What THE WEEK Magazine said, and what they really meant. Monday, Nov 11 2019 

Sometimes (often), a print medium writes a set of words that imply one thing but really mean something quite different.Related image

Here, for instance, is the exact wording of a short article that appeared in the November 8, 2019 issue of THE WEEK Magazine, followed by a translation into more accurate wording:

National debt nears $1 trillion — THE WEEK
The U.S. federal budget deficit increased 26 percent over the past fiscal year and is expected to top $1 trillion in 2020 the U.S. Treasury reported last week.

That puts the deficit at its highest since 2010, following four straight years of red ink.

The deficit has jumped nearly 50 percent since President Trump took office, largely because of shrinking tax revenues.

Massive tax cuts in 2017 have not paid for themselves, as Republican backers promised, and federal spending is now rising at twice the rate of revenue.

In a decade, the national debt is projected to represent a bigger share of the economy than at any point in U.S. history, except the period immediately following the massive expenditures of World War II.

Someone reading the above article, with its use of such pejorative wording as “debt,” “deficit,” “red ink,” “shrinking tax revenues,” and “not paid for themselves,” might be led to believe that the economy and the federal government are in trouble.

But exactly the reverse is true. The article actually describes the primary reasons why the economy has continued to grow, even under the feckless leadership of Donald J. Trump.

And now for the translation. What follows are exactly the same facts, but corrected to convey the true meaning:

Investments in Treasury Securities nears $1 trillion
The U.S. federal government’s financial contribution to the economy increased 26 percent over the past fiscal year and is expected to top $1 trillion in 2020 the U.S. Treasury reported last week.

That puts the federal government’s net contribution to the private sector at its highest since 2010, following four straight years of sending increased growth dollars to the economy.

The economy’s surplus of economic growth dollars has jumped nearly 50 percent since President Trump took office, largely because of shrinking deductions from the private sector.

Massive tax cuts in 2017 have not been matched by massive tax increases, as Republican backers warned, and federal inputs to the economy are now rising at twice the rate of federal deductions from the economy.

In a decade, the total of investments in Treasury Securities is projected to represent a bigger share of the economy than at any point in U.S. history, except the period immediately following the massive expenditures of World War II — the period when the economy grew faster than at any point in U.S. history.

Rather than stressing over federal “debt” and “deficits,” neither of which is any burden whatsoever on the U.S. economy, the U.S. government, or on the U.S. taxpayers, the rewrite demonstrates that increased federal spending and reduced taxes help grow the private sector (i.e the economy) grow.

Now if only we could convince the media to write that way.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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

How to lose an election by being too smart. Saturday, Nov 9 2019 

I like Elizabeth Warren.

I like her tireless energy. I like her desire to narrow the Gap between the rich and the rest. I like her compassion and her morality. I like her intelligence.

What a refreshing difference between her and the current occupant of the White House.

But it may be her high intelligence that costs her the election.

Consider these headlines:

Elizabeth Warren Wants To Pay for Medicare for All With a $9 Trillion Tax That Will Hit the Middle Class
Warren says it’s not a tax. But what else would you call a requirement that employers send money to the federal government to finance a public program?
And:
Elizabeth Warren’s Medicare for All Dilemma
And:
Elizabeth Warren’s Tax-Hike Evasion
And:
How Warren’s Medicare for All plan could impact the middle class financially
By Tami Luhby, CNN

Sen. Elizabeth Warren has promised that she won’t raise taxes on the middle class “by one penny” to finance “Medicare for All.”

The Massachusetts Democrat’s funding proposal, now key to her 2020 platform, is chock full of new levies on employers, corporations, the wealthy and financial firms.

She highlights that people would save $11 trillion that they would have spent on premiums, deductibles and co-pays over the next decade — but that benefit isn’t completely tax-free. Americans of all incomes would fork over $1.4 trillion more in taxes over 10 years.

Buried in the footnotes of the proposal is the assumption that earnings would be taxed at higher marginal income tax rates due to the full repeal of the 2017 Republican tax cuts. The proposal assumes marginal tax rates would rise by 2.3 percentage points.

Warren has two problems:

  1. She has a tax plan to solve the “How will you pay for it” non-problem, and
  2. Her tax plan is so complex and convoluted, few people can understand it, and fewer yet agree with its calculations.

So this mysterious, dark cave of data not only steals attention away from her plan’s coverage benefits, but it also inserts suspicion that she is using fiscal sleight-of-hand to hide something.

This is a bad sign for the passage of a program that actually will use zero tax dollars (because unlike state and local taxes, federal taxes do not fund anything).

The U.S. federal government uniquely is Monetarily Sovereign. It has the unlimited ability to create its own sovereign currency, the U.S. dollar.

When Warren is asked, “How will you pay for it,” her response should be:

“We’ll pay for it the same way we are paying for the GOP’s increases in military spending and tax cuts for the rich. We’ll pay for it the same way we pay for White House lawn mowing and Air Force 1, Congressional travel and meals, and Supreme Court robes:

The federal government simply will push a computer key.”

Then she can quote:

Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” 

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”

The federal government creates dollars, ad hoc, every time it spends dollars. Unlike states, counties, cities, businesses, you, and me, the federal government needs no income.

The government creates new dollars, ad hoc, every time it spends dollars. It neither needs nor uses tax dollars, nor does it borrow.

Why does the government levy taxes? Two reasons, both having to do with control:

  1. To control the economy, it taxes what it wishes to limit, and gives tax breaks to what it wishes to encourage.
  2. To control you by making you believe dollars are scarce so you will not demand free benefits. By impoverishing taxpayers, and then doling out dollars as it sees fit, the federal government exerts powerful control over the lives of taxpayers.

Tami Luhby’s article continues:

Warren’s campaign told CNN that she only supports repealing the tax cuts for the wealthy and big corporations — not middle-class families — and doing so would have no material effect on the revenue estimate.

Tax cuts for corporations benefit the economy by leaving more growth dollars in the economy, and by helping businesses grow. Eliminating those tax cuts is anti-growth.

Warren proposes an anti-growth solution to the “How will you pay for it” non-problem.

Another provision of Warren’s plan — which calls on employers to foot a large share of the bill — could also affect the middle class in an indirect way, say some economic experts and opponents.

Under her proposal, employers would no longer pay premiums to private insurers, which on average cost them more than $14,500 annually, on average, for family coverage.

Instead, companies would write a check to the federal government for 98% of their current health insurance tab to foot nearly half bill for Medicare for All.

She calls this $8.8 trillion levy an “employer Medicare contribution.”

When employers pay premiums to private insurers, the growth dollars stay in the economy, but when employers pay taxes to the federal government, those dollars disappear from the economy.

Here, again, Warren’s plan is anti-growth.

Workers typically receive lower wages because companies factor tax free health insurance costs into their total compensation. So if employers no longer had to pay for health coverage, they would use some of the savings to boost taxable salaries.

“She has found a clever way to make middle-income people finance a portion of government health insurance without paying a direct tax,” Gleckman said. “But make no mistake, they still will be paying.”

This isn’t exactly true. Both salaries and healthcare costs are tax-deductible to corporations. So from that standpoint, the plan is a wash.

But salaries require (unnecessarily) FICA payments from employers and from employees. So employers and employees both would pay more FICA tax to the government, and this represents a net dollar loss to the economy.

Former Vice President Joe Biden, in particular, has attacked her on this point. His campaign calls this provision “a new tax of nearly $9 trillion that will fall on American workers.”

Other experts, however, counter that the employer Medicare contribution would not prompt companies to further diminish workers’ wages.

“Employers are already paying this in the form of premium contributions to employer plans,” tweeted Topher Spiro, vice president for health policy at the Center for American Progress, which supports a universal coverage model that would retain an employer-based insurance option.

“This is just redirecting the premiums to Medicare.”

Redirecting premiums from private insurers to Medicare removes growth dollars from the economy.

Warren and Sanders insist on eliminating the employer-based option. The byzantine tax maze plus the unexplained elimination of private insurance are together enough to make taxpayers throw up their hands and say, “Forget it.”

Smart people may not understand how less intelligent people “don’t get it.” Perhaps her brilliance has made Warren forget the adage, “KISS. Keep It Simple, Stupid.”

Or, perhaps she believes the populace is too stupid to understand the simple, Monetary Sovereignty truth that the federal government can pay for Medicare, without taxes and without inflation.  

Because Donald Trump is a low-IQ con-artist, he is most adept at keeping things simple — by lying in simplistic terms rather than by explaining the more complex reality.

Drain the swamp,” “Build the wall,” “Make America great again,” “Fake news” all are designed to appeal even to the intellectually impoverished.

Those who serve Trump report that he has difficulty comprehending even one complete paragraph. That being the case, he creates his communications to fit Twitter — something brief enough even he and the voters can understand.

To communicate with the voters, and win the election, Warren should attempt this bit of simplicity by saying: “We’ll eliminate FICA, and give you free, no-deductible Medicare and long-term disability.”

Or better yet:No FICA; Free Medicare”, and produce some baseball caps with the letters, “NFFM.”

Or, she can keep turning herself inside out, and look dishonest trying to “prove” she can pay for a trillion-dollar program without federal deficit spending or tax increases.

I hope her honesty will prevail.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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

Does the word, “American,” mean, to you and to the world, “rich people, only?” Monday, Nov 4 2019 

What does the word, “American,” mean to you and to the world?

The question has nagged at me several times recently. I have been an American for somewhat more than 84 years. I was an American during WWII, when the word “American” meant “heroic,” “righteous,” “happy,” “the land of opportunity.”Related image

I was an American when we instituted Medicare and other social programs, partly in response to the nightmare of poverty and racial and social bigotry, when America meant “compassion” and “justice.”

I was an American during Vietnam, when we were “arrogant” and “naive.”

The question returns now, during the Trump era, when I read the following article in the November 2, New York Times:

Judge Blocks Trump’s Plan to Bar Immigrants Who Can’t Pay for Health Care
The court ruling is the latest to derail administration initiatives to limit the admission of certain legal immigrants into the United States.

President Trump’s proclamation barred immigrants who could not prove they had health insurance or the ability to pay for medical costs once they became permanent residents of the United States.

A federal judge on Saturday blocked the Trump administration from implementing a policy that would require immigrants to prove they have insurance or the financial resources for medical costs in order to obtain a visa.

The ruling, by Judge Michael Simon of the Federal District Court in Portland, Ore., was the latest in a string of court decisions to derail administration initiatives that would limit the admission of certain legal immigrants into the United States.

Judge Simon issued a nationwide temporary restraining order preventing the government from carrying out a proclamation by President Trump that would have gone into effect on Sunday.

Mr. Trump’s Oct. 4 proclamation ordered consular officers to bar immigrants who could not prove they had health insurance or the ability to pay for medical costs once they become permanent residents of the United States.

The president had justified the policy on the grounds that immigrants were more likely to be uninsured, and that “costs associated with this care are passed on to the American people in the form of higher taxes, higher premiums, and higher fees for medical services,”the measure said.

Legal immigrants are three times as likely as American citizens to be uninsured, according to a Kaiser Family Foundation study.

Lawyers from Justice Action Center, Innovation Law Lab and the American Immigration Lawyers Association argued that the policy was “plainly illegal” and that it would cause immediate and irreparable harm.

The President’s “costs” justification for blocking immigration is bogus. Our Monetarily Sovereign federal government has the unlimited ability to create its own sovereign currency.

There would be no need whatsoever for “costs associated with this care (to be) passed on to the American people in the form of higher taxes, higher premiums, and higher fees for medical services.” This is part of the big lie that has been fed to the American people for decades.

It became wholly untrue in August of 1971, when President Nixon took us off the last gold standard, removing all blocks to money creation.

The fact is that medical services to immigrants — and indeed to everyone who lives in America — could and should be paid for via federal financing: No taxes, no premiums, no fees.

But, Trump’s base hates immigrants, so Trump appeases them with fraudulent claims, which they are all too ready to believe.

While “dislike” may stem from many causes, hatred always stems from fear. Trump’s followers fear that immigrants will work harder, achieve more, and close the income/wealth/power Gap above them. In short, they fear immigrants because of Gap Psychology.

So Trump gives his haters excuses for their hatred. He tells them immigrants are criminals, rapists, and lazy takers, wishing only to receive free government benefits — all lies. But these lies give his base a “reasonable” rationale for discrimination and for barring immigrants from entry.

Throughout history, many of America’s greatest citizens arrived on our shores penniless, but they were determined to work and make their lives better. In doing so, they made America better.

Here are just ten of the millions of immigrants who would not have been accepted by the Trump regime:

1) Do Won “Don” Chang. Chang grew up in South Korea and moved to California in 1981 with his wife, Jin Sook Chang. He never attended university and worked in coffee shops growing up.

He and his wife, Jin Sook opened a 900-square foot clothing store then named Fashion 21 in 1984 in Highland Park, Los Angeles with only $11,000 in savings.

The store took off, and as they expanded to other locations, the store’s name was changed to Forever 21 otherwise known as XXI. The number of stores grew to 600, with 30,000 employees by 2015.

2) Jordanian native Mufeed Haddad landed in America with only $700, half of which he gave to his brother to buy a car. He was turned down for every job he applied for, even a position flipping burgers at a fast food joint.

The only work he could get was as a paperboy, which meant getting up at 2 a.m. rolling newspapers, and delivering them house to house until dawn.  Ultimately, he founded Liberty Tax Franchise, gross revenue: $34.6 million

3) Andrew Ly Ly fled his native country after the U.S. pulled out of Vietnam in 1975. Ly lived for nine months in a Malaysian refugee camp before getting assistance from the United States Catholic Charity.

Coming to the U.S. in 1979 with just a dollar to his name, Ly settled in San Francisco. He lived for years with eight other family members in a two-bedroom apartment, learning to speak English as he attended classes.

In 1984, Ly and his four brothers pooled their savings to open the Sugar Bowl Bakery. The bakery saw great success and has expanded to a $400 million dollar business, and in 1993 the Ly Brothers Corporation was born. Ly has been recognized as the Bay Area’s “Most Admired CEO” and earned the “Immigrant Heritage Award.”

4) Vinod Dham came to the U.S. in 1975 with $8 in his pocket. He became the CEO of Silicon Spice, which sold for $1.2 billion in 2002.

5) Andrew Grove. During the Hungarian Revolution of 1956, when he was 20, he left his home and family and escaped across the border into Austria. Penniless and barely able to speak English, in 1957 he eventually made his way to the United States.

Grove became Intel’s president in 1979, its CEO in 1987 and its chairman and CEO in 1997. Grove oversaw a 4,500% increase in Intel’s market capitalization from $4 billion to $197 billion, making it the world’s 7th largest company, with 64,000 employees.

6) Jan Koum, co-founder of WhatsApp, arrived in the U.S. when he was just 16 years old, and his family lived on food stamps. In 2014, he entered the Forbes list of the 400 richest Americans at position 62, with an estimated worth of more than $7.5 billion.

7) Irving Berlin Born in Russian hut with a dirt floor, Berlin’s family fled the country after an anti-Jewish pogrom. He entered the country through Ellis Island and lived with his family in a Lower East Side tenement, where he became fascinated by ragtime and saloon music.

He wrote hundreds of songs, many becoming major hits, which made him famous before he turned thirty. During his 60-year career he wrote an estimated 1,500 songs, including the scores for 20 original Broadway shows and 15 original Hollywood films, with his songs nominated eight times for Academy Awards.

Many songs became popular themes and anthems, including “Alexander’s Ragtime Band”, “Easter Parade”, “Puttin’ on the Ritz”, “Cheek to Cheek”, “White Christmas”, “Happy Holiday”, “Anything You Can Do (I Can Do Better)”, and “There’s No Business Like Show Business”.

His Broadway musical and 1943 film This is the Army, with Ronald Reagan, had Kate Smith singing Berlin’s “God Bless America” which was first performed in 1938.[

8) Andrew Carnegie was born in Dunfermline, Scotland, and immigrated to the United States with his parents in 1848 at age 12. When Carnegie was thirteen, his father had fallen on very hard times as a handloom weaver; making matters worse, their country was in starvation.

His mother helped support the family by assisting her brother (a cobbler), and by selling potted meats at her “sweetie shop”, leaving her as the primary breadwinner.

Struggling to make ends meet, the Carnegies then decided to borrow money and move to the United States for the prospect of a better life.

Carnegie started work as a telegrapher, and by the 1860s had investments in railroads, railroad sleeping cars, bridges, and oil derricks. He accumulated further wealth as a bond salesman, raising money for American enterprise in Europe.

He built Pittsburgh’s Carnegie Steel Company, which he sold to J. P. Morgan in 1901 for $303,450,000. It became the U.S. Steel Corporation. After selling Carnegie Steel, he surpassed John D. Rockefeller as the richest American.

9) Artist Willem de Kooning born in the Netherlands, travelled to the United States as a stowaway on a British freighter bound for Argentina, and on August 15 landed at Newport News, Virginia. He stayed at the Dutch Seamen’s Home in Hoboken, New Jersey, and found work as a house-painter.

In 1927 he moved to Manhattan, where he supported himself with jobs in carpentry, house-painting and commercial art.

Some of de Kooning’s paintings have been sold in the 21st century for record prices. In November 2006, the American business magnate David Geffen sold his oil painting Woman III to hedge fund manager Steven A. Cohen for $137.5 million.

A month earlier Cohen had already paid Geffen $63.5 million for Police Gazette by de Kooning. In September 2015, Geffen sold de Kooning’s oil painting Interchange to hedge fund billionaire Ken Griffin for $300 million, the highest price paid for a painting at the time.

10) Thomas Peterffy was born in Hungary. When Hungary became a Russian satellite state, Peterffy and his family lost everything. He immigrated to the U.S. illegally. He had no money and spoke no English. He had a single suitcase, which contained a change of clothes.

By the late 1970s Peterffy had saved $200,000 and founded a company that pioneered electronic stock trades. In the 1990s he founded Interactive Brokers Group. Peterffy, 72, is now worth an estimated $12.6 billion.

Literally millions of people have immigrated to America illegally, and because of their strong urge to succeed, they are among those who have made America great.

None of them would have been able to “prove they had health insurance or the ability to pay for medical costs.” None of them would have made it here if a Trump administration had been in power.

Today, we have no idea how many potential artists, scientists, teachers, athletes, and civic leaders America has lost because of overly restrictive and cruel immigration policies.

How many have been turned away? How many have died in the attempt or been psychologically damaged by the trauma of being caught? How many have been deported? How many have been jailed or otherwise deprived of the ability to achieve greatness, all because of Trump’s appeal to xenophobia?

The danger and difficulty immigrants face shows them to be among the most ambitious, hardworking, and creative people — just the people who really make America great.

These potentially great people lost. America lost. You and I lost. And we never will know how much.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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 relationship between federal deficit spending and GDP growth Wednesday, Oct 30 2019 

Those who do not understand (or who pretend not to understand) economics, repeatedly confuse federal finances with personal finances.

These people decry the size of the federal deficits and debt as being “unsustainable,” which these measures would be if they were personal deficits and debt.

The federal government, being uniquely Monetarily Sovereign, never can run short of its sovereign currency, the U.S. dollar, so the government can “sustain” any size deficit and debt.

  1. Gross Domestic Product is a common measure of the economy
  2. Federal deficit spending adds dollars to the economy.
  3. Economic growth, by formula, requires additional dollar supplies:

GDP = Federal Spending + Non-federal Spending + Net Exports

If the deficit critics were correct, you would expect to see:

  • GDP reduction caused by deficit growth
  • GDP increases caused by deficit reduction
  • Recessions caused by deficit growth
  • Recessions cured by deficit reduction

Yet that is exactly the opposite of what you see.

Image result for great depression

Every depression in U.S. history has been caused by federal debt reduction*

 

*Historically, reduced deficits have caused recessions and even depressions. Increased deficit spending is necessary to cure recessions and depressions.

The following graph compares the annual federal debt percentage changes (red line) which reflect deficits, vs. GDP percentage changes (blue line). The vertical bars are recessions.

What you do see is:

    • Reduced debt growth leads to recessions
    • Increased debt growth cures recessions
    • Increased debt growth leads to increased GDP growth

For clarity, let’s examine individual segments of the above graph:

Prior to 1974, federal deficits rose then fell, pulling GDP along with them. This reduced deficit spending precipitated the recession of 1974, which was cured by increased deficit growth through 1976.

The increased deficit growth precipitated increased GDP growth, with momentum carrying GDP through 1979, when it too began to fall.

……………………………………………………………………………………………………………………………………………………..

As a result of the long period of falling deficit growth, even the short upturn in the last quarter of 1979 could not save the economy, and the falling momentum of GDP resulted in the recession of 1980.

The increased deficit growth cured the recession, which ended in the 3rd quarter of 1980, when GDP turned up, and continued to be pulled up by more deficit growth.

……………………………………………………………………………………………………………………………………………………..

Continued, increasing deficit growth pulled GDP up, and even when deficit growth declined, in 1981, momentum pulled GDP upward.

……………………………………………………………………………………………………………………………………………………..

Yet again, you see that familiar pattern. Declining deficits lead to the recession of 1981, which growing deficit cure by the end of 1982.

Increasing deficits pull GDP upward, and even when deficit increases end in the 2nd Qtr of 1983, momentum continues to carry GDP upward.

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The enormous deficits of 1983 force powerful GDP growth momentum, which reverses as deficit growth continues to decline.

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And there again, the familiar pattern: Reduced deficit growth forcing down GDP growth, and even a short period of deficit growth increase cannot forestall the recession of 1990-1991.

And again, increased deficit growth cures the recession and turns GDP growth upward.

……………………………………………………………………………………………………………………………………………………..

As always, the predictable pattern:

  1. First, deficit growth pulls us out of a recession and forces GDP growth upward.
  2. Then, deficit growth tops out, but momentum carries GPD grow along for several years.
  3. Finally, GDP momentum yields to decreased deficit growth. (This time, we actually ran a federal federal surplus, which normally would cause a full-fledged depression. However, we were “fortunate,” and “only” suffered the recession of 2001.
  4. Then, as always, it took increased federal deficit spending to pull us out of the recession in 2002.

……………………………………………………………………………………………………………………………………………………..

And here we go again: Massive deficit spending pulls us out of a recession; after escaping that disaster we begin again to cut deficit growth, then (in mid-2007) to increase deficit growth; but it’s too late, and we enter yet another recession; this one is the “Great Recession” of 2008.

……………………………………………………………………………………………………………………………………………………..

Now here we are, today. Huge deficit growth, having cured the recession, we continue not only those big deficits, but even grow them, first at 30% annually, finally leveling off at about 5% annual deficit growth — a big number, considering the size of the deficit.

This has caused GDP to average a robust average of about 4% annual growth.

……………………………………………………………………………………………………………………………………………………..

Despite all the incontrovertible data, the next time you open your newspaper, or watch you local federal finance TV “expert,” you will be told that the federal debt and/or deficit are (oh, horrors) at record highs, and are “unsustainable,” or a “ticking time bomb.”

It’s no coincidence that GDP is a record highs, too. Federal deficit spending lifted it there.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The most important problems in economics involve:

  1. Monetary Sovereignty describes money creation and destruction.
  2. 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

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