You can rely on the CRFB to get it wrong. But why?

[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]

The Committee for a Responsible Federal Budget (CRFB) is a fountain of misinformation, or should we say, “disinformation”?

Clearly, they are providing misinformation, i.e. wrong information, but the real question is, do they know it’s wrong, i.e disinformation?

Because they do extensive data analysis, I believe they simply must know their information is wrong. So why do they promulgate so much nonsense?

Before we answer that question, let’s see what they get wrong. Here are some excerpts from their website.

Gas Tax Holiday Would Take A Wrong Turn
FEB 15, 2022 | TAXES
The White House and some in Congress are reportedly considering suspending the 18.3 cent federal gas tax for the remainder of 2022.

The Committee for a Responsible Federal Budget recently estimated that such a proposal would reduce gas tax revenues by $20 billion and, without the general revenue transfer proposed in recent legislation, would advance the Highway Trust Fund insolvency date from 2027 to 2026.

Assuming their numbers are correct, what they really are saying is: “The proposal would reduce the amount of money taken out of the private sector (also known as ‘the economy’) by $20 billion.”

Adding dollars to the private sector is stimulative: taking dollars out of the private sector is recessive. In short, the reduced gas tax revenues would be a $20 Billion economic stimulus.

The CRFB seems to hate anything that stimulates the economy, especially if it directly benefits the middle- and lower-income groups as a reduced gas tax would do.

Further, the so-called Highway Trust Fund is not a real trust fund (see “The Phony Trust Fund Controversy”) and it cannot become insolvent unless Congress and the President want it to become insolvent.

The U.S. government, the creator of the U.S. dollar, cannot run short of dollars. Thus, no agency of the U.S. government can become insolvent, unless that is what Congress wants.

(Former Fed Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”)

To prevent the insolvency of any agency, Congress merely passes a law that provides the agency with more dollars. Congress has the infinite ability to pass such laws.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

With inflation at a 40-year high, policymakers are appropriately focused on how to bring prices under control.

But new tax cuts aren’t going to stop this inflation; after all, excessive tax cuts and spending are part of what caused high inflation.

Contrary to popular wisdom, no inflation in history ever has been caused by excessive tax cuts or spending. All inflations are caused by shortages of key goods and/or services.

Interest rates (blue) and inflation (green) have trended down, while federal debt (red) has increased.

For the past 10 years, federal deficit spending has increased massively, with minimal inflation. Now, suddenly, inflation has increased. Why?

Clearly, the cause is not deficit spending, otherwise it would have happened sooner.

Inflations are caused by shortages of key goods and services..

Today’s inflation is caused by the sudden confluence of several factors, all shortages: Labor, food, gasoline, computer chips, transportation, sand, among others.

(Yes, I said “sand.” U.S. Shale Production Hindered By Sand Supply Crunch.)

While massive federal spending has been with us for at least a decade, what has changed recently to cause the sudden change in inflation from low to high?

The answer: COVID.

The worldwide impact of the disease has caused the shortages that lead to inflation.

The only thing that will cure the inflation is to cure the shortages. And that can be accomplished by more federal spending to obtain the needed goods and services:

More federal spending to encourage oil drilling and/or renewable energy.
More federal spending to support farming
More federal spending to support chip manufacture
More federal spending to support transportation
More federal spending to support hiring (i.e. the elimination of FICA taxes and the reduction of income taxes at the lower end)

Reduced federal deficit spending will lead only to recessions, as it always has.

Reductions in federal debt growth lead to inflation
When federal deficit spending (blue) is reduced, we have recessions (vertical gray bars), which are cured by increases in federal deficit spending.

While a gas tax holiday might provide some temporary relief, much of the benefit may flow through to oil producers or lead to higher prices in other sectors of the economy.

It makes no sense for low gas prices to cause price increases elsewhere. While low gas prices may cause an increase in demand for cars, every industry would see lower production costs, which will ease inflation.

Benefitting oil producers is not something to be avoided. Financially encouraging them to pump more oil will ease the scarcity of oil.

By boosting demand in an already over-stimulated economy, the holiday would likely boost inflation in 2023 once it ends. The holiday will also undercut the Administration’s efforts to address climate change.

The CFRB would like you to believe the economy is “overstimulated.” No one knows what an “overstimulated” economy means, but it sure sounds terrible, doesn’t it?

Presumably, it means companies are making more profits so that they will hire more people and pay more salaries to the lower- and middle income people, thereby narrowing the income/wealth/power Gap between the rich and the rest.

Presumably, it means unemployment is low, so there are fewer impoverished children and their parents, again narrowing the Gap between the rich and the rest.

“Gap Psychology” is the desire to widen the Gap below and to narrow the Gap above. All groups are subject to Gap Psychology, but the very rich are the most expert at effecting it.

As for climate change, yes, encouraging more oil production will increase climate change, in the short term. But financially encouraging more use of renewables will have long-term climate benefits.

Meanwhile, the federal government would be out $20 billion this year alone – and much more if the holiday were extended.

The federal government has infinite money. Infinite minus $20 billion, still is infinite. The federal government always will have the infinite ability to write laws, and those laws have the unlimited ability to create dollars.

The CRFB cries crocodile tears for the infinitely rich U.S. government, but no tears for you. They want you to pay the infinitely rich government more of your scarce dollars.

The Highway Trust Fund is just five years from insolvency, and the last thing we need is to cut its primary revenue source or paper over shortfalls with yet another general revenue transfer.

No, the last thing we need is liars telling us that the federal government is running short of its own sovereign currency, so you poor folks need to pony up more dollars, or receive fewer, benefits.

“Insolvency” is the big, fake bogeyman with which the rich try to scare you.

The Big Lie in economics is: “Federal taxes fund federal spending.” While state and local taxes do fund state and local spending, the federal government, being Monetarily Sovereign, does not rely on, or even use, tax dollars.

In fact, the U.S. Treasury destroys all tax dollars upon receipt. It creates new dollars, ad hoc, every time it pays a creditor.

(How does the Treasuy destroy tax dollars? The dollars in your checking account are part of the M1 money supply. When the Treasury receives those dollars, they disappear. They no longer are part of any money supply measure. They effectively are destroyed.)

Statement from the St. Louis Fed:
“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.

In this sense, the government is not dependent on credit markets to remain operational.”

Thus, the federal government has infinite dollars; it can’t run short; and telling people to give the government more and to accept less is just an example of how the Big Lie works.

As it stands, the gas tax will only cover half of highway and transit spending by the time the trust fund runs out.

In fact, the gas tax covers none of transit spending. Those tax dollars are destroyed. All federal spending, including federal transit spending, is funded by ad hoc, federal money creation.

As inflation subsides, we should either raise that tax or find a new funding source to supplement or replace it.

We don’t need to find a new funding source. And we certainly don’t need to raise taxes. The federal government is the best funding source:

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

As we’ve stated, the CRFB, acts repelled by the fact that federal spending helps narrow the income/wealth/power Gap between the rich and the rest.

A well-designed carbon tax could generate ample tax revenue while substantially reducing carbon emissions and tempering excessive demand.

A well designed carbon tax might be a good idea from an ecological standpoint. But it’s a silly idea if the purpose is to give private sector dollars to a government that has the infinite ability to create dollars.

The pain Americans are feeling at the gas pump – and with rising costs throughout the economy – should be taken seriously and addressed thoughtfully.

The gas price pain will be eased by raising gas taxes??? That’s the utter nonsense the CRFB wants you to believe.

While cutting the gas tax may have political appeal, it would move in exactly the wrong direction, worsening rather than improving our nation’s economic challenges.

The rising costs should be taken seriously, which is why the cost of gasoline should be reduced — by cutting the gas tax.

Inflation takes dollars out of your pocket. The CRFB’s method of taking inflation seriously” is by taking even more dollars out of your pockets via tax increases.

Why does the CRFB act this way?

Because the rich, who run America, also run the CRFB, and support it with donations. The rich and the CRFB want to widen the income/wealth/power Gap between the rich and the rest.

The rich always wish to be richer. The only way to be richer is to widen the Gap. There are two ways the rich can widen the Gap: Obtain more money for themselves and/or make sure you have less money by paying more taxes.

Either one will make the rich richer, and the CRFB seems to be doing everything it can to reach that goal.

In that vein, I just received this Email from CRFB:

Trust Fund Solutions
Featuring Senators Angus King (I-ME) and Mitt Romney (R-UT)

Committee For a Responsible Federal Budget - Our Maya MacGuineas testified before the House Budget Committee yesterday on fiscal goals. Read her testimony http://crfb.org/papers/maya-macguineas-testimony-setting-fiscal-goal. Watch the video https://www ...
Maya MacGuineas:Paid by the rich to tell you that the federal government’s trust funds soon will be insolvent.

The major government trust funds for Social Security, Medicare, and Highway spending face insolvency in the next decade-and-a-half.

Policymakers need to act sooner rather than later to prevent abrupt across-the-board benefit cuts, assure a more sustainable debt path, promote faster economic growth, and achieve a number of important policy goals.

How raising taxes will help “promote faster economic growth” is a mystery the CRFB never really explains.

Trust Fund Solutions will feature opening remarks from Senator Angus King (I-ME) and a discussion between Senator Mitt Romney (R-UT) and Committee for a Responsible Federal Budget president Maya MacGuineas.

The event will also feature a panel of experts, one focused on each trust fund.

The Committee for a Responsible Federal Budget will also debut its new Trust Fund Solutions website and educational tools.

You can bet that the “solutions” for the mythical “Trust Funds” will involve tax increases (for which the rich will given loopholes) plus benefit decreases, both of which will widen the Gap between the rich and the rest.

Widening the Gap is what the rich pay the CRFB to do.

SUMMARY
1. The Big Lie in economics is that the U.S. federal government can run short of its own sovereign currency, the U.S. dollar. Not only does the govarnment itself have access to infinite dollars, but no agency of the government can run short of dollars unless Congress and the President want that.

2. The government neither needs nor uses tax dollars, which are destroyed by the Treasury upon receipt.

3. Federal deficit spending never causes inflations (scarcities are what cause inflations). Federal deficit spending can cure inflations by curing scarcities. Reductions in federal deficit spending lead to recessions or depressions.

