 percent interest rate hike on Wednesday, just hours before Paul presented his budget plan on the Senate floor.

Those higher interest rates will rebound into the federal budget in the form of higher interest payments on the national debt.

Under the Congressional Budget Office’s (CBO) latest budgetary baseline, interest payments on the debt are expected to triple between now and 2032.

If federal interest payments triple, the economy will receive triple stimulus dollars. Our Monetarily Sovereign government can afford it and our economy can use it.

If interest rates climb higher than the CBO expects, however, the federal government could be paying trillions more simply to finance government spending that already occurred.

Those trillions that Boehm fears actually will be stimulus dollars pumped into the private sector. Growth for the economy; easily affordable for our Monetarily Sovereign government.

Obviously, that will make any future attempt at balancing the budget an even more difficult task.

That’s good news.

The opportunity to balance the budget by cutting a mere penny out of every dollar of federal spending has come and gone. After Wednesday’s vote, the Six Penny Plan’s days are likely numbered too.

That’s even better news.

In Summary, the Pauls and the Boehms of the world do not know (or pretend not to know) the fundamental difference between a money creator and a money user, i.e. the Monetarily Sovereign U. S. government vs. monetarily non-sovereign everyone else who spends and accepts U.S. dollars.

This image has an empty alt attribute; its file name is image-6.png — **Taking money from the economy to cure inflation is like applying leeches to cure anemia.**

Monetary Sovereignty is the basis for all of economics. Those who don’t understand it simply do not understand economics.

Money is the lifeblood of an economy. The budget-cutters remind one of the quack doctors who apply leeches to cure anemia, thus killing the patient.

Paul and Boehm wish to apply leeches to the economy, starving it of its money lifeblood. That is what ignorance can do.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
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:

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

MONETARY SOVEREIGNTY

Reason Magazine is confused. Wrong about inflation but partly right about tariffs. And partly wrong.

Read how the right-wing “Libertarians” take opposite sides of the same issue. Here are excerpts from an online Reason (Libertarian) article:

By Refusing To End Trump’s Tariffs, Biden Is Making Inflation Worse
Trump’s tariffs are adding an estimated 0.5 percent to annual inflation.
ERIC BOEHM | Reason |12.10.2021

Tariffs do exactly one thing: raise prices.

No, tariffs do exactly two things: Yes, they raise prices, but they also take dollars from the economy.

Right now, prices don’t need any help getting higher.

Economic data released Friday by the Bureau of Labor Statistics show that year-over-year inflation hit 6.8 percent in November—the highest level recorded since 1982. Despite other indicators showing that the economy is strong, persistently high inflation is a serious problem for American households.

That includes the current resident of the White House, for whom inflation is becoming a major political headache.

There’s probably not much President Joe Biden can do to curb inflation in the short term. That ship sailed when he pushed for and signed off on a major economic stimulus bill earlier this year—one that economists warned was too large and could overheat the economy.

The “too large” phrase might make you believe Mr. Boehm believes stimulus is good, just not so much. Don’t be misled. For Libertarians all federal spending is “too large.”

Had the stimulus package been $5, Mr. Boehm would have complained it was “too large.” Why? Just because. Libertarians are anti-government everything, and would prefer that the economy sink into depression than see more federal spending.

Other factors influencing inflation, like the disconnect between supply and demand that’s largely a result of the ongoing COVID-19 pandemic, are well beyond Biden’s (or any president’s) power to change.

“The disconnect between supply and demand” are not “other factors influencing inflation” They are THE factors causing inflation, the only factors.

All inflations are caused by shortages. Today’s inflation is caused by shortages of oil, food, computer chips, lumber, shipping (and everything else that gets shipped), and labor.

This stimulus package, like all previous stimulus packages, did not cause the oil shortage. It did not cause the food shortage. It did not cause the computer chip shortage. It did not cause the shipping shortage.

It may temporarily have caused a labor shortage by giving people an alternative to low-pay, crap jobs. Unfortunately, the unemployment compensation safety net now has been pulled out from under workers, who the employers hope will be forced to accept those jobs.

But there is one thing Biden could do to immediately provide consumers with relief. He could eliminate the tariffs imposed by former President Donald Trump.

If Boehm is claiming that the tariffs were just another, stupid Trumpian attempt to punish China by punishing American consumers, he is correct. China doesn’t pay for American import taxes. Americans do.

But what Boehm neglects to mention (or doesn’t realize) is that import tariffs take dollars from the American private sector (aka “the economy”) and give those dollars to the federal government, and that reduces the federal deficit and debt.

And as anyone familiar with Libertarians knows, those folks absolutely hate the federal deficit and debt (despite the fact that whenever the deficit and debt are reduced we have recessions and depressions).

So in the backward logic of Libertarians, deficit-reducing tariffs should be a good thing.

Those tariffs, which Biden has been stubbornly unwilling to reverse during his first year in office, are adding roughly 0.5 percent to annual inflation across the economy.

Trump’s tariffs on washing machines, solar panels, steel, aluminum, and a host of Chinese-made goods are a “secondary but noticeable contribution” to overall inflation right now.

That’s pretty much in line with what four economists at the San Francisco Federal Reserve warned in February 2019, shortly after Trump began slapping tariffs on various goods. “Imports from China are an important part of overall U.S. imports of consumer and investment goods,” they wrote.

“Thus, tariffs on these imports are likely to have sizable effects on consumer, producer, and investment prices in this country.”

But wait. Remember Boehm’s “supply and demand” comment at the start of the article. He claimed, in effect, that increased demand is half the problem. But tariffs reduce demand. That’s the underlying purpose of tariffs.

So in Boehm’s world, reducing demand via tariffs should mitigate inflation!

And as we have said, tariffs are taxes. Deficits and debt are the difference between taxes and spending. Libertarians supposedly hate deficits and debt. Tariffs, i.e. taxes, reduce deficits and debt.

Unlike other policies that could help slow inflation, like raising interest rates, Biden could cut tariffs without having to wait for Congress or the Federal Reserve to act.

He’s right, but cutting tariffs also would increase the federal debt, which Boehm doesn’t want.

Similarly, cutting tariffs would not come with some of the negative tradeoffs that other actions might. Raising interest rates will harm the economy in other ways (for example, by making it more expensive to borrow).

Boehm is correct that Trump’s tariffs were, as usual, stupid. But he is dead wrong about raising interest rates. While raising interest rates makes borrowing more expensive, private borrowing adds stimulus dollars to the economy. Banks lend by creating dollars.

Even more importantly, higher interest rates force the federal government to pump more interest dollars into the economy, which helps grow the economy.

To quote from an article we published in 2018, “Interest rates going up. Should you be concerned?”

Rising Rates Could Further Balloon Interest Spending, Mar 21, 2018

The Federal Open Market Committee (decided) to raise the federal funds rate by 0.25 percentage points to 1.5-1.75 percent.

The federal government (is projected) to spend $6.8 trillion on interest costs over the next decade. If interest rates end up just 1 percentage point higher than projected, interest costs would increase by a further $2 trillion. If interest rates return to their pre-recession levels, costs could rise by $3.4 trillion.

Let us rephrase as follows:

The federal government (is projected) to pump $6.8 trillion interest dollars into the economy over the next decade.

Should a $6.8 trillion stimulus — which is similar in effect to a $6.8 trillion tax cut — be a cause for concern?

Contrary to popular myth, raising interest rates does not “harm the economy” as Boehm and many other economists claim. In fact, raising interest rates stimulates the economy by forcing the federal government to pump more dollars into the private sector.

**Blue line is interest rates. Red line is Gross Domestic Product growth.**

Higher interest rates are associated with higher GDP growth, because higher interest rates cause more money growth.

The illusion that high interest rates “harm the economy” is caused by the stock markets, which decline in anticipation of raised rates. But anticipation is based on belief, not on fact.

Adding dollars to the economy, which is what higher interest rates accomplish, stimulates economic growth.

Lifting tariffs will ease inflation and provide a tax cut to many American businesses.

Correct. Tump’s tariffs should be lifted, just not for the reasons Boehm claims.

Again: The one and only thing that tariffs do is raise prices. That is their only function.

Again, their other function is to take dollars from the economy, give them to the federal government (which has no use for them), and reduce deficits and debt (both of which are necessary for economic growth).

Politicians might want to deploy tariffs (to raise prices) for a number of reasons: to protect domestic industries, to influence where in the world individuals choose to invest, to retaliate against what they perceive as unfair trade practices from other countries, and so on.

Tarrifs are nothing more than a spite-one’s-face-by-cutting-one’s-nose exercise. All of the above goals can be accomplished via federal tax cuts and federal spending.

If Biden is going to keep ignoring this basic bit of economic reality, then he is choosing to make inflation worse than it already is.

The basic bit of American economic reality is this:

Inflation is caused by scarcity, not by federal spending. Not by “too much money,” but rather by too few goods.
Cutting tariffs does not increase supply, so it does not reduce inflation.
Inflation can be cured by federal spending to obtain and distribute the scarce goods.
Federal deficit spending is economically stimulative, i.e cutting taxes and spending both grow the economy
Interest rate increases are stimulative
Tariffs are not a good solution for any economic problem

While Mr. Boehm is correct about the need to cut tariffs, he is wrong about the way to cure inflation. That cure requires increased federal deficit spending to acquire and distribute the scarce products while decreasing taxes.

A great place to begin would be to eliminate the FICA tax, which has zero positive effects, but increases business costs and drags down the economy.

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:

Monetary Sovereignty describes money creation and destruction.
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.”

Ten Steps To Prosperity:

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

MONETARY SOVEREIGNTY

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