Tag: debt

–Read how debt-hysteria destroys American medicine

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Last Wednesday, 11/24/10, I posted America’s future if the debt hawks have their way. It told about the misery Ireland, not being monetarily sovereign now will suffer. The other EU nations, that also surrendered their monetary sovereignty, i.e Portugal, Greece, Italy, France et al, eventually will meet the same fate.

Sadly, though the U.S. is monetarily sovereign, and so can create unlimited dollars to service any size debt, our leaders do not understand the concept. In the name of “fiscal prudence,” we suffer at the hands of ignorance. Here are excerpts from an article (Doctors say Medicare cuts force painful decision) about elderly patients, demonstrating the harm debt-hawks do to our families and to us.

By N.C. Aizenman, Washington Post Staff Writer, Friday, November 26, 2010; 12:02 AM

“Want an appointment with kidney specialist Adam Weinstein of Easton, Md.? If you’re a senior covered by Medicare, the wait is eight weeks.

“How about a checkup from geriatric specialist Michael Trahos? Expect to see him every six months: The Alexandria-based doctor has been limiting most of his Medicare patients to twice yearly rather than the quarterly checkups he considers ideal for the elderly. Still, at least he’ll see you. Top-ranked primary care doctor Linda Yau is one of three physicians with the District’s Foxhall Internists group who recently announced they will no longer be accepting Medicare patients.

“’It’s not easy. But you realize you either do this or you don’t stay in business,’ she said.

“Doctors across the country describe similar decisions, complaining that they’ve been forced to shift away from Medicare toward higher-paying, privately insured or self-paying patients in response to years of penny-pinching by Congress.

“And that’s not even taking into account a long-postponed rate-setting method that is on track to slash Medicare’s payment rates to doctors by 23 percent Dec. 1. Known as the Sustainable Growth Rate and adopted by Congress in 1997, it was intended to keep Medicare spending on doctors in line with the economy’s overall growth rate. But after the SGR formula led to a 4.8 percent cut in doctors’ pay rates in 2002, Congress has chosen to put off the ever steeper cuts called for by the formula ever since.

“This month, the Senate passed its fourth stopgap fix this year – a one-month postponement that expires Jan. 1. The House is likely to follow suit when it reconvenes next week, and physicians have already been running print ads, passing out fliers to patients and flooding Capitol Hill with phone calls to convince Congress to suspend the 25 percent rate cut that the SGR method will require next year.”

Debt-hawks tell us that by reducing the federal deficit, they protect our children and grandchildren. But in fact, they condemn our children, grandchildren and us to more costly medical services, fewer doctors, nurses and hospitals, as well as to lower paying Social Security, poorer roads and bridges, a less-equipped military, worse schools and indeed less of every benefit our monetarily sovereign government easily is able to pay for.

Yes, the EU nations were foolish to surrender their ability to control their money supply. That control is one of the prime duties of any government. But we are even more foolish not to understand that we have that control, yet we neglect to use it.

Our leaders fear deficits, not realizing that “federal deficit” merely is a synonym for “money created this year.” Rather than being a negative, it’s a positive; it’s an absolute necessity.

Our leaders fear “federal debt” (which contrary to popular belief is not the total of deficits, but rather the total of outstanding T-securities). Federal debt could be eliminated by the simple act of no longer creating and selling T-securities. They became obsolete in 1971, the end of the gold standard. It is difficult to understand why Congress believes we must borrow the dollars we previously created and have the unlimited ability to create.

Our leaders fear ” uncontrollable inflation.” They do not understand we are so far from uncontrollable inflation that since we went of the gold standard, there has been no relationship between federal spending and inflation, . Further, our leaders don’t realize inflation easily can be controlled by raising interest rates, which is exactly how the Fed has controlled inflation all these years.

By what logic could these fears and the resultant actions, be considered “prudent” or “protecting our grandchildren”?

“Among the top points of contention is the complaint by doctors that Medicare’s payment rate has not kept pace with the growing cost of running a medical practice. As measured by the government’s Medicare Economic Index, those expenses rose 18 percent from 2000 to 2008. During the same period, Medicare’s physician fees rose 5 percent.

“’Physicians are having to make really gut-wrenching decisions about whether they can afford to see as many Medicare patients, said Cecil Wilson, president of the American Medical Association.’”

Of course, not all doctors are suffering. To continue quoting the article:

“On average, primary-care doctors make about $190,000 a year, kidney specialists $300,000, and radiologists close to $500,000, figures that reflect the income doctors receive from both Medicare and non-Medicare patients. The disparity has prompted concern that Medicare is contributing to a growing shortage of primary doctors.”

