The Relentless Con Job By The Rich. The Big Lie In Economics

The efforts of the rich to become even richer never end.

The rich incessantly promulgate lies about our economy. More importantly, they bribe the primary influencers — the politicians, the media, and the economists — to spread the Big Lie that federal spending is funded by federal taxes.

File:Scottpelley.jpg - Wikimedia Commons
Bernanke: “It’s not tax money… We simply use the computer to mark up the size of the account.”

In reality, federal spending is funded by ad hoc federal money creation, not taxes.

Unlike state and local government taxes, all federal tax dollars are destroyed upon receipt.

The tax dollars no longer exist in the economy (the private sector), and since the federal government has infinite dollars, the tax dollars no longer exist anywhere.

The Big Lie convinces the populace that the federal government’s ability to provide benefits is financially limited by tax receipts.

(Politicians are bribed via campaign contributions and promises of lucrative jobs. The media are bribed via advertising dollars and actual ownership. Economists are bribed via gifts to universities and lucrative positions on “think tanks.”) 

Whenever you hear about a federal benefit, and someone asks, “Who will pay for it?” you should know you are about to listen to the Big Lie. The answer is: “The federal government will pay for it by creating dollars.”

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

“Social Security and Medicare are about to become insolvent” is an example of the Big Lie, the purpose of which is to distance the rich from the rest of us.

“Rich” is a comparative, not an absolute. If you have a million dollars, you are rich if most others have less than a million. But you are not wealthy if everyone else has ten million.

That leaves you two ways to become richer: Get more for yourself or make the others have less. The rich in America have chosen both courses.

They try to grab more for themselves; their efforts to force you to have less are not as obvious.

The rich receive most of their income from sources other than salaries. Consider FICA. Congress has deemed FICA should be collected only from salaries, not from other forms of income.

Further, Congress has decided FICA is to be collected on salaries less than $142,800. Anything above that is not taxed.

The FICA limit is just one of the thousands of tax breaks the rich have “encouraged” Congress to give them. The purpose: To widen the Gap between them and you. Widening the Gap makes them richer.

U.S. federal finances are unlike state & local government finances, business finances, and euro nation finances.

The Map and the Territory, by Alan Greenspan | Financial Times
Former Fed Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

The U.S. government is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency.

It never unintentionally can run short of dollars.

Yet we see organizations funded by the rich claiming that federal spending, which goes to the middle- and lower-income people, is detrimental to the middle- and lower-income people.

They want you to believe you should receive lower benefits and pay more taxes.

If they can cement that belief in your minds, you’ll vote for the very people who take money from your pocket.

Here is the entirety of a page posted by the Committee For A Responsible Budget, one of the organizations that continually tries to foist on you the false idea that you should have less.

Every single sentence, including the headline, is false and/or an outright lie:

Why High and Rising National Debt is a Problem

FALSE. High and rising National (i.e., federal) Debt is not a problem. It is not even Debt. It is the total of deposits into Treasury security accounts at the Federal Reserve.

These accounts resemble safe-deposit boxes. When you buy a T-bill, T-note, or T-bond, you open an account at the Federal Reserve and deposit your dollars into it.

The federal government never touches those dollars. It has no need to.

The government can pay off the so-called “debt” merely by returning to you the dollars in your account.

This is no burden on the government, taxpayers, or the economy. There is no “Problem.”

High and rising national Debt will threaten economic growth and the standard of living for all Americans. High Debt will slow the growth of the economy and wages.

FALSE. Federal “debt,” i.e., the total of deposits in T-securities, is set by law to equal the cumulative total of federal deficits.

Bernanke sees decent chance for Fed to pull off a 'soft-ish landing' | The  Hill
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.”

Deficits are the difference between the amount of money the government takes out of the economy vs. the amount it puts in (with some going to foreign nations).

Rising national “debt” occurs when the federal government puts more dollars into the economy than it takes out.

There is no mechanism by which adding money to the economy can “slow the growth of the economy and wages.”

On the contrary, when economic growth slows, the government adds more stimulus dollars (increases the “debt”) to prevent or cure a recession.

The “debt” has no direct effect on wages, which are a function of business profits (stimulated by federal deficit spending) and labor supply.

As Debt rises, higher interest payments will crowd out important investments in areas like education, infrastructure, and research that can help grow the economy.

FALSE. Federal Debt does not force higher interest rates. Interest rates are set arbitrarily by the Federal Reserve to control inflation.

The peaks and valleys of changes for Federal deficits (blue) neither correspond to changes in Interest rates (red) nor are they a leading indicator. Note the 12 years 2008 – 2020, when federal deficit spending grew massively while interest rates neared zero.

Federal interest payments do not “crowd out” other federal payments for “education, infrastructure, and research. The federal government has infinite money with which to pay for anything.

During periods of high deficit spending, interest rates have been low.

Getting the Debt under control once the crisis is over will be very beneficial for generations to come, from higher wages to increased investment to lower borrowing costs for families and businesses.

FALSE. This paragraph is just a restatement of the previous section. There is no mechanism by which fewer dollars coming into the economy can cause “higher wages, increased investment, and lower borrowing costs.

The last decade shows the opposite: Higher deficits along with higher wages, increased investment, and low borrowing costs.

The Congressional Budget Office predicts that the economy will grow faster with Debt on a declining path as opposed to a rising one.

FALSE: History shows that declining Debt leads to depressions and recessions.

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.

The reason is quite simple. Reducing federal Debt requires taking dollars out of the economy. 

Just as adding stimulus dollars to the economy prevents and cures recessions and depressions, taking dollars out of the economy causes recessions and depressions.

The rich do not fear recessions and depressions. They are less harmed than the rest of us. They have more cushion to weather the hard times.

During recessions and depressions, workers become more desperate for jobs, giving the rich the opportunity to cut wages and increase their own relative incomes.

In addition to publishing the completely non-sensical paragraphs just discussed, The rich-run CRFB runs “hearings” on the condition of the government’s finances.”

These hearings contain nothing more than recitations of the Big Lie — false propaganda we have just discussed. The purpose will be to give Congress excuses to:

    • Cut Social Security benefits
    • Cut Medicare benefits
    • Eliminated Obamacare
    • Increase FICA taxes
    • Cut other benefits for the poor and middle-classes
    • Widen the income/wealth/power Gaps between the rich and the rest 

The drumming of lies and misstatements from the rich and toadies for the rich is relentless. So long as it works to indoctrinate the public, it never will end.

The attempts at indoctrination end only when you, the public, demonstrate your understanding of the lies and your willingness to punish the liars.

Fool you once; shame on them. Fool you thousands of times, over and over and over; shame on you.

[No rational person would take dollars from the economy and give them to a federal government that has the infinite ability to create dollars.]

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

……………………………………………………………………..

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

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

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

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

MONETARY SOVEREIGNTY

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

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

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