Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Here is a perfect example of news trash: The media’s misleading use of data to sow fear and ignorance.

US gov’t runs $1.3 trillion budget deficit in 2011
Government deficit totals $1.3 trillion for 2011, third year of $1 trillion plus imbalances

Martin Crutsinger, AP Economics Writer, On Friday October 14, 2011

WASHINGTON (AP) — The government ran a $1.3 trillion deficit for the budget year that ended last month, the third straight year it has operated more than $1 trillion in the red.

Obviously, no one wants to be “in the red.” Martin Crutsinger could have said the economy ran $1.3 trillion in the black, which would have been far more accurate.

The 2011 budget deficit was the second highest on record. It’s slightly ahead of the previous budget year’s $1.29 trillion deficit but below the $1.41 trillion imbalance record in 2009.

A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. But those deficits now loom over tense negotiations in Washington.

Lawmakers are under pressure to agree by Thanksgiving on where they can cut $1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in Jan. 2013.

In other words, if our government won’t reduce the stimulus for this moribund economy, the law will “cut Medicare, defense spending and other critical areas.” That will hurt the economy, hurt older people, and hurt U.S. security, but the Monetarily Sovereign U.S. government, which never can run short of its sovereign dollar, will not have to expend $0 and zero effort to create more dollars for our economy. And this is considered good news.

For 2011, the government had to borrow 36 cents of every dollar it spent. The string of massive debts has made interest on that debt the fastest growing budget category. For 2011, net interest payments rose 15.7 percent to $227 billion.

The government didn’t “borrow” anything. It created T-securities from thin air, which meant so-called “lenders” saw their checking accounts debited and their T-security accounts credited. The government didn’t receive one penny. However, the good news is the additional $227 billion that entered the economy in the form of interest payments. Unfortunately, interest rates are so low, comparatively few dollars are reaching Americans.

And by the way, folks, so-called “borrowing” doesn’t reduce the so-called “deficit.” There is zero connection between T-securities and federal deficit spending other than rules requiring T-securities to be created (from thin air) in an amount equal to the deficit. We could have deficits without T-securities and T-securities without deficits.

The government also lost revenue because of the 2 percentage point cut in Social Security taxes, and also it had to pay for an extension of emergency unemployment benefits. Congress approved both in December to boost the sluggish economy.

More accurately: The economy gained dollars because of the 2 percentage point cut in Social Security taxes and the extension of emergency unemployment benefits. So employees and the unemployed had more money to spend.

The nation’s debt is now $14.8 trillion. The enormity of that figure has stoked intense partisan debate in Congress over spending and taxes. Polls show growing voter anger with the inability of both parties to reach solutions to the country’s budget problems.

“Enormity” doesn’t mean “enormousness.” It means something hugely bad. But that $14.8 trillion is the lifeblood of our economy. The voters are angry that the government has pumped $14.8 trillion into the economy. Had the government not added that money to the economy, the entire nation of the United States of America — you, your children and everyone you know — would have zero dollars. Visualize that enormity.

The August budget deal is projected to trim future deficits by $2.1 trillion. That includes the cuts made by the supercommittee and another $900 billion in savings from caps on discretionary spending.

America has 300 million people. So, each man, woman and child in America will sacrifice $3,000 to the debt-hawk gods. If you’re married, the cost to you will be $6,000. Have two children? The cost to the four of you will be $12,000.

And that’s not all. Because each of your friends and neighbors also will lose $3,000, your local economy will take a huge hit, which will propagate throughout the nation, causing further losses. And those losses will cause more losses, and on and on, until we are in another full-blown recession.

But if you are one of those angry voters, who wants the federal deficit to be reduced (so your standard of living can decline), enjoy the fact that your government, which has the unlimited ability to create dollars, will give you fewer of them.

I award Mr. Crutsinger three dunce caps. It would be more, but for the fact he is just a reporter, parroting the popular wisdom. Were he an economist, the award would be five.

I now am running a deficit of about 35 dunce caps (Mr. Crutsinger would call it “in the red.”) Though I am “dunce cap sovereign,” and in no danger of running short, shall I begin to institute a dunce cap tax among my readers? What do you think?)

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

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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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64% of Americans believe anemia should be cured by a combination of reduced blood transfusions and increased application of leeches. Well, actually it’s 64% of Americans who believe an anemic economy should be cured by reduced federal spending and increased taxes:

Washington Post-ABC News Poll, 10/11/11
This Washington Post-ABC News poll was conducted by telephone September 29-October 2 2011, among a random national sample of 1,002 adults, including landline and cell phone-only respondents.

A committee of (Democrats) and (Republicans) in Congress has until late November to propose ways to cut the federal deficit by one-point-two trillion dollars over the next 10 years. Do you think this should be done by (cutting federal spending), by (increasing taxes), or by a combination of both?

Cutting federal spending . . . 31%
Increasing taxes . . . . . . . . . 3%
Combination . . . . . . . . . . . 64%
No opinion . . . . . . . . . . . . . 2%

No comment.

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

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Here are some excerpts from a truly excellent article in TPM (Talking Points Memo. You can see the entire article here.:

A Taxing Situation: Why The GOP Is Advocating A Tax Increase On The Middle Class
By Benjy Sarlin, 10/13/11

You can almost always count on Republican presidential candidates to be united in their opposition to more taxes for the rich. But this time around, the 2012 field is standing lockstep behind a less traditional idea: the middle class pays too little in taxes.

Thanks to a strange convergence of conservative ideological trends since President Obama’s election, Republicans now are expected to protest the entire bottom half of taxpayers’ contributions as too stingy even while they proclaim Americans are “Taxed Enough Already.” And they’ve yet to figure out a policy that will satisfy both complaints at once.

In recent months, nearly every major Republican candidate has name-checked a popular statistic that 47% of Americans who file taxes paid no income tax in 2009. Given the GOP’s anti-tax zeal you’d think they’d be celebrating. Nope!

“Right now we know that 53% of Americans pay income taxes and 47% do not,” Michele Bachmann told Bloomberg TV on Tuesday. “I think we definitely need to change the tax code. We need to get more in line. Everybody benefits from this magnificent country. Everybody pay something.”

Now stop and think. Who are those people who pay no income taxes? The rich or the middle/poor? Right, it’s the middle/poor at whom she is peeved. The rich? Oh, they pay too much.

Not only do statements like Bachmann’s seem to defy past Republican orthodoxy, but the candidates are explicitly making the argument on the same fairness grounds that progressives like Elizabeth Warren have used to demand greater taxes on the rich. The idea isn’t just that tax breaks for the rich trickle down the poor — it’s that they also deserve them more than freeloading Americans. Rick Perry made this moral outrage a key line in his campaign kickoff.

“We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Perry said in his announcement speech. “And you know the liberals out there are saying that we need to pay more.”

Now the 47% number only tells part of the story: most of those “non-payers” pay payroll taxes, gas taxes, state and local taxes, etc.

In fact, for the middle/poor, those other taxes usually are their biggest tax bill. FICA, for instance, is a profoundly regressive tax. The same is true of sales taxes.

“It’s Republican class warfare,” former Reagan adviser Bruce Bartlett told TPM. “The Democrats say ‘Oh, the millionaires, we need to tax them’ and so they respond in kind.”

Bartlett’s not opposed to the idea of a broader tax code. But the problem is there’s no obvious way to get there without violating other Republican sacred cows on taxes or running into political territory that few politicians dare to tread.

The first issue is that any Republican proposal can’t raise revenue overall — a principle that’s only become more ironclad in the Tea Party era. The obvious solution then is to raise taxes on the middle class but give the money back to the rich and that’s exactly what two of the Republican presidential candidates have proposed. Jon Huntsman would eliminate all tax breaks without exception and use the money to lower income marginal rates — the net effect of which would be a middle class tax hike.

Huntsman’s idea has largely gone unnoticed amid his campaign struggles, but one of his rivals’ proposals is gaining widespread attention this week: Herman Cain’s 9-9-9 plan. Cain solves the non-payer problem by replacing the tax code with 9% income tax, business tax, and new national consumption tax, the combination of which would significantly raise taxes on lower income Americans.

Just when I thought the Republicans had exceeded their allowable limit on nuts, fools and charlatans, with Bachman, Gingrich, Palin, Trump, Paul, Perry, Santorum and Huntsman, they top themselves with Cain. Despite his weird math, taxing poor people 9% on income plus 9% on consumption, and then adding 9% on business, far outweighs any “savings” he dreams up.

(Aside: Like all Republican “stars,” Cain will shoot up in the polls until people actually listen to the nonsense he spouts. Then he will drop, only to be replaced by yet another strange duck. All Romney needs do is smile, shake hands and say nothing, and he will emerge looking like a genius.)

