–The crazy solution to the pension problems of businesses and local governments: Social Security Pension for All

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

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 ultimately 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.
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You probably live in a state, county or city that is in financial trouble because of pension liabilities. Pension problems are everywhere:

WATCHBLOG: Fitch downgrades PA bonds; cites pension problems

Could Philly be the next Detroit?

California unions lost some ground last year when Gov. Jerry Brown pushed through the Legislature a series of public-pension cuts that affect their members.

Dozens of local pension boards are in “bad shape”

The Wall Street Journal reports New Jersey Pension Gap Hits $54 Billion

Too often, you read about the need for pension “reform.” The word “reform” is a euphemism for “screw the retirees, screw the creditors and/or screw the taxpayers.” Whenever you read or hear the words, “pension reform,” you can be absolutely positive, someone will be screwed.

Here’s what the Chicago Tribune said in today’s editorial:

The legislative conference committee assigned to devise pension reforms will meet again Friday. As if on cue, Thursday brought three grim reminders of how urgent it is that this committee rapidly start the long process of rescuing Illinois.

Ladies, gentlemen, what further proof do all of us need that Illinois requires not just half-a-loaf pension “fixes” (same as “reform”), but reforms big enough to take pressure off of the state’s budget? That is, off the state’s taxpayers.

Read how are they propose to “take the pressure off the state’s taxpayers:

The best plan now on the table would eliminate Illinois’ $100 billion unfunded pension liability over 30 years, deliver still-generous benefits to retirees — and save taxpayers a projected $187 billion.

Get it? Cut pensions by $100 billion. According to my math that would cost Illinois taxpayers $100 billion, as it is the taxpayers who would see their pensions cut.

The city of Detroit filed for bankruptcy, in large part because of its retiree pension and health liabilities. The Wall Street Journal reports that, under the bankruptcy plan, retirees are set to get less than 10 percent of what they’re owed.

That’s how pension “reform” works. Everyone gets screwed.

Illinois is already insolvent, unable to pay bills as they come due. And every year Illinois pension costs devour so much revenue that education and other needs go unmet.

We hope the conference committee members absorb all of this and realize that a middling pension deal won’t do what many citizens want: not just save the pension system, but also take a big share of that pressure off the state’s annual budgets.

Chicago isn’t part of the state pension system, but none of us should be surprised if fixes at the state level become the template for a city fix as well. (Moody’s Cites Pension Problems as Reason for Downgrading Chicago’s Bond Rating)

Any plan projected to reduce pension costs by something less than $187 billion would force taxpayers to contribute extra billions. And it likely wouldn’t save enough future spending on pensions to ease the current strangulation of other budget priorities.

We’ll close not with a word of encouragement, but with two: Go big!

Ah, the Tribune’s favorite words: GO BIG! These are exactly the same words the Tribune used when describing their plan for federal deficit reduction (i.e. GO BIG!) Is this a masculinity thing with the Tribune editors?

The words were ridiculous then and they are ridiculous now, because they do not address the fundamental problem facing state and local pension plans:

Every state, every county, every city and village in America is monetarily non-sovereign. It is a rule in economics that any monetarily non-sovereign entity cannot long survive unless it has dollars coming in from outside its borders or sphere.

You, being monetarily non-sovereign, must have income to survive long term. The same is true of corporations, all of which are monetarily non-sovereign.

Each state, county and city must have dollars coming in from outside its borders. It cannot survive long term on taxpayers alone, for taxes merely recirculate internal dollars; it’s added dollars that are needed.

THE CRAZY SOLUTION:

No monetarily non-sovereign entity should be allowed to contract for future pension payments. The problems with pensions are quite simple:

1. They promise future payments, that when totaled, can exceed past deposits. If you live long enough, you will receive more money from your pension than has been deposited by you or for you.

2. To make up the difference, pension plans invest the deposits, and investments often lose money, or don’t return sufficient dollars.

I myself, already have received more from Social Security than I deposited, yet it is 100% impossible for Social Security to go bankrupt (despite what the lying politicians and newspapers tell you.) So how can the federal government keep paying benefits?

The U.S. government is Monetarily Sovereign. It creates dollars at will. It can pay any debt of any size at any time, regardless of tax income. That is what “Monetarily Sovereign” means.

SOCIAL SECURITY AS THE NATION’S SOLE PENSION

In the past, we have advocated Medicare for All, with the federal government underwriting full-pay Medicare for every man, woman and child in America.

Similarly, the U.S. should provide Social Security Pension for All (SSPA), and not the pittance-paying, approx. $15,000 per year Social Security we have now.

No, it should be a Social Security that provides enough money for a person or for a family to live decent lives during their retirement years — with benefits perhaps triple current benefits.

States, counties, cities and corporations should be precluded by law, from providing pensions to employees. If people want pensions exceeding SSPA, they simply should save the additional money. If they are unable to save money, SSPA will provide a living pension income.

No sudden tax increases. No surprises when your planned-on pension doesn’t materialize. Less chance creditors will demand more interest from taxpayer.

In addition ,u>we should eliminate FICA (thus benefiting employees and employers).

Social Security Pension for All, would greatly reduce state, county and city insolvency, reduce the need for taxes and tax increases, reduce the screwing of employees and creditors and allow states to spend their limited and precious dollars on things needed in the state.

The federal government, being Monetarily Sovereign, easily could and should finance Social Security Pension for All. The U.S. government is the sole entity in America that has the unlimited ability to support any initiative.

Question for the Chicago Tribune: Is Social Security Pension for All “GO BIG!” enough for you?

Rodger Malcolm Mitchell
Monetary Sovereignty

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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. Click here
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%

10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt

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:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

–What do we fix first – the environment or the economy?

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

The July 6, 2013 issue of NewScientist Magazine contained an article asking the following question:

What do we fix first – the environment or the economy?
08 July 2013 by Fred Pearce

Before we analyze a few excerpts from that article, take a moment to think about the choice. The clear implication is that in some way, “fixing” (a non-scientific term) the economy and fixing the environment are mutually exclusive — that if we do one, we can’t do the other, at least not at the same time.

It is one of the most pressing questions of our time: what is the relationship between financial and environmental meltdown? Are the two crises the same thing, needing to be dealt with together?

Or do we, as even some business leaders suggest, have to “fix the environment” (another non-scientific term) before we can fix the economy?

Unfortunately, especially in a science magazine, the author never is specific about what “fixing” really means, so determining precedence is a foggy enterprise at best.

You might expect a strong “yes” from the greens to fixing the environment ahead of the economy. Long-time Greenpeace activist Amy Larkin (says) the high costs of coping with extreme weather, pollution and declining resources are, she says, catching up with capitalism.

“Coping with” is not exactly “fixing.” We can “cope with” extreme weather and pollution by staying indoors, and we can “cope with” declining resources by finding more resources — but is that what the greens really want?

Our carefree attitude to the “externalities” of wealth generation has generated an environmental debt that is loading unsustainable financial debt on us all.

Ah, “unsustainable financial debt.” Is that what needs fixing? Is there really any such thing as “unsustainable financial debt”?

For you, yes. For me, yes. For Chicago, for California, for Greece — yes, yes and yes. All are monetarily non-sovereign, so can run short of money.

But for the U.S. government, no. Being Monetarily Sovereign, the U.S. government never can run short of dollars. It never can be unable to pay any size debt payable in dollars. “Unsustainable financial debt” does not apply to the U.S. government

As shortages of natural resources push up prices, a looming resource crunch is manifested in market meltdown.

Shortages of natural resources can push up prices. All that means is more money would be needed to buy these resources. But for Monetarily Sovereign nations, the supply of money is unlimited. So what’s the problem?

Well, there IS a problem, but it’s not a price problem. It’s the problem, very simply, of being short of natural resources.

Paul Donovan and Julie Hudson, economists for the Swiss bank UBS, argue that “there is a second credit crunch”, an environmental one.

By ransacking global resources and enfeebling ecosystems, the authors say, we are drawing down environmental credit as surely as reckless spending on a credit card draws down financial credit.

Investment strategist Jeremy Grantham warns in even starker terms of the escalating impacts of growing food and water scarcities, linked to climate change. “The days of abundant resources and falling prices are over, forever.”

Again, a false parallel is being made between limited resources, like food and water, and the unlimited resource of money.

Many economists argue that reckless consumption, driven by easy credit, helped fuel financial crisis. Environmentalists agree that the same consumer binge drove up environmental debt.

No one knows what “reckless” consumption is, other than it’s what the other person does. Similarly, no one knows what “easy” credit is. Right now, interest rates are near zero, which is pretty “easy.”

The financial crisis was caused by bank fraud, not “easy” credit, and it has been fueled by federal austerity.

The rising prices of diminishing resources such as metals, agricultural products, timber and fish were a constant theme in the run-up to the financial crisis.

Actually, overall inflation (“rising prices) was not particularly high during the years preceding the recession, and inflation did not precipitate the recession.

Now a growing number of business people believe that only by tackling environmental and resource issues head-on can they return to prosperity and growth.

Agreed, depending on what “tackling” means.

The Worldwatch Institute, a highly regarded environmental think tank, argues that we know how to generate renewable energy, feed 9 billion people, restore landscapes, stabilise climate and manage water, while taming corporations and improving social justice.

“There is no physical or technical impediment…”

Absolutely agreed.

Alan Weisman (author of Countdown: Our last, best hope for a future on Earth?) says that humans do have a sustainable future – provided there are many fewer of us. “Either we humanely bring our numbers down or nature’s going to hand out a pile of pink slips.”

Robert Malthus rises again.

Weisman is a little behind the curve here. The average woman in the world today has fewer than 2.5 children, half the figure of 40 years ago. We are most likely heading for peak population by mid-century.

That puts the onus where it belongs – on the overconsuming rich rather than overbreeding poor.

Disagree on both. The rich are not “overconsuming” (yet another non-scientific term) nor are the poor “overbreeding.”

Most authors argue that dealing with them will mean we have to “deleverage”, as economists say. In other words, reduce both financial and environmental debt.

“Financial debt” is another term for “money supply.” The author doesn’t realize it, but he is suggesting the solution to our economic problems is to reduce the money supply.

But for me, they all miss a fundamental difference between the crises. We can write off financial debt, directly through bankruptcies or indirectly through inflation.

But the natural environment is the planet on which we live. We can’t default on climate change, write off disappearing ecosystems, or inflate away eroded soils. There is no way we can shrug off environmental debt.

Well, he’s sort of, kind of right. Money is an artificial, nonphysical construct. We can make as much or as little as we wish. Instantly.

The U.S. government, being the creator of, and sovereign over, the dollar, could if it wished create more dollars than there are stars in the sky, and do it with the push of a computer button.

However, clean air, clean water, plants, food, housing and animal species are physical and real, and come in limited quantities. We cannot create unlimited amounts, instantly.

So getting back to the title question, “What do we fix first – the environment or the economy?” the answer is, we should stimulate the economy by repairing the environment.

For instance: Federal investment in “cleaning” water (sterilization and desalination) would employ people and add dollars to the economy, thereby stimulating the economy.

Federal investment in finding/developing less polluting energy sources (wind, water, solar, geothermal, maybe nuclear) also would employ people and stimulate the economy.

Federal investment in research and development to solve all our ecological problems, merely involves exchanging an unlimited resource (money) for limited ecological resources.

In short, the answer to the title question is: We can help fix the economy BY fixing the environment.

The enemy is not overpopulation. People are our most valuable resource. Nor is the enemy excessive consumption by the rich, although the rich are the basis for our problems.

The enemy is economic austerity, which has been fostered by the rich as a means to widen the income gap between the rich and the rest.

We already have everything we need — money, manpower, brains and science — to solve our environmental problems. We just need to dump the superstition of austerity.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

Why student loans are needless and harmful. The terrible Oregon mistake.

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

Part of America’s ongoing economic crisis is labeled “student loan debt.”

From Scribd
The Economics Of Student Debt

Stafford Loan Interest Rates Are A Short-Term Problem Reflective of A Long-Term Tension

As Congress returns from its recess, it hopes to address the rising interest rate on federally subsidized Stafford (student) loans, provided interest free until six months after graduation to students with a financial need.

The overall issue of student loan debt has the potential to become a significant drag on the economy, with debt now totaling nearly a trillion dollars and 17 percent of borrowers delinquent in their repayment.

Student loan debt is not just an economic drag, but as is standard procedure for this Congress and this President, the middle and lower income groups are the ones punished.

But here’s a solution proposed by the State of Oregon:

No tuition or loan for college? No problem

(MoneyWatch) Can you imagine attending grade school and high school without paying tuition or taking out a single school loan?

Wait a minute. You probably did have the opportunity to attend grade school and high school without paying tuition or taking out a single school loan. American children already are entitled to a free K-12 education .

Why? Because many years ago, America (and much of the civilized world) realized that a nation’s growth and prosperity depended on an educated populace — including not only an educated rich, but an educated everybody.

Today, every child in America can have a free K-12 education courtesy of their local governments. And this despite the fact that all local governments are monetarily non-sovereign, i.e. they do not have the unlimited ability to create dollars, so must rely on taxpayers to foot the bill.

Now, we have arrived in the 21st century, and universal K-12 education is not sufficient to grow America. College and post-graduate educated students are needed, from the rich and from the middle and lower income groups, too.

Not that everyone should have a college education. Some brains and ambitions are not up to the task, and many jobs don’t require it. But a college education should be available to everyone, rich or poor.

So, O.K., the above-mentioned article actually was talking about college, and really read:

Can you imagine attending college without paying tuition or taking out a single college loan?

For millions of college students in Oregon, this could soon become a reality.

Last week, the Oregon legislature unanimously passed a bill that could lead to students attending one of the state’s seven public universities without incurring any upfront costs.

Students would agree to designate a small percentage of their future income to repay the state for their education.

Former students would contribute about three percent of their income during a 24-year repayment period.

Oregon is trying to solve a serious problem:

Huffington Post
Student Loan Debt Will Exceed Median Annual Income For College Grads By 2023: Analysis
By Caroline Fairchild, Posted: 07/10/2013

The policy and communications consulting firm Hamilton Place Strategies found that while average student debt at graduation has skyrocketed by 200 percent since 1993, income growth has stagnated.

From 1993 to 2010, the typical graduate’s monthly student loan payments grew roughly 300 percent, from $100 to nearly $300. In 2011, two-thirds of college students graduated with debt equivalent to about 60 percent of their annual income.

The Oregon plan is based on the rich paying more than the poor and presumably nobody would incur those massive school loan debts, now plaguing America.

(But, the rich wouldn’t need to participate, since they can afford to pay their college bills. So as usual, the full burden would continue to fall on the middle and lower income groups).

The question is: Why should America’s students be required to pay anything for their education? Why doesn’t the logic of free K-12 extend to 13+?

Since educating our young people will help grow the American economy, and keep us competitive with the rest of the world, why do we make it difficult for our young people to get an education? Why do we impoverish the very people upon whom we depend to lead our nation upward?

Why don’t the local governments simply pay for grades 13+, just as they pay for K-12? And the simple answer is: They can’t afford it. They are monetarily non-sovereign.

Who can afford it? Our Monetarily Sovereign federal government.

The U.S. federal government being sovereign over the dollar, never can run short of dollars. In fact, it actually creates dollars every time it pays a bill.

The federal government can and should pay for educating America’s children, not just in grades 13+, but for all grades, and it wouldn’t cost taxpayers one cent. (A Monetarily Sovereign government does not use taxpayer dollars to pay its bills. See: Monetary Sovereignty: The key to understanding economics)

Our Monetarily Sovereign federal government should remove the education burden from the monetarily non-sovereign state and local governments, most of which are in financial stress.

(The rich will object, and falsely claim the government can’t afford it. The rich want to be America’s only educated group. It gives them power over the middle- and lower-classes.)

The Oregon plan, which because it seems like a solution, actually is a step backwards. It eliminates discussion of federal payment, and cements the liability to the backs of the students.

Complex, convoluted solutions that involve payment by monetarily non-sovereign entities (i.e states, counties, cities and private citizens) only turn eyes away from the real solution: Federal support for American education at all grade levels and all income levels.

For that reason, student loans are needless and harmful, and the Oregon “solution” is a terrible mistake.

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

S&P admits its claims of objectivity and independence are “puffery.”

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

If you never read my blog post: More on (moron) the S&P downgrade of American national credit,

or my blog post: S&P downgrades itself,

you absolutely must read this article: S&P’s Public Relations Nightmare
July 12th, 2013, Jonathan Weil

The gist:

The (court) argument S&P made was that company statements extolling the objectivity, independence and integrity of its ratings are only “puffery” and that a reasonable investor wouldn’t depend on them.

After S&P cut Italy’s sovereign-debt rating this week, the website Zero Hedge posted a copy of the company’s report under the heading “Full ‘Puffery’ Statement.” Another blogger joked that S&P stands for “Snake-oil & Puffery.”

If you are an investor, relying on S&P and other rating agencies to guide you to the safest investments, my question is: Why?

I ask the same question of all stock brokers. (I already have written to my broker, Schwab, asking why they show S&P ratings for their bonds. I’ll let you know if/when they answer. Meanwhile, you should ask your broker the same question.)

And as for you media experts who loudly have bemoaned the rating reductions of U.S. government debt — what do you say now?

[Meanwhile, I have a new business model: If you want a good rating from someone who will charge you less than S&P, contact me. For just a few bucks, I’ll to give you an AAA rating. It will be as accurate as those high ratings S&P gave to worthless mortgage debt.

As for my new business: I give it an AAAA+ rating.]

Rodger Malcolm Mitchell
Monetary Sovereignty

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#MONETARY SOVEREIGNTY

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