The almost-too-easy way to grow the economy and narrow the Gap Tuesday, May 9 2017 

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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It takes only two things to keep people in chains: The ignorance of the oppressed and the treachery of their leaders..
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Following the “Great Recession” of 2008, our economy has grown at an achingly slow pace. Look at the graph (below) and compare the past ten years with the period beginning 1972 (the year in which the U.S. went off a gold standard and became more completely Monetarily Sovereign):

GDP Growth Line (Vertical bars are recessions)

Meanwhile, the Gaps between the richer and poorer, as expressed by the GINI ratio, (below) have widened. [A Gini ratio of 0 indicates perfect equality, where everyone has the same income. A Gini ratio of 1 indicates total inequality, where one person has all the income]:

Income inequality has grown substantially in the past 50 years

In short, the economy has grown quite slowly, while the rich have become relatively richer, and the poor have become relatively poorer.

We have suggested the Ten Steps to Prosperity (see section below), as a process by which the economy can grow faster and the Gap can shrink. Some of those steps require significant changes in federal law, together with significant bureaucratic expansions.

But there is one Step that requires only minuscule changes in federal law together with a reduction in the bureaucracy: Step 1. Eliminate the FICA tax.

  1. FICA is the most regressive tax in America, punishing lower-income, salaried workers, while barely touching higher income salaried workers, and having no effect on people who get their incomes from non-salary sources — mostly the retired and the rich.
  2. Corporations submit half of all FICA collected, but corporations don’t actually “pay” taxes.  They merely are legal conduits between customers and corporate employees and owners.  Functionally, employees pay all FICA taxes; corporate managers consider FICA to be as much a cost of paying employees as are salaries.
  3. The Federal government neither needs nor uses FICA dollars. Being Monetarily Sovereign, the federal government creates dollars ad hoc, every time it pays a bill. Tax dollars you send to the Treasury cease to be part of the money supply. Your tax dollars effectively are destroyed.

The elimination of FICA would add a $1 trillion+ to the money supply, which would stimulate the economy by increasing Non-federal Spending:

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports.

Spending by consumers is by far the largest part of the U.S. GDP.  It accounts for an average of about two-thirds of GDP in the United States.

With GDP at about $18 Trillion, an addition of $1 Trillion (from FICA) would create about 5% of GDP growth (broad estimate, less investment).

Social Insurance Receipts*
          Year  | $ Trillions
          
2010 | 0.9
2011 | 0.8
2012 | 0.8
2013 | 0.9
2014 | 1.0
2015 | 1.1
2016 | 1.1
2017 | 1.1
2018 | 1.2

*Amount of Revenue by Source

With GDP growth averaging about 4% in the past ten years, an additional 5% growth (to 9%) would be quite significant — similar to the growth rate in the 1971-1981 period.

This brings us to the subject of inflation. There have been many changes to the methods for calculating inflation (a general increase in prices), and these changes have resulted in somewhat different results.

But, there does not seem to have been a relationship between GDP increases and inflation. (See graph below.)

GDP increases were not marked by inflation

While an increase in the Supply of money is inflationary, an increase in the Demand for money is deflationary: Value = Demand/Supply.

The Demand for money is based on the formula: Demand = Reward/Risk.

Interest is the Reward for owning money. The Federal Reserve controls inflation to its target rate (2%-3%) by increasing the Reward, i.e. by increasing interest rates.

We cannot end this article without referring to the brainwashing conducted by our thought leaders, including the U.S. government.

The Office of Retirement and Disability (Social Security) publishes a bulletin titled, “Social Security Trust Fund Flows and Reserves.”

The bulletin includes such sentences as:

Social Security benefits are paid from the reserves of the Old-Age, Survivors, and Disability Insurance (OASDI) trust fund.

The reserves are funded from dedicated tax revenues and interest on accumulated reserve holdings, which are invested in Treasury securities.

There is no “trust fund” for Social Security any more than there is a “trust fund” for other federal agencies.

Have you ever wondered why there is no “trust fund” to pay for the military, or for the White House, or Congress, or for the Supreme Court, or the CIA, the FBI, NSA, or any other agency you can mention? Have you ever wondered why no one claims these agencies soon will be

Have you ever wondered why no one claims these agencies soon will be insolvent?

The reason: The Social Security “trust fund” is an accounting fiction. It pays for nothing. Social Security and Medicare benefits are paid the same way as Congress’s salaries: By federal deficit spending.

“Trust fund” balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense.

These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury.

The fake “trust fund” merely is a group of balance sheet notations, completely controlled by the government. The “trust fund assets” consist of nothing more than “liabilities” of the U.S. Treasury.  All the “trust fund” owns is what the Treasury owes it.

Thus, rather than paying Social Security and Medicare benefits out of a non-existent “trust fund,” the Treasury could pay benefits directly.  If the “trust fund” ceased to exist, this would have zero effect on the Treasury’s ability to pay Social Security and Medicare benefits.

The next time you read an article or see a graph telling you the Social Security trust fund will run short funds at some future date, know you are being treated to The Big Lie — the lie that federal taxes fund federal spending.

While state and local taxes do fund state and local spending, federal taxes do not fund federal spending. The federal government creates dollars, ad hoc, by spending, and never can run short of dollars.

Even if all federal tax collections fell to $0, the federal government could continue spending, forever.

IN SUMMARY:

Growing the economy, narrowing the Gap, and controlling inflation are three of the most important financial responsibilities of the federal government.  These responsibilities could be accomplished easily and simply by eliminating the useless and harmful FICA tax.

If we eliminated FICA tomorrow, you instantly would begin to reap the economic benefits.

Rodger Malcolm Mitchell
Monetary Sovereignty

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

The Ten Steps to Prosperity: Step 1. Eliminate FICA Wednesday, Feb 1 2017 

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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It takes only two things to keep people in chainsThe ignorance of the oppressed and the treachery of their leaders.

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If you are a regular reader of this blog, you have seen “The Ten Steps to Prosperity” at the end of many posts, including this one.

Each Step includes one or more links that provide explanations and justifications. However, some people find clicking from page to page inconveniently interrupts the continuity of thought.

So, for your convenience, we will devote each of the next few posts to one Step.

Background:
The single biggest problem in world and American economics is the wide and widening Gaps between the richest and those below them (in terms of income, wealth, and power). The Ten Steps were created to address that problem.

The U.S. federal government is Monetarily Sovereign, meaning it is sovereign over its own currency, the dollar.

The government can do anything it wishes with the dollar. It can create dollars, destroy dollars, and give dollars any values it chooses. It never can run short of dollars, it can pay any creditor any amount, and it can cause or cure inflation, at will.

Step #1. Eliminate FICA.
The federal government has three primary sources of income: Individual Income Tax (47%), Corporate Income Tax (11%), and FICA (34%).

But, because the federal government can create dollars at will, and never can run short of dollars, it has no need for income. Even if all of the above-mentioned taxes were eliminated, the federal government could continue spending forever.

The most common measure of the economy as a whole is Gross Domestic Product (GDP). The formula is GDP = Federal Spending + Non-federal Spending + Net Exports.

Federal taxes remove dollars from the economy, while federal spending adds dollars to the economy. When federal spending exceeds federal taxing, i.e adds dollars to the economy, this misleadingly is termed a “deficit.” When federal taxing exceeds federal spending, this is termed a “surplus.”

A federal surplus is the economy’s deficit, and a federal deficit provides the economy with a surplus. Thus, contrary to popular intuition, federal surpluses are recessionary and federal deficits lead to GDP growth.

A regressive tax adversely affects the poorer more than the richer. FICA not only is a large tax, but it is our single most regressive federal tax, because it is collected only on salaries below approximately $100K.

All other incomes –interest, capital gains, salaries above $100K, etc. — which are more important for the rich, are not subject to FICA. (Sales taxes are our largest non-federal regressive taxes).

In 2017, the federal government expects to collect about $3.7 trillion in taxes, of which $1.7 trillion is expected to come from FICA. If the federal government were to eliminate FICA, while continuing to pay exactly the same amounts in Social Security and Medicare benefits, $1.7 trillion would be added to the economy this year.

The addition of $1.7 trillion would offer the greatest benefit to the payors of FICA, the lower income, salaried people. (FICA is a deduction from salaries. Even the portion that ostensibly is paid by corporations actually functions as a salary deduction.)

Simply ending FICA (Step #1) would grow the economy,
improve health care, and narrow the Gap
between the rich and the rest.

Since ending FICA is easy to execute — just stop collecting from paychecks — why hasn’t it been done? Actually, it has, or at least a mini version has:

Payroll Tax Cut Temporarily Extended into 2012
IR-2011-124, Dec. 23, 2011

WASHINGTON — Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011.

The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012.

This reduced Social Security withholding will have no effect on employees’ future Social Security benefits. 

Due to massive federal deficit spending, the “Great Recession” ended, and in 2010, Gross Domestic Product grew 3.78%. However, in 2011, the growth rate fell to 3.70%, and the government feared we might slip back into recession.

So, the government instituted what it called, a payroll tax “holiday.” The government temporarily (for two years) made a small cut (2%) in Social Security collections, and even this temporary, small cut made a difference. In 2012 GDP growth rose to  4.11%.

If a temporary, mini FICA cut could have a positive effect on the economy, and did not reduce Social Security benefits, the question remains, why hasn’t FICA been eliminated?

Three reasons:

  1. The “Big Lie,” which simply stated is: Federal taxes fund federal spending.  Even a cursory examination reveals the truth.Since the federal government has the unlimited ability to create dollars, clearly it does not need taxes to fund its spending. It could (and does) fund spending by creating dollars, ad hoc.
  2. The inflation myth: Cutting taxes increases the money Supply. The inflation myth says that increasing the Supply of money decreases the Value of money  (aka inflation).  However, the Value of money is based on Supply AND Demand. And the Demand for money is based on interest rates, which the Fed controls.The federal government has absolute control over the value of the dollar. There is no historical data, either domestic or foreign, demonstrating that deficit spending causes inflation. (Hyperinflations in Zimbabwe, Weimar Republic, Argentina, et al, were caused by shortages, not by money “printing.”)
  3. The Gaps are the differences between the richer/more powerful and those below them on the economic scales. It is the Gaps that make people richer and more powerful, so they want to widen those Gaps.  But cutting FICA would narrow the Gaps, so the higher economic groups, having more power, are able to convince Congress to keep, and even increase FICA.

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FICA collections have another, more insidious effect. By providing the illusion that FICA funds Social Security and Medicare, FICA forces limits on those benefits — benefits that are far more important to the lower income groups. A double penalty for the less affluent.

But it gets worse. Medicare payments are unnecessarily low (because of the Big Lie), so many of the best doctors now opt to refuse Medicare or become “boutique” doctors. These doctors are not financially available to the lower-income groups, who then receive on average, lesser health care (not only from the standpoint of skill but because of the number of patients each doctor must serve).

And it gets worse, yet: America has a severe shortage of doctors and nurses. But limiting the size of benefits has the unintended consequence of discouraging our best and our brightest from entering medicine.

And then the final insult. Though the dollars you use to pay FICA are taxed (corporate dollars are tax deductible), the benefits you receive from Social Security also are taxed — a double tax against the less affluent.

Summary: FICA is unnecessary; it’s a drag on the economy;  it reduces the number of, and availability of, health care providers: and it punishes the less affluent, widening the Gap between the richer and the rest.

FICA should be eliminated.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

Brownback destroyed Kansas. Same concept would grow the U.S. Wednesday, Dec 28 2016 

Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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As readers of this blog know, the Big Lie is this: Federal taxes fund federal spending.

Unlike state and local governments, and even unlike euro nation governments, the U.S. government is Monetarily Sovereign.  That means it neither needs nor uses tax dollars. It creates dollars ad hoc, by paying invoices.

Even if all federal tax collections fell to $0, the federal government could continue spending, forever.

The Big Lie is expressed in many ways, by the left and by the right. Here is one example:

Brownback eager to see Trump repeat Kansas’ mistakes
12/27/16 10:11 AM, By Steve Benen

Arthur Laffer, the architect of Kansas’ failed far-right economic experiment, is certain that if Donald Trump adopts similar policies at the national level, it will “lead to economic ‘nirvana’ in the U.S.”

The last chief executive to listen to Laffer’s advice, Kansas Gov. Sam Brownback (R), is thinking along the same lines. The Wall Street Journal reported over the holiday weekend:

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured.

Still, Mr. Brownback views his signature idea – eliminating the 4.6% state individual income tax for partnerships, limited liability corporations and similar businesses – as a national model.

He’s not alone. In 2012, Senate Majority Leader Mitch McConnell (R-Ky.) said of Brownback’s radical economic experiment, “This is exactly the sort of thing we want to do here, in Washington.”

This is an unbelievably crazy idea.

As regular readers know, it’s been about six years since Brownback announced his plan to conduct “a real-live experiment” with his state’s economy.

The far-right Kansan, working with a GOP-led legislature, cut taxes far beyond what the state could afford, slashed public investments, and waited for prosperity to flourish across every corner of the state.

None of that has happened. Not only have Kansas’ job growth and economic growth rates lagged behind neighboring states, the state’s budget is in shambles, and Kansas’ debt rating has been downgraded multiple times.

Given these results, common sense suggests the governor and his allies might re-think some of their economic assumptions.

Instead, Brownback and his cohorts are convinced their failures are actually successes, and Republicans at the national level would be wise to repeat Kansas’ missteps.

Clearly, Mr. Benen, the author of the above article, does not understand the differences between a monetarily NON-sovereign government (Kansas) and a Monetarily Sovereign government (the U.S.).

Kansas uses the U.S. dollar, a currency over which it is not sovereign. It, and all other states, counties, and cities, can run short of dollars, so they need continual infusions of dollars to fund their spending.

These dollars can come from taxes, tourism, or exports.  Reducing taxes requires that more dollars come from tourism or exports, or the state will face insolvency.

By contrast, the federal government cannot run short of its own sovereign currency. The U.S. could, and indeed should, reduce taxes, as Kansas did, an act that would leave more dollars in the economy and increase economic growth.

In fact, just the elimination of FICA (see Step #1 in the Ten Steps to Prosperity, below) would provide a powerful stimulus to the U.S. economy.

Unfortunately, Mr. Brownback, being Republican, also “slashed public investments” which invariably translates into cutting programs that benefit poor and middle-income people.

The Big Lie, whether spoken by the right or by the left, leads to one result: It widens the Gap between the rich and the rest.

And, the Big Lie, whether spoken by the right or the left, has one of two causes: Ignorance or intent. Either Mr. Benen is ignorant of Monetary Sovereignty, or he intends to help widen the Gap between the rich and the rest.

Readers of Mr. Benen’s articles might conclude he has a progressive bent, and he would be among the last commentators to opt for widening the Gap.

However, the same readers might conclude he is intelligent, well-read, and understands the truths of Monetary Sovereignty.

Which is the real Steve Benen?  I cannot say. What I can say is his article damages America by spreading the Big Lie, whether intentionally or not.

The bottom line to all of the above is that state finances are different from federal finances, monetary non-sovereignty is different from Monetary Sovereignty,  and tax cuts that were disastrous for Kansas could work quite well for the U.S.

Ignorance has its penalties, and the public, not understanding the above differences, pays dearly for its ignorance.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

Big data, uncertainty, prediction, and approximations Tuesday, Oct 11 2016 

A few thoughts on uncertainty:

Nothing is certain. We live in a universe of approximations.

There is, in physics “the Heisenberg uncertainty principle,” which describes certain limits of what we can know.

We simultaneously cannot know both the position (in space) of a subatomic particle and its momentum (speed times mass). The more accurately we measure one, the less accurately we can know the other.