Whether an average income of $190,000 per year is enough to entice the thousands more doctors we need annually, to endure and pay for many years of post-graduate and internship is debatable. The article quoted one doctor:

”’I graduated medical school $100,000 in debt. I worked 110 hours a week during my residency for $30,000 a year and sacrificed all through my 20s. And even now, you’re still seeing people all day, with meetings and paperwork at night, on top of the emotional side of worrying when the patients you care for aren’t doing well. This is life-and-death stuff. And I feel like that should be compensated.’”

Many doctors have begun to restrict the number of Medicare patients, either by refusing to accept Medicare or by demanding annual fees (boutique doctors).

And the misery rolls down hill. I, who am on Medicare, received this note from Blue Cross, the supplementary insurance I pay for, because Medicare doesn’t pay enough: ‘Effective January 1, 2011, the deductibles and coinsurance amounts for Medicare Parts A and B will increase, which will result in Medicare paying less toward hospital and medical services next year. To compensate for Medicare’s changes, Blue Cross and Blue Shield of Illinois will automatically update its coverage. ‘Update’ is a euphemism for ‘charge more’.”

So this is the way the debt hawks protect our children and our grandchildren. As medical costs increase, Medicare payments decrease. Our families will have fewer doctors from which to choose, receive less service and pay more. And all because of the false belief our monetarily sovereign government can’t afford to pay for America’s health care.

Watch the EU nations slide into poverty and know that is the future awaiting us. And know whom to blame.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–1937 Redux: How our leaders have learned nothing from history

The debt hawks are to economics as the creationists are to biology. They, who do not understand monetary sovereignty, do not understand economics.

For those of you who don’t remember the Great Depression (almost everyone, now), it began in 1929, after several years of federal surpluses ( Item 3.), but by the early-1930’s we already were on our way to recovery – something like today. Then, the government decided to reduce the federal deficit with increased taxes and reduced spending — something like today. So we had four more years of depression (something like tomorrow?)

According to Wikipedia: “The Recession of 1937–1938, sometimes called the Roosevelt Recession, was a temporary reversal of the pre-war 1933 to 1941 economic recovery from the Great Depression in the United States. Economists disagree about the causes of this downturn. Keynesian economists tend to assign blame to cuts in Federal spending and increases in taxes at the insistence of the US Treasury, while monetarists, most notably Milton Friedman tended to assign blame to the Federal Reserve’s tightening of the money supply in 1936 and 1937.”.

Hmmm. Let’s think about that. “Cuts in federal spending . . . and increases in taxes” = federal deficit reduction. “Tightening of the money supply . . .” also = federal deficit reduction. So here you had two different schools of thought, both saying essentially the same thing. The 1937 recession was caused by what we today refer to as “austerity.”

So what do our political leaders favor, now that we are creeping out of the latest recession. Yes, that same austerity. Republicans hate federal spending. They stand ready with dozens of proposals to slash the federal budget. Reportedly, they want to cut $260 billion (25%) from the federal budget. Now that should be stimulative.

Republicans also do not believe their proposed cuts in education, Medicare, unemployment compensation and many other worthy federal projects will hurt anything or anyone.

The Democrats are no smarter. They have to be dragged kicking and screaming, to retain (not even cut, just retain) the Bush era tax levels. They do not believe taxes, which remove money from the economy, slow the recovery. They want to tax the “wealthy,” because . . . well, because that is what Democrats, with their eternal class warfare strategy, do.

Then we have the media. My hometown newspaper, the Chicago Tribune repeatedly rails against the federal debt. They never explain why. They don’t provide data. They just don’t like it. The Tribune is typical of the media, which almost universally hate the debt, and almost universally don’t provide data supporting their position.

And then there is Fed Chairman Bernanke, who feels we must “act to bring down long-term fiscal deficits.” He too, has no clue about why and never gives a coherent reason.

Finally, we have the mainstream economists – all those Nobel winners – none of whom seem to understand monetary sovereignty, and all of whom call for less deficit spending.

Put them all together and things look very bad for this fragile economy. With leaders like these, who needs enemies?

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Which adds to federal debt — federal spending or federal borrowing?

The debt hawks are to economics as the creationists are to biology.

Which adds to the federal debt — federal spending or federal borrowing? Before you read further, think about this question and your answer.

The federal government’s finances are nothing like yours and mine, which is why the economy is so counter-intuitive. Most people worry about the federal debt. They are influenced by the media and the pundits, who also worry about the federal debt. And in turn, they are influenced by mainstream economists, who as college students, were taught to worry about the federal debt. This “debt-worry” translates into “spending-worry,” so we hear continual calls for less government spending. But does federal spending really add to federal debt?

You and I cannot print money. So, before we spend, you and I must have sources of money. We either must have money in hand or we must have a ready source of borrowing, the most popular of which is a credit card. Without a source of money, you and I cannot spend. The states counties and cities are in the same predicament. Without a source of money, they cannot spend.

