Fake federal trust funds and fake concerns

It takes only two things to keep people in chains:
The ignorance of the oppressed and the treachery of their leaders

The Peter G. Peterson Foundation is a self-described “nonpartisan” mouthpiece for the right wing.

Image result for pete peterson — Peter Peterson

Its “nonpartisan” leanings include advocating:

cuts to federal support for Social Security
cuts to federal support for Medicare
increases to Social Security and Medicare taxes (FICA).
increases to taxes on the middle-income groups.
cuts to taxes for the rich
cuts to the federal deficit spending that grows the economy

The Foundation continually publishes articles that falsely claim our Monetarily Sovereign nation somehow can run short of its own sovereign currency, and thus, Social Security, Medicare, and other federal “trust funds” are running short of dollars — all untrue.

It is 100% impossible for a Monetarily Sovereign entity to run short of its own sovereign currency. Similarly, it is 100% impossible for any agency of a Monetarily Sovereign entity to run short of the sovereign currency, unless that is what the entity wants.

Neither the U.S., nor Social Security, can run short of U.S. dollars, unless that is what Congress wants. Period.

So it was with amazement that I read these excerpts from an article published by the Peterson Foundation:

WHAT ARE FEDERAL TRUST FUNDS?
Sep 20, 2016, Peter G. Peterson Foundation

A federal trust fund is an accounting mechanism used by the federal government to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.

The largest and best-known funds finance Social Security, Medicare, highways and mass transit, and pensions for government employees.

Federal trust funds bear little resemblance to their private-sector counterparts.

In private-sector trust funds, receipts are deposited and assets are held and invested by trustees on behalf of the stated beneficiaries.

In federal trust funds, the federal government does not set aside the receipts or invest them in private assets.

Rather, the receipts are recorded as accounting credits in the trust funds, and the receipts themselves are comingled with other receipts that Treasury collects and spends.

This is all correct. Federal so-called “trust funds” are nothing like state and local government trust funds and nothing like private trust funds.

All private sector financing is constrained by one simple fact: The private sector is monetarily non-sovereign.

It does not have the unlimited ability to create its own sovereign currency, for the simple fact that it has no sovereign currency.

The U.S. private sector (which includes state and local governments) uses the sovereign currency of the federal government.

And then, having admitted that federal “trust fund” receipts are comingled with other Treasury receipts, the article promptly forgets what it said:

Further, the federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and raise or lower collections and expenditures.

No need to raise or lower collections. The correct statement would be:

The federal government owns the accounts and can, by changing the law, unilaterally alter the purposes of the accounts and/or provide additional funding.

In the late 1770s, the federal government created the original U.S. dollars from nothing, and today it continues to create dollars at will.

Neither the federal government nor the misnamed “Social Security Trust Fund” (or any other federal trust fund) can run short of dollars unless Congress wants it to.

The Peterson Foundation, and far too many others, including those in the federal government, have been pretending that to save Social Security taxes must be increased or spending must be cut. It simply is not true.

The article continues:

What happens when a federal trust fund runs a deficit?
Treasury must finance trust fund interest payments and the redemption of trust fund securities through additional borrowing from the public (unless policymakers raise taxes or cut spending).

The above is wrong. Not only is it wrong about the supposed need for raising taxes and cutting spending, but it also is wrong about borrowing.

Unlike you and me and all other monetarily non-sovereign entities, our Monetarily Sovereign federal government creates unlimited dollars ad hoc, by paying creditors.

Thus, the federal government has no need for any kind of income. It has no need for tax income. It has no need to cut spending. And it has no need for borrowing.

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.”

Thomas Edison: “If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. . . . It is absurd to say our Country can issue bonds and cannot issue currency.”

The federal government has several trust funds. The three most important trust funds are for Social Security, Medicare, and transportation projects.

Social Security Trust Funds
In 2034, unless reforms are enacted, the Social Security trust funds are projected to be fully exhausted. At that point, Social Security’s receipts will only be sufficient to cover 79 percent of benefits.

Benefits will then have to be cut by 21 percent to continue making payments to all beneficiaries.

Wrong.

As the article previously said, Social Security “receipts are comingled with other receipts that Treasury collects and spends.

This means the receipts cannot be “sufficient” to cover anything.

The dollars, once received by the Treasury and comingled, disappear from any money supply measure.

They effectively are destroyed upon receipt.

Asking how many dollars the Treasury has is akin to asking how many sentences you have. The Treasury creates its dollars as needed, and you create your sentences as needed.

Just as the Treasury is Monetarily Sovereign, you are “sentence sovereign.” You never have to ask anyone — via taxing or borrowing — for sentences, and you never can run short.

The Social Security Disability program is in worse condition. Its trust fund will be depleted in 2023, and unless its finances are addressed, its benefits will be cut by 11 percent.

The Social Security Disability benefits will be cut only if Congress wants them to be cut.

Medicare Trust Fund
In the Medicare program, payroll taxes are credited to the Medicare Hospital Insurance (HI) fund and premiums paid by Medicare beneficiaries are credited directly to Medicare’s Supplemental Medical Insurance (SMI) fund.

Unless reforms are enacted, Medicare’s Hospital Insurance Trust Fund is expected to be exhausted in 2028, which will precipitate a 13 percent cut in its payments to hospitals and other providers.

The SMI fund cannot be depleted — each year, general revenue contributions are set to cover whatever costs remain after beneficiary premiums are taken into account.

Wait! What?!

“The SMI fund cannot be depleted — each year, general revenue contributions cover whatever costs remain after beneficiary premiums are taken into account.”

SMI, which pays for Part B and Part D benefits, is funded by Congress. It doesn’t rely on a fake “trust fund.” Congress directly authorizes what funds are needed.

So you have the ridiculous situation in which, Medicare Part A supposedly runs short of funds, but Medicare Parts B and D do not. And you are expected to believe this??

Ask your Senator or Representative why all of Medicare and Social Security cannot be handled like SMI, with the federal government simply paying expenses.

That approach would end all talk of trust funds supposedly running short of dollars.

Highway Trust Fund
The Highway Trust Fund will be depleted by 2021. In this fund, taxes on gasoline and diesel fuel are credited directly to the Highway Trust Fund, but the fund’s income falls short of its spending.

This situation has already precipitated a slowdown of highway and other surface transportation projects as states prepare for a shortfall in federal funding.

The same fraudulent situation as with other phony federal “trust funds.” The result: Either infrastructure projects are delayed, not done at all, or are passed to the monetarily non-sovereign state and local governments.

Does it get any more outrageous than this? A Monetarily Sovereign government, which has an unlimited supply of dollars, claims poverty and passes spending responsibility to monetarily non-sovereign state and local governments, which are limited in their spending ability.

The article ends with these truths:

How do trust funds affect the overall budget?
Although many believe that the existence of trust funds guarantees the sustainability of programs in the future, trust funds are simply accounting mechanisms that are part of the way the federal government keeps its books.

The actual cash inflows and outflows of the programs are combined with all other federal programs and therefore contribute to federal surpluses and deficits.

If a program is in surplus, the federal government’s overall deficit balance improves because it uses the additional receipts from the program to fund costs of other programs.

In effect, the government is conducting transactions with itself but keeping track of inflows and outflows of funds through trust funds.

Ultimately, trust fund income and outlays are not separate from the rest of the federal budget, and the sustainability of trust fund programs, like Social Security, depends on the overall sustainability of the federal government.

That last sentence completely destroys any notion that the fake Social Security “trust fund” is running short of dollars and so, taxes must be increased and/or benefits decreased.

The U.S. federal government can “sustain” (i.e. pay for) any amount of expenses because it has the unlimited ability to create dollars. It never can run short.

Unlike you and me, and the states, and businesses, and the euro nations, the U.S government is Monetarily Sovereign.

Remember this whenever you hear that Social Security, Medicare and any other federal program will run short of money or become “insolvent.”

It is a lie designed by the very rich, to make you believe you must settle for fewer federal benefits or higher taxes.

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

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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

MONETARY SOVEREIGNTY

That horrible, terrible, frightening trade deficit

It takes only two things to keep people in chains:

The ignorance of the oppressed
And the treachery of their leaders

================================================================================

Ooooh, that horrible, terrible, frightening monster trade deficit; it scares everyone, especially our President. Image result for scary monster

Here are excerpts from a recent article in Forbes Magazine:

Total debt for the five largest U.S. banks have grown by 4.3% over the last twelve months – above the industry-wide growth figure of under 4%.

This is a large increase by these banking giants, given their massive debt base which averaged more than $5.3 trillion in Q3 2017.

This represents a share of more than 40% of the $13.2 trillion U.S. debt market, and this figure is likely to trend even higher.

Sounds frightening, doesn’t it? Our largest banks have gone into debt by an additional 4.3%. Time to pull your money out?

Well, I didn’t lie, but I misled. The actual article read:

Total deposits for the five largest U.S. banks have grown by 4.3% over the last twelve months – above the industry-wide growth figure of under 4%.

This is a commendable feat by these banking giants, given their massive deposit base which averaged more than $5.3 trillion in Q3 2017.

This represents a share of more than 40% of the $13.2 trillion U.S. deposit market, and this figure is likely to trend even higher as the largest banks continue to outperform the overall industry.

In the banking world, deposits are bank debt. And though you never hear any bank boasting about the size of its debt, banks often boast about the size of their deposits.

I told you this little story to demonstrate how deceptive the word “debt” can be, depending on circumstances.

Well, there is another word that can be equally deceptive and that is the word “deficit,” especially when used in the phrase “trade deficit.”

U.S. trade deficit falls in April, but still up for year
The U.S. trade deficit with China grew 8.1 percent in April, though it fell slightly overall. (Julie Jacobson/AP ) By Paul Wiseman Associated Press

WASHINGTON — Record exports shaved the U.S. trade deficit in April for the second straight month. But so far this year, the deficit is up 11.5 percent from a year ago despite President Donald Trump’s vow to close the gap through new tariffs on imports and renegotiated trade deals.

The president has proposed tariffs on up to $150 billion in Chinese imports. The Chinese have targeted $50 billion in U.S. products in retaliation.

Talks to head off a trade war between the world’s two largest economies have so far failed to produce a resolution even though China has offered to step up purchases of U.S. farm and energy products.

Trump is also trying to renegotiate the North American Free Trade Agreement with Canada and Mexico. The administration is also taxing imports of steel and aluminum.

The president views trade deficits as a sign of economic weakness that can be brought down by more aggressive trade policies.

What exactly is a trade “deficit” and why does President Trump worry about it?

You should know the answer. Every time you go to your local store, or buy something online, you run a “trade deficit,” which is nothing more than buying more than you sell.

Running a trade deficit is no problem for you, so long as you have sufficient income to pay for what you buy.

And running a trade deficit is no problem for the U.S. Because it is Monetarily Sovereign, it has the unlimited ability to pay for goods and services. The U.S. government never can run short of dollars.

Blue line is Gross Domestic Product. Red line is the amount of the trade deficit. Not only is the trade deficit a *tiny fraction of GDP*, but we have one almost *every year*, with no measurable negative effect on GDP growth.

Most economists say trade deficits are caused by bigger economic forces, mainly the fact that the United States consistently spends more than it produces.

The trade gap has continued to rise since Trump entered the White House partly because the U.S. economy is strong and American consumers have an appetite for imported products and the confidence and financial wherewithal to buy them.

The whole concept of a trade deficit is silly at best and deceptive in reality:

If you and another person exchanged items of equal value, which of you has run a trade “deficit”? Or said another way: If you give someone a dollar, and he gives you something worth a dollar, which of you has run a deficit?

Take it a step further: Imagine you own a machine that can print infinite dollars and you grab a big boxful of those dollars and exchange them with a foreigner for a car.

The foreigner gives you a car — something that cost him time, labor, and valuable materials to produce — and you give the foreigner some dollars, of which you have an infinite supply and which cost you nothing to produce.

Who received the better deal, you or the foreigner? Would you look up that exchange as a “deficit”?

I have just described the U.S. trade “deficit.” Dollars are free to the U.S. government, and in exchange for those free dollars, we receive valuable assets. Yet Trump and many others fret about the U.S. trade “deficits.”

If Illinois runs a trade deficit, that might worrisome. Illinois does not own that money-printing machine. It cannot create infinite income the way the federal government can. It must rely on other income sources, notably taxes. The same is true for Cook County and for Chicago.

And you, too. You must have sufficient income, either from earnings, gifts, or borrowing, to pay for goods and services. But the federal government needs none of these.

Being Monetarily Sovereign it merely creates dollars by pressing computer keys.

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.”

So tell me, again, Mr. President, since “trade deficit” means the U.S. exchanges dollars it produces at no cost, for valuable goods and services, why are you concerned? Isn’t a trade deficit the greatest benefit imaginable?

Getting much more value than we give — that’s not a deficit. If anything, it’s a surplus.

What traditionally has been misnamed a “trade deficit,” more properly should be called a “trade surplus,” when referring to the Monetarily Sovereign U.S. government.

Then, everyone could stop wringing their hands in worry.

“Debt” and “deficit” are the most misused and misunderstood words in all of economics, when applied to our Monetarily Sovereign government.

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

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

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

MONETARY SOVEREIGNTY

Why the Democrats need new leadership

It takes only two things to keep people in chains:

The Democrats have sold their progressive soul to the devil.

The ignorance of the oppressed
And the treachery of their leaders

==========================================================================
The Dems truly are hopeless. They will manage to blow the next election, though they have everything going for them:

*An incompetent, criminal President plus an incompetent, criminal cabinet.
*An anti-middle-income, anti-low-income, pro-rich party.
*Tax increases on imports.
*A new Trump/GOP scandal daily.
*White House lies daily.
*Broken promises daily.
*The vast majority of media opposed to the Trump agenda.
*Making enemies of our allies
*Pro-bigotry
*Immoral treatment of immigrants, especially immigrant children.
*Progressivism is more popular than conservatism

Yet the boobs running the Democratic party — the Pelosi/ Durbin/ Schumer bunch — are doing everything in their power to become conservatives, even to the point of denouncing anything or anyone progressive (See Bernie Sanders).

Consider this: Want to win the working-class vote? Try progressive economic policies, Democrats

Dem leaders embrace pay-go
By Mike Lillis – 06/06/18

House Minority Leader Nancy Pelosi (Calif.) and other top Democrats are vowing to abide by fiscally hawkish pay-as-you-go rules if they seize the majority next year, rejecting calls from liberals who feel they’d be an impediment to big legislative gains.

Pelosi, who adopted “pay-go” rules when she held the Speaker’s gavel more than a decade ago, says she’ll push to do it again if the Democrats win the House in November’s midterm elections.

“Democrats are committed to pay-as-you-go,” Pelosi spokesman Drew Hammill said Tuesday, affirming the policy would be a 2019 priority.

“Pay-go” is the other name for a balanced budget, the process by which the federal government does not create any new dollars.

This forces the money supply to remain the same, which precludes economic growth, and absolutely, positively guarantees a depression.

Deficit reduction is harmful and unnecessary: Alan Greenspan said it. Ben Bernanke said it. The St. Louis Fed said it. Even Thomas Edison said it.

Rep. Steny Hoyer (D-Md.), the minority whip, is also endorsing the notion that a Democratic majority should adopt the budget-neutral rules next year.

“The pay-go rule is a good rule and we ought to reinstitute it,” Hoyer told The Hill last week.

No, it is not a good rule. It is not even a bad rule. It is the most stupid, disaster of a rule that our worst enemies would wish on us.

Yet the idea is already prompting howls from some liberals in the caucus, who want to pursue an ambitious legislative agenda next year — including costly, big-ticket items such as expanding health-care access, subsidizing education opportunities and boosting infrastructure projects — and fear pay-go might be too confining.

Rep. Raúl Grijalva (D-Ariz.), who heads the Congressional Progressive Caucus (CPC), said the Democrats would be foolish to adopt the fiscal restraints, especially in light of the Republicans’ newly adopted tax-reform law, which is estimated to add almost $2 trillion to the debt over the next decade.

“The pay-go thing is an absurd idea now given the times and given what’s already been done to curry favor with corporate America,” Grijalva said.

What? There actually is an intelligent Democrat in Congress? Hard to believe.

Even the Trump Republicans were smart enough to understand that a Monetarily Sovereign government (a government with the unlimited power to create its sovereign currency) must run deficits (create money) in order to grow.

What happens when our government restricts deficit spending?

The vertical gray lines signify recessions. What happens leading up to recessions? Right. Deficit growth is reduced. Seven consecutive recessions preceded by reductions in deficit growth.

And how did we cure recessions? Right. By increasing deficit growth. Worked every time.

Attention Democrats: Any lessons to be learned?

Politically, Republicans will surely bash the Democrats if they pursue expensive government programs without offsets.

But the GOP under President Trump has lost the fiscal high ground, having busted budgets themselves, particularly with the enactment of their tax-reform law. The Congressional Budget Office predicts the annual deficit will top $1 trillion by 2020.

Even the author of this article, Mike Lillis, calls deficit reduction (i.e. starving the economy of dollars) “fiscal high ground.” Does it get more ignorant than that?