This counter-intuitive fact has nothing to do with the act of measurement (aka “the observer effect”) somehow changing the result. It has to do with what we absolutely never can know, despite out best, most careful efforts.

At any moment in time, each particle has both a position and a momentum. But we cannot know both.

Nature has decided some knowledge will be hidden from us, today, tomorrow and forever.

If you find this hard to believe, perhaps a slightly more familiar situation will be instructive: We simultaneously cannot know the diameter and the circumference of a circle.

We can measure the diameter of a circle. We can measure the circumference of a circle. But no matter how hard we try, we cannot measure both for the same circle.

We can measure the diameter as precisely as we wish. Let’s call it exactly “1” (1 inch, 1 foot, 1 mile, 1 light year).

No matter how precisely we create that circle, we never can know the diameter, which is based “1” multiplied by the infinite sequence known as π. Being an infinite sequence, π cannot be measured precisely.

In mathematics, there is a workaround, or rather a convenience, that says an infinite sequence can be expressed as the rounding of the last terms. For instance, 1.9999999 . . . can be treated as being the “same” as 2, because the difference would be infinitely small..

Pi is an infinitely long sequence. You can see a million digits of Pi here.

The first few digits are 3.14159 . . . , which sometimes are rounded to 3.14 or to 3.1416 if greater precision is desired.

True, the word “pi” represents a number, just as the word “one” and the numeral “1” each represent a number, but there is no way to measure both the circumference of a circle and the diameter, by the same number system.

If, for instance, one uses pi to measure a circle’s diameter, no fraction of pi will measure the same circle’s circumference.

Every circle has both a specific circumference and a specific diameter but you never can know both.

The uncertainty principle of physics and the uncertainty of pi in geometry are distant cousins. Physics at its core is mathematics, and mathematics at its core is geometry.

Because of the uncertainty found in geometry, mathematics, and physics, they all function only as approximations. Everything we know devolves to an approximation.

(In mathematics, even simple “1+1 = 2” is equivalent to the approximation:  .99999 . . . + .99999 . . . = 1.99999 . . .)

Economics, at its core, is psychology, and the measures in psychology are even less certain that are those of geometry.

Consider inflation (or as some call it, “price inflation”). It is defined as a general increase in prices. Though we can look back and declare with some confidence that there has been inflation, we cannot say how much.

Like subatomic position and momentum, or pi, inflation is unmeasurable.

Circulating through America’s and the world’s economies are billions, perhaps trillions, of different products and services, each changing through time. Today’s overall mix of products and services is different from yesterday’s. Tomorrow, just one day later will see a different mix.

How then does one compare the pricing of yesterday’s product/service mix “A” with the pricing of today’s product/service mix “A+1”?

If “A+1” has a higher price than does “A” does this represent inflation? Or does it merely represent the fact that two different product/service mixes have two different prices?

Consider a basic example: The price inflation of milk. We can’t even measure that . Too many alternatives. Skim, 2%, or regular; gallon, quart, or pint; Pasteurized, flavored, or raw;glass bottle, paper carton or plastic; grass-fed cow from Wisconsin, grain-fed cow from Illinois or a goat from Missouri.

Only fourteen such questions will yield nearly five million alternatives. What then is the better measure of price inflation in milk?

One sometimes hears that the federal government fudges the inflation statistics to make some point — to exaggerate or to minimize the measure of inflation. And this often may be true.

But since there can be no accurate measure of inflation, the best that can be attained is an approximation. The argument then becomes, “Whose approximation is ‘better'”?

“Better” for what? Is it “better” to know the position of a subatomic particle or its momentum? Or an approximation of both?

Is it “better” to know the diameter of a circle or the circumference or some approximation of each?

Is it better to know the price inflation of milk, or of some static and selected basket of products and services, or of some evolving and selected basket of products and services?

Our approximations tell us there has been some inflation in the past 20 years, though how much, we cannot know, nor do we know how much is “best.”

We can try to impute inflation by determining the changing value of money itself.  The formula is: Value = Demand/Supply.

Sadly, we have no measure for those terms, either.

Gross Domestic Product (GDP), another often-used measure, suffers the same problem. Without knowing inflation, a gross measure like GDP is all-but-meaningless. In fact, all the measures in economics are based on approximations, and when approximations are compounded by other approximations, results can vary wildly.

But it gets worse, for economics is massively complex, with all factors being related. Employment is related to GDP, which is related to education, which is related to income inequality, and on and on — trillions upon trillions of inter-relationships of approximations.

Much of science, including economics, has as its goal, prediction. Unless one can say, “If ‘A’ happens, ‘B’ will result,” of what value is economics?

And that is exactly the problem facing economics: It lacks predictability.

When someone predicts kicking a ball will send the ball into the air, that is not an impressive forecast. And when someone predicts that a triangle will resist deformation better than a square, that is expected.

But, when someone predicts a recession or inflation or a stock price increase, and that recession, inflation or stock price increase happens near the predicted time, the person is acclaimed, so rare is even somewhat accurate, prediction in economics.

Given that geometry is far more predictive than psychology (despite the effects of infinity), one might think economics would attempt to incorporate geometry into its calculations.

And indeed, it has, in the form of graphs and charts. Look in any economics text or read any economics blog, and you will frequent use of graphs and charts.

Unfortunately, the graphs and charts are constructed from the same uncertain data that makes economics prediction so difficult. Extending trend lines usually fails.

Finally, psychology is based on the brain, and the brain is an approximation device. We do not actually see an object. We translate a two-dimensional sensing of the light coming from the object, into a three-dimensional approximation, which is why illusions can be so convincing.

Approximations can make for good science, so long as we understand their limitations. Consider the Ten Steps To Prosperity (below), the plan for narrowing the income/wealth/power Gap between the rich and the rest.

Step #1 is “Eliminate FICA.” That tax is highly regressive, being imposed only on salaries (not on all income and not on wealth). Its primary effect is on the low- and middle-income workers.

We believe:

  1. The Gap is too wide and has been widening, though we don’t know how wide it is or how wide it should be.
  2. One measure of the Gap is via the GINI ratio, but this ratio is based on many variables, the measure and weighting of which can be debated.
  3. Eliminating FICA would narrow the Gap, but there is no way to determine how great the narrowing would be.
  4. Because the federal government is Monetarily Sovereign, and never can run short of its own sovereign currency, it neither needs nor uses FICA tax dollars.
  5. The only negative to eliminating FICA might be inflation, though we don’t know whether that negative is real, nor how much inflation might occur, nor whether, for certain,  inflation could be contained.

We see many beliefs, unknowns, and uncertainties indicated in those points. We cannot quantify them, nor prove them.

So why do we believe them?

The human belief system is based on translating insufficient information into certainty.

Everything is approximate. Looking out the window, I am certain I see a tree. But my brain has made an approximation. It has interpreted certain light quanta, falling on my retina to approximate a tree and a window, though upon closer inspection, the whole approximation might be a shadowbox or a photo or just a play of light.

Physics, geometry, and economics can grow only as we reduce the human element, i. e. the human interpretation and intuition as solutions to uncertainty.

The purpose of human intuition is quickly to interpret a massive amount of information that otherwise cannot be factored. But machines are good with massive amounts of data. A machine could find relationships in the huge data described in the milk illustration.

Think of Google’s web crawler, then think of more advanced computers crawling the web for every mention of every product and service.

At some future point, the computers will “know” the relationships between all past sales, uses and prices of everything, and from these past relationships, be able to estimate the future.

Big data will be the solution to big uncertainty, as we creep ever closer to knowing the position and mass, the diameter and circumference, the future of the Gap and of inflation.

Closer is as good as it ever will be.

Rodger Malcolm Mitchell
Monetary Sovereignty

===================================================================================

The single most important problems in economics involve the excessive income/wealth/power Gaps between the rich and the rest.

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE AN ANNUAL ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONEFive reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and corporate taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

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