The federal government is different. Or it can send you a check, and when you deposit that check, your bank will mark up your account and the federal government will mark up the bank’s account, and it can do this endlessly, without having any source of money.

When the federal government spends, money is created from nothing. But no debt is created, at least not the federal debt referred to in “debt clocks” or by media editors.

So what does create the federal debt? The creation and sale of T-securities. The federal government not only has the unlimited power to create money from thin air, it also has the unlimited power to create T-securities from thin air, and then exchange these T-securities for dollars it previously created from thin air.

There are two separate processes, unrelated by function, though related by law. Process #1 is federal spending, which requires the creation of dollars by printing currency or by crediting bank accounts. Process #2 is federal borrowing, i.e. the creation and sale of T-securities. Functionally, either of these processes can take place without the other. The federal government can spend without borrowing, and it can borrow without spending.

While federal spending leads to the Deficit (the difference between spending and tax receipts), federal borrowing leads to the Debt (the total of outstanding T-securities). In this way, the federal debt would not necessarily be the total of federal deficits, except for an obsolete law that requires it.

By law, the U.S. Treasury must sell enough T-securities to equal the deficit – the difference between federal spending and federal tax receipts. This law is a relic of gold standard days, when the federal government did not have the unlimited ability to create money. Back then, dollars had to be matched by gold, and so were limited by gold supplies.

But for this law, there would be no need for federal borrowing and there would be no federal debt. The government simply would spend by creating money, i.e. by crediting bank accounts.

In summary, federal spending does not add to the much feared, often maligned federal debt. Instead, the federal debt is created by an obsolete law, which requires T-security creation to equal federal deficits. So debt-worriers, there is no need to cut federal spending. Merely change that needless law. No law; no debt.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Here is the financial solution for your state, county and city

The debt hawks are to economics as the creationists are to biology.

Illinois is broke. Your state either is, or soon will be, broke, too. Illinois’s 13 million population owes $13 billion. Like all states, counties and cities, Illinois is not monetarily sovereign, so unlike the federal government, which is monetarily sovereign, states cannot create money to pay their bills. Illinois is far behind on payments to the many vendors who supply services to its citizens. The state has no hope of continuing its “borrow now, pay later” system.

Yes, Illinois may be the most dishonest state in America. Several of its recent governors have gone to jail, and the government is run by swindlers. Although the reprehensible head of the Democratic party in this traditionally Democratic state, Mike Madigan, can be blamed for much of the financial chaos, there is plenty of blame spread around.

We can begin with the voters, who inexplicably continue to vote solid Democratic, despite the astounding record for corruption this party has amassed. Not only is Illinois thoroughly crooked, but so is Cook County and Chicago, also Democratic strongholds. Chicago aldermen traditionally go to jail after a few years in office, and Mayor Daley is the classic Sgt. Schultz, the guy who repeatedly said, “I know nothing, I see nothing.”

Daley sold income-earning city assets, then spent the money, putting Chicago ever deeper in the hole. (Pity the next mayor). And don’t ask about Cook County Board President Todd Stroger, who was appointed by his father after his father died (really), and instituted a “friends and family” system of patronage hiring. With all this, voters march to the polls, like little automatons, pull the Democratic lever, and march back out to complain. (In all fairness, Illinois has had its share of venal Republican governors, too, though these guys were mere minnows in a sea of sharks.)

Nevertheless, though the state, its largest county and its largest city all are run by criminals, even a theoretically honest state cannot survive on tax receipts alone. Because monetarily non-sovereign governments cannot create money, inflation forces them all to obtain money from outside their borders.

“Outside” earnings can come exports of goods and services. Example: Salaries earned by Evanston, Illinois residents, paid by Chicago firms. Or outside earnings can come from government support. Example: Illinois pays some Chicago Transportation Authority expenses. And this later approach demonstrates the only way to save Illinois and all the other states.

If the U.S. federal government would give Illinois just $1,000 for each resident, the state debt would disappear. And if the federal government continued to give Illinois an ongoing $500 for each resident, Illinois could pay its cities and counties enough to achieve better schools, better roads, better transportation and other improvements in human benefits, while reducing the onerous property, income and sales taxes, that hurt Illinois’s economy.

Yes, Illinois’s crooked politicians will continue to steal, and Illinois voters will continue to elect them, but state poverty hasn’t stopped the politicians, anyway. And though Illinois politicians uniformly promise to reduce the debt, this requires self destructive taxes and spending cuts. Austerity is a path to disaster. So, the sole financial solution for Illinois and for all states, a solution that will improve the lives of its residents and of all America’s residents, a solution easily affordable by the federal government, is per capita support for all states.

Without increased support to states, America’s quality of life will decline, as schools, roads, health care, nursing homes, housing, courts, police and fire protection, parks and businesses all disintegrate. There is no other solution. Mathematically, America’s states, counties and cities cannot do it themselves. The federal government must do it.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”