Two Chicago Tribune Columnists. Which one is clueless?

Here are excerpts from two articles that appeared in today’s Chicago Tribune. One of the authors has proved time and again he is a Trump conservative and clueless about economics — a redundancy.

Here are excerpts from the two articles.

Fed bailout for state akin to aiding bust-out gambler
John Kass

If you’re a taxpayer from a well-run state with low public worker union pension debt, you may be watching in horrified fascination as House Speaker Nancy Pelosi pushes the political buttons for the new CARES Act 2 federal coronavirus relief bill.

People and businesses need help. The government shut down the economy to deal with the pandemic. There are serious coronavirus costs and federal help is needed.

But what’s worrisome is this: politics could morph necessary relief into a massive no-strings-attached bailout for Illinois, New York, New Jersey and other poorly run states to pay down their unfunded public worker pension debts.

And who pays? You do.

It’s like watching your grandma take your college fund to pay off her brother’s gambling debts.

OK, you guessed it. John Kass, whose column appears on the coveted page 2 of the Tribune, writes a good column about local government, but he is Trump-dumb when it comes to federal finance.

I have corresponded with him numerous times about the difference between the federal government’s (Monetarily Sovereign) financing vs. state/local government (monetarily non-sovereign) financing.

I have explained to him that unlike state/local taxpayers, who do fund state/local government spending, federal taxpayers do not fund anything.

Their tax dollars are destroyed upon leaving their checking account, and the federal government creates brand new dollars, ad hoc, every time it pays a bill.

So it is nothing at all “like watching your grandma take your college fund to pay off her brother’s gambling debts.”

That might be a decent analogy if Kass were talking about state/local government taxpayers, but it simply is wrong when talking about federal taxpayers.

But (and I’m sure you have learned this), Trump-dumb people are Trump-dumb stubborn, especially when it comes to learning something Trump or Fox has not told them.

So Kass continues on his merry way, spreading Trump-ignorance to the masses, with the able assistance from such learned scientists as Russ (“It’s the common cold.”) Limbaugh and Sean (“There is no crisis.”) Hannity, and the boobs at Fox & Friends.

More excerpts from the Kass article:

The Democratic governors have their talking points. This isn’t a bailout, they say. Instead, it’s all about “fairness” and “donor states.”

“As you know, we are a donor state to the federal government,” Illinois Governor Pritzker said the other day. “We pay more in federal taxes in Illinois than we get back from the federal government.

“The states who are being bailed out, year after year, are the states who take more out of the federal dole than they put in.”

The Democratic talking points sound reasonable, until you realize the states Pritzker says are being “bailed out, year after year,” are in the main, extremely poor states, with many poor people who need federal assistance programs.

These “extremely poor states, with many poor people who need federal assistance programs” also, by strange coincidence mostly are “red” states that gather nice, big, fat surpluses from the federal government.

Perhaps Kass was being compassionate, right? Uh, not really.

The political class in each of these states, mostly Democrats but with help from a few local Republican handmaidens, had put taxpayers on the hook for unsustainable public pension deals for government workers.

Now in Illinois, the unfunded public worker pension debt is estimated in the hundreds of billions of dollars. The state’s bond ratings are just above junk status. Illinois state Senate President Don Harmon, D-Chicago, has asked Congress for a $41.6 billion bailout.

Taxpayers are on the hook and the pension burden shifts to property taxes. The property taxes rise, and their home values fall. Taxpayers are now the servants of public servants.

Coronavirus didn’t do this. Trump didn’t do this. Local politicians did this.

“Compassionate” Kass is concerned about the “many poor people who need federal assistance programs” in red states, but far less concerned about public workers whose pensions are in danger in blue states.

He also is far less concerned about Illinois (blue state) homeowners whose already high property taxes will rise again and whose homes will lose value. After all, they mostly are anti-Trump Democrats.

And Mr. Jack (Trump shill) Kass, thank you for making sure we understand that Trump wasn’t at fault.

But then, he never is at fault for anything, is he?

So why should taxpayers of “well-run and prudent states” be asked to bail out the politicians of Illinois and elsewhere for decades worth of bad decision-making?

The politicians and mouthpieces will prattle on about “fairness” and “donor states.” But they want someone else to pay their debts.
And the bill is due.

jskass@chicagotribune.com
Twitter @John_Kass

Now let’s get to the facts, which the Trump-dumb always ignore in favor of scorn tossed at some non-Trump group.

The states having big cities with large, minority, poor populations are the ones having the worst financial problems, because these large, minority, poor populations need the most government financial assistance — which liberal blue states provide and conservative red states avoid (like paying for health-care).

Blue, progressive states are more likely to help the poor. The red, conservative states are the ones that do the least for the poor.

That’s an important reason why the red states appear (to Kass) to be “well-run and prudent states.” In Kass/Trump world, “prudent” means: “Screw the poor.”

It sure isn’t that the red-state governments are less crooked, or more “well-run and prudent.” (Lousiana, Missippi, Alabama, Georgia, South Carolina, North Carolina, Kansas — well-run and prudent? Really?)

Those red-neck southern politicians are no less slimy than the blue state grafters.

Of course, all the phony moralizing by Jack Kass is a “look-the-other-way” digression.

Federal spending costs federal taxpayers nothing. It would take $0 from any taxpayer’s pocket if the federal government simply gave billions to every state and didn’t take anything from any state.

And now we come to a second article that appeared in today’s Tribune:

Turnabout’s fair play: Illinois has been ‘bailing out’ other states for decades
Gov. J.B. Pritzker responded Monday to a tweet by President Donald Trump, saying Illinois pays “more in federal taxes in Illinois than we get back” from the feds.
Eric Zorn

President Donald Trump took to Twitter midmorning Monday with an aggressive question : “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?”

Trump was amplifying a complaint April 22 about “blue-state bailouts” by U.S. Senate Majority Leader, Republican Mitch McConnell, R-Ky., as well as South Carolina’s former Republican Gov. Nikki Haley’s tweet on Saturday singling out Illinois when making the case that federal pandemic relief funds “should not bail out states that have recklessly spent and taxed their way into oblivion.”

Gee, I wonder where Jack Kass got his talking points.

They sound just like Trump and Trump toadies Moscow Mitch McConnell and the Republican former governor Nikki Haley.

Plagiarism?

According to a January analysis by the State University of New York’s Rockefeller Institute of Government, in the years 2015 through 2018, Illinois sent an average of $5.6 billion a year more to Washington than Washington sent back in such forms as grants to state and local governments, wages to federal workers, safety-net programs, contracts, and Social Security, veterans’ and Medicare benefits.

Haley’s home state of South Carolina? That red state received an average $21.8 billion more from Uncle Sam than its taxpayers remitted, according to the Rockefeller data.

McConnell’s red state of Kentucky? A whopping average of $37 billion more.

The Rockefeller study identified 10 other states along with Illinois that pay more in federal taxes than they get back.

On that list are only two “red” states that voted for Republican Trump in the 2016 presidential election: No. 8 Nebraska ($752 million) and No. 10 Utah ($595 million).

A similar analysis by the New York state comptroller’s office that focused just on fiscal year 2018 found Illinois had a negative federal balance of $11.4 billion.

In that study, Illinois was one of just seven donor states, all of which voted for Democrat Hillary Clinton in 2016.

South Carolina, for reference, came out $26.1 billion ahead in 2018; Kentucky came out $29.9 billion ahead.

Odd how Jack Kass failed to mention those numbers.

Illinois residents “bailed out” other states to the tune of $863 per person, the New York comptroller’s report shows.

Each South Carolina resident, in contrast, came out $5,139 ahead on average, while each Kentucky resident came out $6,694 ahead.

According to “ States Most Dependent on the Federal Government ,” published in 2019 by SmartAdvisor, Illinois is the 45th most dependent on federal dollars with 29.4% of its annual budget coming from the feds. South Carolina is 28th most dependent with 33.2% and Kentucky is sixth at 41%.

I guess they are what is known as “well-run and prudent states,” so long as the federal government is pumping billions of dollars into their treasuries.

This sort of imbalance is nothing new.

Data in an old Tax Foundation study, “ Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005 ,” shows that on average, Illinois had a $16 billion annual negative balance over those 25 years, with taxpayers getting back an average of 74 cents in federal spending in the state for every dollar they sent to the IRS.

The Tax Foundation has not updated that study, and the Illinois governor’s Office of Management and Budget does not track these figures.

Numerous factors influence how federal dollars are acquired and distributed at the state level, including poverty rates, the age of the population, the location of military bases, universities and major businesses and prevailing wages.

O.K., so that should take care of the Trump/Kass “bailout bullshit.”

But then, oh dear, save us from our friends. It looks like even the more intelligent writers still are ignorant about federal finances. Eric Zorn’s article continues:

But no matter how or why the money flows where it does, the bottom line is that Illinois and other donor states are helping prop up such recipient states as South Carolina and Kentucky.

Our taxpayers in effect funnel money into their economies, money that props up their businesses and keeps their taxes and government spending lower than they would otherwise have to be.

No, Eric, Illinois taxpayers do not funnel money to South Carolina or Kentucky. All federal tax dollars are destroyed as soon as they leave a taxpayer,s checking account.

The fact that Illinois taxpayers pay more, and Kentucky taxpayers receive more gives the illusion that Illinois taxes pay for Kentucky’s largess.

(Just to be fair to Eric Zorn, he did say “in effect,” so perhaps he does understand that federal taxpayers do not “funnel money” to anywhere or any thing. Those dollars immediately are destroyed.)

That is like the railroad crossing illusion in which the blinking lights individually turn off and on, but look like they are bouncing back and forth.

The railroad crossing lights are an analogy for Monetary Sovereignty. Think of the left light being taxpayers and the right light as the Treasury.

The left light going off is equivalent to dollars in the checking account of a taxpayer being instantly destroyed as soon as the check is cashed.

The right light going on is equivalent to an internal, accounts receivable, balance sheet credit.

Then, the right light going off is equivalent to a debit to that accounts receivable account, and the left light going on is equivalent to a credit to a private-sector checking account — new money being created.

The lights and the dollars do not flow back and forth. They are alternately created and extinguished.

It only is instructions that tell each party what to do, just as instructions tell each railroad light to turn on and off.

There is no back-and-forth flow of money or light.

The U.S. government has the unlimited ability to debit and credit (light and extinguish) its balance sheet at will.

But that does not affect its ability to send instructions to a creditor’s bank, which debits and credits a private sector account.

But if Illinois had gotten back even close to what its taxpayers had put into the federal system over the years, its public pensions would be fully funded and the treasury would still show a surplus of literally hundreds of billions of dollars.

And that is the key. Blue state residents send billions of dollars to a federal government that destroys every dollar it receives and creates new dollars for spending.

Of course that’s not how it works. Not in a city, where taxes from wealthier neighborhoods support services in poorer neighborhoods.

Not in a state, where taxes from prosperous regions support residents in struggling areas.

And not in a nation, where, in the end, we’re all supposed to be in the fight together.

The answer to Trump’s question about why the people and taxpayers elsewhere should be bailing out states particularly hard hit by this pandemic is simple: Because we’ve been bailing them out for years.
ericzorn@gmail.com
Twitter @EricZorn

Not quite. We (Illinois et al) needlessly have been tossing dollars down the federal toilet.

That is a huge reason “we” need money from the federal government.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually.

8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9%

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest.

MONETARY SOVEREIGNTY

The latest nothing that has our thought leaders in a tizzy: Japan’s trade “deficit” –or is it a surplus?

I noticed a news item that ranks very high on my “So what, who cares?” meter.

Economists, politicians, and media folks, who either don’t understand, or don’t want you to understand economics, are all in a tizzy about this:

Japan has second straight year of red ink on trade last year

TOKYO (AP) — Japan logged a deficit for a second straight year last year as its exports were hurt by a slowdown of demand in China amid a tariff war with the U.S.

Government data released Thursday showed Japan’s exports fell 5.6% in 2019, to 76.9 trillion yen ($701.6 billion), while imports fell 5.0% to 78.6 trillion yen ($710 billion).

That left a deficit of 1.6 trillion yen ($14 billion).

Japan had a trade surplus of 6.6 trillion yen ($60 billion) with the U.S. last year, as exports fell 1.4% from 2018, and imports fell 4.4%.

Shipments of computers, construction and textiles equipment and power generating machines contributed to a 3.7% increase in exports of machinery to the U.S.

Vehicle exports, which account for nearly 40% of Japanese exports to the U.S., declined 5.5%, the data show.

Is all of this bad news or good news for Japan? The use of the words “deficit,” and “red ink,” which has pejorative insinuations, would lead one to believe this is terrible news.

If you are associated with vehicle manufacturing you may believe it’s bad news — unless exports to other nations and local consumption increased enough to offset the decline in shipments to the U.S. — and that is assuming exports of vehicles to the U.S. are profitable.

Or then again, if you’re associated with the manufacture of computers, construction and textiles equipment, and power generating machines, you might feel it’s good news.

