STOP THE STUPID. The Pell Grant “reserves”

Just An Introduction
Trump followers claim that Republican judges and SCOTUS justices are cowards who have yielded to mythical “pressure” into denying Trump’s absurd claims.Stop the Stupid Tucker Carlson Boycott - POLITICO Magazine

But, most of the so-called “pressure” is coming from Trump, and as for SCOTUS justices, what sort of pressure can affect them? They are immune.

Nevertheless, Trumpers have taken to the streets to scream, “Stop the Steal.”

I suggest the retort should be “Stop the Stupid,” for only a very stupid person actually believes that 30+ judges and the entire Supreme Court, most of whom are right-leaning, would ignore right-wing evidence.

(The problem is, when people are stupid, they are too stupid to realize they are stupid.)

The Main Idea
The phrase “Stop the Stupid” brings me to an article published by that ever-dependable source of economic ignorance, The Committee for a Responsible Federal Budget (CRFB)

Today’s article, like virtually all CRFB articles, suggests cutting federal benefits to everyone who is not rich.

Whether it be Social Security, Medicare, unemployment compensation, food stamps, or any other financial support program for the middle or poor, you can rely upon the CRFB to come in, all a-twitter, with charts and articles demonstrating the lie that the federal government can’t afford such spending.

And so it is now, with Pell grants.

WHAT ARE PELL GRANTS?
Today, the Pell Grant program assists undergraduates of low-income families, who are actively attending universities and or other secondary institutions. Before the Pell Grant became what it is today, it went through numerous changes.

In 1965, Congress passed the Higher Education Act of 1965 (HEA). President Lyndon B. Johnson implemented the HEA as a part of his administration’s “Great Society” agenda to assist and improve higher education in the United States.

It was the initial legislation to benefit lower- and middle-income students.

The HEA program included not only grants but also low-interest loans to students who did not qualify for grants.

Universities and other institutions, such as vocational schools, benefited as well from the HEA program, by receiving federal aid to improve the quality of the education process.

Student aid programs administered by the US Department of Education are contained in Title IV of the HEA and so are called “Title IV Programs.”

As you can see, the HEA, like all laws, was created from thin air by Congress and the President. It was a time when Congress and the President cared about helping low- and middle-income families. (Remember those days of yor?)

Congress was able to create HEA, and subsequent Amendments, because being Monetarily Sovereign, the U.S. has unlimited dollars available to it. Even without collecting a single dollar in taxes, the federal government cannot ever run short of dollars. Not ever.

In 1972, Title IX Higher Education Amendments were a response to the distribution of aid in the current grant.

Senator Claiborne Pell set forth the initial movements to reform the HEA. Lois Rice, an American corporate executive, scholar, and education policy expert is known as the “mother of the Pell Grant” for her work lobbying for its creation.

Opportunity Grant Programs (Basic Grant) were intended to serve as the “floor” or “foundation” of an undergraduate student’s financial aid package. Other financial aid, to the extent that it was available, would be added to the Basic Grant up to the limit of a student’s financial need.

Most changes to the federal student aid program result from a process called reauthorization.

Through the process of reauthorization, Congress examines the status of each program and decides whether to continue that program and whether a continued program requires changes in structure or purpose.

Congress has reauthorized campus-based programs every five or six years, beginning in 1972.

In short, the Pell program is completely arbitrary.

It has no intrinsic financial constraints. Pell’s finances are constrained only by what Congress and the President happen to voice on any particular day.

Pell primarily is funded by arbitrary appropriations.

President Donald Trump signed a bill finalizing funding for the government for fiscal year (FY) 2020

The bill provides $72.8 billion in discretionary funding for the Department of Education (ED), a $1.3 billion increase from FY 2019. The bill boosts the maximum Pell Grant award to $6,345, though it relies on a $500 million recession from the program’s reserve fund.

The bill also increases funding for the Federal Supplemental Educational Opportunity Grant (FSEOG) program by $25 million (to $865 million) — which Trump proposed to cut entirely — and allocates $1.2 billion for the Federal Work-Study (FWS) program, a $50 million increase from FY 2019.

In Trump’s proposal, he suggested slashing funding for FWS in half.

To hammer home the central point, the Pell grant, and every other program financed by the government, can be at any cost. The federal government, unlike state and local governments, cannot run short of dollars.

Congress and the President decide what to spend, and create the spending dollars from thin air.  The federal government controls infinite financial resources.

Here for instance is what Congress appropriated for Pell during a 5-year period, 2007 – 2011.

Appropriations
Fiscal Year 2011: $41,674,180,000
Fiscal Year 2010: $21,772,000,000
Fiscal Year 2009 : $19,378,000,000
Fiscal Year 2008 : $16,256,000,000
Fiscal Year 2007 : $13,660,711,000

Why the hugely different amounts? Congress simply voted for whatever it pleased. There are no financial limits placed on Congress or the President. You wouldn’t know that, however, if you read the latest CRFB histrionics:

Now’s Not the Time to Raid the Pell Surplus
December 14, 2020

With 2020 college enrollment down as a result of the COVID-19 pandemic, the Pell Grant program may add more to its reserves than previously estimated.

A lie. There are no “reserves.” They are a financial myth.

Think: Of what purpose would “reserves” be, when the supply of dollars is infinite. Creating “reserves” is just a way to con the poor and middle-income people into believing that federal money is tight.

It is a lie, and I have come to the conclusion that, after all these years, everyone at the CRFB knows it is a lie.

Policymakers may be tempted to spend these additional reserves in the end-of-year omnibus bill by expanding Pell Grants, for example, to cover short-term educational or training programs. They should avoid this temptation.

As recent experience from the Great Recession shows, economic downturns can quickly increase the costs of the Pell program and lead to large shortfalls.

A lie. “Shortfalls” only will come if Congress unnecessarily votes to create shortfalls. Fictional “reserves” can’t cover “shortfalls” or anything else. The federal government never unintentionally faces financial shortfalls.

Spending funds now on low-priority, questionable initiatives will leave less room to weather the economic downturn or target future funds where they are truly needed.

A lie. The “room to weather an economic downturn or target future funds” is infinite. This year, Congress voted to spend an additional $3 trillion in stimulus money.

No problem. It could (should) have voted double or triple that amount, and still there would be no problem. The federal government simply creates money by spending money. That is the federal government’s standard process for creating dollars.

The Pell Grant program, which provides financial aid to low- and middle-income college students, has a unique budgeting structure.

Program costs are based on the number of eligible applicants, and all eligible applicants automatically receive their award based on a formula.

It is mostly funded, however, through the annual appropriations process.

Exactly. Congress votes; the President signs; and the money is created from thin air, at the touch of a computer key.

When appropriations exceed costs, the program can essentially save the unspent dollars to expand its reserves. This has been the case in recent years, leading to an $11 billion reserve in 2020.

Prior to the COVID-19 pandemic, CBO projected reserves would continue to grow to $18 billion by 2030.

A lie. The “reserve” is a  bookkeeping fiction. Totally unnecessary.

At the whim of Congress, the reserve could be $0 or $1 trillion, and nothing would change. Whenever it wishes, Congress merely can vote to increase the reserve, eliminate the reserve, or do anything else it wishes. The reserve is financially meaningless, meant to fool the uninformed.

CBO previously projected the Pell program would generate $850 million of extra funds in 2021; the actual amount is likely to be higher.

As a result of the pandemic, college enrollment for the 2020-2021 academic year is down 4 percent for all students and 16 percent for freshmen.

A lie. The Pell program generates nothing. Congress spends whatever it wishes to spend.

If Pell costs fell just 5 percent as a result, the Pell reserve would grow an additional $1 billion per year; if they fell 10 percent, it would expand by more than $2 billion per year.

A lie. The reserve is neither more nor less than what Congress and the President want.

The “reserve” is just numbers on a balance sheet that the government has the infinite ability to change at will. It’s like a game of Monopoly™, where the players can change the rules any time they wish.

Politicians may view these extra reserves as an opportunity to expand the Pell program. Given current economic uncertainty, however, this would be a mistake.

A lie. One cannot say what Congress viewed, but the reality is, “extra reserves” provide no opportunity to expand the program.

The opportunity to expand the program comes from Congress’s and the President’s acknowledgment that unlimited dollars are available.

While pandemics tend to reduce college enrollment, recessions often boost enrollment substantially.

During every recession since the 1960s, college enrollment has increased as unemployed workers looked to learn new skills and saw college as a more attractive option given the lack of available jobs.

This was particularly evident during the Great Recession, when the number of people collecting Pell Grants jumped 70 percent from 5.5 million in 2008 to 9.4 million in 2012.

The fact that more people opt for college during hard times merely demonstrates the wisdom of the populace.

It is no threat, whatsoever, to federal solvency, which is infinite.

Over this period, the Pell finances took a turn for the worse. In 2007, CBO’s projected future Pell costs would roughly match funding levels.

By 2012, the agency projected a ten-year shortfall of nearly $60 billion.

The expansions to the Pell program at the beginning of the Great Recession and subsequent rise in enrollment and average award meant Congress had to inject more than $50 billion above regular appropriations between 2009 and 2014 and cut eligibility and benefits in the latter years.

A lie. Pell finances turn for the worse (or better) based on which political party is in control.

If the Democrats control, Pell usually is given more money. The GOP usually tries to cut Pell.

Note that Congress injected more than $50 billion extra into the program, simply by voting to do so. The money didn’t “come from” somewhere. Congress created it just by voting.

The same deterioration could occur again once an effective vaccine is distributed throughout the population and people are no longer avoiding in-person schooling.

This time enrollment could increase for several reasons – including from enrollment of those who delayed schooling through the pandemic, those who suffered job losses or business closures, and those who continue to enroll in newly expanded online programs.

Until these enrollment pressures are better understood, policymakers should avoid spending what is likely a very temporary source of excess funding.

A lie. If the Democrats regain control over Congress, there is a greater chance funding will increase. It’s that simple.

It has nothing to do with job losses and business closures. It has to do with the desire to support the more needy Americans.

Instead of expending a temporary Pell surplus on a questionable new policy, policymakers should save it for rainy days that could be soon to come.

As we monitor enrollment in the post-pandemic portion of the recovery, we will have a better sense of what resources are available and more time to deliberate on how to use them effectively to best achieve the goal of ensuring higher education access and affordability for low-income students.

A massive lie. In federal finances, there is no such thing as a “rainy day.”

For the federal government, every day is financially sunny. The federal government should not just expand Pell. Rather it should fund college for everyone who wants it, regardless of personal wealth and income. (See: Ten Steps to Prosperity, below)

Each dollar spent on college educations funds greater American brainpower, economic growth, and international competitiveness.

In Summary

CRFB is one gigantic lie, composed of numerous half-lies, innuendos, false comparisons, fear-mongering, and flat-out dishonesty.

It is funded by the very rich to provide the government with false excuses for not helping the middle and the poor.

The purpose is to widen the Gap between the rich and the rest.

If you want to know who the liars are, here’s a list.

You can tell them: STOP THE STUPID.

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 or a reverse income tax
  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

Pete Peterson foundation, your center for economic ignorance, speaks again.

The Peter G. Peterson Foundation (PGPF), like the equally wrong, Committee for a Responsible Federal Budget (CRFB), continues to broadcast economic nonsense, the purpose of which is to widen the Gap between the rich and the rest.

On November 20, 2018, PGPF published a post titled “Top 10 Reasons Why The National Debt Matters.”

In typical PGPF fashion, some of its “top 10 reasons” aren’t really reasons at all, and the rest are utter nonsense.  Here is a sampling for your amusement or horror:

At $21 trillion and rising, the national debt threatens America’s economic future. Here are the top ten reasons why the national debt matters.

I. The national debt is a bipartisan priority for Americans. Nearly three-quarters of voters (71 percent) agree that the national debt should be a top-three priority for the country, including 69 percent of Democrats, 68 percent of Independents and 79 percent of Republicans.

The above is not a reason why “national debt matters.” It merely is the result of polling Americans who do not understand the economics of Monetary Sovereignty, and who mistakenly believe federal finances are like personal finances.

The so-called “debt” isn’t what most people think it is. It is ‘’DEPOSITS’‘ into T-security accounts.

When you (or China) “lends” to the federal government, you take dollars from your checking account and deposit them into your T-security account.

These accounts are similar to bank savings and CD accounts.

Then, to pay you back, the government sends your dollars from your T-security account back to your checking account. It’s a simple money transfer the Treasury does this every day as T-securities mature.

Banks boast about the size of their deposits. They don’t call them “debt,” though deposits are a form of debt.

Before maturity, your dollars remain in your T-security account. The government has no use for them, since the government creates new dollars, ad hoc, every time it pays a creditor.

The U.S. federal government, being Monetarily Sovereign, never can run short of its own sovereign currency. Even if all federal taxes were $0, and no T-security dollars were accepted, the government could continue spending forever.

The purpose of federal taxes is different from the purpose of state and local taxes, which supply state and local governments with money. The federal government neither needs nor uses tax dollars. It destroys them upon receipt.

The real function of tax dollars is to control the economy, so “desirable” things are encouraged by being taxed less than “undesirable” things.

The federal government has no need to borrow. The purpose of T-securities is:
1. To provide a safe parking place for unused dollars. This helps stabilize the U.S. dollar
2. To help the Fed control interest rates, which helps control inflation.

II. The return of trillion dollar deficits.  The Congressional Budget Office (CBO) projects that the budget deficit will rise from $779 billion in 2018 to $1.5 trillion by 2028, resulting in a cumulative deficit of $12.4 trillion over the 10-year period from 2019 to 2028.

“Reason” #II also is not a reason why federal debt matters, unless one believes all large numbers matter. Like the CRFB, the PGPF loves to quote big numbers without explaining why we should be concerned about them.

Deficits merely are the difference between federal taxes collected and destroyed, vs. the federal spending that grows the economy. There is no reason why we should be concerned about the federal government’s spending that helps grow the private sector. 

The PGPF quotes a big deficit number to make you think that, like you and me, the federal government can have difficulty paying large financial obligations.

But the federal government is not like you and me. Nor is the federal government like state and local governments. Being uniquely Monetarily Sovereign, the federal government never can run short of dollars. Never.

III. Interest costs are growing rapidly. Interest costs are projected to climb from $315 billion in 2018 to $914 billion by 2028. Over the next decade, interest will total nearly $7 trillion. By 2026, interest will become the third largest category of the budget. With our many important budget priorities, none of us wants interest to become the third largest government “program.”

Federal deficit spending grows the economy. In fact, when federal deficit spending is too low, we have recessions and depressions. And how are recessions and depressions cured? With increased deficit spending.

The more interest dollars the federal government pumps into the economy, the healthier is the economy.

Declining deficit growth leads to recessions (vertical bars) which are cured by increasing deficit growth. Federal interest payments stimulate economic growth.

IV. Key investments in our future are at a risk. In addition, growing federal debt reduces the amount of private capital for investments, which hurts economic growth and wages. A nation saddled with debt will have less to invest in its own future.

Growing federal “debt” increases the amount of private capital for investments. The so-called “debt” is related to federal deficit spending, which adds growth dollars to the economy.

Additionally, growing federal debt requires growing federal interest payments, which also add growth dollars to the economy.

V. Rising debt means lower incomes. Based on CBO projections from last year, growing debt would reduce the income of a 4-person family, on average, by $16,000 in 30 years. Stagnating wages and growing disparities in income and wealth are very concerning trends. The federal government should not allow budget imbalances to harm American citizens.

There is no economic mechanism that would cause rising federal “debt” to reduce incomes.

The additional stimulus dollars that increased federal “debt” produce, would stimulate higher incomes, not lower.

VI. Less flexibility to respond to crises. On our current path, we are at greater risk of a fiscal crisis, and high amounts of debt leave policymakers with much less flexibility to deal with unexpected events. If we face another major recession like that of 2007–2009, it will be more difficult to work our way out.

Once again, the Peterson Foundation demonstrates abject ignorance of economics or intentional deception about economics. Take your pick.

“Reason” VI  assumes that the federal government can run short of dollars with which to “deal with unexpected results.” Fact: Our Monetarily Sovereign federal government, never can run sort of U.S. dollars.

Since 1940, the federal debt has increased from $40 billion to $20 trillion, a gigantic 50,000% increase. Yet the government never has lacked “flexibility” in dealing with unexpected events.

During the Great Recession of 2008, the federal government ran massive deficits to grow us out of the recession, and it continued to run deficits every year, thereafter. No lack of flexibility occurred.

VII. Protecting the essential safety net. Our unsustainable fiscal path threatens the safety net and the most vulnerable in our society. If our government does not have sufficient resources, these essential programs, and those who need them most, could be put in jeopardy.

“Unsustainable” is a favorite word of the deficit Henny Pennys. No one can explain how our Monetarily Sovereign government can find debt or deficits unsustainable.

Once again, the Peterson Foundation tries to tell you that the federal government, like state and local governments, can run short of U.S. dollars. To put it a charitably as possible, it’s a damn lie.

VIII. A solid fiscal foundation leads to economic growth. A solid fiscal outlook provides a foundation for a growing, thriving economy. Putting our nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity.

With a strong fiscal foundation, the nation will have increased access to capital, more resources for private and public investments, improved consumer and business confidence, and a stronger safety net.

In Peterson-speak, “solid fiscal foundation” means cutting deficit spending, i.e austerity, the program that always, always, always lead to recessions and depressions.

Every depression in U.S. history was the result of a Peterson-like attempt at a “solid fiscal foundation.”

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.

IX. Many solutions exist! The good news is that there are plenty of solutions to choose from. The Peterson Foundation’s Solutions Initiative brought together policy organizations from across the political spectrum to develop long-term fiscal plans. Each of those organizations developed specific proposals that successfully stabilized debt as a share of the economy over the long term.

“Many solutions exist” is not a reason why “National Debt Matters.” We can only assume this so-called “reason” was included to get the magic number up to 10.

We feel quite confident that any “solutions” put forward by PFPG will accomplish just one thing: They will widen the Gap between the rich and the rest. 

X. The sooner we act, the easier the path. It makes sense to get started soon. According to CBO, we would need annual spending cuts or revenue increases (or both) totaling 1.9 percent of GDP in order to stabilize our debt. If we wait five years, that amount grows by 21 percent. If we wait ten years, it grows by 53 percent. Like any debt problem, the sooner you start to address it, the easier it is to solve. 

Again, number X isn’t a reason, nor are annual spending cuts or revenue increases a solution to anything.

The rich always favor spending cuts, particularly to social programs the benefit the non-rich:  Social Security, Medicare, Medicaid, aid to education, poverty aids, etc.

And tax increases are welcome, so long as they are increases in the taxes the non-rich must pay: FICA and taxes on Social Security benefits. You seldom will see Peterson recommend increases in taxes on capital gains or on the tax loopholes the rich love.

In Summary:

The Peter G. Peterson Foundation is just another right-wing, pro-rich organization that masquerades as a non-partisan think tank. Its goal is to widen the Gap between the rich and the rest of us.

Federal finances are not like personal finances or state and local finances. The federal deficit and debt neither are a threat to the federal government nor burden on taxpayers. The federal deficit is necessary for economic growth. The federal debt could be paid off, tomorrow.

The public’s ignorance about Monetary Sovereignty allows the PGPF and the CRFB to spread misinformation about the federal debt and deficit.

 

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

More scare nonsense from the CRFB.

The nation’s leading supplier of federal debt lies, the Committee for a Responsible Federal Budget, has released its latest salvo of utter nonsense:

Here are a few of their baseless claims:

1. The Deficit Could Hit $1 Trillion This Year and $2 Trillion Within a Decade
Although deficits decreased from Fiscal Year (FY) 2011 to FY 2015, they’ve been rising ever since.

We now expect deficits to return to nearly $1 trillion this fiscal year (2019) and stay above that level indefinitely.

In fact, if lawmakers extend the costly tax cuts and spending increases indefinitely, deficits will be more than $2 trillion by 2028.

Although the above claims themselves are not baseless, the implication that somehow increases in the federal deficit are bad — that is baseless.

An increasing deficit merely means that the federal government pumps more dollars into the economy that it removes. That is a good thing. It is what grows the economy.

In fact, the opposite of deficits — i.e. surpluses — have been the cause of every depression in U.S. history.

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.

A growing economy requires a growing supply of money. Austerity (i.e. reduced deficit spending) invariably leads to recessions and depressions.

2. The Long-Term Debt Outlook is Terrifying
This fall, CRFB released its own 75-year budget outlook, which projected an unsustainable fiscal outlook.

Under current law, debt will rise from 78 percent of Gross Domestic Product (GDP) in 2018 to 160 percent by 2050 and nearly 360 percent by 2093. Under the Alternative Fiscal Scenario, debt will exceed 600 percent of GDP by 2093.

Why is the high debt/GDP ratio “unsustainable”? It isn’t. 

There is no relationship between federal debt and GDP. The debt is not serviced by GDP, nor is it serviced with taxes, exports, or any other form of income.

The federal government is Monetarily Sovereign. It has the unlimited ability to service any amount of debt. It never can run short of dollars.

Japan, for example, carries a debt/GDP ratio exceeding 250%, and no one claims this debt is “unsustainable.” See graph, below.

Japan General Government Gross Debt to GDP

3. “Debt-Financed Laws” Offered a Temporary Stimulus
While the economy has grown by about 3 percent over the past year, our analysis Can America Sustain the Recent Economic Boost? showed that the growth rate would likely return to 2 percent per year.

As we illustrated, near-term growth was largely driven by one-time stimulus and other effects from the Tax Cuts and Jobs Act (TCJA), the 2018 Bipartisan Budget Act, and other deficit-financed legislation.

Unfortunately, the economic boost from these laws will be temporary – but the debt will be permanent.

The CRFB admits that economic growth is driven by deficit stimuli. 

They also admit that continuing economic growth requires continuing deficit stimuli, which our Monetarily Sovereign government has the infinite ability to provide.

The U.S. government never unintentionally can run short of U.S. dollars. Never. Even if the federal government collected zero taxes, it could continue spending, forever.

So, exactly what is the problem? The CRFB never says.

4. Rapid Economic Growth is Unlikely to Last
In the analysis of America’s recent economic boost, we showed that nearly all forecasters agree that current rapid rates of economic growth are unlikely to last.

For example, the Congressional Budget Office (CBO) projects that the economy will grow by 3 percent in 2018 and 2.8 percent in 2019, but then grow by between 1.6 and 1.9 percent per year for the remainder of the decade.

A primary factor in predicting economic growth is federal debt growth. Debt growth creates the dollars that stimulate economic growth.

Economic growth (red) parallels federal debt growth (green).

5. Deficits Shouldn’t Rise When the Economy is This Strong
Typically, a strong economy is paired with low deficits (or even surpluses) – both because strong economic performance produces more revenue and because it creates the economic space for deficit reduction.

Yet despite the economy performing at or even above its potential, deficits are widening.

In a recent analysis of deficits and the economy, we showed that the deficit has never been this high when the economy was this strong. 2018 and 2019 are extremely abnormal in that we are running high and rising deficits despite low unemployment, no significant output gap, no recession, and strong economic growth.

The above is a lie of Trumpian proportions. Rising deficits make the economy strong by adding dollars to the economy.

Reduced deficit growth leads to recessions, which are cured by increased deficit growth:

Reduced federal deficit growth leads to recessions (vertical bars) which are cured by increased deficit growth.

And as you have seen, federal surpluses do not create strong economies. Quite the opposite. Federal surpluses create depressions.

It is true that economic growth brings in higher taxes, but that does not create “economic space for deficit reduction.”

The term “economic space for deficit reduction” is gobbledegook. As long as there are deficits, they always can be reduced, so long as one wishes to experience recessions and depressions.

6. Policymakers are Responsible for More than Half of This Year’s Deficit
This year, the deficit will approach $1 trillion – and policymakers have no one to blame but themselves.

We estimate that 55 percent of this year’s projected deficit is the result of deficit-financed legislation enacted since 2015.

Recent spending hikes and tax cuts will cost $540 billion this year. Had these laws been offset or not enacted, the deficit would be $440 billion rather than $981 billion, as CBO projects.

Said more accurately, “Policymakers are Responsible for More than Half of This Year’s Economic Growth, simply because deficits create the dollars necessary for economic growth.”

7. Recent Tax and Spending Bills Both Cost Trillions, If Extended
The Tax Cuts and Jobs Act of 2017 and the Bipartisan Budget Act of 2018 both added tremendously to the national debt.

And while the tax cuts will cost significantly more ($1.9 trillion versus $435 billion) over ten years, that is largely an artifact of the most of the tax cuts enacted for eight years, while the spending boost was a two-year deal.

We found that if lawmakers extend both laws indefinitely, the tax cuts will cost about $2.7 trillion over a decade while the spending bill will cost $2.4 trillion. That’s $5 trillion of additional debt that this country simply cannot afford.

The CRFT prays that you not understand Monetary Sovereignty, otherwise you would know that:

8. Revenue Has Dropped, Not Risen
While some have claimed that revenue grew over the past year  . . . we estimated that actual revenue fell by 3.6 percent between tax year 2017 and tax year 2018. Revenue fell by 5.4 percent after inflation, and by 8.1 percent relative to GDP.

Said more accurately,  . . . “we estimated that 3.6 fewer dollars were taken from the economy between tax year 2017 and tax year 2018.”

Taking fewer dollars out of the economy helps the economy grow, and the government has no need for those dollars.

And now we come to the real reason why the CRFB exists, why it devotes all its resources to promulgating the “Big Lie”: The Committee for a Responsible Federal Budget is paid by the rich to convince you that your federal benefits should be reduced.

The single, biggest economic problem facing the U.S. and the world is widening Gaps between the richer and the poorer.

9. Entitlements and Interest Explain Long-Term Debt Growth
While near-term deficits are largely self-imposed, medium- and long-term debt growth are driven primarily by growing costs of Social Security, federal health spending, and interest on the debt. Indeed, these three categories of spending are responsible for over four-fifths of all nominal spending growth over the next decade alone.

Yes, nothing irritates the rich more than you receiving money. This irritation is “Gap Psychology,”   the human desire to widen the Gap below you on any economic or social measure, and to narrow the Gap above you.

Gap Psychology drives the appeal of expensive jewelry, cars, homes, and designer clothing. Gap Psychology drives the resentment some have for anti-poverty aids like food stamps and college preferences, as well as immigration.

10. Social Security is Hurdling Toward Insolvency
Social Security costs continue to grow faster than dedicated revenue, and its trust fund is running out.

CBO projected that just 13 years from now – when today’s 54-year-olds reach the normal retirement age and today’s youngest retirees turn 75 – the Social Security trust fund will be depleted.

The Trustees project insolvency in 16 years, when today’s 51-year-olds reach the normal retirement age and today’s youngest retirees turn 78. At that point, the law calls for a deep automatic across-the-board cut in benefits.

It is a perfect example of the “Big Lie.”

The federal government cannot run short of dollars, and because the federal government cannot run short of dollars, no agency of the federal government can run short of dollars unless that is what the federal government wants.

The rich run the federal government. The rich want you to believe Medicare and Social Security and Medicaid and every other government program that benefits the not-rich must cut spending. 

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.

There is no “Social Security trust fund.” It is a bookkeeping fiction. The federal government could, if the rich wished, supply unlimited funds to support Social Security and Medicare for every man, woman, and child, of all ages, forever.

11. Rising Health Costs Are Driving Up the Debt
Health care spending is rising even faster than Social Security spending – both as a result of population aging and rising per-person health care costs.

In our analysis of health spending and the federal budget, we found that If health spending were held constant at today’s level, debt would stabilize around 90 percent of GDP; if it had been held constant in 2010, debt would peak in about a decade and return to today’s level by 2040.

Said more accurately, “If only you people would spend more out of your own pockets on health care, and take less from the government, the federal debt would be lower, the economy would decline and the Gap between you and the rich would widen.”

12. Tax Expenditures Remain Costly
While Social Security, Medicare, and Medicaid are the fastest growing federal programs, tax breaks remain costly.

According to the Joint Committee on Taxation, income tax expenditures will cost about $1.5 trillion per year in lost revenue.

While one goal of tax reform was to dramatically shrink the size and number of these tax breaks, the Tax Cuts and Jobs Act actually only eliminated one significant tax expenditure, and it did little to reduce the overall cost of tax preferences.

In the misleading world of the Committee for a Responsible Federal Budget, the words “Tax Expenditures” are not expenditures at all. They are economic savings.

Those are the dollars not taken from your pockets. Those are the growth dollars that remain in the economy.

Then after telling us that Social Security, Medicare, Medicaid and other benefits to you should be cut, the CRFB suddenly expresses false concern for your future generations:

13. Policymakers are Prioritizing the Past Over the Future
Instead of leaving future generations better off, we’re leaving them with a stack of large bills.

Interest payments on the debt are expected to exceed federal spending on children by 2020 and all federal support for children (including tax expenditures and spending) by 2021.

That means we’ll soon be spending more financing the consumption of past generations than investing in our future.

All lies. Future generations will not pay for future federal deficit and debt, any more than current generations pay for current deficits and debt.

Who pays? The government pays for its deficits by creating dollars from thin air, just as it has done ever since it created the very first dollar, way back in the 1780s.

Federal taxes do not fund federal spending. All tax dollars are destroyed upon receipt, and brand-new dollars are created, ad hoc, each time the government pays a creditor.

If interest payments exceed federal support for children, the government could solve that “problem” simply by spending more on children.

Meanwhile, federal interest payments add growth dollars to the economy.

And finally, we come to the biggest whopper of them all:

14. Reducing Debt Would Increase the Size of the Economy
One consequence of a rising national debt is that it crowds out productive investment, which in turn slows income growth.

The corollary is that lower debt can actually boost income growth.

CBO estimates that if debt were reduced to its historic average of about 41 percent of GDP by 2048, per-capita GNP (a rough parallel for average income) would be about $6,000 (6.5 percent) higher than under current law.

Simply holding debt at current levels would boost income per person by $4,000 per year in 2048.

This is so laughably wrong, that one wonders how anyone with an IQ above 50 could possibly believe it.

Federal debt, by law and not by necessity, results from federal deficits. Federal deficits are economic surpluses. When the government runs a deficit, the economy runs a surplus — more money enters the economy than leaves it.

It takes a peculiar sort of illogic to claim that adding dollars to the economy “crowds out productive investment, which slows income growth.”

In short, the CRFB and its rich patrons want you to believe that cutting your federal benefits and/or increasing your federal taxes actually increases your income. 

If the people who wrote this nonsense actually believe it, they are woefully ignorant of basic economics, and if they don’t believe it, they are shameless liars.

Take your pick.

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

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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

 

The CRFB myth machine keeps on rolling

It takes only two things to keep people in chains:Image result for fortune teller
The ignorance of the oppressed
And the treachery of their leaders

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Quotes: 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.”

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. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets.”

Alan Greenspan (Re. Social Security solvency): “There’s nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

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The CRFB (Committee for a Responsible Federal Budget) was formed in 1983. For the past 38 years, they have been telling the same old story, namely that the federal deficit and debt are too high —  really, really, really too high.

But while that myth . . . uh, story, remains the same-old, same-old, year after year, there is another story they conveniently have omitted: What does it mean for the deficit and debt to be high — really, really high? Why should we care?

  1. Does it mean the federal government is running short of dollars?
  2. Does it mean the federal government will be unable to pay its debts?
  3. Does it mean your taxes need to rise?
  4. Does it mean the economy will suffer because of the federal debt?
  5. Does it mean the federal debt will cause hyperinflation?
  6. Does it mean no one will want to buy Treasury securities?

You might think that after 38 years, the CRFB would be ready, willing, and able to provide data to answer such questions. But amazingly, during those 38 painfully wrong years, the CRFB never even attempts to answer.

They just keep repeating the myth that the deficit and debt are too high. The CRFB seems to believe that if they repeat a lie often enough, they can get people to believe it.

Here are excerpts from the sorry and ongoing saga of CRFB, the paid mouthpiece for the rich:

Welcome to the woeful world of free-lunch economics
By Maya MacGuineas. Opinion Contributor — 04/13/18

Congress and the president have been on quite the borrowing binge over the past few months — from multiple rounds of tax cuts to smashing through the budget caps. Meanwhile, talk of paying for these budget-busting policies has just about disappeared.

Immediately, MacGuineas jumps into the phony “paying for” theme. Why is it phony? Because the federal government, unlike state and local governments, uniquely is Monetarily Sovereign.

Being Monetarily Sovereign, the federal government created the very first dollars out of thin air, by creating laws out of thin air. And ever since that time, 240 years ago, the federal government has continued to create dollars out of thin air.

U.S. dollars are not physical things. They are balance sheet notations, and the federal government owns the balance sheets.

Monetarily non-sovereign, state and local government can’t do this. Nor can businesses. Nor can the euro nations. Nor can you and I. The public’s confusion between Monetary Sovereignty and monetary non-sovereignty, is what helps the CRFB promulgate its myth.

But, in fact, as both former Fed Chairmen Alan Greenspan and Ben Bernanke admit, the federal government, uniquely cannot run short of its own sovereign currency, the dollar (which answers questions #1, and #2, above).

Given that the federal government has the unlimited ability to create its own sovereign currency, it neither needs nor uses tax dollars to pay its bills.

In fact, even if all federal tax collections fell to $0, the federal government could continue to spend dollars, forever, simply by creating more dollars (which answers question #3, above).

So, why does the federal government levy taxes? Federal taxation mostly is a relic of our gold and silver standards — those years when the federal government voluntarily surrendered its unlimited ability to create dollars.

Taxation also is an economic control device to reduce certain activities — for instance sin taxes on cigarettes, gasoline, and liquor. Unlike state & local taxation, federal taxation does not fund its spending. 

Finally, the rich, who own the federal politicians, do not want you to know that federal spending is not limited by debt or dollar supply.

Continuing the CRFB article: Instead of the sensible conversation that starts with: “If something is worth doing it is worth paying for,” we have been hearing from our leaders: “Don’t worry, this will pay for itself,” and, “This is too important to have to pay for.”
Welcome to the world of free-lunch economics.

By “pay for itself,” many of our leaders try to make you believe something like: “Increased deficits will cause increased income, which will cause increased tax collections, which in turn, will reduce deficits, leading to lower tax collections.”

The CRFB is right. The whole notion that increased deficits can cause reduced deficits is nutty. The idea leads to a ridiculous endless circle, in which high deficits would beget low deficits, which presumably would again beget high deficits.

Thus, it logically and mathematically is impossible for deficit spending ever to “pay for itself” — impossible and wholly unnecessary for a Monetarily Sovereign government.

More to the point, however, the CRFB never acknowledges that increased deficits actually result in economic growth.

Deficit spending grows the economy by putting dollars into consumers’ pockets, which is why when deficit growth decreases we have recessions, and when we have recessions, deficit growth cures them.

The CRFB never mentions this fact, though that answers question #4, above. The economy does not suffer because of federal debt; it thrives.

Recessions (vertical bars) tend to begin after deficit growth has been low, and are cured by increased deficit growth.

Continuing the CRFB article: Just this week, we learned that budget deficits are now projected to be $12.4 trillion over the next 10 years — an increase of $2.3 trillion since 10 months ago.

The milestones of trillion-dollar deficits about to return and become permanent, the debt reaching the size of the economy in just over a decade, and annual interest payments increasing by $600 billion over the decade are signs this new school of economics is not putting us on a smart path.

Why are “trillion-dollar deficits” a problem? The CRFB never tells you, principally because they aren’t a problem — not for the federal government and not for taxpayers. No, your grandchildren never will pay the U.S. federal debt, just as you have not paid the debt accumulated for the past seventy years.

(Deficits are a problem for monetarily non-sovereign state and local governments, and for you and me, but the CRFB doesn’t want you to understand the difference.)

And as for question #5 above, do not believe the scaremongers, who tell you deficit spending will cause a Zimbabwe, Weimar Germany hyperinflation (which the U.S. never has had in all its 240-year history).

This graph shows the huge increase in federal debt compared to our modest increase in inflation.

Federal debt (red line); inflation (blue line)

(Aside: Hyperinflations historically have not been caused by deficit spending. They are caused by shortages. Zimbabwe’s was a shortage of food. Germany’s was a shortage of gold. Deficit spending often has been a government’s bad response to hyperinflation, not a cause.)

Continuing the CRFB article: In just a little over a decade, our debt could be the highest it has even been compared to the overall economy. The current record was set just after World War II. The difference here, though is there is no world war. No recession. No depression. Unemployment is low. Growth is strong.

There is no need for stimulus and no rationale to rack up such a huge tab during stable times and already historic levels of debt.

Apparently, Ms. MacGuineas doesn’t realize that she has just admitted the truth:

The highest debt it has even been” and “historic levels of debt” have brought us “no recession, no depression, low unemployment and strong growth.”

So Ms. MacGuineas, please remind us again why you wish to reduce the debt.

Continuing the CRFB article: Instead, at this point in the business cycle, we should be running surpluses (remember that quaint concept?) to be prepared for the next emergency. But there is zero talk of changing course.

Not only are federal surpluses a “quaint concept,” but they are an economically suicidal concept. U.S. depressions tend to come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Why have federal surpluses repeatedly led to economic failures?  Because federal surpluses require either higher taxes and/or lower federal spending. In short,  federal surpluses take dollars out of consumers’ pockets, which depresses the economy. 

It’s really a simple and straightforward concept, which the CRFB wishes to obfuscate. Don’t fall for it.

Continuing the CRFB article: Sure, there is the empty idea of voting on a balanced budget amendment. If people were serious, this would be a reasonable idea for discussion.

Many details would need to be worked out, like escape hatches for recessions and emergencies, and balancing restraints on spending and revenue.

If a balanced budget was a “reasonable idea,” why would it need “escape hatches for recessions and emergencies?”

Hers is a tacit admission that a balanced budget cannot grow the economy, and whenever a balanced budget causes economic stagnation (which it always has), we need to “escape” from the balanced budget.

Escape how? By running federal deficits — by pumping dollars into the economy — and the bigger the deficits, the faster the recovery.

Continuing the CRFB article: Our fiscal hole is now so large that balance is a long, long way off, and it is better to focus on more credible goals. But come on, in this context, the balanced budget amendment is a total joke.

Here, we agree with MacGuineas. The balanced budget amendment is a total joke, because it would cause the greatest depression in American history, with no way out, no “escape hatch.”

Continuing the CRFB article: Voting to require balancing the budget without putting out a budget that does indeed balance is still looking for that free lunch.

MacGuineas never explains “free lunch,” but we’ll try to help her. A “free lunch” is what the rich receive whenever deficit reduction plans are put forth. The rich always make sure to escape the pain, while the poor and middle-income groups suffer.

Continuing the CRFB article: Our debt is projected to increase by almost 20 percentage points over the next 10 years. Spending on health, retirement and interest alone will double in dollars, and entitlement reform is long overdue.

During the next 13 years, our nation’s major trust funds for highways, Medicare hospital insurance and Social Security will run out of full funding. If Congress had addressed this problem 10 years ago, revenue and benefit changes would have been much smaller.

And here, the CRFB reveals its true motive: On behalf of the rich, the CRFB wants to cut Medicare, Social Security, and all other social programs (aka “entitlement reform”). 

Using the lie of unaffordability, the rich want to widen the income/wealth/power Gap between the rich and the rest.

(The Gap is what makes the rich, rich. Without the Gap, no one would be rich; we all would be the same. The wider the Gap, the richer they are.)

Continuing the CRFB article: Even today, changes can be phased in. But if we wait a few more years, the choices are much more difficult. Instead, this fiscal situation has been made dramatically worse by the large, irresponsible, unpaid-for tax cuts.

Taxes are “paid for” by taxpayers. But, who pays for tax cuts? Answer: The federal government which, being Monetarily Sovereign, neither needs nor uses tax dollars.

Continuing the CRFB article: Free-lunch economics appears poised to do major damage to our economy, slowing growth, increasing the chances of some type of crisis and starving the nation of the resources and flexibility to meet new challenges — from the threat of recession to grappling with artificial intelligence and the future of work.

Let’s examine the above nonsense paragraph. MacGuineas claims deficit spending “slows economic growth.” But how does pumping more dollars into the economy — the thing the government does to cure recessions — slow economic growth? It doesn’t.

And how does adding dollars to the economy “starve the nation of resources and flexibility to meet new challenges”? It’s all ridiculous.

Finally, if one wishes to “grapple with artificial intelligence (AI),” we must provide a source of income for people who have lost income to AI. Federal deficit spending, not tax increases, are needed.

Continuing the CRFB article: Policymakers have dug themselves into quite the hole. Our historic and unsustainable debt cannot be fixed with more tweaks and gimmicks.

What is “unsustainable” about the debt? It consists of deposits plus interest. The deposits are paid off with dollars already in the accounts, and the interest is paid by a government that has the unlimited ability to create dollars.

So, “unsustainable,” a word the CRFB often uses to describe the deficit and debt, is a lie, a Big Lie.

And then finally MacGuineas repeats the real purpose of the CRFB:

Continuing the CRFB article: It will take a big deal including new discretionary spending caps, a real plan to fix our entitlement programs and changes to bring in more revenues. Fairy dust, wishful thinking and free-lunch economics won’t get us there.

The real purpose of the CRFB is to facilitate cutting “entitlement” programs — Medicare, Social Security, Medicaid, aids to the poor, aids to education.

The CRFB wants to cut the programs that help narrow the Gap between the rich and the rest. That is the fundamental purpose of the CRFB.

Let’s end with a mention of question #6: Does it (a large debt) mean no one will want to buy Treasury securities?

As we already have discussed, the federal government does not need to sell T-securities — at least not to fund spending.  And even if the federal government did need to sell T-securities, and in the remote possibility that no one wanted to buy them, the Federal Reserve has the power to buy them — in fact, it already has, many times.

An excerpt from a December 22, 2010, Wall Street Journal article by Jon Hilsenrath, gives you one example:

“Back in March 2009, Mr. Ben Bernanke told CBS News’s Scott Pelley that the Fed was printing money to fund an earlier bond-buying program.

“It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank.

“So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed.

“It’s much more akin to printing money than it is to borrowing.”

The Federal Reserve, an agency of the federal government, the bank where other federal agencies maintain accounts, has the unlimited ability to “use the computer to mark up the size of the account that they have with the Fed.”

That is how the federal government creates dollars. It uses the computer to mark up accounts. It can do this endlessly if it chooses.

So think about it. If you could use your computer to create unlimited dollars simply by marking up your bank account, at any time, and in any amount you chose, would you worry about debt? Would you need to borrow? Would you need to ask anyone for dollars?

Of course not. And that is why the CRFB is a fountain of lies — lies that hurt America, just to widen the Gap between the rich and the rest.

To summarize:

  1. The federal government is not running short of dollars.
  2. The federal government always will be able to pay its debts.
  3. Your taxes do not need to rise.
  4. The economy will not suffer. because of the debt.
  5. The debt will not cause hyperinflation.
  6. It does not mean no one will want to buy Treasury securities.

Continuing the CRFB article: Maya MacGuineas is the president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt.

MacGuineas should be ashamed of damaging America by telling such monstrous lies, but apparently, a nice salary can be convincing.

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

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

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 (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

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MONETARY SOVEREIGNTY