Mitchell’s laws:
●The more 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.
==========================================================================================================================================

Here are excerpts from a letter sent by six of the senators who voted for sequestration – the process by which automatic cuts in the federal deficit are made, because of the popular, wrong-headed belief federal deficits hurt the economy.

Remember now, these guys voted FOR sequestration.

September 21, 2012
Dear Majority Leader Reid and Republican Leader McConnell:

We face a critical challenge in the next few months: balancing the need to reduce the deficit with the need to safeguard important priorities, particularly protecting our national security, vital domestic programs, and our economic recovery. We believe it is imperative to enact a bipartisan deficit reduction package to avoid the severe economic damage that would result from the implementation of sequestration.

Translation: “Cutting the deficit will damage the economy, so we need to cut the deficit.”

Yes, cutting the deficit will damage the economy, because deficit cuts require spending cuts and/or tax increases. But a basic equation in economics shows that: Federal Spending + Non-federal spending – Net Imports = Gross Domestic Product (GDP).

All federal spending cuts reduce the 1st term of the above equation and all tax increases reduce the 2nd term. So, deficit cuts reduce GDP. Simple mathematics. Even $1 in deficit reduction reduces GDP, and the greater the deficit reduction, the greater the GDP reduction.

With a growing population, even a perfectly balanced budget (federal spending = federal taxes) reduces per-capital GDP, so for the economy to grow, there must be significant deficit growth. And these guys are talking about deficit reduction? Yikes!

Any deficit reduction package should be long term and should provide as much certainty as possible for businesses and consumers.

No problem. The certainty is this: Cutting federal deficits will cause a recession if we are lucky or a depression if we are not. Clinton’s federal surplus, beginning in 1998, caused the recession of 2001.

The Congressional Budget Office has already warned sequestration in combination with the expiration of current tax policy could send our fragile economy back into a recession and raise unemployment above 9 percent, and the administration agrees that sequestration “would be deeply destructive to national security, domestic investments, and core government functions.”

Translation: “Reducing the deficit will kill the economy, so let’s reduce the deficit.”

Failure to act to address the debt would result in sequestration taking effect in January 2013 with significant detrimental impact on our fragile economic recovery. According to a report done for the Aerospace Industries Association, if sequestration is allowed to occur in January, the nation will lose approximately 1 million jobs because of defense budget cuts and 1 million jobs because of domestic cuts in 2013.

Translation: “Reducing the deficit will add 2 million to the unemployment rolls, so let’s reduce the deficit.”

Make no mistake about the devastating impact of sequestration. According to Defense Secretary Leon Panetta, sequestration would leave our nation with its smallest ground force since 1940, smallest number of ships since 1915, and smallest Air Force in its history, and “would inflict severe damage to our national defense for generations.” The indiscriminate across-the-board defense cuts scheduled to start this January would result in a 9.4 percent reduction to defense discretionary funding and a 10 percent reduction to defense mandatory spending programs.

The administration reports that “sequestration would result in a reduction in readiness of many non-deployed units, delays in investments in new equipment and facilities, cutbacks in equipment repairs, declines in military research and development efforts, and reductions in base services for military families.” Specifically, the Army would see a $7 billion reduction in operations and maintenance (O&M) funding, and the Navy and Air Force would lose another $4.3 billion each in their O&M accounts.

Translation: “Reducing the deficit will reduce our ability to defend ourselves, so lets reduce the deficit.”

In addition, sequestration’s impact will be felt beyond the Department of Defense. On the non-defense spending side, the administration reports that sequestration would “undermine investments vital to economic growth, threaten the safety and security of the American people, and cause severe harm to programs that benefit the middle-class, seniors and children.”

The National Institutes of Health would face a $2.5 billion cut and “would have to halt or curtail scientific research, including needed research into cancer and childhood diseases.”

The Centers for Disease Control and Prevention would see a $464 million cut, and states and local communities would lose billions in federal education funding for Title I, special education State grants, and other programs.

Translation: “Reducing the deficit will damage our investments, harm our security and damage our health and our children’s health, so let’s reduce the deficit.”

Based on this, we are committed to working together to help forge a balanced bipartisan deficit reduction package to avoid damage to our national security, important domestic priorities, and our economy.

Translation: “We need to reduce the deficit while not reducing the deficit.”

Sequestration will endanger the lives of America’s service members, threaten our national security, and impact vital domestic programs and services. Meeting this challenge will require real compromise, and we do not believe that Congress and the president can afford to wait until January to begin to develop a short term or long term sequestration alternative. All ideas should be put on the table and considered. Accordingly, we urge you to press between now and November the Congressional Budget Office and the Joint Committee on Taxation to score any bipartisan proposals forwarded to them so that Congress may evaluate these plans.

We believe it is important to send a strong signal of our bipartisan determination to avoid or delay sequestration and the resulting major damage to our national security, vital domestic priorities, and our economy.

Carl Levin
John McCain
Jeanne Shaheen
Lindsey Graham
Sheldon Whitehouse
Kelly Ayotte

Translation: “We voted for a monstrosity that will destroy America. Now someone else can do something about it. Maybe a bipartisan committee (to spread the blame) can figure out how to cut GDP, while simultaneously growing GDP. We want a little deficit reduction to reduce GDP a little, rather than a big deficit reduction, which will reduce GDP a lot. What’s wrong with that?”

Why does Congress, knowing that deficit reduction reduces GDP, want deficit reduction? Are they ignorant or evil?

Some are ignorant. But for the rest, the motive is simple evil: Reducing the deficit hurts the lower 99% income group far more than it hurts the upper 1%. In other words, it increases the gap between rich and the middle-to-low classes.

The rich don’t care how much money they have. They care how much MORE money they have than the lower income groups. Wealth is not an absolute; wealth is a comparative.

Because our politicians are puppets of the 1%, they pretend to believe the deficit is “unsustainable,” despite the fact that our Monetarily Sovereign nation can pay any bills of any size. They pretend a “fiscally prudent” government does not spend “more than it has,” despite the fact that “spending more than it has” is the only way to grow GDP.

People: You should know this: The politicians, in cahoots with the media and old-line economists, are lying to you. Reducing the federal deficit, even a balanced budget, will destroy the U.S. economy. Every depression and nearly every recession, has begun with deficit reduction.

The rich want to increase the income gap. They want to murder the middle and lower classes. That is the sole motivation and the only result of deficit reduction.

The rich want you to vote for your own murder.

And many of you will.

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 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.
==========================================================================================================================================

I’ve liked Paul Volcker. He cured the inflation of 1979 through 1983, by raising interest rates (which increased the demand for dollar-denominated securities, thereby increasing the value of the dollar.)

[Aside: This is an area of disagreement between Monetary Sovereignty and MMT, which claims high interest rates increase business costs, thereby forcing prices up – an inflationary effect. MS agrees this is true, but claims the increased reward for owning dollars has a much greater, anti-inflationary effect.

The dueling claims are discussed in more detail at: Preventing and Curing Inflation: Modern Monetary Theory vs. Monetary Sovereignty]

I also like the “Volcker Rule, part of the Dodd–Frank Wall Street Reform and Consumer Protection Act. The Rule limits bank speculation on investments that risk customer deposits, and don’t benefit customers. (I’d prefer that all banks be federally owned. The Volcker Rule is a short step in the right direction.)

But, even a well-respected Fed Chairman can go astray when discussing basic economics. The September issue of MONEY magazine, contained an interview with Volcker, relevant excerpts of which are:

Question: Which vision on how to fix the U.S. economy makes more sense to you: the Paul Ryan plan of tax cuts for the wealthy and deep bites into federal spending, or Simpson-Bowles [the presidential commission that offered a major deficit-reduction plan by increasing some taxes and cutting spending], which increases taxes for the wealthy with far less dramatic reductions in federal expenditures?

Volcker: Well if you’re just aiming for a balanced budget—it would be extremely difficult to achieve without some significant reform in the entitlement area. We’ve also got to take some look at the defense area, where expenditures are so large relative to the rest of the world that there might be some room for savings. But on top of that, you’re going to need some additional revenues. It’s not possible right now, but we need a real structural reform in our tax system if we’re going to approach equilibrium between spending and taxation. In addition, we’ve got great budget pressure on state and local governments.

Sadly, Volcker discusses how to achieve a balanced federal budget, rather than saying (as he should have): “If you’re talking about balancing the federal budget, that is a sure path to recession or depression. Balancing the budget requires spending decreases and/or tax increases.

But, Federal Spending + Non-federal spending – Net Imports = GDP. Spending decreases reduce the 1st term in that equation and tax increases reduce the 2nd term. So together, they reduce GDP.” Volcker should understand this basic truth of economics.

Question: So what would you do on taxes?

Volcker: To put it bluntly, we have to move more toward a consumption tax. There are different ways you could do that, but that’s what we ought to be doing.

Because lower income people spend a greater percentage of income on consumption than do higher income people, Volcker’s recommended tax would increase the gap between the rich and the not-so-rich. Hard to believe Volcker doesn’t realize this.

Question: Would you get rid of the Bush tax cuts?

Volcker: In the short run, you’ve got to deal with your income taxes. You can do that either by repealing the Bush tax cuts, at least for some people, or by rearranging the exemptions and loopholes, all those things people talk about adopting, something along the lines of Simpson-Bowles.

Every income tax increase reduces the “Non-federal spending” part of the GDP equation, thereby leading us to recession. Simpson-Bowles is a guaranteed plan for recession or depression.

How has Obama done in handling the economic recovery?

Volcker: Everybody thinks it would be nice if the administration were more effective in promoting a balanced package on taxes and spending. The problem is that the political system has been so ideologically divided, and the congressional situation is such that it’s been hard to get any degree of consensus on any sensible program.

Yet another Volcker claim that a disastrous balanced budget would be beneficial.

Question: Do you think that some version of Simpson-Bowles or Rivlin-Domenici [another bipartisan panel putting forth a deficit-reduction plan] is the best we can do?

Volcker: Yes, absolutely. I wish Mr. Obama would do it today. Those two approaches have the essentials. Neither has the kind of tax restructuring that I envision, though Rivlin-Domenici had a little bit of it. Ironically, the easiest thing to do, politically and otherwise, is Social Security reform. Such reform would be important as an example of what we can do in the medium and longer run.

“Social Security reform” is a code phrase meaning: “Cut benefits and/or increase taxes, because the government can’t afford to pay for Social Security.” Cutting benefits and/or increasing taxes punishes the lower income people, thereby increasing the gap. It also would lead to recession.

Further, the government, being Monetarily Sovereign, and having the unlimited ability to pay any size bills at any time, could afford to pay all Social Security benefits, even without FICA.

Question: Is the Federal Reserve Bank living up to its charter of maintaining price stability and promoting full employment?

Volcker: I’ll be radical and say this dual mandate confuses the issue. The most important thing the Federal Reserve can do over time is maintain price stability. Obviously when you’re in the midst of a recession to start they can maintain price stability and provide a lot of stimulus at the same time.

I agree, completely. The primary job of the Fed is to prevent and cure inflation. Stimulating the economy is the job of Congress and the President. Sadly, the politicians have abdicated their economic responsibilities, so have tossed the hot potato to the Fed, which is ill equipped for the job.

In short, Volcker was a good Fed Chairman, but a lousy economist.

Hmmm . . . Is that even possible?

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 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.
==========================================================================================================================================

Mitt Romney released a fake tax return. I’ll tell you why it’s fake, but first a bit of background. According to FOX News (my bible):

Romney released his final tax return for 2011 on Friday. That document shows the Romneys paid $1.9 million in taxes on nearly $14 million in income, mostly from investments, giving them an effective tax rate of 14.1 percent.

There must be a powerful reason why he refuses to disclose the past 10 years of tax returns, though he did disclose them to Sen. John McCain, in an attempt to be the Vice-Presidential nominee.

After seeing the returns, McCain rejected Romney and chose Sarah Palin. There may be no relationship between those two events, but to be rejected in favor of Sarah Palin! Yikes!

At any rate, see that 14% number? Here’s why it was important. According to the Wall Street Journal:

Their $4 million donation proved to be so large that it threatened to drive their effective tax rate to near 10%. That would have exacerbated a critique from Democrats that says America’s wealthiest don’t pay their “fair” share.

So the Romneys decided to simply give up a large chunk of their $4 million deduction, taking only $2.25 million instead. In effect, it was another gift, but this time to the federal government.

Here’s why that tax return is a fake. Immediately after the election, no matter who wins, there is absolutely nothing to prevent Romney from flip-flopping once again and filing an amended return, to claim his full charitable deductions, and any other deductions he “accidentally” omitted.

He has three years in which to file an amended return (which may relate to why his earlier returns were not disclosed).

Consider that 2011 tax return a mere bit of political showmanship. Remember, there is no penalty for filing a false return showing you owe too much.

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 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.
==========================================================================================================================================

Recently, I attended a bar mitzvah, a coming-of-age ceremony for 13 year-old, Jewish boys. During the ceremony, the boy recounted good works he had done, as part of his bar mitzvah obligations. He had gone door-to-door collecting cans of food, to be given to the poor.

Little did this boy know he was helping to foster what Mitt Romney refers to as the “culture of dependency.” You see, according to the “religious” right, America was built by self-sufficient heroes, who neither needed, nor asked for, help from others.

“Under a culture of dependency, poverty becomes a trap, and recipients get stuck. Long-term welfare recipients lose work habits and job skills . . .” (Matthew Spalding, vice president of American Studies and director of the B. Kenneth Simon Center for Principles and Politics at the Heritage Foundation, a conservative think tank in Washington, D.C.)

Apparently, those who are poor, deserve their poverty, because they are lazy. They’d rather receive government help, than find a job and work. That is why food stamps and other poverty aids should be cut.

And everyone knows the sick are responsible for their illnesses and for buying their own health insurance, which is why Medicare and Medicaid benefits should be cut and taxed. The elderly, too, are at fault. They should have saved for their future, which is why Social Security benefits should be cut. It’s all part of self-sufficiency.

Poverty is such a pleasant lifestyle, that when you give people help, they cannot resist staying poor. Consider unemployment compensation. The benefits are so generous, it’s no wonder recipients are reluctant to seek work.

For example, if you lose your $50,000 per year job in Illinois, your benefits will be $450 per month, up to a maximum total benefit of $11,700 – well worth lounging at home, wouldn’t you agree? That same job in Alabama will earn you $255 a week and a maximum total benefit of $6,630. Most people receive less, but isn’t that tempting?

Then there’s Supplemental Nutrition Assistance Program (SNAP), aka “food stamps.” In Illinois, your family of four can get a maximum of $668 a month depending on your other sources of income. (The more you earn, the less SNAP you get.) Who wouldn’t want that?

As Robert Samuelson disparaged in the 9/22/12 Chicago Tribune: “America has created a welfare state.” And as the “religious” right know, helping the unfortunate actually does them a disservice, because charity creates a drug-like addiction.

”Welfare is both a consequence and a cause of several conditions best described as social pathologies. These conditions include dependency, poverty, out-of-wedlock births, nonemployment, abortion, and violent crime.” William A. Niskanen, The Cato Journal

As you can see, federal charity actually causes dependency, causes poverty, causes out-of-wedlock births, causes nonemployment, causes abortion, and causes violent crime. Presumably, if we cut back on that welfare, there will be less dependency . . . etc.

The right wing knows this. They are the religious right. They read the bible.

*But when thou makest a feast, call the poor, the maimed, the lame, the blind – Luke 14:13
*Blessed is he that considerth the poor: Psalm 41:1, 2
*As for the rich in the present age, charge them not to be haughty . . . They are to do good, to be rich in good works, to be generous and ready to share. – 1 Timothy 6:17, 18
*. . . we must help the weak. . . It is more blessed to give than to receive. Acts 20:35
*But if anyone has the world’s goods and sees his brother in need, yet closes his heart against him, how does God’s love abide in him? 1 John 3:17
*You shall love your neighbor as yourself. There is no other commandment greater than these. Mark 12:31

Hmmm . . . Perhaps, the “religious” right reads a different bible. Or is it more likely that their own greed, selfishness and contempt for human suffering has given them a convenient rationale for not helping the needy?

When Romney receives cheers for saying, “There are people . . . who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it,” to whom was he speaking?

What kind of people claim to be religious, yet despise those in need? Was America built on aid to those in need? Or was it built on so-called, “self sufficiency,” as the religious right wing claims? If so, no one told our letter carriers:

William Bland of Lebanon, KY, rescued a pregnant woman and child after they were involved in an auto accident. Bland waded into waist-deep river water to find the woman and her infant hanging upside down, barely above water, restrained by their seatbelts. When he couldn’t release the buckles, he ran to his vehicle, called 911, and returned with a letter opener to cut the seatbelts. Bland finally was able to get the woman and child out of the vehicle.

Walter Hayes of St. Louis, MO, saw a speeding driver strike a student who was crossing the street. Hayes immediately ran to the student’s aid, lying next to the child to keep the student warm and to help calm him.

Letter Carrier Melissa Kelley saved a customer from two attacking pit bulls. She chased them away using her satchel and dog spray. The man had been bitten on his arms and face and had his front teeth knocked out. Kelley stayed with him until paramedics arrived. Later, he thanked Kelley, calling her his “angel.”

Oakland, CA, Letter Carriers Alan Girard, Rick Quinonez, Gilbert Rangel, Tanya Joseph and Karen Hill bravely helped rescue 100 residents from an apartment fire.

The irony is, these postal workers gave of their own time and physical safety to rescue fellow Americans in need. But, federal support of the poor and lame, federal support of Social Security and Medicare, indeed all federal spending costs you no time, no effort and not one cent.

That’s right. The U.S. government is Monetarily Sovereign. While state and local governments, being monetarily non-sovereign, do rely on taxes to support spending, the federal government does not.

If FICA disappeared, this would have no effect on the federal government’s ability to pay Social Security and Medicare benefits. If all federal taxes fell to $0, the federal government still could continue to pay every bill, forever.

So here is the bottom line:

1. Federal “welfare” costs you nothing. Zip. Zilch. Zero.

2. Federal “welfare” closes the gap between the richest and the poorest among us, which is why a candidate whose wealth is $250 million, sneers at the less fortunate, and resists helping them. He wants that gap widened.

3. There is no evidence a significant number of people would rather be on SNAP and unemployment, than have a decent, paying job. The “food-stamp mother,” who is too lazy to work, and has bunches of illegitimate kids in order to collect welfare, is an extreme rarity. Few people would relish that kind of life. It’s much more difficult than working.

4. Federal “welfare” payments stimulate the economy, benefitting every American, not just the poor. (GDP = Federal Spending + Non-federal Spending – Net Imports)

5. Those who begrudge the social benefits paid by the federal government, simply are mean-spirited, unpatriotic bastards, who don’t deserve to call themselves religious or American.

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

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