Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Speaker Boehner speaks:

Washington Post, 9/15/11: Boehner insisted that the path to creating jobs is to cut spending.

“If the supercommittee can rein in federal spending, the economy will rebound. The joint committee is a jobs committee.”

If anyone can demonstrate how cutting federal spending stimulates the economy and creates jobs, please let us know. Also, please give me your address; I have a bridge I’d like to sell you.

While Boehner relies on Americans being ignorant of economics, I suspect he himself knows exactly what he is doing. His focus is on the 2012 election, and to hell with struggling Americans. I suspect he knows full well that cutting federal spending will push the nation back down into recession, just in time for the Republicans to claim that President Obama caused the problem.

For this comment, Boehner is awarded three traitor flags for putting party politics ahead of America’s future:

Rodger Malcolm Mitchell

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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: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Mark, one of our readers, called our attention to this article:

AMERICA’S DEBT CHALLENGE, By Jeanne Sahadi @CNNMoney September 12, 2011:
NEW YORK — When it comes to cutting deficits, don’t play small ball. That was the message Monday in a letter to Congress’ national debt super committee from a group of more than 60 leading economists, budget experts, former Treasury secretaries and former lawmakers.
[…]
Fiscal experts estimate that to stabilize the debt held by the public at today’s level — roughly 67% of GDP — by the end of the decade, lawmakers would need to institute about $4 trillion worth of deficit reduction over 10 years. If the committee only recommends $1.5 trillion in deficit reduction, the country’s accumulated debt will still be on track to grow faster than the economy indefinitely.

They predict the federal debt (i.e. the total of outstanding T-securities) will grow faster than GDP. This has been true since 1971, when we went off the gold standard. So? As readers of this blog know, the Debt/GDP ratio is meaningless. The letter writers make an ominous statement to strike terror into your heart, but as usual, provide no data to support it.

We do know this much, however. Slow deficit growth leads to recessions.

“We believe that a go-big approach … is necessary to bring the debt down to a manageable and sustainable level, improve the long-term fiscal balance, reassure markets and restore Americans’ faith in the political system,” the letter said.

Total garbage. What does “manageable and sustainable” mean? They have no idea. What is the benefit of “long-term fiscal balance”? They have no idea. And as for restoring American’s faith in the political system,” are you kidding? Any American who has faith in Washington must have no source of news.

Signing the letter were a number of former lawmakers from both sides of the aisle, including Republican Judd Gregg and Democrat Bob Kerrey, as well as a bipartisan bevy of former presidential economic advisers, including Christina Romer, Martin Feldstein and Glenn Hubbard. The letter was also signed by former Treasury secretaries Robert Rubin and Paul O’Neill, as well as Erskine Bowles and Alan Simpson, who co-chaired President Obama’s 2010 fiscal commission. Several fiscal experts rounded out the group. Among them: William Gale of the Brookings Institution and Maya MacGuineas of the nonpartisan Committee for a Responsible Federal Budget, which organized the letter.

May their names live in infamy. And look at what “organized the letter.” The Committee for a Responsible Federal Budget. This notorious bunch wouldn’t understand Monetary Sovereignty if their mothers read it to them from their coloring book.

Next week, President Obama will send the super committee his proposal for how to reduce the debt over time, and he’s promised it would be big enough to stabilize the debt in the long run.

I’m afraid no president ever has been more over his head than President Obama. For every issue, whether it be Israel/Palestine, Pakistan, Afghanistan, Iraq, Iran, Syria, Egypt, the euro, Medicare, Social Security, the Tea Party or the federal budget, we repeatedly think to ourselves, “This guy simply does not get it.”

Here is the man who perfected the “Obama compromise” (doing exactly what the other guy wants and calling it a compromise). But in all fairness, can we really expect someone who was both a Harvard graduate and a University of Chicago professor to understand anything about the real world?

I must admit I voted for him, because I thought a Chicago politician would be smarter. Turns out he was just carried along by the real Chicago politicians. Now, he’ll have to depend on Rahm Emanual to save Florida for him (but that’s another story).

Three years ago, Byron York wrote an article about President Obama for the National Review online. It ended with this sentence: “He’ll dazzle the country with his message of hope and possibility. But we shouldn’t expect much to actually get done.”

Anyway, cutting the federal deficit absolutely, positively will lead to a recession if we are lucky and a depression if we are not. I award all those who signed the letter four dunce caps.

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: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
==========================================================================================================================================================================

Continuing the discussion from the previous post, “Closing the gap between rich and poor: Eliminate all local taxes,” how about the elimination of all private banking?

What if the federal government took over all banking functions and eliminated private banks? What would be the advantages and disadvantages?

No bank ever would become insolvent. There would be no “runs” on banks by depositors. Savings would be 100% protected. Clearly, an advantage.

The lack of a profit motive would eliminate “credit default swaps” and other strange investment derivative beasts that helped lead to the Great Recession. Advantage.

The lack of a profit motive also would eliminate the temptation to lend to credit-poor borrowers. Advantage.

The absence of outrageous, multi-million dollar salaries would translate into less expensive banking services, plus services offered in “bank deserts,” where the poor are required to use expensive, neighborhood check-cashing services. Advantage.

There would be no need for reserves and for the massive bureaucracy needed to track reserves, nor for the massive compliance bureaucracies, nor for FDIC insurance. Advantage in efficiency.

No need for Fannie Mae or Freddie Mac. Advantage.

There would be no need for the Fed or for the likes of Greenspan and Bernanke. Advantage.

Bankers would hate the idea. Huge advantage.

Frankly, I’m having trouble thinking of disadvantages. O.K., I can think of one disadvantage. Government workers have the reputation of being without imagination or the willingness to take risks. Since lending always entails risk, and lending against new ideas involves even more risk, might federally owned banks choke off innovation or on the other hand, be subject to political pressure to grant bad loans?

I’m sure that would be the objection from those who believe the private sector can do no wrong and the government can do no right. But there are non-bank people in the private sector, known as “venture capitalists” who could provide investment capital.

Perhaps the question about socialized banking boils down to whether you feel banking should be considered just another profit-making business or a public service. Unless convinced otherwise, I suspect the negatives of privately-owned banks outweigh the positives.

What do you feel?

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

Mitchell’s laws: To survive, a monetarily non-sovereign government must have a positive balance of payments. Economic austerity causes civil disorder. Reduced money growth cannot increase economic growth. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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Background: The politicians, the media and the old-line economists worry about how our Monetarily Sovereign federal government will pay its bills, despite the absolute fact the government can pay any bills of any size, any time.

Perhaps those same politicians, media and economists, rather than thinking of ways to support a government that needs no support, should worry about how the middle- and lower-classes will pay their bills. I don’t know whether to laugh or to cry when I hear our leaders insist that federal taxes must equal federal spending (i.e. a “balanced budget”), while doing nothing to make sure the people of America have balanced budgets.

Caring more for the financial health of our financially omnipotent government than for our financially suffering poor- and middle-classes, demonstrates uncommon ignorance. Even more remarkable is the acquiescence of the lower classes to this outrageous, Tea/Republicanism.

If Bill Gates and Warren Buffet refused to give a dime to charity, because they wished to run their own “balanced budget,” the world would be outraged at such meanness. Yet, even Gates and Buffet are not Monetarily Sovereign. So what should we say about our government, which unnecessarily wishes to balance its budget on the backs of the citizens?

In several posts I have explained that lifting the poor does not involve bringing down the rich. Very simply, lifting the poor requires lifting the poor.

On July 11, 2010 I posted
“A partial solution for the gap between rich and poor: Education.” The post suggested that fully paid-for education, not just K-12, but all the way through college and beyond, would be one step toward lifting the poorer classes. I also suggested that the government actually pay people a wage for attending college.

I also have suggested that eliminating FICA, the single most costly tax on working people, would help lift the lower classes. Now, in typical Obama style, we almost, but not quite, will eliminate FICA. We temporarily will eliminate half of it. That is the symptom of this administration: Always too little and too late

There is another tax, or rather a group of taxes, that powerfully affect the lower classes: Local taxes. Cities charge them. Counties charge them. States charge them. Even the federal government charges them. What if all local taxes were eliminated?

Though the federal government neither needs nor uses tax income, the states, counties and cities, being monetarily non-soveriegn, do. So how will these local governments be supported?

Here’s a “What if?” for you to think about: What if the federal government offered to support every state, county and city on a per-capita basis, if these governments voluntarily would forego collection of all local sales and income taxes?

Consider Chicagoans. They pay taxes to Chicago, to Cook County and to Illinois. Here are the taxes residents pay just to the state of Illinois:

Aircraft Use Tax, Automobile Renting Occupation & Use Taxes, Bingo Tax & License Fees, Business Income Tax, Charitable Games Tax & License Fees, Chicago Home Rule Municipal Soft Drink Retailers’ Occupation Tax, Cigarette & Cigarette Use Taxes, Coin-Operated Amusement Device Tax, County Motor Fuel Tax, Dry Cleaning License Tax & Fee, Electricity Distribution & Invested Capital Taxes, Electricity Excise Tax, Energy Assistance & Renewable Energy Charges, Environmental Impact Fee & Underground Storage, Gas Tax, Gas Use Tax, Hotel Operators’ Occupation Taxes, Individual Income Tax, Liquor Gallonage Tax, Manufacturer’s Purchase Credit (MPC), Metropolitan Pier and Exposition Authority (MPEA) Food & Beverage Tax, Motor Fuel Taxes, Oil & Gas Production Assessment, Personal Property Replacement Tax, Property Tax Information, Pull Tabs & Jar Games Tax & License Fees, Qualified Solid Waste Energy Facility Payments, Real Estate Transfer Tax, Sales & Use Taxes, Sales of Aircraft & Watercraft by Lessors, Tax Increment Financing (TIF), Telecommunications Tax, Telecommunications Infrastructure Maintenance Fees, Tire User Fee, Tobacco Products Tax, Use Tax for Individual Taxpayers, Vehicle Use Tax, Watercraft Use Tax, Withholding (Payroll) Tax

Not only are these taxes costly for residents (The payroll tax alone is 5%.), but they are costly to collect. What if the federal government said to Illinois, if you will forego your $25 billion in total annual taxes, we will give you $2,000 per person. Since Illinois has about 13 million people, that would come to $26 billion. If you consider deducting for collection costs, the state would come out millions ahead. What would the citizens say and what would the politicians say?

Then there is Cook County. It will collect $2 billion in taxes next year. With a population of 5 million, making the same deal with the federal government would require $400 per person.

Finally, Chicago: It collects about $3 billion a year in taxes. With a population of about 2.7 million, federal support would amount to about 1,100 per person.

So, replacing all Chicago, Cook County and Illinois taxes would amount to $3,500 per person. If every city, county and state in America opted to forego taxes, the federal government would supply a total of about $1 trillion dollars.

In 2010, the federal government spent about $3.5 trillion, so would an additional $1 trillion (29%) to eliminate all city, county and local taxes in America be “affordable”? Would it cause the inflation, the “inflationistas” always worry about? For perspective, 2009 federal spending increased 29%, and 2010 spending increased another 20% on top of that. Are they affordable? Do we have inflation? Have any federal checks bounced?

Admittedly, there would be many issues to consider, not the least of which is the probability that local politicians like taxes. They are a source of power. But what would you, as a taxpayer, think about the elimination of all local taxation and the associated budget (collection) savings? Something to think about.

The U.S. government is Monetarily Sovereign. It’s about time we make use of that asset.

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