But in reality, looked at from the whole Japanese nation’s standpoint, it’s no news at all.

A “trade deficit” merely means that Japan as a nation, sent fewer goods and services to the U.S. than the U.S. sent to Japan, and in return, Japan sent more money to the U.S. than the U.S. sent to Japan.

But is that a trade “deficit” or is it a trade surplus?

Trade is an even exchange. Goods and services sent one way, and an equivalent value in money sent the other way.

Since trade is an even exchange, is Japan better off sending more goods and services overseas or sending more money overseas?

Asked another way, which is more difficult for Japan to obtain, goods and services or money?

Japan is Monetarily Sovereign. It has the unlimited ability to create an infinite amount of Japanese yen, at no cost, and at the touch of a computer button. Money is free and easy for Japan to obtain.

By contrast, Japan is a geographically small, island nation, with limited natural resources. Goods and services are costly and hard-to-get.

So again, is it better to produce and send away something that is costly and hard-to-get and to receive something in return that is free and easy-to-get (aka a “trade surplus”) or is it better to receive costly and hard-to-get goods, and send away something that costs you nothing (aka a trade “deficit.”)?

I, for one, would prefer the so-called trade “deficit.”

But, you may ask this good question, “What about the individual industries, like vehicles, that rely on exports?”

They are in a different category from the Japanese government. While the government is Monetarily Sovereign, the private sector is monetarily non-sovereign. Unlike the government, businesses cannot create yen at the touch of a computer key.

For the private sector, money is hard-to-get. So what’s to be done?

The obvious solution is for the government to fund businesses and their employees. In that way, the private sector would not suffer because of duties and trade deficits.

Yes, I know. International trading pacts frown on government support of business, but these rules are honored mostly in the breach. The vast number of government-owned and government-funded businesses speaks to this.

And yes, this solution would increase a government’s deficit and debt. But, of course, a deficit and debt is meaningless for an entity that can create its own sovereign currency at will.

There was a time when the economically ignorant predicted that if ever the U.S. debt rose to 100% of the U.S. Gross Domestic Product, the stars would fall from the skies, and pestilence would ravage the earth.

Well, here we are:

United States Gross Federal Debt to GDP — **U.S. Debt now at 106% of GDP**

And as for Japan, it’s more than twice as “bad” (good).

Japan General Government Gross Debt to GDP — **Japanese debt now at 238% of GDP**

Not only is central government debt meaningless for a Monetarily Sovereign entity, but so is every fraction that includes central government debt, i.e. the ratio of Debt/GDP. It is much referenced and essentially meaningless.

Japan would not need to export one yen’s worth of goods and services, and it could survive very nicely, thank you, via government deficit spending.

“Looking ahead, we think the recovery in exports will be weaker than many expect. That reflects our view that GDP growth in Japan’s main trading partners will remain subdued this year,” Tom Learmouth of Capital Economics said in a report.

Although export growth and GDP growth in trading partners can be connected, the former is meaningless to Japan, and the latter is meaningful to the trading partners.

He noted that an increase in Japan’s sales tax, to 10% from 8%, as of Oct. 1 has also hurt consumer demand and private investment.

Why would Monetarily Sovereign Japan increase the sales tax its own citizens pay? No good reason at all. It’s foolishness at a high level. Japan has no need or use for tax money.

President Donald Trump has thrown out past trade deals, including that with China, that he said added to the U.S. trade deficit and cost the country manufacturing jobs.

In his typical ignorance, President Donald Trump “solves” the jobs problem by raising tariffs, an act which is guaranteed to cost the U.S. private-sector jobs.

A better approach would be to eliminate business taxes, not raise them, which would increase company competitiveness, sales, and employment.

The best approach would be to institute the Ten Steps to Prosperity, which would narrow the Gap between the rich and the rest, put more money into the private sector, and improve the lives of the people.

That, ultimately, is the purpose of government.

Nearly 50 years have passed since President Richard Nixon removed the handcuffs of a gold standard and freed the U.S. government to be a true Monetary Sovereign.

Yet still, we remain shackled by our own fears and ignorance, leaving us not much better than the euro nations, which gave away their Monetary Sovereignty many years ago.

Too many Americans suffer from inadequate health care, inadequate housing, inadequate nourishment, inadequate education, inadequate financial resources — and it all is so unnecessary.

Ignorance and fear. Ignorance and fear.