Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●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.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

Here we go again — another benefit program for the lower 99% income group, under siege by the upper 1%.

The excellent blog, Global Economic Intersection, published an article titled “CBO Infographic: Bringing Social Security Disability Insurance Under Control.”

The words “Under Control” provide the first clue, because whenever the old-line economists, in cahoots with the upper 1% income group, worry about “control,” they really mean controlling the lower 99% income group.

Here are the lead paragraphs of the article:

Econintersect: The Social Security Disability Insurance (DI) program is one of the entitlement programs for which costs are spiraling out of control. This program “pays cash benefits to nonelderly adults (those younger than age 66) who are judged to be unable to perform “substantial” work because of a disability but who have worked in the past.”

The Congressional Budget office (CBO) has prepared a study on potential solutions which center on the following options:

increase program revenue
change the disability insurance benefit formula
change how the disability insurance benefits grow over time
change the eligibility rules
change the waiting period for benefits

Translation: “The only solutions to the ‘control’ problem are to cut benefits to the 99% and/or to increase taxes on the 99% — presumably those FICA taxes that mostly punish lower-salaried people.”

You should read the entire article, because it contains several interesting, little-known facts about the DI program. The key issue is simple: Taxes are less than benefits. Where have we heard that oh-so-shocking news, before?

The article includes this bit of information:

The DI program provided $119 billion in benefits to 8.3 million disabled workers in fiscal year 2011, accounting for nearly 18 percent of total Social Security spending. The Congressional Budget Office projects that in 2022, the DI program will provide benefits totally $204 billion to over 12.3 million disabled workers and their dependents.

Translation: “The program is ‘out of control’ because it will do exactly what it was designed to do, i.e. give aid to disabled people and their families, virtually all of whom are in the lower 99% income.”

The article also includes this list:

An entitlement program is one which guarantees access to benefits based on established rights or by legislation. A list of other entitlement programs:

529 or Coverdell
Home Mortgage Interest Deduction
Hope or Lifetime Learning Tax Credit
Student Loans
Child and Dependent Care Tax Credit
Earned Income Tax Credit
Social Security–Retirement & Survivors
Pell Grants
Unemployment Insurance
Veterans Benefits
G.I. Bill
Medicare
Head Start
Social Security Disability
SSI–Supplemental Security Income
Medicaid
Welfare/Public Assistance
Government Subsidized Housing
Food Stamps

Translation: “We’re coming to get you, you of the 99% who receive benefits from the government. Although your federal government is Monetarily Sovereign, and therefore can afford any benefits of any size, we have you brainwashed into believing your Monetarily Sovereign government actually is monetarily non-sovereign, and is in danger of going broke.

“We do this so we can cut and gut your benefits, and in this way increase the income gap between the upper 1% and you lower 99%, thereby increasing our power (aka “control”) over you.

“So all you people who receive benefits from any of the above programs, get ready. One by one, we’ll chip away at your benefits, until we have brought you to your knees, and will do what we tell you to do.”

Because the public does not realize that a Monetarily Sovereign nation can and should pay increasing benefits for the welfare of the public, the 1% is given free rein to cut those benefits.

This is what ignorance of Monetary Sovereignty has accomplished. Like cattle being led into the slaughterhouse, the 99% docilely acquiesces, with hardly a “moo.”

In fact, they resist anyone who warns them not to step into that chute.

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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 exports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●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.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

The great thing about having readers is they not only offer solutions you might not have considered, but perhaps more importantly, offer questions you are forced to answer. For that I must thank readers Yuu Kim and Woj for their very insightful comments and questions.

Yuu Kim asked the a question, elegant in its simplicity:

If the government is the banker, then what would be the point of making loans to the public?

My answer was:

Not only does the government not need to make a profit, it doesn’t even need to receive the loan money back. The government literally could give money rather than lend it.

The problem then becomes: To whom to give the money, and how much? The credit system provides a method, albeit a method that could be criticized on many fronts: Give (or lend) money to people who have good credit. It’s weak, but it’s a method.

It was a lousy answer, especially since I often have criticized the European Union for lending, not giving, euros to the euro nations. Clearly, loans to people who can’t repay, make no sense.

But Yuu Kim’s question implies, “Does it make any more sense to refuse loans to people who can’t repay — if you don’t need repayment?

Then came Woj, who said:

The (current) credit system, however, works because it is a market in which the profit motive helps different individual/institutions price credit.

Yes, that is partially true — though only partially. Credit card issuers are notorious for not considering credit ratings, whether for granting credit or establishing rates. Mortgage lenders consider credit ratings more on a “go, no-go” basis, than on a rate-setting basis.

That said, nothing would prevent a federally owned bank from setting lending rates according to credit rating — if that were important. We really need to explore the notion that a lender with infinite dollar resources (the U.S. government) should charge interest, or if it does charge interest, scale that interest according to credit rating — or lend at all.

Currently, the government gives, not lends, dollars to people whom the government judges “need” dollars or “are entitled to” dollars. All poverty aid falls into this category. Social Security and Medicare (which, by the way, are not paid for by FICA), are gifts from the government. So are roads, food inspection, military protection and thousands of other valuables.

So I ask:

1. Should a person with poor credit be charged higher interest than a person with good credit, if the lender doesn’t need the loan to be repaid?

2. Should that lender even charge interest, or rather should it lend on a no-interest basis?

3. Should that lender actually lend at all, or should it only give?

4. What should be the determining factors with regard to whether a person or business receives a loan with interest (and what interest rate) vs. a gift?

Currently, the for-profit market makes those determinations, but is that the best, public-interest way? The for-profit market puts roadblocks in the way of “money-needers” having poor credit. But, should all such money-needers be denied money or charged more for it?

What happens to America, when someone wants to buy a house or rent an apartment, build a business, pursue an invention or get an education, but can’t receive an affordable loan? No one knows.

Is there a homeless genius out there, whose ideas could revolutionize the world, but whose homelessness precludes his advancing those ideas? No one knows.

Is there a 180 IQ somewhere, who can’t afford to go to college, not only because of tuition costs, but because she needs to work to support her family? No one knows.

Every year, millions of dollars are destroyed in our economy, as loans are repaid. How much has this money destruction inhibited economic growth and contributed to recessions and depressions, joblessness and misery? No one knows.

Is private banking’s profit motive the best determinant (or even a good determinant) of “who-gets-money“? Is credit rating the best allocation method for America? Currently, the government spends trillions answering that question. But the private banks spend even more trillions.

Consider the criminal banksters who caused the Great Recession. What role in “who-gets-money” should they have? Then consider private credit rating agencies that gave AAA ratings to worthless investments — ratings that helped cause the Great Recession. What should be their role in “who-gets-money“?

Finally, consider our inept, politically driven Congress, President and Supreme Court. Should they be the sole determinants of “who-gets-money,” or do the private sector criminals provide some sort of economic balance against the public sector criminals?

In short, how should America decide “who-gets-money”?

Questions, questions, questions. My intuition (without proof) says:

1. Federally owned banks would be less criminal than the large privately owned, profit-driven banks. Some may believe that small banks would be more responsive to the public, though my personal experience with a local Social Security office (survey of one) has been excellent. A federally owned agency can deal with the public, just as well as a private bank, even on an individual customer basis.

2. Lending, rather than giving, weeds out those who do not have a serious purpose, so though federally owned banks could give, they should lend.

3. The federal bank lending rate should be zero for all. If, according to whatever lending criteria the bank sets, the borrower deserves a loan, that loan should not carry interest. Neither interest payment to the government, nor punishment of borrowers, serves any public purpose.

Consider this a think-piece, and tell me: What do you think?

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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 exports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●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.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

In March of this year, I posted: The end of private banking: Why the federal government should own all banks.

Recently, Warren Mosler wrote:

the question of public vs private is about pricing of risk. when the public sector prices risk it tends to get politicized, like Solyndra, and all the other scandals surrounding loans by the public sector. When the private sector prices risk you get the problems we’ve seen recently. both have serious issues. i tend to favor the private sector pricing risk with some skin in the game/private capital, but operating narrowly as per my proposals. http://www.facebook.com/l/rAQGPndBhAQHD25OMjMaQw2w8asEGyW_cHLLiZWdi49-qyw/www.moslereconomics.com/?p=8968

and

And bank regulation and supervision is plenty tight to consider today’s banks public sector entities. The FDIC can fire bank management and limit compensation as well as dividends at will. What we’ve seen in the last 5 years is a total failure of regulation and supervision, partly because congress’s banking regulations allow them to do more than regulators can possibly keep up with.

My response was: “Warren: There never will be a time when bank regulators are able to keep up with regulations or with bankers. If regulators ever were able to maintain the tight reins you describe, they would in effect, run the banks. At that time, bank employees would be unnecessary puppets.

“Not only are the regulators unable to keep up, but the regulations themselves are unable to keep up. Why? The profit motive taints the entire banking industry. Remove the profit motive and you eliminate virtually all the illegality.

“You worry about Solyndra ?? I worry about JPMorgan Chase, BoA, Citigroup, Wells Fargo and all the other crooked, “too big to fail” banks, that bribe lawmakers and regulators to look the other way.

“So long as there are private banks with ‘skin in the game’ (aka ‘profit motive’) there will be bankster criminals bribing regulators and lawmakers, and the public will pay the price. This has been true, throughout history.

“(By the way, Solyndra was a private company with a profit motive. Just sayin’)”

The importance of this debate cannot be underestimated. Banks create the vast majority of dollars in existence. And banksters are ruled by the profit motive. They do not care what’s best for the public or for the nation.

(The green line is total dollars; the blue line is bank-created dollars; the red line is federally-created dollars)

Now, the blog Naked Capitalism has published a post titled Is Public Ownership A Solution? Excerpts from that post:

Gar Alperovitz, professor of political economy at the University of Maryland, pointed out how the growth expectations for public companies are at odds with resource conservation and how their rampant short-termism stunts investment. Some economists have recently taken a systematic look at the latter problem. From a 2011 post:

Most recently, in 2011 PriceWaterhouseCoopers conducted a survey of FTSE-100 and 250 executives, the majority of which chose a low return option sooner (£250,000 tomorrow) rather than a high return later (£450,000 in 3 years). This suggested annual discount rates of over 20%.

Recently, Matthew Rose, CEO of Burlington Northern Santa Fe (America’s second biggest rail company), expressed frustration at the focus on quarterly earnings when locomotives lasted for 20 years and tracks for 30 to 40 years. Echoes, here, of “quarterly capitalism”.

That same post published a comment by someone named “psychohistorian,” who wrote:

The propaganda argument that private industry can be more responsive and do everything cheaper is bunk.

Yes, there are things private industry can do better, and there are things the government can do better. But we Americans have become so vaccinated with “free enterprise always is better than government,” we tend to be hostile to any government action, which we incorrectly label, “socialism.”

When private individuals control vast amounts of money, and when they are compensated according to their control of this money, even the saints among us would be tempted. Bottom line, private banking is, and always has been, crooked, the bigger the bank, the greater the temptation, the more crooked.

In banking, the profit motive corrupts. And combining the profit motive with short-termism corrupts absolutely. Always has; always will.

All banks should be federally owned.

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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 exports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more budgets are cut and taxes increased, the weaker an economy becomes.
●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.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================

[Chicago Mayor Rahm Emanuel: “Why would he (missing Congressman Jesse Jackson, Jr.) go back to work at a Congress that does not work? Why rush it? I mean, they’re all talking about him going back to work. Last time I checked, Congress had their second repeal of their healthcare bill – another symbolic victory. Why rush?”

Lest you believe Congress, Chairman Bernanke and the old-line economists are not schizophrenic, Read this:

How the Potential Across-the-Board Cuts in the Debt Limit Deal Would Occur
By Richard Kogan, Updated November 22, 2011

The debt limit deal enacted on August 2, 2011 calls for about $900 billion in cuts in discretionary programs over the next decade and would impose further automatic, across-the-board spending cuts in many programs if Congress fails to enact an additional $1.2 trillion in deficit-reduction measures by January 15, 2012.

Those across-the-board cuts would represent approximately a 9 percent annual cut in affected non-defense programs, along with roughly a 9 percent cut in defense programs in 2013.

Translation: “We all knew Congress would not enact those $1.2 trillion in deficit cuts. How could they? The cuts not only would require massive reductions in the military, but reductions in Medicare and Social Security benefits, too, imediately throwing the nation into a depression.

“So why did Congress pass the law in the first place, if it knew implementation would be impossible?

“Anyone?”

(That was then. This is now.)

7/12/12: Bernanke to the the Joint Economic Committee:

“Even as fiscal policymakers address the urgent issue of fiscal sustainability, a second objective should be to avoid unnecessarily impeding the current economic recovery.

“Indeed, a severe tightening of fiscal policy at the beginning of next year that is built into current law–the so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery.”

Translation: “I know the ‘urgent issue of fiscal sustainability’ is a myth. How do I know. Because as Fed Chairman, I’m well aware a Monetarily Sovereign nation can “sustain” any amount of debt.

“How? So-called ‘debt’ is nothing more than the total of the T-security accounts at the Federal Reserve Bank. When people buy T-securities, we transfer their dollars from their checking accounts to their T-securities accounts.

“To pay off the ‘debt,’ we’ll merely transfer their dollars back from their T-securities account to their checking accounts. It’s the same as your bank transferring your money from your savings account to your checking account. No problem.

“I also am aware of this formula: Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net Exports.

To grow GDP, something on the right side of the equation has to grow. “But deficit reduction reduces everything on the right side of the formula. So deficit reduction reduces GDP growth, i.e. the ‘fiscal cliff‘.

“However, if I tell Congress the facts, they might fire me, so I’ll just take both sides of the issue, and let them work out the details.”

“Fortunately, avoiding the fiscal cliff and achieving long-term fiscal sustainability are fully compatible and mutually reinforcing objectives.

Translation: “We need to cut the debt, while not cutting the debt, that is, we must destroy the economy while stimulating the economy. Those are the ‘fully compatible and mutually reinforcing objectives.’

“Got it? Anyone?”

“I’d tell you to try to avoid a situation in which you have a massive cut in spending and increase in taxes all hitting at one moment, as opposed to trying to spread them out over time in some way that will … create less short-term drag on the U.S. economy,” Bernanke said.

Translation: “If we cut deficits fast, there will be a fast drag on the economy. If we cut the deficits slowly, there will be a slow drag on the economy.

“Which do you prefer?”

U.S. ‘Fiscal Cliff’ Looms: Will Lawmakers Heed Bernanke’s Warnings?
By Morgan Korn | Daily Ticker – Tue, May 15, 2012 8:37 AM EDT

Economists agree that tax hikes and spending cuts will drag down economic growth in 2013 yet the estimates vary.

Moody’s Analytics chief economist Mark Zandi predicts the fiscal drag next year could be to closer to 1.5 of a percentage point of GDP.

The Congressional Budget Office calculated GDP could drop by nearly 3.6 percentage points in the 2013 fiscal year.

Morgan Stanley economist David Greenlaw says fiscal tightening could translate into a 5 percent drag on GDP during the 2013 calendar year.

Er, ah, excuse me, but remind me again. Why do we wish to raise federal taxes and cut federal spending?

Anyone?

Rodger Malcolm Mitchell
Monetary Sovereignty

==========================================================================================================================================
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 exports

#MONETARY SOVEREIGNTY