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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As readers of this blog know, I’d tended to vote Republican. I’d felt they had a better handle on the economy than the Democrats. However with the election of G.W. Bush, and the takeover by the Tea Party, I now feel the Republican Party has lost its way. What do you think?

Washington Post
GOP budget plan cuts deeply into domestic programs, reshapes Medicare, Medicaid
By Rosalind S. Helderman and Lori Montgomery, Updated: Tuesday, March 20, 2012

House Republicans laid down a bold but risky election-year marker Tuesday, unveiling a budget proposal that aims to tame the national debt by reshaping Medicare and cutting deeply into Medicaid, food stamps and other programs for the poor, while reshuffling the tax code to sharply lower rates.

Translation: Cut the money supply to stimulate the economy, i.e. apply leeches to cure anemia. Cut benefits for the poor and middle classes. “Sharply lower rates” to the rich.

Congressional Republicans argue that restraining future borrowing is a moral imperative and that entitlement programs for the elderly and the poor must be redrawn both to reduce red ink and to ensure that federal benefits continue to be available.

Translation: It is a “moral” imperative to screw the elderly, the poor and the middle classes, so the government can do what it could do anyway without the screwing: i.e. pay its bills.

But the document — which pairs deep spending cuts with a reduction in the top tax rate paid by the wealthy — quickly provided new fodder for Democrats, who argued that Republicans would slash the social safety net while protecting the rich.

Translation: We call screwing the elderly, the poor and the middle class, “broadening the tax base and making taxes fairer.” We’ll use those words often in the future.

The proposal, authored by Budget Chairman Rep. Paul Ryan (R-Wis.), calls for spending cuts and tax changes that would put the nation on course to wipe out deficits and balance the budget by 2040.

Translation: We want to wipe out federal money creation and make sure we enter a depression that will make the Great Depression look like Disney World. The rich, of course, will remain rich, but the middle class will disappear. Anyone want to buy an apple?

Ryan calls for turning over to the states responsibility for the major federal programs for the poor, including Medicaid and food stamps, and giving recipients a deadline to find work and get off the government dole — much as welfare reform did to cash benefits in the late 1990s.

Translation: The federal government never can run out of dollars, but most states are financially destitute. So let’s pile it on the states. Regarding the poor, if those lazy bums don’t find work, let them and their children starve (or eat cake).

All told, Ryan proposes to slash federal spending by $5.3 trillion over the next decade compared with President Obama’s latest budget blueprint, with the biggest savings taken from health programs — including the repeal of Obama’s initiative to expand health coverage to the uninsured — and entitlements for the poor.

If the poor can’t afford health insurance, let them die. Or, let them go to hospital emergency rooms, which are twice as expensive, and will be paid for by the 1% anyway (but the 1% doesn’t know it, so don’t tell them.) As for the middle class, this will bankrupt them. So??

But it might not be enough for many tea party conservatives, who are demanding that Republicans balance the budget within the next 10 years.

Translation: We realize the Tea Party is composed of economic idiots, but they along with the Christian Taliban are our base, so we’re stuck with them.

Ryan argued that the plan offers “real spending discipline. It does this not through indiscriminate cuts that endanger our military . . . ”

Translation: We, of the right wing love guns, so we’ll protect the military.

Ryan said, adding that he has spoken with the major GOP candidates, who have all told him he is “on the right track. Each of these people running for president have all given their various ideas and reforms that perfectly jive with and are consistent with what we’re proposing.”

Translation: Our fools are so greedy for power, they would kill their own grandmothers for one vote. So, of course they agree with the party line.

In reaction to Democratic criticism that the plan “ends Medicare,” Ryan has tweaked that proposal: He now aims to preserve traditional Medicare as an option, though seniors could be required to pay significantly more for Medicare coverage if the program proved to be more expensive than the private plans.

Translation: Sure, you can keep Medicare; just pay more.

But though Ryan crafted the new variation with Democratic Sen. Ron Wyden (Ore.), Democrats have made clear that the veneer of bipartisanship will not inoculate him from a fresh round of political attack.

Translation: We found ourselves a Judas. Hey, we’re the religious right. What did you expect?

“The Republican proposal would end the Medicare guarantee, shift costs to seniors, and let Medicare wither on the vine, while providing billions in tax breaks for Big Oil and special interests, and destroying American jobs,” House Minority Leader Nancy Pelosi (D-Calif.) said in a statement.

Translation: Yes, Nancy is correct. But nobody listens to her. They’re more concerned with her face job.

On taxes, Ryan offers a bit more detail than he did last year about how Republicans would reshape the tax code. The proposal calls for replacing the current tax structure’s six brackets with just two: a 10 percent rate for lower-income earners and a 25 percent rate for upper-income earners.

Translation: You poor people who pay less than 10% (not counting that regressive FICA you pay) will now be additionally screwed, but don’t worry. It will help the rich. Feel better?