Dean Clancy, Legislative Counsel for Tea Party organizer Freedomworks, who seems like the perfect demographic for Cain’s idea on paper. . . But he’s not on board with Cain, in large part because American voters aren’t ready for that kind of change.
[…]
But if Republicans beyond Cain and Huntsman are unwilling to raise taxes on the bottom half of taxpayers or transition to a consumption tax, their hands are tied. TPM asked both the Romney and Perry campaigns how they’d handle the 47% problem they’ve both derided, but received no response.
[…]
“If the Republicans are suggesting that it’s bad that some people are not paying federal income taxes, can they please clarify that they are in fact proposing a tax increase?” Steve Warmhoff of Citizens for Tax Justice told TPM in an e-mail.

The Tea/Republicans, and to a lesser extent the Democrats, are in a logic trap. They want to reduce the deficit, but that requires taxing somebody more (a Tea/Republican no-no) or spending less. But while “spending less” seems nice in the overall, the devil really is in the details, because Americans want, and should have, Social Security, Medicare/Medicaid and the protections from the military, Homeland Security, FEMA, food & drug inspection etc., etc.,etc. In fact, spending on the biggest budget projects really needs to increase, substantially.

So what’s a debt-hawk to do? The economy needs more federal spending just to recover, let alone to supply real growth and security, and tax increases are out of the question. I suspect that, as usual, when every other bad idea has been tried and found wanting, eventually Congress and the President will be dragged kicking and screaming into the sole good idea, an increase in deficit spending — and (gulp) a big one — as the remaining economic solution.

Cain has done the nation one service, however. Debate about his 9/9/9 plan has exposed the Tea/Republicans as having no viable economic plan whatsoever. They are solidly the “Party of ‘No,’ with nothing to offer but austerity, especially for the lower classes.

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

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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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================================================

Here is why the economy will have great difficulty recovering from the recession, and more likely will fall into a depression:

Obama Loses Big on Jobs Bill
By Patricia Murphy | The Daily Beast|10/12/11

Nothing quite illustrates the depth of Barack Obama’s weakness in Washington better than the painfully public defeat the Senate handed him Tuesday by blocking his signature American Jobs Act.
[…]
The defeat was . . . a vote of no confidence on . . . his idea that flooding the economy with public money will jump-start the private sector. But even Obama’s fellow Democrats seem to have developed sufficient spending fatigue to put the brakes on new outlays, while the most moderate Democrats say the economy will never recover as long as the deficit continues to spiral out of control.

There you have it: The media’s and the politicians’ puzzling belief that our economy, which is starved for money, will not recover if we feed it. Instead, the idea seems to be we should reduce the debt, i.e. starve the economy, to feed the federal government, which never can starve because it has the unlimited ability to create “food.” It’s madness.

Visualize the poorest among us sending dollars to Warren Buffett, and even that picture doesn’t begin to show the magnitude of the ignorance. Or, no need to visualize. Just look at what happens when deficit spending growth declines: Recession. And what happens when deficit growth increases? Recovery. And which way is the line headed, now?

The latest Obama plan would have spent $447 billion on infrastructure projects, teacher salaries, and an extension of a payroll tax cut that is set to expire. To pay for it, Senate Democrats last week protected a series of popular tax loopholes in favor of slapping a 5.6 percent surtax on households making more than $1 million a year.

Spending $447 billion is far too little to create a recovery, yet even that inadequate effort is stymied by the myth a Monetarily Sovereign nation – a nation with the unlimited ability to create dollars – needs or even uses tax dollars. The words, “to pay for it” demonstrates total lack of economic understanding. While state taxes pay for state spending and city taxes pay for city spending; federal taxes do not pay for anything.

Sens. Bill Nelson and Jon Tester, two moderate Democrats up for reelection, joined the GOP to block the bill. Tester said he wanted more infrastructure spending and fewer tax breaks in the package. Nelson said the half-trillion-dollar price tag was too rich for his blood.

Meaning, a half-trillion dollars is too much economic recovery for his blood.

“The bottom line is, I don’t believe the potential to create jobs with the Act justifies adding another half trillion to our almost $15 trillion national debt,” said independent Sen. Joe Lieberman.

Congress does not want to increase the meaningless national debt number – an accounting figure that could be eliminated today by the simple expedient of crediting the checking accounts of all T-security holders. Congress prefers austerity for all of us (so long as their own salaries continue.)

Thus do the blind lead the blind into the chasm of despair.

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

==========================================================================================================================================
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. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY