There are some things only the government should do.

Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

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We are social animals. Rules, laws, codes, and mores are the natural consequence of that shared life. We establish governments to organize and formalize those rules.

The fundamental purpose of governments is to improve and protect the lives of the governed.

Those of a libertarian bent decry government as being intrusive upon their freedoms. Yet, the very purpose of laws is to limit any individual’s freedom to do harm to society. For humans, anarchy tends to devolve into chaos.

For arch Libertarians, every law (or at least every law they dislike, today) is pejoratively defined as “Socialism,” and that supposedly ends the argument. They opt for “small government” which tends to translate into, less taxing of the rich and fewer benefits for the poor.

But Socialism, like most “isms,” neither is bad nor good, in of itself. The assessment depends on conditions and how the “ism” is applied.

When Ronald Reagan famously declared, “Government is the problem,” he was President of one of the more successful governments on this planet — successful in the sense that it oversaw one of the freest, wealthiest, most powerful nations in history. Clearly, Reagen was not a Libertarian when he uttered those words, which in any event have been misconstrued and twisted over time.

And as it turned out, Reagan was not a small-business President.

Today’s Libertarianism leans heavily toward a form of Conservatism that favors the rich over the poor, to the point where virtually any benefit for the poor is denounced as encroaching on “our” (meaning the rich’s) freedoms.

Despite the “Socialism!” howls of today’s Republicans, and the “Big Government!” screams of the Libertarians, some things truly are better left to the federal government. Three of these things are discussed at: The military, the nation’s banks, and healthcare.

Sure you paid us insurance premiums, but do you really expect us to pay for your healthcare?

When deciding what should be done by government and what should be done in the private sector, here are five of the key issues:

Coordination:
America is a huge nation, huge in area, huge in population, with huge demographic and legal diversity. Very few businesses are able to coordinate nationwide projects. National coordination is best handled by a national government.

Labor supply
Even the federal government doesn’t employ sufficient labor to handle large projects. Example: The National Highway System. But the federal government has the means and political power to hire, set the rules for, and supervise private contractors nationwide.

Expertise
Some projects require a wide range of technical expertise. The federal government, far more than any single business, benefits from the extensive military and non-military research projects it funds.

Affordability and financial risk
Here is where the federal government really shines. It literally can afford anything and when speculative projects don’t work, the government can afford to absorb the loss.

Profit motive
This may be the most important reason for the government, rather than the private sector, handling a project: The profit motive. The federal government doesn’t have one.

It can go “where no man has gone before.” It can try experiments. It can fail and try again. It can focus on the mission rather than on the profit.

When NASA was instructed to send a man to the moon, all its attention was on that mission, not on whether moon flights might be profitable. Subsequently, it has sent missions all over the solar system.

Now, fifty years later, private industry has decided there might be money to be made in sending a few rich people briefly into space, though not even yet to the moon. That is the difference between the federal government’s efforts and private industry’s.

Left to its own devices, private industry might never travel to the moon. The financial risk too great; the profit, too uncertain.

And in that vein, I give you the following article:

Major Insurers Running Billions of Dollars Behind on Payments to Hospitals and Doctors

Posted on October 10, 2021 by Lambert Strether: “We should bail them out. Obviously.”

Jay Hancock, of Kaiser Health News.

Anthem Blue Cross, the country’s second-biggest health insurance company, is behind on billions of dollars in payments owed to hospitals and doctorsbecause of onerous new reimbursement rules, computer problems and mishandled claims, say hospital officials in multiple states.

Anthem, like other big insurers, is using the covid-19 crisis as cover to institute “egregious” policies that harm patients and pinch hospital finances, said Molly Smith, group vice president at the American Hospital Association. 

Hospitals are also dealing with a spike in retroactive claims denials by UnitedHealthcare, the biggest health insurer, for emergency department care, AHA says.

What is the underlying problem? Money, or more specifically, the profit motive.

While the primary mission of Medicare and Medicaid is to pay for medical expenses, the primary mission of private-sector health care insurance companies is to make a profit.

A government agency can be inefficient, uncaring, and downright ignorant. So can private insurance companies. The single biggest difference is the profit motive, or the lack thereof.

Disputes between insurers and hospitals are nothing new. But this fight sticks more patients in the middle, worried they’ll have to pay unresolved claims.

Hospitals say it is hurting their finances as many cope with covid surges — even after the industry has received tens of billions of dollars in emergency assistance from the federal government.

“We recognize there have been some challenges” to prompt payments caused by claims-processing changes and “a new set of dynamics” amid the pandemic, Anthem spokesperson Colin Manning said in an email. “We apologize for any delays or inconvenience this may have caused.”

“Any delays or inconvenience” sounds benign, but it is a serious, often existential problem. Nurses rely on their salaries. Doctors, too. Hospitals have creditors who rely on repayment. And patients suffer emotionally and medically from those delays and inconveniences.

When an insurer reneges on its payment responsibilities, a falling domino effect occurs, where thousands of people are injured, some permanently.

Virginia law requires insurers to pay claims within 40 days. In a Sept. 24 letter to state insurance regulators, VCU Health, a system that operates a large teaching hospital in Richmond associated with Virginia Commonwealth University, said Anthem owes it $385 million. More than 40% of the claims are more than 90 days old, VCU said.

For all Virginia hospitals, Anthem’s late, unpaid claims amount to “hundreds of millions of dollars,” the Virginia Hospital and Healthcare Association said in a June 23 letter to state regulators.

Clearly, Anthem values its own finances above the finances and health of many thousands of people.

Nationwide, the payment delays “are creating an untenable situation,” the American Hospital Association said in a Sept. 9 letter to Anthem CEO Gail Boudreaux. “Patients are facing greater hurdles to accessing care; clinicians are burning out on unnecessary administrative tasks; and the system is straining to finance the personnel and supplies” needed to fight covid.

Complaints about Anthem extend “from sea to shining sea, from New Hampshire to California,” AHA CEO Rick Pollack told KHN.

Substantial payment delays can be seen on Anthem’s books. On June 30, 2019, before the pandemic, 43% of the insurer’s medical bills for that quarter were unpaid, according to regulatory filings. Two years later that figure had risen to 53% — a difference of $2.5 billion.

Anthem profits were $4.6 billion in 2020 and $3.5 billion in the first half of 2021.

While Anthem thrives, everyone else suffers. The villain all of this is not just Anthem, but the profit motive. That is where the problem begins.

If Anthem were like the federal government and wasn’t concerned about profits, everyone would have been paid, and those payment dollars would have benefitted the entire economy.

Alexis Thurber, who lives near Seattle, was insured by Anthem when she got an $18,192 hospital bill in May for radiation therapy that doctors said was essential to treat her breast cancer.

The treatments were “experimental” and “not medically necessary,” Anthem said, according to Thurber. She spent much of the summer trying to get the insurer to pay up — placing two dozen phone calls, spending hours on hold, sending multiple emails and enduring unmeasurable stress and worry.

It finally covered the claim months later.

Apparently, the claim was a good one. Anthem paid it, not out of the goodness of their hearts, but because the claim should have been paid. The delay was unwarranted. The fundamental purpose of the delay was the profit motive.

“It’s so egregious. It’s a game they’re playing,” said Thurber, 51, whose cancer was diagnosed in November. “Trying to get true help was impossible.”

Privacy rules prevent Anthem from commenting on Thurber’s case, said Anthem spokesperson Colin Manning.

When insurers fail to promptly pay medical bills, patients are left in the lurch. They might first get a notice saying payment is pending or denied. A hospital might bill them for treatment they thought would be covered. Hospitals and doctors often sue patients whose insurance didn’t pay up.

Yes, there are times when Medicare refuses to pay, but those have to do with disagreements about the rules and coverages. The federal bureaucrats making those decisions are not constrained by profits or affordability.

They simply interpret the rules. They have no m oneyreason to lean away from the creditor.

Hospitals point to a variety of Anthem practices contributing to payment delays or denials, including new layers of document requirements, prior-authorization hurdles for routine procedures and requirements that doctors themselves— not support staffers — speak to insurance gatekeepers.

“This requires providers to literally leave the patient[’s] bedside to get on the phone with Anthem,” AHA said in its letter.

Ah, the old “prior authorization” insurance scam. How many millions of patients have been tripped up by that one?

A frightened, inexperienced patient is told he/she needs a procedure. In a panic about her health, her personal life, and the future, she neglects to tell the insurance company in advance. Payment is denied, not because the procedure isn’t proper, but simply because she didn’t go through the formality of prior authorization.

Gotcha!

Medicare seldom requires prior authorization.

Anthem often hinders coverage for outpatient surgery, specialty pharmacy and other services in health systems listed as in-network, amounting to a “bait and switch” on Anthem members, AHA officials said.

“Demanding that patients be treated outside of the hospital setting, against the advice of the patient’s in-network treating physician, appears to be motivated by a desire to drive up Empire’s profits,” the Greater New York Hospital Association wrote in an April letter to Empire Blue Cross, which is owned by Anthem.

Medicare and Medigap do not use provider networks. With Original Medicare and Medigap you can use any healthcare provider that accepts Medicare-assignment.

With Original Medicare, you do not have to wander through the “in-network, out-of-network” jungle.

Anthem officials pushed back in a recent letter to the AHA, saying the insurer’s changing rules are intended partly to control excessive prices charged by hospitals for specialty drugs and nonemergency surgery, screening and diagnostic procedures.

A for-profit organization has to worry about “excessive prices. For the government, “excessive” prices merely mean that the federal agency will pump more stimulus dollars into the economy.

Claims have gotten lost in Anthem’s computers, and in some cases VCU Health has had to print medical records and mail them to get paid, VCU said in its letter. The cash slowdown imposes “an unmanageable disruption that threatens to undermine our financial footing,” VCU said.

“Lost” is the way a for-profit organization increases its profits.

United denied $31,557 in claims for Emily Long’s care after she was struck in June by a motorcycle in New York City. She needed surgery to repair a fractured cheekbone. United said there was a lack of documentation for “medical necessity” — an “incredibly aggravating” response on top of the distress of the accident, Long said.

The Brooklyn hospital that treated Long was “paid appropriately under her plan and within the required time frame,” said United spokesperson Maria Gordon Shydlo. “The facility has the right to appeal the decision.”

United’s unpaid claims came to 54% as of June 30, about the same level as two years previously.

When more than half of all claims are not paid, something is terribly wrong. There simply cannot be that many false claims.

When Erin Conlisk initially had trouble gaining approval for a piece of medical equipment for her elderly father this summer, United employees told her the insurer’s entire prior-authorization database had gone down for weeks, said Conlisk, who lives in California.

“There was a brief issue with our prior-authorization process in mid-July, which was resolved quickly,” Gordon Shydlo said.

Brief issue” is private insurance-speak for “the longer you have to wait, the more money we make. Maybe you’ll just give up, altogether.”

When asked by Wall Street analysts about the payment backups, Anthem executives said it partly reflects their decision to increase financial reserves amid the health crisis.

Decision to increase financial reserves” is insurance-speak for “decision to make more profits.”

“Really a ton of uncertainty associated with this environment,” John Gallina, the company’s chief financial officer, said on a conference call in July. “We’ve tried to be extremely prudent and conservative in our approach.”

Translation: “To be really prudent and conservative, we’ve decided not to pay claims. You’d be amazed at how that reduces our costs. But you better send in your premiums on time.”

Several health systems declined to comment about claims-payment delays or didn’t respond to a reporter’s queries. Among individual hospitals “there is a deep fear of talking on the record about your largest business partner,” AHA’s Smith said.

“Business partner” is a synonym for “the guy who is squeezing my reproductive organs in his fist.”

Alexis Thurber worried she might have to pay her $18,192 radiation bill herself, and she’s not confident her Anthem policy will do a better job next time of covering the cost of her care.

“It makes me not want to go to the doctor anymore,” she said. “I’m scared to get another mammogram because you can’t rely on it.”

And that is exactly what your insurance company wants. Plenty of premiums with no costs. An excellent business model.

That is where the profit motive can devolve in the health care business.

Health should be a recognized basic human right. In a Monetarily Sovereign nation, federal support of healthcare costs taxpayers nothing. Comprehensive, no-deductible Medicare for All is the correct solution.

But, until the public realizes it, it won’t happen. The politicians are too well-bribed by the insurance industry.
Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Should a big country with big needs have a big government? Why not?

REASON is a libertarian publication.

Libertarians oppose “big government.” The problem is, they never provide a reason why they oppose big government, and they never tell exactly what “big” means.

ᐈ Scolding stock images, Royalty Free scolding photos | download on Depositphotos®
The Libertarians are content to act only as scolds

You can search their website for the answers to these questions, as I have, and you will be disappointed.

Is a “big” government one that employs many people, and if so, how many? How many is too “big” and how many are just right?

Or is a “big” government one that has many departments and agencies, and if so, how many? How many is too “big,” and how many are just right?

Or is a “big” government one that spends a lot of money, and if so, how much? How much is too much and how much is just right?

One would expect that a group complaining about “too big,” “too many,” and “too much” at least would have the answers to those fundamental questions.

But, so far as I can discern, any number of government employees is too many for the Libertarians;  any number of departments and agencies is too many, and any amount of spending is too much.

Seemingly, the Libertarians are content to act only as scolds. They seem to feel that as long as they simply complain, they have demonstrated prudence, acumen, and wisdom, and let someone else come up with real-world solutions to real-world problems.

Here is yet another article of that ilk. In red, is what REASON published, and in black is my commentary.

Will Joe Biden Destroy Trump’s Legacy of Deregulation?
Trump did more than any recent president to pare back regulatory red tape, but the incoming Biden administration is eager to add more.
Chrisitan Britschgi | 1.19.2021

Translation: Trump has many legacies, nearly all harmful. Trump did more than any recent president to pare back consumer protections.

During his first days in office, incoming President Joe Biden is planning to sign “dozens of executive orders, presidential memoranda” which will involve rejoining the Paris Climate Accords, expanding wilderness protections, and moving the country toward a 100 percent “clean energy” economy.

Translation: During his first days in office, incoming President Joe Biden is planning to . . . help reduce global warming and to protect our environment for our children and grandchildren.

“The priority of the Trump administration has been to reduce regulatory burdens,” says James Broughel, a senior research fellow at George Mason University’s Mercatus Center.

“The Biden administration is going to want to issue lots of new regulations. That’s a near certainty. We’re going from an era where reducing burdens was the goal to where burdens will be added in the name of achieving certain social goals.”

Translation: “The priority of the Trump administration has been to reduce regulatory burdens” on polluters and dishonest businesses, while increasing burdens on consumers and on the earth itself. In reality, the priority of the Trump administration was Trump himself — his wealth, his power, his re-election.

Those “certain social goals” of the Biden administration have to do with the health, safety, and well-being of Americans and of the world.

The guiding light of the Trump administration’s deregulatory efforts was Executive Order 13771. That 2017 order instituted the famous rule that regulators issue two deregulatory actions for every new regulatory action.

. . . the infamous “rule that regulators issue two deregulatory actions for every new regulatory action” without regard to the benefit of the regulations or to the effect of the cuts. It is the most simplistic, childish solution to the perceived problem of overregulation.

It also created a system of . . .  regulatory budgets that limited the costs of new regulations they could impose, and often required them to find regulatory savings.

. . . while ignoring the social, environmental, and legal costs of cutting protective regulations, willy-nilly, just to save dollars.

Using this measurement of regulatory savings, the Trump administration has been modestly successful at its goal of deregulating the economy, claiming $198 billion in eliminated regulatory costs.

From fiscal years 2017–2019, the administration claims to have eliminated 3.6 rules for every new rule added. That ratio is 3.2 for fiscal year 2020. 

“. . . successful at its goal of deregulating the economy, claiming $198 billion in eliminated regulatory costs,” while completely ignoring the costly damage caused by cutting regulations that protect the nation, the public, and the environment.

The irony is: The Trump administration rightly complained that “defund the police” was a stupid idea. But it’s a classic, senseless, cut-the-budget, Libertarian idea. It would have saved a great deal of money for local governments, which being monetarily non-sovereign could use the savings.

Trump’s cuts were equally senseless, and they saved money for the federal government, which being Monetarily Sovereign, didn’t need the savings. It creates unlimited dollars, at will.

Further, because Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports, Trump’s cuts immediately took billions from the economy, and more if you consider the economic damage they caused.

Using other measurements, the Trump administration has been less successful. In some areas, they’ve done more to slow the growth of the administrative state without significantly reducing it.

The length of the Code of Federal Regulations stayed essentially flat during Trump’s time in office, hovering at around 185,000 pages.

The Mercatus Center’s tracker of restrictive words in the federal regulatory code comes to a similar result, finding that these words grew from 1.08 million at the beginning of Trump’s term to 1.09 million as of January 1, 2021.

Trump “leaves us with fewer regulations than Hillary Clinton would have—though not many fewer regulations than we had before,” summarizes Robert Verbruggen in a November National Review article.

It’s not clear what exactly “the administrative state is” or why it is bad, but counting the number of words in the federal regulatory code cannot possibly be an intelligent procedure for anything. 

Could it be that all the Libertarians really want is an editor who will make sentences shorter? What next for the Libertarians: A coloring book version of the federal regulations?

One can expect this limited progress to be more than reversed under the new administration. Biden has already announced plans to reinstate Obama-era regulations that were pared back by the Trump administration.

Oh, woe. Biden will resume protections for the public and the environment. How awful.

Politico reports that he’ll likely try to revive the Obama administration’s Clean Power Plan—which regulated carbon dioxide emissions from power plants—that the Trump administration had replaced in 2019. Biden’s housing platform calls for a revival of the 2015 Affirmatively Furthering Fair Housing Rule that Trump gutted in July 2020. The Trump administration’s replacement of the Obama administration’s clean water rules will also likely be ditched.

More woe. We’re going to have cleaner power production, less carbon dioxide emissions, fairer housing, and cleaner water. To the Libertarians, it’s outrageous that Biden won’t force our children to breathe polluted air, drink polluted water, and live in a world damaged by global warming.

Doesn’t Biden know that the real goal of the President is to make the Code of Federal Regulations shorter?

In order to facilitate new rules, large and small, Biden will almost certainly rescind Executive Order 13771 and all the limits it imposed on new red tape.

The Libertarians wrongly equate “red tape” (i.e. inefficiency) with the existence of rules. One assumes that speed limits, food and drug protections, saving lakes and rivers from pollutions, etc. are all classified as “red tape.”

“All the cost caps will probably be eliminated,” says Broughel, as will the regulatory budget the Trump administration used to account for the costs of new rules. Doing so would be a “slap in the face at trying to estimate the effects of the regulatory system.”

Nevertheless, the fact that the Trump administration was able to adopt a regulatory budget at all proves that it can be done. Other future administrations might be more able and willing to pick it up again.

“I suspect in some form the regulatory budget will come back,” says Broughel. “The Trump administration showed that it was workable.”

The Trump administration proved that any idiot could say, “Cut two rules for every new one, without regard to effect.” How about an improvement on that. Make it “cut three rules for every new one,” or even better, cut ten rules for every new one.

Or just let everyone run wild and eliminate all rules.

There, in fact, is no record of the Libertarians objecting to the cut of any rule, no matter how beneficial that rule had been or how damaging the cut. In truth, the Libertarians have no objection to anarchy. It is their model of success.

Throughout his presidential campaign, Biden promised Americans a return to normalcy after the unusual, often unsettling administration of Donald Trump. There could be nothing more normal than the federal government issuing a steady stream of red tape without bothering to account for its costs.

Since the Libertarians have not demonstrated any concern about social, environmental, and health costs, and only are concerned about governmental spending, why would anyone take them seriously?

More importantly, why do the Republicans object to Biden’s newly proposed stimulus spending?

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Once again, Reason Magazine promulgates the Big Lie to stifle the economy.

The “Big Lie” comes in various forms. It is stated as:

  1. Federal spending is funded by federal taxes.
  2. The federal debt will lead to insolvency.
  3. Cuts in federal spending are financially prudent.
  4. Federal finances are like state/local government finances.
  5. Federal spending causes inflation.
  6. The federal government should live within its means.
  7. The federal debt is a ticking time bomb.
  8. China will stop lending to us.
  9. Profligate federal spending reduces our ability to deal with financial crises.
  10. Federal debt reduces economic growth
  11. The “debt”/GDP ratio is too high

All are widely promulgated, even by some economists and virtually all politicians and media writers — and all are absolutely untrue. They all are facets of The Big Lie.

Consider the following article from Reason Magazine:

The Next Pandemic Will Be Caused by the National Debt. It Will Crater the Economy.
Debt held by the public equals about 100 percent of GDP. That’s hurting growth and will fuel a major crisis. By Nick Gillespie,7.2.2020
Nick Gillespie is an editor at large at Reason, the libertarian magazine of “Free Minds and Free Markets.”

When President Donald Trump said on March 6 that the coronavirus “came out of nowhere,” it wasn’t quite accurate.

Actually, it was 100% wrong:

  1. A pandemic is caused by germs, not by debt, and . . .
  2. Federal debt not cause a financial crisis (lack of federal debt causes financial crises), and . . .
  3. A pandemic has been anticipated by every administration of the past few decades.

The Obama administration compiled a detailed plan for dealing with a pandemic — a plan the Trump administration completely ignored, costing many thousands of lives.

So far, more than 125,000 Americans have died — most unnecessarily — and many more will follow. To say Trump’s statement was not “quite accurate” is like saying the Pacific Ocean is somewhat damp.

Now, move to another comment that is “not quite accurate,” another statement of “The Big Lie.”

There’s another totally predictable crisis that promises to be even more damaging to our way of life: The national debt—the amount of money the federal government owes—is already choking down economic growth, but in the future, it could lead to “sudden inflation,” and “a loss of confidence in the federal government’s ability or commitment to repay its debts in full.”

It must be extremely difficult to pack so much misinformation into one short paragraph, but Nick Gillespie has accomplished the seemingly impossible.

1. The misnamed “national debt” is not the amount of money the federal government owes. It is the amount of money deposited into Treasury Security Accounts at the Federal Reserve bank.

The government does not “owe” this money; the government does not even “have” this money. It is owned by, and controlled by, the depositors.

To invest in a T-security (T-bill, T-note, T-bond), you open a T-security account. Visualize a bank vault into which you put your money, jewels, deeds, etc.

The bank does not “owe” you the value of your deposits. It possess them but does not own them. It merely holds them for you, and gives them back to you upon your demand.

Similarly, the government does not owe you your deposit. The bank possesses your deposit, but does not own it. It simply keeps it for you, and whenever you want it back, the government returns your deposit to you, plus accumulated interest.

2. Your deposits (the so-called national “debt”) do not “choke down” anything. In fact quite the opposite. Until COVID-19, both the economy and the federal “debt” had been growing massively.

The federal “debt” is a reflection of federal deficit spending which stimulates economic growth. In fact, whenever the national debt has been reduced, America has suffered a depression or recession.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

Even when the federal debt grows insufficiently, America suffers recessions.

Recessions (vertical bars) occur after a period of reduced Federal Debt Held by the Public (red line) and are cured by increased Federal Debt.

The reason, quite simply, is that a growing economy requires a growing supply of money, so recessions are caused when the money supply does not increase sufficiently.

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

That also is why recessions are cured when the federal government pumps dollars into the economy via deficit spending.

3. Contrary to popular myth, federal debt does not cause inflation, much less “sudden inflation.”

All inflations in world history have been caused by shortages of vital goods or services, most often food or energy.

While Federal Debt (red) has risen massively in the past 70 years, Inflation (blue) has risen moderately.
There is no relationship between changes in Federal Debt (red) and changes in Inflation (blue).

4. There never has been, and never will be a “loss of confidence” in the federal government’s ability to pay its debts.

All federal debt either is denominated in dollars or denominated in a currency that can be exchanged for dollars.

The federal government has the unlimited ability to create dollars — every knowledgeable economist knows this — so the federal government cannot run short of dollars with which to pay its debts.

Further, there is a vast difference between what erroneously is termed “the federal ‘debt'” and the federal government’s debts.

The federal “debt” is the total of deposits into T-security accounts, which the federal government pays off simply by returning the dollars in those accounts.

Federal government “debts” are dollars owed to creditorGreenspan quote.pngs for goods and services purchased by the federal government.

These debts are paid off by the creation of new dollars.

The federal government accomplishes this by sending instructions to each creditor’s bank, telling the bank to increase the balance in the creditor’s checking account.

When the bank does as instructed, brand new dollars are created and added to the nation’s money supply. The federal government can do this endlessly

Mr. Gillespie’s scare-article continues:

“Such a crisis could spread globally” causing some “financial institutions to fail.”

That’s all according to the nonpartisan Congressional Budget Office (CBO), which has been warning Americans about the long-term consequence of the ballooning debt for years.

Yes, the CBO and other organizations have issued the same warning for at least 80 years, and we still are waiting for that “loss of confidence in the federal government’s ability to pay.”

Since 1940, the growing federal debt has been called “a ticking time bomb.”  After 80 years, it surely is the slowest “time bomb” in history.

But despite being wrong for 80+ years, the warnings continue.

Congress and presidents from both major parties have accepted Dick Cheney’s false maxim that “deficits don’t matter.”

Instead, they just keep spending more than we take in during good times and bad, even though being so deeply in hock will make us less able to deal with a future crisis.

Sadly, Mr. Gillespie does not understand the difference between the Monetarily Sovereign, U.S. government, and the monetarily non-sovereign state & local governments.

A Monetarily Sovereign government never can run short of its own sovereigBernanke quoten currency. A monetarily non-sovereign entity (like you and me) has no sovereign currency, so can become insolvent.

The amount of money the government owed to the public was 79 percent of gross domestic product at the end of 2019, up from 31 percent in 2001.

The COVID-19 lockdowns and subsequent emergency spending will push the curve above 100 percent of GDP by the end of 2020, and it’s expected to keep rising.

Emergency spending and plunging tax revenues are making a bad situation worse.

CBO forecasts that the budget deficit this year will be 17.9 percent of GDP, meaning that the government is running much larger deficits, racking up significantly more debt, than it did even at the height of the financial crisis of 2007-2008.

Also, contrary to popular myth, the “debt”/GDP ratio is meaningless.  GDP is a measure of spending in any one year. Federal “debt” measures the net amount of deposits into T-security accounts.

Two completely different measures and two completely time scales. The “debt”/GDP ratio isn’t just apples and oranges. It’s apples and adverbs — two measures that could not be more different.

Mr. Gillespie sounds the ominous warning about the ratio exceeding 100%. As of June 2019, the nation with the highest debt-to-GDP ratio is Japan with a ratio of 253%.

The next highest ratio is from Greece, which at 181.1%, lags significantly behind Japan.

Other nations with high debt-to-GDP ratios include: Cape Verde: 123.4%, Portugal: 121.5%, Congo: 117.7%, Singapore: 112.2%, Mozambique: 110.5%, Bhutan: 108.64%, United States: 105.4%, Jamaica: 103.3%, Cyprus: 102.5%, Belgium: 102%, Egypt: 101.2%

The nations with the lowest debt-to-GDP ratios include: Brunei: 2.4%, Afghanistan: 7.1%, Estonia: 8.4%, Swaziland: 9.95%, Russia: 13.5%, Burundi: 14.4%, Cayman Islands: 14.5%, Kuwait: 14.8%, Libya: 16.5%, Republic of the Congo: 17%, Kosovo: 17.12%, Palestine: 17.5%, Cuba: 18.2%, United Arab Emirates: 18.6%, Guinea: 18.66%

As you can see, there is zero relationship between the “debt”/GDP ratio and a nation’s ability to pay creditors.

It, very simply, is a meaningless ratio used by those who either wish to scare the public, or who are ignorant of economics.

Economists such as Nobel Prize-winner Paul Krugman and proponents of modern monetary theory (MMT) look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.

While it’s true that the cost of paying interest on the debt is still dwarfed by other expenditures, that’s because historically low interest rates have made government borrowing cheap.

But there’s no reason to believe that interest rates won’t rise over time. According to conservative estimates from the CBO, as the total budget grows as a percentage of GDP, the cost of paying interest on the debt will increase faster until, by 2050, it accounts for about 24 cents of every dollar spent.

And these estimates don’t take into account emergency spending for COVID-19, which will make servicing the debt even more costly over time.

No, economists don’t “look at the absence of inflation and higher interest rates so far as justification for ever-more spending and borrowing.”St louis fed quote.png

The U.S. federal government does not borrow. Unlike state/local governments, the federal government has the unlimited ability to create dollars, so why would it borrow?

That is what the Fed means when it says “the government is not dependent on credit markets.”

T-securities not represent borrowing. They represent the acceptance of dollar deposits for safe-keeping.

And low interest rates are meaningless for a government that has the unlimited ability to create dollars.

High interest rates actually have a stimulative component. The higher the rate, the more interest dollars — i.e. growth dollars — the federal government pumps into the economy.

The justification for ever-more spending is quite simple: Federal spending not only grows the economy, but federal spending buys valuable goods and services for the American people.

It is federal spending that brings us roads, bridges, dams, healthcare, the military, scientific research & development, education, farming, courts, a government — the list goes on and on.

And now, Mr. Gillespie reveals either ignorance or perfidy:

Like a monthly credit card payment that eats into a household budget, federal debt means less money to buy other things.

He equates federal finances with personal finances. Either he doesn’t understand the difference, or he hopes you don’t understand the difference.

The U.S. federal government neither has nor needs anything resembling a “credit card.” It creates unlimited dollars at the touch of a computer key. The government does not borrow, and it pays creditors simply by issuing instructions to banks.

And when governments run large, persistent deficits, it also has a devastating impact on economic growth over time.

Our current debt levels could reduce GDP by about one-quarter over 23 years, according to research by Harvard economists Carmen Reinhart and Kenneth Rogoff.

It’s a case of what French economist Frédéric Bastiat referred to as “the unseen” because we’ll never get to experience how much wealthier we otherwise would have been had the federal government practiced fiscal prudence.

Anemic growth will impact the poorest Americans most of all, causing their material progress to slow considerably. It means less leisure time, smaller homes, older cars, and less health care.

Could it be that Mr. Gillespie doesn’t realize the Reinhart and Rogoff conclusions have been debunked, not only for mathematical errors, but perhaps more importantly, because Reinhardt and Rogoff did not differentiate between Monetarily Sovereign governments and monetarily non-sovereign governments.

The former do not borrow and cannot run short of money. The latter do borrow and can run short of money. Quite a difference to overlook.

Remember that equation: GDP = Federal Spending + Non-federal Spending + Net Exports. There is absolutely no mechanism by which a reduction in federal spending can increase GDP.

Mr. Gillespie may be one of the last remaining economic writers who still believes  austerity can grow an economy, though he never explains how that works.

In the short-term, there’s no question that the government can and will be able to borrow massively, and interest rates are likely to stay low for the time being as the world shifts into recession.

The federal government does not borrow. Interest rates will stay low if that is what the Federal Reserve wants. The Fed has absolute control over the interest the federal government will pay on T-security deposits.

And now we move from the merely wrong to the outright ridiculous:

But there’s also the specter of investors here and abroad refusing to buy U.S.-issued debt as our economy flattens, China flexes its economic and political might, and alternative instruments such as bitcoin and gold offer safe refuge.

The federal government doesn’t need China or anyone else to buy its “debt.” The Federal Reserve itself has the unlimited ability to buy T-securities, which it does, every day.

The government “lends” to itself in an endless circle of finance.

And, bitcoin offers “safe refuge”?? Is this a joke?

Gold, which has only minimal intrinsic value, pays no interest or dividends, costs money for storage and shipping, and the value of which is not guaranteed by anything or anyone — that is “safe refuge”?

Many nations have suffered depressions while on gold standards.

And it keeps getting worse and worse and worse:

Even the most hubristic economist or president would have to admit that there will come a time when the U.S. dollar is no longer the world’s reserve currency.

That change won’t necessarily be as dramatic as when German paper marks became worthless after World War I, but it will massively reduce purchasing power even as it increases the cost of everything.

Mr. Gillespie wrongly believes that “reserve currency” endows the U.S. dollar with some valuable status.

A “reserve currency,” of which there are many, depending on the bank, is nothing more than a currency a bank keeps in reserve to facilitate foreign exchange and trade. 

The U.S. dollar, the euro, the British pound, the Mexican peso, the Chinese yuan, the Brazilian real, all are reserve currencies for various banks.

The value of these currencies does not rely on being held in reserve by banks. It’s just a currency exchange convenience.

And then Mr. Gillespie tosses in the inevitable reference to German hyperinflation, which had nothing to do with reserve currencies or with over-spending or with anything else pertinent to the discussion.

The German hyperinflation, like all hyperinflations, was caused by shortages of life’s necessities — food, clothing, housing, energy — the result of onerous financial conditions placed on Germany by the Allies after WWI.

Germany simply ran out of money to pay for goods and services, so these items became scarce, and when a needed item is scarce, the price goes up. Period.

The German hyperinflation was cured when Germany issued a new currency and used it to purchase needed goods additionally to buying the greatest war machine the world had ever known. 

German government war spending actually cured the hyperinflation by curing the shortages.

Finally, Gillespie argues against his own proposition:

Between 1940 and 1945, federal spending increased tenfold from $10 billion to over $100 billion to pay for the war effort.

But when victory was won, the government immediately cut military spending.

That cut in federal spending led to the recession of 1945.

Our out-of-control spending has been driven by the persistent rise in the cost of entitlements like Medicare and Social Security.

Mr. Gillespie, as a stout libertarian, hates “entitlements,” (aka, benefits to the public). He would prefer a government that does not provide Medicare, Medicaid, Obamacare, Social Security, roads, bridges, dams, education, a military, courts, Congress, national parks, scientific research & development, food & drug inspection, weather reports, and the myriad of other benefits the public receives from the government.

To a libertarian, any government is bad government, and any government spending should be reduced or eliminated. 

When the debt crisis materializes and our options are severely limited because of decades of profligate spending, politicians sitting in the Oval Office and Congress will claim that it all just came out of nowhere, like that crazy virus back in 2020.

But nothing could be further from the truth: Budget wonks are already sounding the alarm. We need to heed these warnings now or suffer an economic lockdown later from which there may be no escape.

Back in 1940, the federal “debt” was about $40 billion. Today it is over $20 trillion, and our options are no more limited now than they were then. (Actually, our options are less limited, because federal money creation no longer is hampered by a gold standard.)

The “Big Lie” reflects ignorance of Monetary Sovereignty, which is the single biggest problem facing America’s and the world’s economies.

Rodger Malcolm Mitchell

Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Social Security for all or a reverse income tax

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10.Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY