Are there good deficits and bad deficits?

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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While Congress struggles with plans to cut federal deficits (i.e. cut federal money creation), and simultaneously tries to encourage banks to lend (i.e increase private money creation), it might be instructive to see why this is exactly the wrong approach. Please go to a post I wrote last June (since updated), titled, Is federal money better than other money?

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

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

–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.”

–Fed profits. You lose.

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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When the Fed profits, you lose.

1/10/11: WASHINGTON (Reuters) – The Federal Reserve is turning over a record $78.4 billion to the U.S. Treasury Department after its swollen securities portfolios generated big profits in 2010, the central bank said on Monday.
The remittance to the Treasury for 2010 is $31 billion more than a year earlier.
“The increase was due primarily to increased interest income earned on securities holdings during 2010,” the Fed said in a reference to portfolios that have been fattened by buying aimed at stimulating a slow-paced recovery.

That’s $78.4 billion taken from the economy and lost forever. Last year $47 billion was lost. True, much of this money was interest on T-securities, which was paid by the government, so the money merely recirculated. But had that money been paid to private holders, rather than to the Fed, it would have stimulated the economy.

The Fed turns over profits to the Treasury annually and has never posted a loss.

In short, every year the Fed removes money from the economy, an annual anti-stimulus action. While many people will cheer the Fed’s “profits,” this money is identical with a tax on the private sector.

No, these so-called profits do not reduce your taxes. No, these so-called profits do not increase the federal government’s ability to pay its bills. No, these so called profits do not have a positive effect on our economy. They are a dead loss to the money supply — exactly the opposite of the stimulus spending. They are the worst financial news of the day.

When it comes to federal financing, “profit” is bad and “deficit” is good. That has been true since 1971, when we became Monetarily Sovereign. One day, the government and the mainstream economists will get it.

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.”

–Playing politics with your life, your health and your finances

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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Rep. Fred Upton(Republican) said, “If we pass this bill with a sizable vote, and I think that we will, it will put enormous pressure on the Senate to do perhaps the same thing.” “This bill” is the attempt to repeal the health care bill. He went on to say, “But then, after that, we’re going to go after this bill piece by piece.”

So, he expects to fail in his attempt to repeal the entire bill, but then he will try to gut it. If he is successful in either attempt, here is what will happen to you:

–Your children may be denied health insurance because they have a pre-existing condition.
–Your insurance company might put a ceiling on the claims you can submit, during your lifetime.
–You can be charged extra for an emergency room visit to a hospital not in your insurance company’s network.
–You will lose coverage of your children through age 26.
–Your coverage can be cancelled if you get sick.
–When you are a senior, you will not receive free screening for cancer, the biggest killer of Amercians.
–Millions of Americans will lose insurance coverage.

And other bad stuff too numerous to mention.

So why do the Republicans want to do this to the American public? Four reasons:

1. Through time, this bill will gain in popularity, and become known as a signature Democratic initiative, on a par with Social Security, Medicare and the civil rights bills. Since most recent Republican initiatives have been to go to war with Iraq based on a lie, deport undocumented aliens and the Bush tax cuts, the Republicans are desperate either to come up with something great or to destroy whatever the Democrats do. They need an issue, and this is all they can think of (Heaven forbid they come up with something beneficial to the lives, health and finances of the general public.)

2. The stated belief the “individual mandate” is onerous or illegal, in that you can’t penalize people for not buying something. Really? Try driving in my state, Illinois, without buying significant amounts of liability insurance. Try buying anything without paying the retailer sales tax. (And unless you think this is just a tax, it isn’t. The retailer actually makes a profit on it, because he pays against total sales, while he receives a rounded up amount from each sale.) True, the self-styled “originalists” on the Supreme Court may rule against it, because it does not meet their right wing agenda, but this will just open the door to a single payer option, which the right wing will hate even more.

3. Pandering to the Tea Party. Unfortunately for the Republicans, the bloom is going off the Tea Party rose, and soon Sarah Palin and the rest of the gang will be remembered laughingly in the same terms as the infamous “Know Nothing” party, which the Tea Party closely resembles. See: Know Nothing party

4. The bill is “too costly” or “unsustainable” or will force tax increases on taxpayers. Those who have read the posts on this blog have learned that taxpayers do not pay for spending by a Monetarily Sovereign government, taxes will not need to be increased, there is nothing that is unsustainable for the federal government, and all the talk about affordability is utter nonsense. If you have not read the posts, you can begin with: Introduction and work your way forward.

Although I have spend most of my life voting Republican (because I didn’t like the “tax” part of the Democrats’ tax ‘n’ spend policies), I find myself drifting leftward, partly because of the mean-spirited, hate filled, ultra-political beast the Republican party has become. So it will be entertaining to watch the Republicans try to destroy one of the great human initiatives in American history. Yes, the health care bill is not perfect. I’ll repeat that: The health care bill is not perfect. But it’s an excellent start toward doing what any great nation must do – protect its citizens – whether against foreign invaders, poverty, illiteracy or sickness. It’s the reason we have a government.

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.”