To pay for those changes, Ryan proposes to wipe out a vast array of deductions, credits and other tax breaks benefiting people and companies at virtually every income level. Neither he nor House Ways and Means Committee Chairman Dave Camp (R-Mich.) on Tuesday spelled out specifics, but tax experts said their proposal would almost certainly have to take a whack at expensive tax breaks such as those for home mortgage interest, employer-provided health insurance and retirement savings.

Translation: We just ran this by Bill Gates and Warren Buffett. They say it sounds good to them.

Ryan proposes $1.028 trillion in total agency spending — $19 billion less than the cap set during last summer’s bitter showdown over raising the legal limit on government borrowing, known as the debt ceiling. Ryan also proposes to instruct six House committees to come up with proposals by May for generating additional savings and averting across-the-board cuts set to hit in January.

Sen. Patty Murray (D-Wash.) said, “By desperately attempting to appease their extreme conservative base, House Republicans are reneging on a deal their own speaker shook on less than eight months ago,” she said. “They have shown that a deal with them isn’t worth the paper it’s printed on and they are threatening families across America yet again with the prospect of a government shutdown.”

House Speaker John A. Boehner (R-Ohio) countered that the $1.047 trillion cap represents an upper limit, not an agreement. “People have limits on credit cards. That doesn’t mean that you’re required to spend up to the limit, it just says you can’t spend anymore than that,” Boehner told reporters. “We all know that we’ve got a real fiscal problem here in Washington. And, frankly, we think we can do better.

Translation: I am extremely religious, and my word means nothing. So, what’s wrong with that?
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Overall translation: If you make less than $300K per year, or truly are religious rather than mouthing piety, you’d be a fool to vote Tea/Republican. But if you are wealthy, and/or don’t give a damn about people less fortunate than you, and/or claim to be a patriot, but really don’t care about Americans, by all means vote for the Tea/Republicans.

I award the Tea/Republican Party five traitor images for trying to do more damage to America than Osama bin Laden ever dreamed of — just to win power.

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

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.
==========================================================================================================================================

This article ran on page 2 of the 3/20/12 Chicago Tribune’s Business Section. Is it good news or bad news?

Mortgage bailout at $25B in black

The U.S. Treasury Departmen said Monday that it made a $25 billion profit on sales of mortgage-backed securities acquired during the financial crisis, part of its ongoing efforts to wind down the taxpayer-financed bailout programs.

The sales were the latest indication the multiple programs the government and Federal Reserve initiated to bail out the financial sector may turn out to be less costly than originally feared.

The Treasury bought $225 billion of the securities in 2008 and 2009 in an effort to keep the mortgage market from freezing up as private investors fled. The $250 billion it reaped from the investment reflected both principal and interest.

So, in summary, what happened? First, the government pumped $225 billion into the economy, trying to prevent a worsening of the economy. After that stimulus, the government withdrew $250 billion from the economy.

So you tell me. Is this good news or bad news?

Side question: Was this really a “taxpayer-financed bailout program”?

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. 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 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.
==========================================================================================================================================

This article ran on page 2 of the 3/20/12 Chicago Tribune’s Business Section. Is it good news or bad news?

Mortgage bailout at $25B in black

The U.S. Treasury Departmen said Monday that it made a $25 billion profit on sales of mortgage-backed securities acquired during the financial crisis, part of its ongoing efforts to wind down the taxpayer-financed bailout programs.

The sales were the latest indication the multiple programs the government and Federal Reserve initiated to bail out the financial sector may turn out to be less costly than originally feared.

The Treasury bought $225 billion of the securities in 2008 and 2009 in an effort to keep the mortgage market from freezing up as private investors fled. The $250 billion it reaped from the investment reflected both principal and interest.

So, in summary, what happened? First, the government pumped $225 billion into the economy, trying to prevent a worsening of the economy. After that stimulus, the government withdrew $250 billion from the economy.

So you tell me. Is this good news or bad news?

Side question: Was this really a “taxpayer-financed bailout program”?

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. 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 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.
==========================================================================================================================================

That is the question. You can decide for yourself. Here is the link to the entire article:
The Logic and Fairness of Greece’s Program. Here are some excerpts:

The Logic and Fairness of Greece’s Program
by iMFdirect
By Olivier Blanchard

To get back to health, Greece needs two things. First, a lower debt burden. Second, improved economic competitiveness. The new program addresses both.

Some countries have been able to work down heavy public debt burdens. Those that were successful did it through sustained high growth. But in Greece’s case, it had become clear that high growth—let alone sustained high growth—was not going to come soon enough. Debt had to be restructured.

Not come “soon enough”? Under the euro system, the correct adverb would have been “ever.”

The PSI (private sector involvement) deal—the largest ever negotiated write-down of public debt—has reduced the debt burden of every man, woman, and child in Greece by close to €10,000 on average, a sizable contribution on the part of foreign savers.

Of course, no thought is given to the Greek people and Greek institutions that may have owned Greek debt and were royally screwed.

Greece now has to do its part―with sustained political commitment to implement the difficult but necessary set of fiscal, financial, and structural reforms that have been agreed as part of the program.

First, it has to bring down its fiscal deficit further. Otherwise, this will simply negate the progress which was just made on the debt. Greece is still running a primary deficit, and it will soon need to run a primary surplus. There is simply no alternative. Much spending will need to be cut. And, on the tax side, given the harsh measures that have to be taken, much of the focus of the program is on fairness, on making sure that richer people do indeed pay their fair share.

Even cheating creditors out of billions didn’t do the job. Now Greece must cheat its own citizens, further. Raise taxes; cut spending. And disregard that “fair share BS.” This will be huge tax increase on the entire nation, destroying the private sector to aid the public sector.

Equally, or perhaps more importantly, Greece has to reduce its current account deficit. For two separate reasons. First, no country can run a large current account deficit and borrow from the rest of the world forever. Second, as fiscal austerity cuts into domestic demand, the only way to return to growth is to rely more on foreign demand to reduce the current account deficit.

Yes, austerity will cut into domestic demand by impoverishing the people. The more austerity, the more distant is the current account surplus. Visualize mice running on a wheel.

“Forever” is a favorite word of debt-hawks. They neglect to mention that reducing deficits “forever” guarantees total collapse of an economy. However, The U.S., being Monetarily Sovereign, actually can run a current account deficit “forever.”

At any rate, this “solution” is known as the “beggar-thy-neighbor plan.” If one nation runs a current account surplus, another nation must run a current account deficit. So who will Greece beggar? Another euro nation? Or will it be a Monetarily Sovereign nation, the only ones that can afford current account deficits “forever.” The IMF never says who will be expected to pay the price.

By how much does Greece need to improve its competitiveness? It is difficult to be sure, but an improvement in competitiveness―or a real depreciation―of about 20 percent seems to be what is required.

There are two ways to become more competitive: become much more productive, or reduce wages and nonwage costs. The first way is much more appealing. But there is no magic wand. While many sectors in Greece show a large productivity gap, the reforms needed involve changes in regulation and behavior, none of them easy to achieve.

This leaves decreases in relative wages, at least until higher productivity can kick in. In countries with flexible exchange rates, this can be achieved through currency depreciation. In a country which is part of a common currency area, it has to be achieved by decreasing nominal wages and prices.

How will cutting Greek wages improve productivity? Most increases in productivity come from education and automation, not from impoverishing your own population. Education and automation require money, the very thing disappearing from Greece.

And did we see an admission that countries with flexible exchange rates (aka Monetarily Sovereign nations) can do what the euro nations (monetarily non-sovereign) cannot? Oops! How did that admission slip out?

The best way forward would have been a negotiation between social partners to reduce wages and prices. This did not happen. The program tries to accelerate the process, while protecting the most vulnerable.

Who is the “most vulnerable” in the opinion of the IMF? Not the poor. To hell with them. Their salaries will be cut. So who is it? In IMF-speak the most vulnerable are the rich and, of course, the EU and IMF themselves.

Were there less painful alternatives? I do not believe there were, or are.

For example, the notion which is sometimes floated that large infrastructure projects might boost growth, increase productivity, and improve the fiscal and current accounts, is fanciful. The problem of Greece is not primarily a problem of physical infrastructure. Projects financed by state funds would do little to impact growth in the short term, would make the fiscal deficit worse, and would only delay the inevitable adjustment.

Here, the IMF tells the world that hiring thousands of people to build roads, bridges, dams, electrical, water and sewer infrastructure would not stimulate the economy. No, better to cut their salaries.

What about leaving the Eurozone? Euro exit followed by a sharp depreciation could achieve the relative wage and price decline that Greece needs, and achieve it faster. Indeed, if Greece had had its own currency to start with, this would surely have been part of the program. But Greece is part of the Eurozone. And, leaving aside the large costs of no longer belonging to the Eurozone, the dislocations from a disorderly exit—from the collapse of the monetary and financial system, to the legal fights over the proper conversion rates for contracts—would be very, very large.

Translation: What we really fear is the collapse of the euro. We built it. Our reputations and excessive salaries depend on it. So don’t cause anything “disorderly.”

Greece will have to climb a mountain at least as high as the one it has just climbed and success will hinge crucially on the government’s sustained and strong implementation.

But it is also true that the program deals squarely with the two most fundamental issues facing Greece―not only high debt but also low competitiveness. And it is fair, both in asking for shared sacrifices, not only within Greece, but also between Greece and its creditors.

Everyone shares sacrifice — the Greek government, Greek citizens, Greek lenders — everyone except — the IMF and the EU. No sacrifice for them.

The IMF and the EU. They were the ones who convinced the euro nations to surrender their Monetary Sovereignty in exchange for what? Financial security? Monetary stability? Fiscal jurisdiction? How well has that worked out?

And now that they have created an economic Frankenstein, they are reluctant to admit their error and lose their cushy jobs. Rather, they prefer that thousands, no millions, of people suffer.

The title of this post asks a question. The answer is, no, it’s not stupidity or insanity. It’s arrogance that dooms Europe — the very doom I predicted back in 2005.

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. 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