Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Here’s a good news, bad news story. First the good news.

Bipartisanship lives! And it will likely cost taxpayers money.
Posted by Suzy Khimm,10/05/2011

(SOURCE: BLOOMBERG) The GOP-crafted House appropriations bill cuts the agency’s budget by more than $600 million, compared with 2011 funding levels, while the Senate has proposed more than $450 million in cuts. Perhaps most significantly, both chambers would reduce funds for enforcement in 2012 by more than $266 million — more than $700 million under what the agency had requested for the year.

House Democrats, in particular, have denounced the bipartisan proposals for a funding cut, saying it would hamper the IRS’s ability to close the “tax gap” — the estimated 16 percent of revenue that the government loses because Americans fail to pay their taxes in full. “The IRS estimates that this cut will end up costing $4 billion per year due to the lack of enforcement on tax cheats,” Rep. Norm Dicks said of the House proposal. “This cut literally increases the deficit.”

Of course, Ms. Khimm doesn’t know what she is talking about. How does collecting less tax cost taxpayers money? Right. It doesn’t. That “cost taxpayers money” phrase has to do with the myth that taxes pay for federal spending.

That’s true in monetarily non-sovereign governments (states, counties, cities, Greece, Ireland), but is not true for the Monetarily Sovereign U.S. federal government. Cutting U.S. federal taxes saves taxpayers money. Period.

Now for the bad news:

The National Treasury Employees Union, which represents federal workers, warns that the cuts would result in layoffs of 3,000 to 4,000 IRS employees, increasing the burden on an agency that’s already short-staffed. A 2011 report by the Treasury Inspector General concluded that hiring of new revenue officers hasn’t kept pace with attrition, even as the number of tax returns continues to rise and the tax code itself has grown more complex.

This adds people to the unemployment lines. Very bad. They should be paid for at least a year, or given other federal jobs.

Now for more good news:

As a result, the percentage of delinquent tax accounts that have been resolved “has steadily decreased,” the Treasury IG concludes.

Ultimately, the lost potential revenue could end up outstripping the upfront savings from IRS budget cuts. The agency’s “general rule of thumb is every additional dollar spent on enforcement brings $4 to $5 dollars of additional revenue . . . and there generally has been a reasonable return on enforcement dollars,” says Eric Toder, co-director of the Urban Institute-Brookings Tax Policy Center. “I don’t think, at the end of the day, this really saves the government any money.”

Someone please tell Mr. Toder that a Monetarily Sovereign government doesn’t need to “save” money. It pays its bills by instructing creditors’ banks to mark up the creditors checking accounts. The federal government can send these instructions, endlessly.

Update: A Senate Democrat who works on appropriations issues further explains the party’s thinking on the IRS cuts: “They are right –they took a sizable hit…With less money to allocate, cuts had to be made and because of its size, IRS – which represents about 54% of the subcommittee’s discretionary funding – took a big hit. They’ll still be taking in revenue, but it is counterproductive, unfortunate and something everyone hopes can be fixed…The point is it’s about choices and everyone making do with less.”

No, it is productive and fortunate, and if by being fixed, the Democrat means to find a way to collect more taxes, that’s one heck of a lousy “fix.”

In this regard, here is the full text of a letter I sent to Bruce Dold and Tony Hunter, the top two executives of the Chicago Tribune, with whom I have been corresponding:

Bruce and Tony,

Here is a great idea for a timely editorial: “How reducing the federal deficit, with higher taxes and/or reduced federal spending, will stimulate economic growth.”

Rodger Malcolm Mitchell

I don’t expect a response, though I’d love to see them try to write that editorial.

Only one dunce cap for Suzy Khimm. She’s just the messenger, and as a typical media writer, she has been trained it is not necessary to understand economics when writing about economics.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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On first impression: This is a good idea:

India announces $35 tablet computer to help lift villagers out of poverty

Washington Post, Associated Press, Wednesday, October 5/2011:

NEW DELHI — India introduced a cheap tablet computer Wednesday, saying it would deliver modern technology to the countryside to help lift villagers out of poverty.
[…]
Developer Datawind is selling the tablets to the government for about $45 each, and subsidies will reduce that to $35 for students and teachers. In comparison, the cheapest Apple iPad tablet costs $499, while the recently announced Kindle Fire will sell for $199.

Datawind says it can make about 100,000 units a month at the moment, not nearly enough to meet India’s hope of getting its 220 million children online.

Human Resources Development Minister Kapil Sibal called the announcement a message to all children of the world.

“This is not just for us. This is for all of you who are disempowered,” he said. “This is for all those who live on the fringes of society.”
[…]
Although the $10 goal wasn’t achieved, the Aakash has a color screen and provides word processing, Web browsing and video conferencing. The Android 2.2-based device has two USB ports and 256 megabytes of RAM. Despite hopes for a solar-powered version — important for India’s energy-starved hinterlands — no such option is currently available.
[…]
India, after raising literacy to about 78 percent from 12 percent when British rule ended, is now focusing on higher education with a 2020 goal of 30 percent enrollment. Today, only 7 percent of Indians graduate from high school.

“To every child in India I carry this message. Aim for the sky and beyond. There is nothing holding you back,” Sibal said before distributing about 650 of the tablets to the students.

Hard to say how well this will work, but the direction is good. Increased emphasis on education is necessary for any nation to grow and to compete in the future. Otherwise, historians will talk about the Rise and Fall of America and the American Dream. The above link references a post that says, in part, “That is, the government should pay not only for elementary, middle and high school, but also for college and advanced degrees. Further, I suggest that the government pay a wage for college attendance, to encourage the impoverished who might otherwise have to decide between work and education.”

I wonder whether India has Tea/Republicans who, being ignorant of Monetary Sovereignty, have demanded that spending for this initiative be offset by spending reductions in some other area, thereby making economic growth impossible.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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In economics, there is one Big Question we often neglect to ask, but instead we ask many, small and wrong questions, which is why we arrive at the wrong answers, this recession being one of the wrong answers.

Economics either is very complicated or very simple, depending on how you approach it. If you slip into economics’s many formulae, or argue the details of positive, normative, rational, behavioral, macro, micro or heterodox economics, you quickly may find yourself drowning in abstruse terminology and hypothetical argument, from which you never will emerge nor be seen again.

But economics can be simple if you look at the big picture which leads directly to the Big Question. The big picture in economics revolves around the fundamental purpose of economics, which I submit is to improve our lives.

Now you may believe economics has another purpose or purposes, and that’s all right. I won’t argue, so long as somewhere in your belief statement are the words, “improve our lives.” That’s what economics is really about. That’s why people devote their careers to economics. They wish to understand how to improve our lives.

But strangely, this often is forgotten, when people discuss economics. In our ongoing, historical effort to improve our lives, we have created our greatest invention: Government. All social animals have some sort of government, and as the most sophisticated social animal, we have created the most sophisticated governments, rife with labyrinthine and intertwining laws and interpretations of laws, and elaborate systems for interpretations of interpretations.

To guide our detailed, complex social structure we need such intricacy in our government, or at least, such intricacy is inevitable. For each problem we devise a solution, which we add to all the other solutions previously devised – solution upon solution upon solution, growing ever larger, until what millennia ago began as a few, small shrubs has evolved into a great, expanding jungle of giant trees, which no one could hope to understand in it entirety.

The economic jungle, this Government, has become so big it has acquired a life of its own, a living organism separate from those of us who created it. It demands that we support it and care for it, and that is where we have lost our direction. Remember, government was created to “improve our lives,” but because government has become so large and powerful, the purpose often is perverted to “improve the government’s life.”

Thus, we have invented such initiatives as federal debt reduction, federal spending reductions, firing of federal workers, taxes and austerity. Consider this October 4, 2011 article in the Huff Post:

Should the federal government concentrate on paying off its debt, even if it comes at the expense of a more robust economic recovery? Or should it focus on stimulating the economy, even if that means running up more costs?

According to a poll published Wednesday, 59 percent of Americans want the government to make national debt reduction its top priority, even if it comes at the expense of kick-starting the economy. Only a third think the focus should be on stimulation.

Talk about a perversion of purpose! We have become so confused by the complexities of government, we have forgotten why government exists at all. We have been led to believe caring for a tool we created and can modify in any way we choose, is more important than caring for ourselves. We have been led to believe we must sacrifice for the sake of the tool rather than re-making the tool to work for us.

The Big Question we repeatedly should ask is this: Does this improve our lives, now?

When someone tells you to pay more taxes, because the government needs taxes, ask, “Is my taking money out of my pocket and sending it to the government the best way to improve our lives, now?” Or should I change the government so it doesn’t need my taxes?

When someone says to cut Social Security, Medicare and Medicaid benefits, ask, “Does providing lower benefits to humans, while reducing government costs, improve our lives, now?” Or should I change the government so it can pay me these benefits?

Does firing federal human workers, so the government can pay less, improve our lives now? Does reduced federal purchases of goods and services, to save the government money, while hurting the human vendors of those goods and services, improve our lives, now? Or should I change the government so it can hire us and buy from us?

We are asked to sacrifice for the “greater good,” but is it for the greater good of human people or the greater good of the government? We own the government. We created it and we can change it. It is our lump of clay. We can make it taller or shorter, fatter or thinner. We can make it walk or run or jump or sit. It can create money, stop inflation, prevent recessions, facilitate education, eliminate poverty. It can do or be anything we want. Government is infinitely malleable. It is our creation.

When we are told to provide for this lump of clay, we should refuse. The lump of clay should be molded to provide for us. If government wants more taxes, change the government. If government wants to pay less benefits, change the government. If government wants to fire people, change the government.

The right wing wants smaller government. They want us to be forced to be self-sufficient, to do with a weaker, less effective tool. Exactly wrong. Self sufficiency is not a goal; it is one means to a goal, and a terrible means it is. We created government specifically so we would not have to be self sufficient. We created government to improve our lives. We created it and we can modify it, not be enslaved by it.

Yes, the Big Question we must ask is, “DOES THIS IMPROVE OUR LIVES, NOW?” not later, not eventually, not someday, but now. Life is short and death is forever. We cannot wait for a distant, unknowable, unpredictable future. We cannot wait for politicians’ promises or guarantees. They know nothing. Ask the question, “Does this improve our lives, now?”

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================================================

People have asked me whether Ben Bernanke “really” understands Monetary Sovereignty, or whether he is playing ignorant because that currently is politic. Judge for yourself.

Time Magazine: Stocks Fall as the Fed Launches Operation Twist
Posted by Stephen Gandel Monday, October 3, 2011

On Monday, Ben Bernanke launched his latest effort to boost the economy. The stock market, for one, seems skeptical it will work.

The plan, which has been dubbed Operation Twist, is for the Fed to cash out of $400 billion worth of its short-term bonds and replace them with long-term debt. The first move came Monday morning when the Fed bought $2.5 billion worth of long-term U.S. Treasury bonds. The Fed has been buying U.S. Treasury bonds ever since the financial crisis in an effort to drive down interest rates and boost lending and hopefully the economy.

Note that line: “The Fed has been buying U.S. Treasury bonds ever since the financial crisis in an effort to drive down interest rates and boost lending . . . “

Is this classic debt-hawk ignorance, or what?. They want the federal government, which can afford anything, to borrow less. But they want the private sector, which is struggling to pay its bills, to borrow more.

Federal deficit spending creates money. Private sector deficit spending (aka borrowing) also creates money. But, federal deficit spending is far more stimulative than private deficit spending. (See: Is federal money better than other money? > In fact, there is a serious question as to whether private deficit spending is stimulative at all.

So, why would any sane person want the private sector to borrow more and the federal government to borrow less?

I award Mr. Bernanke one dunce cap for this effort. Why just one? Because he has been put in the impossible position of trying to grow the economy without having the tools to do so, while Congress, which does have the tools, is doing everything it can to shrink the economy.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

==========================================================================================================================================
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY