Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

Erskine Bowles and Alan Simpson are Co-Chairs of what ironically is named, “The Moment of Truth Project.” If ever there was a moment when these two spoke the truth, that time is well past and long forgotten. A more appropriate name would be, “The Years of Deceit Project.”

On April 19, 2013, they published an Email addressed to “Dear Colleagues and Friends.” The entire letter is reprinted in the Comments section of this post, but I’ll discuss a few passages:

This morning, the two of us are releasing a detailed plan to control our mounting debt and grow the economy.

When you read their letter, you’ll see not one proposal for growing the economy. All their proposals are for deficit cutting, i.e. austerity, which has been an economic disaster everywhere in the world it has been tried.

Our plan, the Bipartisan Path Forward to Securing America’s Future, fleshes out the framework we released this February, which built on the negotiations between Speaker Boehner and President Obama in December. Our plan would save an additional $2.5 trillion over the next ten years, address all areas of the budget, and would put the debt on a downward path over the long-term.

Calling something “bipartisan” is supposed to give it credentials. The reality: “Bipartisan means: The right wing demanded it, the President always wanted it and the left wing acceded to those demands.

No discussion ever is made of how removing $2.5 trillion from the economy can possibly benefit America.

The failure to get our debt under control, reform our tax code, and put our entitlement programs on a fiscally sustainable course is robbing us of the ability to invest in our future and will leave us without the resources we need to meet other challenges facing our nation.

Translation: The failure to reduce the money supply, tax the middle class more and gut Social Security and Medicare, is robbing the upper .1% of the ability to widen the gap between the rich and the rest.

Focus on the incredible notion that increasing taxes and reducing federal benefits somehow would help us invest in the future. It’s like saying, “We need to lighten up by chopping off our legs, so we can run faster.”

That is what passes for a “Moment of Truth” to Bowles and Simpson and the rest of those bought-and-paid-for by the upper .1% wealth group.

It is critical that leaders in both parties come together to put our fiscal house in order if they have any hope of addressing the other challenges and opportunities that we face as a nation.

Translation: “Fiscal house in order” means cut social programs and increase middle-class taxes.

. . . despite multiple efforts from Speaker Boehner and President Obama to reach a “grand bargain,” the country has still done nothing to make our entitlement programs sustainable for future generations, make our tax code more competitive and pro-growth, or put our debt on a downward path.

Translation: The “grand bargain” is President Obama’s long time dream of destroying the New Deal social programs. “Entitlement programs sustainable” means gut Social Security, Medicare, Medicaid and aids to the poor, in order to save them.

This entire program is based on the theory that the United States federal government is short of money, but you poor and middle classes have too much money. So you must give more of your money to the government.

Last December, the negotiating parties were as close as they’ve ever been on a plan to put our fiscal house in order.

When you read the full text, you’ll see repeated use of such vague, meaningless euphemisms as, “fiscal house in order,’ “grand bargain,” “sustainable for future generations, “moment of truth,” “more competitive and pro-growth,” “addressing our challenges, “principled compromise,” “better future for our grandchildren.”

These phrases are the Simpson/Bowles equivalent of Orwell’s: “War is peace. Freedom is slavery. Ignorance is strength.”

Taken together, these policies would put our debt on a clear downward path as a share of the economy while protecting the recovery, promoting long-term economic growth, protecting the most vulnerable in society, and ensuring our entitlement programs remain fully available to future generations.

What you will not see is any evidence that tax increases and spending decreases “protect the recovery, promote long-term economic growth,” blah, blah, blah. No, you will not see even one ounce of data showing how this plan would grow the economy, reduce unemployment or in any way at all, better the lives of the poor and the middle classes. The reason: Such data do not exist.

At the end of their letter is a table showing their recommended deficit cuts. Here are just a few. As you read them, ask yourself, “Whom they will impact most, the rich or the rest?”

Health Care: $585 billion
Military health and retirement: $100 billion
Higher education: $35 billion
Increase User Fees: $50 billion
Chained CPI: $280 billion

In summary, here is your “Moment of Truth”: Simpson/Bowles is a lie — a prescription for economic disaster, a destruction of the lives of Americans living and yet to be born, and a spectacular widening of the gap between the rich and the rest.

The names of these men will live in infamy. The program they propose is a disgrace, exceeded only by the disgraceful ignorance of those who believe it.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

On April 9, 2013, a group called “Chicago Booth” asked professors from MIT, Harvard, Yale, Berkeley, Chicago and Princeton to rate the following statement::

Countries that let their debt loads get high, risk losing control of their own fiscal sustainability, through an adverse feedback loop in which doubts by lenders lead to higher government bond rates, which in turn make debt problems more severe.

The question is so poorly written it cannot be answered. Sadly, these professors, each from a distinguished school, didn’t object. They all answered.

Some of the problems are:

1. It is a three-phrase question, and each phrase changes the possible answer.
2. No definition is given for “their debt loads” (The whole nation’s or just the central government’s?)
3. No definition is given for “high,” nor for “higher bond rates.” (Higher than what?)
4. “fiscal sustainability” is not clear (Ability to pay bills? Ability to prevent inflation? Ability to grow economically? Ability to prevent recession, depression, stagflation, poverty?)
5. “doubts by lenders” (Doubts of what? Repayment? Inflation?)
6. “debt problems” (Specifically, what are the debt “problems” that becomes “more severe”?)
7. In total, the question assumed the answer (“Agree”) and the professors dutifully went along, without thought or concern, like little automatons.

The question might have been written by a high school freshman. But, as nonsensical as the question was, the answers were even worse.

Every one of these professors agreed with the statement! Yikes!

The closest anyone came to even approaching reality, was David Autor and possibly David Cutler, both of whom might understand the difference between Monetary Sovereignty and monetary non-sovereignty. But even they agreed with the statement.

The others’ answers were completely clueless. Aaron Edlin was so sure of his wrong answer, he added the supercilious comment, “Does gravity make bricks fall when dropped?” One is left to wonder when he last learned anything new.

And these people, from “top” schools, are teaching our children. What a disgrace for the U.S. educational system, when even our “best” schools turn out such wrongheadedness.

To my knowledge, there is one school (thankfully) in America, that teaches real economics: The University of Missouri, Kansas City.

The rest seem to teach a flat-earth philosophy, and if the following group is typical, our economics students, and indeed our nation, will suffer for many years.

Here are the professors and their responses. The number indicates 1-10 the strength of their agreement. In a few cases, they added a comment:

Daron Acemoglu MIT Strongly Agree 7

Alberto Alesina Harvard Strongly Agree 10

Joseph Altonji Yale Agree 7

Alan Auerbach Berkeley Agree 7

David Autor MIT Agree 6
This is generically true, but we don’t the threshold where it matters. And not clearly true for countries that borrow in their own currency.

Katherine Baicker Harvard Agree 3

Marianne Bertrand Chicago Strongly Agree 3

Raj Chetty Harvard Agree 4

Judith Chevalier Yale Strongly Agree 8
“Risk” is the operative word here; it is hard to forecast ex ante at what point the negative feedback loop will become problematic.

Janet Currie Princeton Agree 4

David Cutler Harvard Agree 3
Lots of particulars matter, including who it is owed to and whether the country has its own currency.

Angus Deaton Princeton Strongly Agree 7

Darrell Duffie Stanford Strongly Agree 10
In perfect transparent markets, the market clears at an appropriate yield in one step. In actuality, price discovery involves feedback.

Aaron Edlin Berkeley Strongly Agree 10
Does gravity make bricks fall when dropped?

Barry Eichengreen Berkeley Uncertain 7
Much depends on other factors like growth of the denominator of the debt/GDP ratio, which will vary with policies & circumstances.

Ray Fair Yale Strongly Agree 5

Pinelopi Goldberg Yale Agree 6

Michael Greenstone MIT Agree 7
Tough question is definition of “high”. See Rogoff/Reinhardt for best evidence. Does “high” differ for country w global currency, like US?

Robert Hall Stanford Strongly Agree 8
Simple math…interesting that it has not happened to Japan, however.

Bengt Holmström MIT Agree 8

Caroline Hoxby Stanford Agree 9

Kenneth Judd Stanford Agree 4
The debt load may be a factor in reputation but the US has experienced great increases in debt in the past without suffering these problems.

Anil Kashyap Chicago Strongly Agree 9
The only question is when the tipping point kicks in. Japan will face trouble after Europe is sorted out, as might the UK and maybe then US

Pete Klenow Stanford Strongly Agree 7

Jonathan Levin Stanford Agree 6
Yes, but clearly conditions vary – right now US can borrow easily with high debt, but some euro countries cannot.

Eric Maskin Harvard Agree 8

William Nordhaus Yale Agree 7

Maurice Obstfeld Berkeley Strongly Agree 10
Government vulnerability will depend on the maturity of its debt (more short term debt means more exposure) and the size of its deficit.

Emmanuel Saez Berkeley Uncertain 5

José Scheinkman Princeton Did Not Answer

Richard Schmalensee MIT Agree 3

Hyun Song Shin Princeton Agree 7

Nancy Stokey Chicago Strongly Agree 10
With debt/GDP around unity, a substantial risk premium can be the difference between the debt load being “sustainable” and “unsustainable.”

Richard Thaler Chicago Agree 3
Yes I suppose so, but what of it?

Christopher Udry Yale Agree 3

Luigi Zingales Chicago Strongly Agree 6

Throughout America, there are continuing efforts to test our students to determine what they are learning. Clearly there needs to be similar testing of teachers, to determine what they are teaching.

If this were our best and our brightest, America would be doomed.

Rodger Malcolm Mitchell
Monetary Sovereignty

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

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

By now you may have seen articles like this one:

Huff Post
Influential Reinhart-Rogoff Pro-Austerity Research Riddled With Errors: Study

Influential research by U.S. economists Carmen Reinhart and Ken Rogoff, touted by policymakers pushing government austerity in the United States and Europe, is riddled with errors, a bombshell new academic study claims.

The findings may not have much impact on the debate over government debt, and it probably won’t cause those who have spent the past several decades panicking over government debt to stop their panicking. But it seriously erodes the intellectual underpinnings of the pro-austerity argument — and makes the damage done by austerity in Europe and the U.S. in recent years all the more poignant.

Right. Deficit reduction, aka “austerity” has ruined millions of lives around the world. And it all has been unnecessary.

“This is a mistake that has had enormous consequences,” wrote Dean Baker of the Center for Economic and Policy Research. “If facts mattered in economic policy debates, this should be the cause for a major reassessment of the deficit reduction policies being pursued in the United States and elsewhere.”

And there is the key sentence, for of course, facts do not matter. The supposed need for deficit reduction is a lie that never has been based on facts, but rather on motive — the motive of the upper .1% income group to widen the gap between the rich and the rest.

The Reinhart-Rogoff paper, “Growth in a Time of Debt,” has been THE definitive research document backing austerity. It said, countries with public debt more than 90 percent of gross domestic product had significantly slower growth. It lied.

House Budget Committee Chairman (R) Paul Ryan, the notorious shill for the rich, referred to the Reinhart/Rogoff study in his 2013 budget, “The Path to Prosperity: A Blueprint for American Renewal.” He said, “Essentially, the study confirmed that the massive debts of the kind the nation is on track to accumulate are associated with stagflation — a toxic mix of economic stagnation and rising inflation.”

It is a lie — a lie that was obvious to those who understand Monetary Sovereignty, though it is a lie widely believed by a brainwashed public.

And when faced with the facts, Reinhart and Rogaff didn’t even have the decency to admit their errors. Instead, they announced, “. . . we are very careful in all our papers to speak of “association” and not “causality”. . . ”

Get it? They now say, the paper cited by politicians to “prove” big debt causes slow growth, doesn’t do that at all. They now say, slow growth may cause big debt, rather than the other way around. Maybe. Possibly. Or not. Summary: This much lauded paper is so filled with errors, it shows nothing and proves nothing. It’s a nothing.

Remember, not once, had Reinhart/Rogoff ever complained that their (false) research results were being misused. Instead they sat back and bathed in the warm glow of esteem provided by the austerity plotters, while millions suffered and died as a result.

Never did Reinhart/Rogoff say, “Our research provides no reason to cut Social Security, no reason to cut Medicare, no reason to fire federal employees, no reason to cut food inspection, drug inspection, food stamps and NASA, no reason to cut postal service, aid to the poor, aid to states and rebuilding of infrastructure, no reason to cut aid to education, anti-pollution efforts, ecology protection and R&D.”

Even now, Reinhart/Rogoff defend their findings by saying their data have “many nuances of alternative interpretation” (their words). “Many nuances of alternative interpretation”?? Isn’t that academic-speak for, “We are as likely to be wrong as right, but we won’t admit it.”

Bottom line, the need for deficit reduction is a monumental lie backed by quack-science.

John Boehner lied when he said America is broke. Obama lied when he said America needs to live within its means. The Republicans lie every time they say federal spending should be reduced. The Democrats lie every time they agree with the Republicans and Obamausterity.

They all are paid to lie by the .1%, via monster campaign contributions (Thank you, right-wing Supreme Court) and promises of lucrative employment after they leave office (aka being “Clintonized”). The rich want the gap between them and the rest to widen. They want to press the middle class down into poverty. They want to increase their power over the people. Reinhart/Rogoff were complicit in the plot.

Federal spending costs the taxpaying public nothing. Not one cent. But what does cost the public dearly is austerity. It costs in lost jobs and lost income. It costs in hunger, homelessness and crime. It costs in lost happiness and lost hope.

The rich claim our grandchildren will pay the federal debt. A lie. Our grandchildren will pay for the poverty our austerity passes down to them.

Will the revelations about the Reinhart/Rogoff “research” affect Obamausterity. Will the Republicans and the Democrats rethink their relentless drive to impoverish America, while widening the gap? Will they base their actions on economic fact rather than on myth?

Did fact keep despots from burning witches at the stake?

Rodger Malcolm Mitchell
Monetary Sovereignty

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

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY