–Will you follow a leader who has no compass and doesn’t care where he’s going? Meet the Zelig of American politics.

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. 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.
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What do these excerpts from an article in the National Memo tell you?

How Santorum Boxed In Romney
April 11th, 2012, E. J. Dionne

WASHINGTON — Rick Santorum’s departure from the presidential race could not come soon enough for Mitt Romney. In proving himself more tenacious than anyone predicted, Santorum dramatized one of Romney’s major problems, created another, and forced the now inevitable Republican nominee into a strategic dilemma.

Romney performed best among voters with high incomes, and was consistently weaker with the white working class, even in the late primaries where he put Santorum away.

At the same time, Santorum’s strength among evangelical Christians pressured Romney to toughen his positions even as the Republican Party as a whole, at both the state and national levels, has pushed policies on contraception and abortion that have alienated many women, particularly the college educated.

This is Romney’s other problem: Among college-educated white men, Romney had a healthy 57 percent to 39 percent lead over President Obama in the latest Washington Post/ABC News poll. But among college-educated white women, Obama led Romney by 60 percent to 40 percent. This netted to a rather astounding 38-point gender gap.

Thus the box the primaries built for Romney: He must simultaneously court evangelical Christians and working-class voters who have eluded him so far, but also reassure socially moderate women higher up the class ladder who, for now, are providing Obama with decisive margins. It’s not easy to do both.

Henry Olsen, a vice president at the American Enterprise Institute, sees Obama’s echoes of Bill Clinton’s pledges to help those who “work hard and play by the rules” as shrewd politics aimed at rehabilitating his standing with such Americans.

And in Romney, Obama faces a candidate whose “troubles in the primary electorate demonstrated his trouble in connecting with the white working class.” Romney, Olsen says, “has difficulties with his background, difficulties with his manner, some difficulties Obama shares.”

Here’s what I understand: Romney has no core values. His only concern is (and supposedly should be) to win the election by saying whatever is required to deceive voters into believing he will be the President they want.

Pandering to voting blocks is not new — all politicians do it — but I can’t recall any politician having zero true beliefs of his own. Though I felt Rick Santorum was a menace to America, with his drive toward theocracy, I will give him this: He said what he believed and he believed what he said.

Not so for Romney. He is nothing more than an echo chamber. The man is the Zelig of American politics.

Why anyone would believe anything that comes out of his mouth, much less trust him enough to vote for him and want to be led by him, is beyond me. O.K., hate President Obama for whatever real or invented reasons you have. Heaven knows he has been a disappointment to many.

But why elect a leader who has absolutely no moral or strategic compass, no plan for America and no personal beliefs, unless you really don’t care where he’ll take you?

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. 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

–Which is the greater threat: Inflation or recession?

Debt hawks have a predictable argument. First they say the deficit and debt are “unsustainable” (a favorite word). When you challenge them to define “unsustainable,” they say the federal government will not be able to continue servicing a growing debt “forever’ (another favorite word).

When you tell them a Monetarily Sovereign nation has the unlimited ability to create its sovereign currency, so can service any debt of any size, they switch positions. They then claim that money “printing” (yet another favorite word) causes inflation. Finally, they mention Weimar Republic and Zimbabwe, two nations whose hyper-inflation caused money creation and not the other way around.

Let’s ignore the fact that the federal government does not “print” money. It creates dollars by the act of paying its bills. The Treasury does print dollar bills, but they aren’t money; they are evidence of dollar ownership.

Instead, let’s get to the point, which can be summarized in three questions:

1. Will federal dollar creation cause inflation?
2. Are low interest rates stimulative?
3. Is inflation a greater threat than recession?

The first question can be addressed by the following graph.

The red line shows the federal deficit; the blue line shows the Consumer Price Index. As you can see, for at least the past sixty years (!) there has been zero relationship between federal deficit spending and inflation. This is discussed in greater detail at: Oil causes inflation.

As for whether inflation is a greater threat than recession, we already are in, and have been in, a recession. Millions of people are suffering from joblessness and poverty. By contrast, inflation remains about what the Fed wants it to be: 2% – 3%. So you tell me which is the greater threat.

I mention this because of an article that appeared in today’s Washington Post. Here are some excerpts:

Fed Inflation Hawks Warn More Stimulus Could Fuel Prices
By Sam Gustin

Are inflation hawks preparing to take flight? That’s the sense one gets reading comments made by two U.S. central bank officials Tuesday, including Dallas Fed President Richard Fisher, who said that corporate chiefs have been sounding the alarm about an increase in prices thanks to the Fed’s easy money policy.

Fisher’s latest remarks are sure to fuel a growing debate about whether the Fed should embark on another round of monetary stimulus, especially in light of last month’s lackluster jobs report.

Fisher said that he’s heard from business leaders who are concerned that the Fed’s easy money policy could raise inflation, which would increase prices for companies just as they’re trying gain a solid footing.

“I’m just reporting what I hear on the street, which is a real concern that with our expanded balance sheet, we are just a little bit in an ember of what could become an inflationary fire,” Fisher said in comments cited by Bloomberg.

He said business leaders are telling him, “Please, no more liquidity.”

This is economics? What he’s heard on the street? And are business leaders really begging for no more stimulus? Gimme a break. It’s total BS.

Separately, Minneapolis Federal Reserve Bank President Narayana Kocherlakota said that the threat of inflation means that the central bank will likely have to begin to reverse its easy money policy as early as the end of the year.

“Conditions will warrant raising rates some time in 2013 or, possibly, late 2012,” Kocherlakota said in comments cited by Reuters.

That puts Kocherlakota at odds with the policy-making Federal Open Market Committee, which has said since January that it plans to keep interest rates low through 2014.

Confused nonsense. Low interest rates are not stimulative. (See: The low interest rate/GDP fallacy)

In fact, the opposite is true. Low rates hinder economic growth. Ask anyone holding CD’s, bonds or Treasuries.

So yes, by all means, raise interest rates.

Fisher and Kocherlakota are well-known inflation hawks, which means they tend to worry more than other policy-makers about the risk that inflation poses to the economy.

So it’s not surprising that Fisher, in particular, would voice business leaders’ concerns that inflation could make buying the materials — or inputs — they need to run their companies more expensive.

And that answers it. These guys mistakenly fear inflation more than recession (Think of what affects them personally, with their guaranteed, recession-proof salaries.)

And they mistakenly believe federal spending is the cause of inflation. And they mistakenly believe low interest rates are stimulative. And they mistakenly base policy on what someone says on the street.

Considering these are “experts,” is it any wonder the public is confused?

Fisher is the more hawkish of the pair. He’s called the idea of more monetary stimulus a “fantasy of Wall Street,” while Kocherlakota has allowed that “if the outlook for inflation fell sufficiently and/or the outlook for unemployment rose sufficiently, then I would recommend adding accommodation.”

Here’s where the real confusion emerges. Yes, monetary policy, (usually focused on interest rates), is a fantasy for economic growth, although interest rates do control inflation.

But fiscal policy (usually focused on deficit spending), is reality. Deficits are stimulative and the lack of deficits is recessionary and deflationary.

Bottom line:
1. Low interest rates are not stimulative; high rates are stimulative.
2. High rates fight inflation.
3. Federal deficit spending has not caused inflation for 60 years, though deficit spending is stimulative.

So to grow the economy without inflation, raise interest rates and increase deficit spending. And by all means, don’t listen to debt-hawks. They hate the word “debt,” without knowing why; they don’t understand Monetary Sovereignty; and they ignore economic reality.

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

#MONETARY SOVEREIGNTY

–Why the “bad” news about Medicare is good news, and why you’re supposed to regret not starving the economy

Here are some excerpts from an article in the Washington Post:

Read the first paragraph and decide what is the bad news:

Health-care law will add $340 billion to deficit, new study finds
By Lori Montgomery

President Obama’s landmark health-care initiative, long touted as a means to control costs, will actually add more than $340 billion to the nation’s budget woes over the next decade, according to a new study by a Republican member of the board that oversees Medicare financing.

No, the bad news is not that the law will add $340 to the deficit. That’s the good news. The bad news is that this is described as “budget woes.” Ms. Montgomery does not understand Monetary Sovereignty, so as a result, does not understand economics.

The study is set to be released Tuesday by Charles Blahous, a conservative policy analyst whom Obama approved in 2010 as the GOP trustee for Medicare and Social Security. His analysis challenges the conventional wisdom that the health-care law, which calls for an expensive expansion of coverage for the uninsured beginning in 2014, will nonetheless reduce deficits by raising taxes and cutting payments to Medicare providers.

No, the conventional wisdom is that federal financing is similar to personal financing, where deficits are bad and surpluses are good. But the federal financing is the opposite of personal financing. The former is Monetarily Sovereign, while the later is monetarily non-sovereign.

Ms. Montgomery, do you see the difference between “sovereign” and non-sovereign? They are opposites.

For instance, when the federal government runs a deficit, the economy runs a surplus. And, when you pay taxes to cut the deficit, that increases the economy’s deficit. This simple fact gives you a choice:

1. The government, which has the unlimited ability to create dollars, and never can run short of dollars, can run a deficit
or
2. The economy, which is short of dollars, can run a deficit.

Which do you prefer?

The 2010 law does generate both savings and revenue. But much of that money will flow into the Medicare hospitalization trust fund — and, under law, the money must be used to pay years of additional benefits to those who are already insured.

To demonstrate the ignorance of the conventional wisdom, consider this. Lori Montgomery actually believed it was possible to insure an 30 million more people, and additionally “pay years of additional benefits to those who are already insured – while reducing the cost!

And she, and the rest of conventional wisdom, now complain they were fooled?!!

“Does the health-care act worsen the deficit? The answer, I think, is clearly that it does,” Blahous, a senior research fellow at George Mason University’s Mercatus Center, said.

It “worsens” the federal deficit, meaning it improves the private economy’s finances (“Private,” meaning you and me). Remember: Federal Deficits – Net Imports = Net Private Savings. If deficits go down, private savings go down. This is a law of economics.

Medicare is financed in part through a trust fund that receives revenue from payroll taxes.

Here comes accounting voodoo. If there were no payroll taxes, and no trust fund, the federal government would continue to do exactly what it does now: Pay bills by crediting the checking accounts of hospitals, doctors and pharmaceutical companies. Absolutely nothing would change.

Before Obama’s health-care act passed, the trust fund was projected to be drained by 2017 (later updated to 2016).

More accounting voodoo. The so-called trust fund is an accounting fiction that does not exist in the real world. Those checks to doctors come from the Treasury. The checks are instructions to doctors’ banks, telling the banks to increase the doctors’ checking accounts. The Treasury can send these instructions, endlessly, and banks will obey, endlessly. That’s how dollars are created.

“This isn’t just a persnickety point about the intricacies of budget law,” Blahous said. “If Medicare were going insolvent in 2016, you’d better believe right now there would be more pressure on lawmakers to do something about it. . . . It’s essential that there be a full public understanding of the most economically significant federal law in years.”

Amen to that, brother. It is absolutely essential that there be a full public understanding of the realities of federal financing, i.e. Monetary Sovereignty. Medicare is a federal agency. The federal government, being Monetarily Sovereign, never can be insolvent, so none of its agencies can be insolvent.

I award Lori Montgomery three dunce caps (My memory says she already has received some, so perhaps she is a professional collector.)

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

#MONETARY SOVEREIGNTY

–How cutting Medicaid will give the poor and middle classes, doctors, nurses and hospitals nice haircuts

Monetarily non-sovereign entities (including states, local governments, businesses, the euro nations, you and me) cannot survive long-term without a positive balance of payments, i.e., more money coming in from outside their borders, than leaving.

The reason: Our Monetarily Sovereign government pays bills by creating dollars; you and I pay bills by transferring dollars — and that makes all the difference.

Let’s begin with you and me. To spend, we need income. We cannot create dollars, other than by borrowing. So, short term, we can survive without income, but long term we cannot. We have to pay back those loans.

The same is true for businesses. Long term survival depends on income exceeding expenditures.

And the same is true for state and local governments. Taxes aren’t income for a state; taxes merely are circulation of dollars within the state. A monetarily non-sovereign government cannot survive long term on taxes. It needs a positive balance of payments; dollars coming in (via exports or other payments) must exceed dollars going out. Borrowing provides temporary income, but loans must be repaid — along with interest.

The euro nations suffer the same problem. They cannot create a sovereign currency. Those that are net exporters survive; the others rely on borrowing, which merely buries them deeper.

I mention all this because of an editorial in today’s Chicago Tribune, titled, “Saving Medicaid.” According to Medicaid.gov, “Medicaid and CHIP Provide Health Coverage to nearly 60 million Americans”

Here are excerpts from the Tribune editorial:

Gov. Pat Quinn has called for $2.7 billion in Medicaid cuts in next year’s budget.

The Medicaid cuts will be painful for health care providers and the 2.7 million people who depend on the program. Absent a huge downsizing, however, the state Medicaid program will capsize. The state expects to have about $1.9 billion in unpaid Medicaid bills on hand at the end of fiscal 2012. Without a fix, that backlog will balloon to $21 billion in just five years.

“Unpaid Medicaid bills” mean doctors, hospitals, nurses and pharmacies are not being paid. They are paying for the state’s insolvency. One way a monetarily non-sovereign entity can delay insolvency is to cut expenses, particularly expenses that send dollars out across the border. This is a temporary hold, however. As dollars continue to flow out, repeated cuts become necessary.

One major reason for Medicaid’s faltering health: From 2000 to 2011, the number of people receiving Medicaid services in Illinois doubled. Federal law will land hundreds of thousands more people on the state’s Medicaid rolls starting in 2014 and strictly limits the state’s ability to tighten eligibility requirements.

The financial need grows, but the federal government tells the states whom they must pay.

Two overarching changes are needed to start to save Medicaid:

• Stop services for people who simply don’t qualify. Some recipients don’t even live in the state.

Payments to out-of-staters are particularly damaging.

Some make too much money to get health care designated for the poor. An estimated 100,000 to 300,000 people can be removed, saving $100 million to $700 million a year.

The government says, “Children in families with incomes up to $44,100 per year (for a family of four) are likely to be eligible for Medicaid coverage . . . Covers people with disabilities, people with incomes up to $1,868; many states go to $10,890 Federal Poverty Level. . . Beginning on January 1, 2014, adults under age 65 with family incomes up to $14,484 will be eligible for Medicaid.”

Summary: Medicaid takes care of those below the Federal Poverty Level. But who are those 100,000 to 300,000 people Illinois wishes to remove from the rolls? Are they wealthy, or are they simply not poor enough?

* Speed the switch to managed care to save money and improve quality of care. Managed care generally means patients are assigned a “medical home” — a doctor who oversees their care.

Translation: Put the financing onus on doctors and hospitals.

Beyond that, program cuts and eligibility changes will be necessary. Setting lower income eligibility on adult coverage in Family Care would save almost $50 million.

Translation: Eliminate those at the upper end of poverty — though still impoverished.

Prescription drug coverage costs Medicaid $814 million a year. Eliminating that wouldn’t be wise because many drugs help control chronic conditions and prevent expensive hospital stays. But drug coverage can be prudently trimmed. If Medicaid recipients were limited to five prescriptions a month, the program would save a whopping $136 million.

Translation: Make sure your health problems don’t require more than five prescriptions a month. This means the sickest people will be penalized most.

Possibly on the block: Illinois Cares Rx, a supplemental drug program for seniors that doesn’t draw federal reimbursement. It costs $72 million a year.

Translation: Who cares about poor seniors? They’ll die soon, anyway.

There’s lots more on the table, such as hospice care (about $89 million)

Translation: People on hospice don’t vote.

Adult dental care ($51 million); durable medical services and supplies such as wheelchairs and ventilators ($150 million); adult speech, hearing and language therapy ($411,000); podiatric services ($5.8 million); bariatric surgery ($8.4 million); group psychotherapy for nursing home residents ($14 million); even therapy for refugees who were torture victims in their native countries ($133,000).

Translation: We don’t care if their teeth rot, they have to crawl, they can’t breath, can’t talk, can’t hear or are psychotic. They should have thought about those problems when they were youngsters.

All of that still doesn’t come close to $2.7 billion. That’s why there’s a 6 percent cut for hospitals and nursing homes in play. Savings: $550 million. Hospitals argue that the state should exhaust other options before trimming providers, who are already reimbursed at low rates. But providers likely will feel some pain. “Everybody,” the governor says, “will take a haircut.”

Translation: “Haircut” is the euphemism-du-jour for screwing. Creditors take a haircut when debtors don’t pay. In the above case, the only one that doesn’t take a haircut is the state.

Bottom line: The entire philosophy behind Medicaid — making monetarily non-sovereign states pay for some of their residents’ health care — is nuts. It would be no burden on our Monetarily Sovereign, federal government, which actually creates dollars by spending dollars, to pay for everyone’s health care.

The notion that our Monetarily Sovereign, federal government can’t afford health care, but the poor and middle class can, is beyond nuts. It’s stupid/nuts. But that is exactly what the debt-hawk, Tea/Republicans try to make the 99% believe.

Putting the burden on the states, actually puts the burden on health care providers and on the poor. The religious right will tell us that it is the fault of the poor and middle classes that they cannot afford health care. If only those people weren’t so lazy they’d get jobs that provide employer health care. And, if only they weren’t so clumsy, they wouldn’t need disability care. And if only they didn’t have so much sex, they wouldn’t need children’s health care.

The 99% are such a burden on the 1%, aren’t they? And think about it. Isn’t the federal debt a terrible burden on you, while your personal debt is no problem at all?

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

#MONETARY SOVEREIGNTY

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