Tag: Economics

–Religious zealotry, homeopathic medicine, creationism and debt fear: The debt hawks and the vaccine deniers

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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The existence, for instance, of religious zealotry, homeopathic medicine and creationism, have inoculated me against amazement at the human ability to believe strongly in ideas for which there is no supporting evidence. So rather than being surprised, I was strangely fascinated by an article appearing in the January 2011 NewScientist magazine, titled “The irrationality vaccine.”

The article described three books, The Panic Virus: A true story of medicine, science and fear, by Seth Mnookin, Deadly Choices: How the anti-vaccine movement threatens us all, by Paul Offit, and Tabloid Medicine: How the internet is being used to hijack medical science for fear and profit, by Robert Goldberg. Here are excerpts from the article:

As he tells it, Mnookin was annoyed by the clueless intellectuals he encountered at New York dinner parties, who boasted about withholding necessary vaccines from their children. To these elites, these thinkers, giving children so many shots “just felt wrong.”

Hmmm. Clueless intellectuals. Science trumped by intuition. Medicine withheld. Sounds familiar.

. . . one cannot grasp how we became so dangerously irrational in our outlook on vaccines without first understanding the role of the mass media – now almost entirely shorn of its science journalists and increasingly driven by sensationalism and crass financial considerations.

Hmmm. Media dominated by sensationalism. Sounds familiar.

Anti-vaccine activists and a few sympathetic scientists raise concerns that, although implausible, draw uncritical media attention.

Hmmm, Uncritical media attention. Sounds familiar.

. . . the activists continue to draw followers and, if anything, only grow more extreme in their convictions. They continue to garner media attention, and so the irrationality the media let out of the bag is never put back in.

Hmmm. More extreme convictions garner even more media attention. Sounds familiar.

Sustained encounters with a small group of like-minded people almost inevitably leads to the conclusion that everyone thinks the way you do. . . Children are dying out there because of anti-vaccine misinformation and those who act on it. . . Offit hopes the press will tell the other side of the story – about the harms caused by anti-vaccine advocates.

Hmmm. Children sick and dying because of misinformation. Sounds familiar.

. . . these three books . . . are a call to arms against the broader phenomenon of tilting against reality, or making up ones’ own version of it, and clinging to it fiercely despite all evidence and consequences . . . Irrationality can be a very dangerous and communicable disease – and we still don’t know how to adequately inoculate against it.

Hmmm. Clinging to ideas fiercely, despite all evidence and consequences. Sounds familiar.

I found the article about vaccine deniers eerily reminiscent of what has happened to the science of economics, where intuition overrules fact, media (especially TV) are shorn of real economists and dominated by sensationalism and extremism, uncritical media attention for factually unsupported ideas, children sick and dying as a result, and vain hopes the media some day will tell the other side of the story – about the harms caused by the anti-deficit advocates.

In essence, the debt hawks are religious zealot, creationist, vaccine deniers. They encourage the media to print wrong-headed, “sky-is-falling” sensationalism. They rely not on facts, of which they have none, but on personal intuition. They withhold from the economy, the one medicine necessary to cure it: Money.

As a result, we have an epidemic of debt-fear, sentencing millions of American men, women and children to a future of mean and miserable lives, then to die prematurely.

Who is at fault? The debt hawks? The media? The politicians? The voting public?

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

No nation can tax itself into prosperity, nor grow without money.

–Advice to Republicans: Here’s how to appeal to voters and win the next election

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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Here is some advice for the Republican party. Don’t be deceived by your successes in the past election. That was the result of voter panic. Your downward slide already has begun. Look at the polls. Look at the drop in money contributions.

If you follow this advice, you will reverse the coming slide, appeal to voters and possibly win the next election. If you don’t follow it, and continue on your current path, you will win — the race to the edge of the cliff.

What is the biggest problem facing America? The voters will tell you it’s jobs. What is the Republican focus? Obama and the budget. You Republicans have forgotten your strengths in your tunnel-vision rush to oppose everything Obama and the Democrats want.

The Republicans should stop trying to cut the deficit. Reducing the deficit will provide exactly zero jobs. Your strength is your support for, and your understanding of, business. And it is business that provides the jobs, not budget cuts.

Here’s what the Republicans should try to accomplish:
1. Eliminate FICA. FICA takes money from the pockets of businesses and consumers, and it’s regressive. It probably is the worst tax in America. It is dramatically negative for jobs.

2. Reduce business income taxes. Why punish the people who provide jobs if you want to increase jobs? Why reduce business’s ability to grow and to hire?

3. Provide more financial support for the states, so the states can fund those local projects that create jobs, for instance construction, education, police and fire. I suggest, as a start, giving each state $1,000 for each resident, no strings attached.

Not only would these initiatives provide a powerful stimulus for the American economy, but they would give Republicans good talking points with the voters. Republicans would be able to lay claim to the “job-building party.”

Sadly, the Republican “leadership” (Is there a Republican leadership?) wants to fire people, by cutting federal jobs and by cutting federal spending on dozens of job-creating initiatives. They simply don’t get it.

I am sad to see how far the Republican party — once my party of choice — has fallen. This is not the Reagan party any more. It’s the Tea Party now, and America is paying the price.

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

No nation can tax itself into prosperity.

–Am I MMT? Are you?

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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People often ask me whether I am part of MMT (Modern Monetary Theory), and my answer is, “No, I agree with MMT on its factual bases, but disagree with certain areas of opinion.

For instance, it is absolute, undeniable, historical fact that in 1971, the federal government gave itself the unlimited ability to create money, i.e. to spend dollars. This point cannot be argued. And because the government has the unlimited ability to create dollars, it needs neither taxes nor borrowing to support its spending. If taxes and borrowing were zero, this would not affect by even one penny, the government’s ability to create and spend dollars, which means that taxpayers do not pay for federal spending. The federal government does not spend taxpayers’ money. This too is undeniable fact.

If every federal lender (China et al) were to demand payment for all outstanding debts tomorrow, the U.S. government simply could say, “No problem. I’ll push this computer key, which will credit your bank account for the amount of the T-securities you own. All debts will be extinguished.”

Evolving from this is the fact that the federal government cannot be forced into bankruptcy, and evolving from this is the fact that no agency of the federal government can be forced into bankruptcy – not Congress, nor the Supreme Court, nor the Department of Defense, nor the other 1,000 federal agencies, including Social Security and Medicare. All those people who tell you Social Security will be bankrupt in “X” number of years, do not understand that the federal government supports all federal agencies the same way: By federal money creation. And none can be forced into bankruptcy.

Where I depart from MMT is where facts are lacking, i.e. in matters of opinion. MMT believes:
1. Taxation is necessary to give value to money
2. Inflation should be prevented/cured by reducing the money supply.

1. Taxation

Originally, MMTers said federal taxes were necessary to give value to dollars. I pointed out if taxes were necessary, there existed. sufficient state and local taxes to do the job. That belief now has been adopted by MMT.

As I have stated elsewhere in this blog (“Ignorance: Why you will pay more taxes and receive less service in the coming years.”) I do not accept the idea that taxes are necessary for money demand. People accept dollars because:

-They are handier than barter.
-Everyone else accepts them.
-The government has made dollars legal tender in payment of all bills.
-There is no other governmentally authorized form of money.
-If you sell a product or service to the government, it will pay you in dollars.
-If you receive Social Security, Medicare, Medicaid or any other federal benefit, you and your service providers will receive payment in dollars.
-If you receive food stamps, your grocer will be paid in dollars
-Your army pay will be in dollars
-Federal stimulus payments, to cure recessions, will be in dollars
-In 2010, the federal government spend $3.7 trillion, all in dollars. The state governments spent trillions more, also in dollars.

Then there are non-tax payments to the government:
*Fines and Fees (for instance, in court)
*Fees (for instance, garbage pickup)
*Licenses (hunting, fishing, driving)
*Services (real estate registration)
*Tolls

(*Admittedly, these could be eliminated by a Monetarily Sovereign government and could be considered taxes)

Millions of people in America did not pay taxes last year, but they accept dollars. Of course, taxes are not going to disappear, so in practical essence the question is moot.

2. Inflation

I believe inflation can and should be prevented/cured by raising interest rates. MMT holds that rather than curing inflation, raising interest rates actually exacerbates inflation. Their logic is: Raising interest rates, by increasing the cost of borrowing, increases the cost of production, which results in inflation. I suggest that interest payments are a minuscule part of most company’s costs, and increases in interest payments are even less important — not enough to cause significant price increases.

Instead, we should consider money to be a commodity, the value of which is determined by supply and demand. Yes, increase the supply, and the value goes down – unless you also increase the demand, which is influenced by the reward for owning money – i.e. interest. The higher the interest, the greater the demand for money. That is why, when interest rates go up, the demand for non-money (stocks, real estate) declines, while the demand for money (bank CDs, savings accounts, money market accounts) goes up.

MMT believes inflation can and should be prevented/cured by reducing the money supply, i.e by spending reductions and/or tax increases. However, history shows that every depression in U.S history, and most recessions, have coincided with reductions in debt growth or with actual reductions in debt. While recessions and depressions can stop inflation, they certainly are a bad medicine.

So in summary, I agree with the factual basis of MMT, and argue (without proof) against certain opinions held by MMT. If you want to give what I believe a name, call it “Monetary Sovereignty.” I’m not MMT. Are you?

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.”

–Should the states be able to declare bankruptcy?

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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Some states are so deep in debt, it is all but impossible for them to extricate themselves. Illinois, for instance, has proposed a massive tax increase on individuals and on business. The result will be that individuals and business will flee the state, making even more tax increases “necessary.”

As I’ve posted earlier, it is arithmetically impossible for a monetarily non-sovereign government (as are all the U.S. states and the euro countries) to survive long-term, on taxes alone. (See: Why the states are in financial trouble) They need money coming in from outside their borders, either from exports, tourism or federal subsidy.

Since all states can’t be net exporters or tourist Meccas, they need money from the federal government, which being Monetarily Sovereign, has no difficulty supplying.

Now read an excerpt from an article posted in the “naked capitalism” blog:

(From) an article today in Pensions & Investments: Former House Speaker and possible GOP presidential contender Newt Gingrich is pushing for federal legislation giving financially strapped states the right to file for bankruptcy and renege on pension and other benefit promises made to state employees…

So rather than assist the states by, for instance, giving each state $1,000 per resident, which would stimulate the entire U.S. economy, and which the federal government easily can do, a leading politician wants to solve the problem by destroying the retirement plans of state employees.

I’ve been at this for more than 15 years, and this idea, in addition to being unconstitutional, ranks near the top of the “Clueless-Heartless” scale.

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.”