4. The rich grow richer by widening the Gap between the rich and the rest. Gap widening has two paths: Gaining more for the rich and/or forcing the rest to accept less.

5. The CRFB is paid to aid the rich by convincing the populace to accept Gap widening.

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

The economics scare-mongers defy facts. Were you fooled?

Since 1981, the CRFB (Committee for a Responsible Federal Budget) has been scaring you about a “soon-to-come economic doomsday.”

The fiscal apocalypse always is imminent — always just around the corner.

Does the fact that it never arrives embarrass the CRFB? Apparently not,

If you made the same wrong predictions every year for the past 40 years wouldn’t you be a bit hesitant about doing it yet again? And if you were one of the CRFB’s readers, wouldn’t you have learned long ago not to trust anything these people say?

It seems that being wrong again and again and again, doesn’t cause them any embarrassment, nor does it cause their followers any second thoughts.

The CRFB keeps peddling the same nonsense every year, using exactly the same words. Only the numbers change.

Today, the Congressional Budget Office (CBO) released its March 2021 Long-Term Budget Outlook, confirming that the federal budget is on an unsustainable long-term trajectory. 

Let us pause to examine the word “unsustainable.” What does it mean? The CRFB never says.

Does “unsustainable” mean the federal government will go bankrupt? No, that cannot happen.

It can happen to monetarily non-sovereign entities like U.S. states, counties, and cities. It can happen to euro nations because they are monetarily non-sovereign. It can happen to businesses, and to you and to me.

But it cannot happen to the U.S. government. It is Monetarily Sovereign. It creates U.S. dollars by the very act of paying creditors.

[To pay a creditor, the federal government sends instructions (in the form of a check or wire) to the creditor’s bank. The instructions say, “Pay to the order of________”

When the bank receives those instructions, it does as it is told. It increases the numbers in the creditor’s checking account. At the moment that happens, a money measure known as “M1” increases.

The bank then clears the instructions through the government’s own Federal Reserve Bank, which always approves government instructions. In short, the government approves its own instructions.

That is the way the federal government creates dollars.]

Because the government never can run short of instructions, it never can run short of dollars.

Does “unsustainable”  mean the federal government will be unable to pay its debts? No. Clearly having unlimited money gives the government unlimited ability to pay its debts.

Does “unsustainable” mean countries or people will begin to reject payment in dollars? No. The U.S. has a massive economy. Long after people begin to reject euros, and the money of smaller economies like those of Japan, Canada, Australia, England, China et al, they still will accept U.S. dollars.

Does “unsustainable” mean that one day, China will demand a return of all the dollars it has lent the U.S.? No. China has not lent the U.S. any dollars. (The U.S. government, having the unlimited ability to create dollars, has no need to borrow dollars.)

What erroneously is termed “borrowing” actually is China making deposits of U.S. dollars into its own T-security accounts held at the Federal Reserve Bank. There the dollars remain until China wants them back. The U.S. government has no need for them.

Whenever China wants those dollars returned, the Bank merely transfers them to China’s own checking account, at any bank in the world. This is a simple money transfer that is no burden on the U.S. or on taxpayers. It happens every day of the week.

Does “unsustainable” mean we will have uncontrolled inflation? No, our Monetarily Sovereign government has unlimited control over the value of the U.S. dollar, a control it has exercised many times over the years.

It formerly was accomplished by arbitrarily changing the dollar’s exchange value with gold or silver. Today, it is accomplished by arbitrarily changing the interest rates paid on Treasury Securities. Raising the rates makes the dollar more valuable (i.e., decreases inflation).

So what does “unsustainable” mean? It means, “We want you to be worried, frightened even, about some unknown thing lying in the shadows.” But folks, the only thing lying is the CRFB, and they do it every day:

Analysis of CBO’s March 2021 Long-Term Budget Outlook | Committee for a Responsible Federal Budget (crfb.org)

 Under current law, CBO projects federal debt held by the public to rise from less than 80 percent of GDP at the end of FY 2019 to 202 percent of GDP by 2051.

Under a more realistic scenario, debt could reach nearly 260 percent of GDP by 2051.

Why is it bad that the total of deposits into T-bill, T-note, and T-bond accounts (wrongly called “debt”) will be more than double Gross Domestic Product?

It isn’t. One has nothing to do with the other. It’s like announcing that the number of blond-haired people will be double the number of fire-plugs in Chicago. The “debt”/GDP ratio is an irrelevant apples/oranges comparison.

So-called “federal debt” is the total of deposits into T-security accounts, similar to bank savings accounts. In today’s federal bookkeeping system, it also is the net total of federal deficits run by the federal government in the 240 years since the U.S. began.

By contrast, GDP is a one-year total of spending by the U.S. public and private sectors. Increases or decreases in deposits do not correlate with increases or decreases in spending. The U.S. government has the power to stop accepting dollars in T-security accounts, while continuing to spend, forever.

Japan, which has a ratio exceeding 250%, long ago proved the meaninglessness of that meant-to-be-scary debt/GDP fraction.

Perhaps, that is why the CRFB never specifically says what problems the ratio supposedly causes — just a vague reference to “unsustainable.”

Deficits Will Explode. Under current law, CBO projects annual budget deficits will grow to 13.3 percent of GDP by 2051.

While this is lower than the COVID-driven deficit of 14.9 percent of GDP in FY 2020, it will be nearly three times higher than the 2019 deficit of 4.6 percent of GDP, roughly four times as high as the 3.3 percent of GDP average seen over the past 50 years, and higher than any point in modern history outside of World War II and the current crisis.

Ooooh, “explode”! How frightening. The CRFB fails to mention that 2020, 2019, the past 50 years, and World War II, all were periods of large deficits and of economic growth.

And what are those terrible “deficits” the CRFB wants to scare you with? Deficits are times when the federal government pumps more stimulus dollars into the private sector than it removes via taxing.

Not only does federal deficit spending stimulate economic growth, but the economy could not grow without federal deficit spending. In fact, when federal deficit spending is reduced, we have recessions and depressions.

When the growth in federal deficit spending is reduced (red line), we eventually have recessions, which are cured by increases in deficit spending. Other than that, there is no relationship between deficit spending and federal “debt” (blue line).

Is a growing economy something that should frighten you??? The idea is laughable.

Spending Will Continuously Outpace Revenue.

CBO projects spending will grow from 21.0 percent of GDP in 2019 to 31.8 percent of GDP by 2051, while revenue will grow from 16.3 to 18.5 percent of GDP.

Over the long term, rising health care, retirement, and interest costs will cause a significant increase in spending. Revenue will also grow under current law, but only modestly.

In the above paragraphs, the CRFB confuses federal finances with personal finances.

You and I, and indeed all monetarily non-sovereign entities, use income (“revenue”) to fund spending. Without some form of income, we can’t spend.

The Monetarily Sovereign government, which creates dollars, ad hoc, from thin air, whenever it spends, needs no income. In fact, the federal government destroys all income upon receipt.

When, for instance, your tax dollars reach the U.S. Treasury, they cease to be a part of any money measure (M0, M1, M2, M3). Your tax dollars effectively no longer exist.

While comparisons between revenue and spending are important for you and me, they are meaningless for the federal government. The CRFB intentionally confuses the two.

Major Trust Funds Are Headed Toward Insolvency.

CBO projects Highway Trust Fund (HTF) insolvency in FY 2022, Medicare Hospital Insurance (HI) trust fund insolvency in FY 2026, Social Security Old Age and Survivors Insurance (OASI) trust fund insolvency in calendar year 2032 and Social Security Disability Insurance (SSDI) trust fund insolvency in calendar year 2035.

On a theoretical combined basis, the Social Security program will be insolvent in calendar year 2032.

The major “trust funds” are not really trust funds (See “The phony ‘trust fund’ controversy”), and whatever one wishes to call them, they are not “headed for insolvency.”

Given that the federal government has the unlimited ability to create dollars, no federal agency can become insolvent unless the government wishes it to be insolvent. The federal government could (and should) end collection of the FICA tax, and still pay Social Security and Medicare benefits, forever.

The Long-Term Outlook is Similar to Last Year.

Ultimately, high debt levels will slow income and wage growth, increase interest payments, place upward pressure on interest rates, reduce the fiscal space available to respond to a recession or other emergency, place an undue burden on future generations, and heighten the risk of a fiscal crisis.

Once the current crisis ends, policymakers must work to get our long-term fiscal house in order.

It’s all a lie.

Increased debt levels (red line) have not slowed personal income growth (blue line).

As for “increased interest payments,” they stimulate economic growth by adding dollars to the private sector

 

There has been no “upward pressure on interest rates” which instead are at historic lows.

And because the federal government has the unlimited ability to create dollars, by definition it always has infinite “fiscal space” to respond to a recession or other emergency. It has demonstrated this infinite fiscal space by repeatedly passing multi-trillion dollar stimulus packages.

There is no burden on future generations. Future taxes will not fund today’s spending. The only burden on future generations would be a poverty burden if the government had not spent trillions to stimulate the economy.

And finally, “fiscal house in order” is a word-salad meaning nothing with regard to our Monetarily Sovereign federal government.

In Summary

The CRFB article is one gigantic lie, designed to scare those who do not understand the workings of a Monetarily Sovereign entity. It makes false claims that are contradicted by easily seen facts.

These are people who insist you are standing in the midst of a thunderstorm while you plainly can see the sun shining.

Michigan mansion once owned by Eminem is back on the market
Maintaining the Gap

Why does the CRFB lie about the economy? Because they are paid by, and controlled by, the very rich, who because of Gap Psychology, want you to accept higher taxes and lower federal benefits.

[“Rich” is a relative term. If you have $1,000, and everyone else has $1, you are rich.; The wider the Gap between you and those who are poorer, the richer you are.

“Gap Psychology” is the desire to become richer by widening the income/wealth/power Gap below, while narrowing the Gap above.

Being funded by the rich, the CRFB spreads lies that will influence you to believe the federal government can’t afford social benefits.

They want you meekly to accept your lower station in life, so that the rich can maintain or increase their control over America.]

This is the same motive behind the repeated, claims that federal deficit spending is the dreaded “socialism.” It isn’t. “Socialism” is government ownership and control. Though all governments are partly socialistic, most federal spending involves neither ownership nor control.

But the rich know that the word “socialism” has pejorative implications, so they apply it to such federal benefits as Medicare, Social Security, SNAP programs, etc.

It is all a lie proxies for the rich continually repeat until the false ideas are implanted so deeply into the public consciousness, that obvious facts are doubted.

Because of liars like the CRFB, the rich own you, and only the truth can set you free.

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

And just when I began to feel so good about Congress and the President, at long last, . . .

And just when I began to feel so good about Congress and the President at long last beginning to understand and tell the truth about economics, then I am splashed by ice water coming from the Committee for a Responsible Federal Budget.Image result for splashed with ice water

You know the CRFB.

They are the ones who run interference for those in Congress who want you to believe the common myth that federal finances are just like your finances.

Here’s what they say:

Important to Pay For Child Tax Credit Expansion

Democratic lawmakers are planning to unveil legislation to substantially boost the child tax credit from $2,000 to $3,000, providing monthly payments to households and higher payments for younger children.

While this thoughtful proposal to expand support for children deserves consideration, it cannot legitimately be classified as COVID relief and should be fully paid for under the House PAYGO rules and normal principles of budgeting.

Briefly, “PAYGO” is an ill-considered concept that requires federal spending to be matched by taxes or T-security deposits.

It’s part of the myth that federal finances are like personal finances (and state/local government finances), where outgo must be funded by income. That’s why CRFB speaks of “normal principles of budgeting.”

Those “normal principles” are normal for you, normal for your state, county, and city, and normal for businesses. But they are not normal for the federal government, and this is what CRFB does not want you to understand.

When you pay for your spending, you must have a money source.

You must have a paying job, or you must borrow, or you must have savings. That’s because you are monetarily non-sovereign.

State and local governments, and businesses operate the same way. They too are monetarily non-sovereign.

The federal government is different. It is Monetarily Sovereign. It uses neither income nor borrowing. It creates, ad hoc, every dollar it spends,, each time it pays a creditor.

The federal government does not borrow and the taxes it collects are destroyed upon receipt.

The federal government does not have money; it creates money. Last year, it was able to spend trillions of dollars it did not have, and yet never ran short, and never bounced a check.

You can’t do that, nor can any other monetarily non-sovereign entity.

Soon, the Biden administration will spend another $2 trillion the government doesn’t have, and still no checks will bounce. That is Monetary Sovereignty.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

We are still in the midst of a pandemic and economic crisis, and more borrowing will be needed to provide necessary relief and support the economic recovery.

However, emergency borrowing authority must be reserved for pandemic-related needs, not for enacting long-sought-after policy priorities.

It’s amazing how many misstatements the CRFB can pack into three short sentences:

  1. What they call “borrowing” (T-bills, T-notes, T-bonds) merely consists of accepting deposits into T-security accounts. The government does not use those deposits. They remain in the accounts, accumulating interest, until maturity, at which time they are returned. You do not lend to the federal government. You make deposits into your own T-security account.
  2. There is no need to “reserve emergency borrowing authority.” The government can accept as many dollars into T-securities accounts as it wishes, any time it wishes (though again, it doesn’t use the dollars in those accounts. That’s why it isn’t “borrowing.)
  3. I’m not sure why the CRFB tries to differentiate between “pandemic-related needs” and “long-sought-after policy priorities.” Spending is spending. All federal spending is funded exactly the same way: Via money creation.

House PAYGO rules make clear that new spending increases and tax cuts not related to the COVID response or climate change must be paid for.

Expanding the child tax credit clearly doesn’t qualify under either of these exemptions, as it is clearly meant as a permanent policy and is in many ways duplicative with the proposed $2,000 per child recovery rebates.

All federal spending is “paid for.” Apparently, the CRFB falsely means, “paid for via borrowing or taxing.” This demonstrably false statement has been disproven every year. In 2020 alone, trillions of dollars of federal spending easily were “paid for” without the need for tax increases or borrowing.

Replacing the current $2,000 child tax credit with a more broadly available $3,000 to $3,600 credit would help address the disadvantages that kids face in the federal budget.

But we shouldn’t borrow from our kids in order to pay for their care when there are plenty of offsets available.

This mixed-up sentence speaks of “borrowing from our kids,” which probably means future (totally unnecessary) tax increases. But then it talks about “offsets.” And what are those so-called “offsets” that don’t “borrow from our kids?

Overall, this policy will cost over $100 billion per year and more than $1 trillion over a decade if made permanent. Reducing child poverty is a worthy policy priority and one worth paying for.

Senator Mitt Romney’s recent proposal to consolidate existing support for children and workers and repeal regressive tax breaks represents one possible package of offsets.

The $5.8 trillion of tax increases and budget savings proposed by President Biden during the campaign also offers many alternatives.

Offsets could also be phased in to avoid imposing tax increases during a pandemic or disrupting a fragile recovery.

So, to help reduce child poverty, we should “consolidate existing support for children and workers”?? Ah, that lovely little word “consolidate” which in CRFB language means an even smaller word: “Cut.”

And, of course, “repealing tax breaks” is a synonym for “increasing taxes.” (Historically, the breaks the CRFB has seemed to favor eliminating are those that benefit the poor and middle classes.)

It is the “children and workers” who would have to pay the increased taxes and suffer the reduced support.

Offsets could also be phased in to avoid imposing tax increases during a pandemic or disrupting a fragile recovery.

This is a worthy policy aimed at achieving a worthy goal. That’s no reason to throw budget discipline out the window. Borrowing for the pandemic isn’t an excuse for unrelated tax cuts, nor is it a reason to enact permanent policies that aren’t properly financed.

So let’s see. The recovery is “fragile,” but we should have “budget discipline,” which means increasing taxes during this fragile recovery. How wise.

So the government should do something temporary — cut taxes and increase spending — and when we recover the government can increase taxes and cut spending.

“But we shouldn’t borrow from our kids.” Except that “borrowing from our kids” is exactly what future tax increases and spending cuts would do.

If empty-headed claims were dollars, the CRFB would be the wealthiest organization in the world.

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

How To Prevent Economic Growth, by Maya MacGuineas of CRFB

No one can do a better job of describing how to thoroughly destroy the American economy than Maya MacGuineas, head of the Committee for a Responsible Federal Budget (CRFB).  She not only writes articles for the CRFB web site, but she often is invited to spew her wisdom before Congress. She is a true celebrity in Washington.

To give you a taste of her acumen, here are excerpts from an Email I just received from her:

Wed, Oct 7 at 8:29 AM, The Cost of the Trump and Biden Campaign Plans

Whoever is inaugurated on January 20, 2021, will face many fiscal challenges over his term.

Under current law, trillion-dollar annual budget deficits will become the new normal, even after the current public health emergency subsides.

Meanwhile, the national debt is projected to exceed the post-World War II record high over the next four-year term and reach twice the size of the economy within 30 years.

For reasons never explained, MacGuineas repeatedly compares the national “debt” (i.e. the federal “debt”), with Gross Domestic Product.

The former is nothing more than the total of deposits into Treasury Security accounts; the latter is total spending in America. The two are not directly related, co-dependent or in any way comparable.

The federal government could stop accepting deposits into T-security accounts tomorrow, at which time the so-called “debt” would begin to shrink to $0 — and this would have no effect on GDP. Or the government could accept twice as much in deposits, and this too would have no effect on GDP.

So her complaint that these deposits will “reach twice the size of the economy” is meaningless, meant more to shock you than to educate you.

Four major trust funds are also headed for insolvency, including the Highway and Medicare Hospital Insurance trust funds, within the next presidential term.

What MacGuineas (and many others) misleadingly term “trust funds” are not trust funds. They are nothing more than bookkeeping accounts that are 100% controlled by the federal government. These accounts cannot become insolvent unless Congress wants them to become insolvent.

The federal government, which has the unlimited power to create U.S. dollars, along with the unlimited power to change its bookkeeping, can put any numbers it wishes into those accounts, any time it wishes.

The federal government arbitrarily could decide to double or triple the balances in these so-called “trust fund” accounts, and as if by magic, the numbers would double, and MacGuineas could stop fretting.

Whenever you see or hear the words, “federal trust funds,” know you are not being told the truth. Though even federal sites refer to “trust funds,” these are like the Bank in the game of Monopoly™: Changeable according to the players’ desires.

Fiscal irresponsibility prior to the pandemic worsened structural deficits that were already growing due to rising health and retirement costs and insufficient revenue.

It is not fiscally irresponsible for the federal government to spend more. On the contrary, not spending more would be fiscally irresponsible. Federal deficit spending grows the economy, and insufficient federal deficit spending shrinks the economy.

The country’s large and growing national debt threatens to slow economic growth, constrain the choices available to future policymakers, and is ultimately unsustainable.

The above sentence is diametrically wrong. False complaints about the national “debt” being a ticking time bomb,” have been voiced since 1940, while the economy has grown massively.

MacGuineas herself has been making the same wrong predictions continually. and for many, many years, but has learned nothing from her predictive failures.

Yet neither presidential candidate has a plan to address the growth in debt. In fact, we find both candidates’ plans are likely to increase the debt.

Under current law, the so-called “debt” results from federal deficit spending, which pumps stimulus dollars into the economy. MacGuineas opts to remove dollars from the economy by running federal surpluses. She ignores the fact that removing dollars from the economy causes recessions and depressions.

A growing economy requires a growing supply of money. Federal deficit spending increases the supply of money, which grows the economy.

The formula for GDP is: GDP = Federal Spending + Non-federal Spending + Net Exports. All these terms are related to the money supply in the United States.

Under our central estimate, we find President Donald Trump’s campaign plan would increase the debt by $4.95 trillion over ten years and former Vice President Biden’s plan would increase the debt by $5.60 trillion.

Debt would rise from 98 percent of Gross Domestic Product (GDP) today to 125 percent by 2030 under President Trump and 128 percent under Vice President Biden, compared to 109 percent under current law.

Despite MacGuenias’s hand-wringing, both plans are insufficient to grow GDP over time. An average of 1/2 trillion dollars in deficit spending in a $20 trillion economy, amounts to only 5% per year, a level that on average, has led to recessions.

 

Vertical gray lines are recessions. Year to year reductions in federal “debt” growth lead to recessions, while increases in federal “debt” cure recessions.

President Donald Trump has issued a 54 bullet point agenda that calls for lowering taxes, strengthening the military, increasing infrastructure spending, expanding spending on veterans and space travel, lowering drug prices, expanding school and health care choice, ending wars abroad, and reducing spending on immigrants. He also has proposed a “Platinum Plan” for black Americans, which increases spending on education and small businesses.

Meanwhile, Vice President Joe Biden has proposed a detailed agenda to increase spending on child care and education, health care, retirement, disability benefits, infrastructure, research, and climate change, while lowering the costs of prescription drugs, ending wars abroad, and increasing taxes on high-income households and corporations.

Which of the above proposals does MacGuineas suggest should be eliminated?

She never says. She decries deficit spending while not saying where the deficit spending should be reduced. Why is she so reticent? Because she probably understands the economic need for federal deficit spending, but she is paid to deny it.

That is why she has been mouthing the same tripe for so many years.

Debt has already grown from 39 percent of the economy in 2008 to 76 percent in 2016, and is estimated to reach 98 percent by the end of FY2020.
Under current law, the Congressional Budget Office (CBO) projects debt will continue to rise to 109 percent of GDP by 2030.

Our central estimate of the Trump plan finds debt would rise to 125 percent of the economy by 2030, excluding the effects of further COVID relief. Under our central estimate of the Biden plan, debt would rise to 128 percent of the economy by 2030, again excluding COVID proposals.

Then next few paragraphs of MacGuineas’s letter comprise an endless recitation of “debt” as a percentage of “the economy” (GDP), all with the tacit — and completely wrong — assumptions that a low ratio is a good ratio, and a high ratio is a bad ratio.

Here is a list showing the Debt/GDP ratio for many nations:

Based solely on the percentages, which nations would you expect to have the healthiest and/or strongest economies”?

Japan 237.54%, Venezuela 214.45%, Sudan 177.87%, Greece 174.15%,
Lebanon 157.81%, Italy 133.43%, Eritrea 127.34%, Cape Verde 125.29%,
Mozambique 124.46%, Portugal 119.46%, Barbados 117.27%, Singapore 109.37%,
United States 106.70%, Bhutan 103.85%, Cyprus 101.04%, Bahrain 100.19%,
Belgium 99.57%, France 99.20%, Spain 95.96%, Jordan 94.83%, Jamaica 94.13%,
Belize 92.64%, Angola 90.46%, Brazil 90.36%, Republic Of The Congo 90.19%,
Antigua And Barbuda 88.35%, Canada 88.01%, Egypt 86.93%, United Kingdom 85.67%,
Aruba 83.57%, Sri Lanka 82.99%, Tunisia 81.55%, Mauritania 80.61%, Zambia 80.50%,
Dominica 79.84%, Gambia 78.67%, San Marino 77.12%, Pakistan 77.00%, Argentina 75.90%,
Sao Tome And Principe 74.10%, Sierra Leone 72.37%, Suriname 72.05%,
Saint Lucia 71.62%, Saint Vincent And The Grenadines 71.38%, Uruguay 71.34%,
Austria 71.17%, Croatia 70.73%, Montenegro 70.58%, Togo 70.39%, India 69.04%,
El Salvador 68.10%, Mauritius 67.50%, Hungary 66.62%, Slovenia 65.44%, Albania 65.13%,
Morocco 65.11%, Laos 64.13%, Burundi 63.54%, Djibouti 62.99%, Ireland 62.42%,
Ukraine 62.03%, Senegal 62.00%, Ghana 61.99%, Maldives 61.43%, Oman 61.29%,
Bahamas 60.49%, Nauru 60.39%, Finland 59.88%, Saint Kitts And Nevis 59.49%,
Malawi 59.01%, Israel 58.96%, Gabon 58.48%, South Africa 57.81%, Puerto Rico 57.70%,
Ethiopia 57.43%, Vietnam 57.36%, Guyana 57.22%, Bolivia 57.11%, Germany 56.93%,
Malaysia 56.32%, Costa Rica 56.15%, Grenada 56.12%, Kyrgyzstan 56.09%, Niger 55.60%,
Kenya 55.50%, China 55.36%, Guinea Bissau 54.92%, Yemen 54.51%, Seychelles 54.49%,
Mexico 54.11%, Benin 54.00%, Qatar 52.74%, Vanuatu 52.18%, Netherlands 52.04%,
Namibia 51.60%, Belarus 51.08%, Serbia 50.95%, Ivory Coast 50.92%, Iraq 50.25%,
Fiji 50.22%, Rwanda 50.00%, Trinidad And Tobago 49.75%, Tajikistan 49.46%,
Samoa 49.44%, Ecuador 49.20%, Colombia 49.16%, Armenia 47.95%, Poland 47.48%,
Algeria 46.92%, Slovakia 46.90%, Liberia 46.66%, Guinea 45.98%, Georgia 45.05%,
Uganda 44.81%, Chad 42.91%, Burkina Faso 42.47%, Malta 42.46%,
Central African Republic 42.25%, Dominican Republic 41.92%, Thailand 41.47%,
Eswatini 41.11%, Australia 41.10%, Madagascar 41.02%, Nicaragua 40.88%,
Honduras 40.80%, South Korea 40.54%, North Macedonia 40.48%, Switzerland 39.49%,
Myanmar 39.19%, Philippines 39.10%, Cameroon 38.11%, Romania 37.99%, Lesotho 37.95%,
South Sudan 37.81%, Panama 37.81%, Papua New Guinea 37.72%, Equatorial Guinea 37.49%,
Sweden 37.23%, Mali 36.93%, Norway 36.75%, Latvia 36.66%, Tanzania 36.57%,
Bosnia And Herzegovina 36.34%, Haiti 36.23%, Comoros 35.08%, Bangladesh 34.81%,
Taiwan 33.91%, Lithuania 33.79%, Denmark 33.61%, Iceland 33.13%, Nepal 33.07%,
Czech Republic 31.57%, Turkmenistan 30.25%, Nigeria 30.05%, Iran 30.04%, Turkey 29.93%,
Cambodia 29.57%, Indonesia 29.29%, Moldova 28.82%, New Zealand 28.07%, Peru 27.18%,
Chile 27.17%, Guatemala 24.76%, Saudi Arabia 23.71%, Kiribati 23.48%,
Marshall Islands 23.37%, Uzbekistan 23.23%, Paraguay 22.37%, Tuvalu 21.81%,
Luxembourg 21.61%, Zimbabwe 20.99%, Kazakhstan 20.90%, Bulgaria 19.33%,
United Arab Emirates 19.20%, Micronesia 18.41%, Kuwait 17.78%, Azerbaijan 17.59%,
Solomon Islands 14.56%, Dr Congo 14.01%, Russia 13.79%, Botswana 12.78%, Estonia 7.61%,
Afghanistan 6.88%, Brunei 2.63%

If you say there seems to be no relationship between “debt” and GDP you would be correct, for several reasons:

  1. Some nations are Monetarily Sovereign, which means they have the unlimited ability to create their own sovereign currency. Any liability denominated in their own currency is serviced simply by creating new currency. They cannot become insolvent if they owe their own currency.
  2. Some nations are monetarily non-sovereign, which like you, me, the euro nations, and all local governments, cannot arbitrarily create money, and so can become insolvent.
  3. The word “debt” means something entirely different, depending on what is owed, and why. If the “debt” consists of optional deposits, as does America’s, Japan’s, Canada’s, Australia’s, and the UK’s, paying it off merely requires returning the money on deposit.
  4. But if the debt is necessary for the purchase of goods and services, like state and local government debt, then taxpayers must fund it, or the government will become insolvent.
  5. If the “debt” adds net money to the economy, as with Monetarily Sovereign governments, it will grow the economy.
  6. But, if the debt must be paid by taxpayers, which subtracts net money, as is the case with monetarily non-sovereign governments. it will shrink the economy.

Conclusion: Even before the onset of the COVID-19 pandemic and subsequent global economic crisis, the federal government was on an unsustainable fiscal path.

Under our central estimate, neither major candidate for President of the United States in 2020 has put forward a plan that would address our unsustainable fiscal path.

The favorite word used by debt critics is “unsustainable.” They never explain what they mean by that word.

Does it mean the U.S. government will run short of dollars? No, that is impossible. The government has the unlimited ability to create dollars at the touch of a computer key.

Does “unsustainable” mean other nations will not lend to the U.S.? No, the U.S. never borrows from other nations. What erroneously is termed “borrowing.” actually is the acceptance of deposits, which has two purposes:

  1. To provide a safe, parking place for unused dollars, which helps stabilize the dollar.
  2. To assist the Fed in controlling interest rates.

Neither purpose has anything to do with the federal government acquiring dollars. The U.S. government does not need to “acquire” dollars. It creates all the dollars it needs. Those dollars on deposit never are touched. They merely are returned when the T-certificates mature.

Does unsustainable mean people will refuse to use the U.S. dollar? No, Despite an 80-year supply increase of more than 50,000%, the U.S. dollar remains a trusted currency. No knowledgeable person fears U.S. insolvency.

So what does the oft-used term unsustainable mean? It is a term that has no specific meaning, but is used to hint at some dark, unspecified, future event, to make you believe the federal debt is too high, without your knowing why.

This high and rising debt could have significant economic, generational, fiscal and distributional consequences.

What are the consequences of a high and rising debt? Answer: Economic growth and prosperity.

Addendum: As I write this, I am watching the so-called debate between Kamala Harris and Mike Pence. It isn’t a debate so much as a performance, but one thing struck me: The both repeat the Big Lie that federal government financing is like state/local government financing.

They both claim that federal taxes fund federal spending, and the “How will you pay for it?” question needs be answered via a complex, convoluted, Byzantine explanation involving increased taxes and money transfers.

The real answer: The federal government will do what it always has done: It will create new dollars, ad hoc, every time it pays a bill. It’s called “Monetary Sovereignty.”

It is the way, the only way, the U.S. economy has grown and will continue to grow.

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