Grijalva noted that the revenue losses created by the tax law are already squeezing federal programs favored by Democrats. Adopting pay-go rules on top of that, he argued, would only pinch them further.

“It would be, I think, irresponsible to try to tie up Congress’s ability to respond to economic downturns or, in the current discussion, to slash programs,” he said. “We’re going down a path that I think helped cause the Great Recession.”

Is Grijalva the only intelligent, informed person in Congress? Seems like.

Anyway, this is why Pelosi et al should leave, now:

The liberal position could create a headache for Pelosi and other party leaders, who have hammered the Republicans for being reckless with the budget and want to portray themselves as the more fiscally responsible party.

“We all have responsibility for reducing the debt for our children,” Pelosi said last month at a forum hosted by the Peter G. Peterson Foundation, which advocates for reducing the national debt.

“Democrats believe that you must pay as you go. Whatever you want to invest in, you must offset.”

Pelosi has zero — make that ZERO — understanding of Monetary Sovereignty and the differences between federal financing vs. state/local government financing.

Pelosi claims there is some magic by which the economy can grow without the money supply growing.

The Republican critics of the strategy argue that pay-go, by the Democrats’ design, is too weak to be effective, since it hasn’t applied to some of the biggest federal cost drivers, including Social Security.

Yes, there is nothing the GOP, the party of the rich, would like better than to cut social programs like Social Security, Medicare, Medicaid, Obamacare, etc.

After all, these programs just benefit the poor and the middle, and do little to benefit the rich.

See if you can discern any difference between the Pelosi position and the ravings of the ultra-right-wing CRFB (Committee for a Responsible Federal Budget):

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

“The Committee for a Responsible Federal Budget strongly supports calls from House Democratic Leadership to restore PAYGO rules and also urges policymakers to strengthen and closely abide by PAYGO.

“The idea that new spending or tax cuts should be offset is basic to budgeting. If Congress had followed PAYGO principles over the past year rather than debt-financing tax cuts and spending hikes, deficits wouldn’t be approaching the trillion-dollar mark next year.

“Ultimately, lawmakers are going to have to enact significant spending reductions and revenue increases to fix the debt. In the meantime, we should all agree to at least stop the digging and not make the situation worse.”

Let me rephrase her comments for clarity and honesty. She means:

“If the government had followed PAYGO, the money supply would not have increased, the economy would not have grown, and we could have cut spending for Social Security, Medicare, Medicaid, Obamacare, the military, infrastructure repairs and improvements, medical research and development, aids to education, poverty aids, and every other federal initiative that has built America.

“In this way, we can increase tax cuts to the rich, who after all, are the people who give us those nice, juicy campaign contributions.

“We know that federal debt is nothing like personal debt, in that unlike you, the federal government is Monetarily Sovereign, so it creates its sovereign currency at will.

“We also know that every time we cut deficit spending, we have a recession or a depression, like this:

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

“We know it, but we don’t want you to know it, because we are paid by the rich to lie to you.”

There, that’s the truth, finally.

And yet:

US primary elections in eight states confirm rightward shift by Democratic Party (By Patrick Martin)

No one knows what the Democrats stand for. Both parties take money from the rich.

The Democrats need new leadership, because the current leadership has sold its progressive soul to the devil.

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

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

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

MONETARY SOVEREIGNTY

Are you paying for Trump’s tariffs?

It takes only two things to keep people in chains:

The ignorance of the oppressed
And the treachery of their leaders

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A May 31, 2018, CNN headline began: “Trump hits allies with metal tariffs.“

Why should you care? Aside from the fact that the headline claims we are hitting our own allies, with Trump as president, we really don’t have allies anymore, do we?

And the rest of the headline is: “Mexico, EU, and Canada vow to retaliate.” Well, that “retaliate” word doesn’t sound very good. It sounds like war.

But Trump has assured you that, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.“

Thus, you are faced with four questions:

Are you actually paying for Trump’s tariffs?
Do tariffs help domestic industries grow?
Is the U.S. losing many billions of dollars on trade?
Are trade wars good and easy to win?

The CNN article tells us:

President Trump is imposing steep tariffs on steel and aluminum from three of America’s biggest trading partners — Canada, Mexico and the European Union.

The trade penalties, 25% on imported steel and 10% on imported aluminum, take effect at midnight, Commerce Secretary Wilbur Ross told reporters Thursday.

Who will pay for those tariffs? It’s a trade war, and in any war, you assume your government is shooting at the enemy.

In this case, the “enemy” is Canada, Mexico, and the European Union.

Image result for backwards shooting gun — Shoot at your own people

So you may assume that Canada, Mexico, and the EU will pay those tariffs, right? Wrong.

Are you actually paying for Trump’s tariffs?
A trade war is not like any war you ever have known.

In a trade war, your government shoots at you, because it is you who pays the tariffs. Canada, Mexico, and the EU will not pay one cent.

When the imported products arrive in America, they arrive with their usual price.

Then the U.S. government adds a tariff to that price, and that increased price is what you pay.

Steel and aluminum are used widely: Cars, planes, appliances of every type. Are you thinking of buying a car, house, a refrigerator, a TV, a computer, a phone, any canned good?

Even your gas and oil will cost more because the oil industry and energy utilities use steel and aluminum extensively.

Steel and aluminum prices affect almost every product and service you buy, so prepare to pay more here, more there, more everywhere.

2. Do tariffs help domestic industries?
Existing American factories cannot supply U.S. needs. So new factories would have to be built and/or old factories be re-opened.

But consider the realities. Trump changes his mind, minute-by-minute. Would you invest millions or billions of dollars, and years of effort, to build a new factory, or to re-open old ones, when tomorrow Trump might decide that, “No, there won’t be tariff increases”?

At best, current factories might be able to ramp up production somewhat, which will increase profits but have a negligible effect on employment. More likely, they simply will raise prices, because they won’t have to compete with foreigners.

Meanwhile, U.S. manufacturers who use aluminum and steel will have to keep importing and paying the duties. That will require them to cut profits or raise prices, both of which will negatively affect Americans.

Even if an American manufacturer buys from domestic steel mills or aluminum smelters, those companies would raise their prices because they wouldn’t have to worry about competition from low-priced imports.

Under any circumstances, you would pay more, while the federal government takes dollars out of the private sector. No matter what happens, there would be scant benefit from a trade war and substantial punishment to the American economy.

3. Is the U.S. losing many billions of dollars on trade?
When Trump says “the U.S. is losing many billions of dollars on trade,” he means the U.S. is running a “trade deficit.” But a trade deficit is not the same as “losing” dollars.

Related image — **The man receives money; the woman receives food. The woman is running a “trade deficit,” but neither one is “losing.”**

When you shop at your local grocery store, you give them dollars and they give you goods and services.

In reality, you run a trade deficit with that store, but do you consider that to be “losing money”?

When you buy shoes that were made China, you run a trade deficit with China, but are you “losing money”?

Would you prefer not to run a trade deficit with your grocery store, and instead grow or manufacture all your groceries, yourself?

The vast majority of Americans would answer “No,” to both questions. We buy from foreign nations because the things we buy there either are better or cheaper, or both.

It benefits us to buy better and cheaper goods and services.

Further, when dollars flow out of the U.S., this is no problem for our Monetarily Sovereign government, which has the unlimited ability to create dollars.

Sending dollars to Canada, Mexico, the EU, China, et al, does not make the U.S. even one cent poorer. It merely strengthens the dollar’s position as the world’s go-to currency.

That is why, for many years, the U.S. has been able to run billions of dollars in trade deficits, with no adverse effect on our economy. In fact, our economy has grown massively.

Being Monetarily Sovereign, we can continue to run trade deficits forever, and the only result will be that we will receive better, and/or less expensive, products and services than we can produce domestically.

4. Are trade wars good and easy to win?
For the U.S., a trade war is stupid. There is no better way to say it. Stupid.

The Democrats know it. The Republicans know it. Our foreign friends know it. Our foreign enemies know it. The vast majority of economists knows it. Only Trump seems not to know it.

He likes conflict, especially when he can bully others, so he has begun an “I-can-cut-off-America’s-nose-faster-than-you-can” trade war.

Contrary to Trump’s statement, trade wars are not good, and no one wins.

Imagine, for instance, that Trump “triumphs” over China, and China agrees to reduce its deficit with the U.S. It can accomplish this in two ways: It can sell less to us and/or it can buy more from us.

If it sells less to us, we either will have to buy elsewhere (which makes no change in our trade deficit) or we can make the goods ourselves. But if we were able to make those goods better, or at a better price, we already would be doing so.

We either will have to settle for higher prices or for lower quality.

If China buys more from us, that means China will send us more dollars than it previously had.

But the U.S. does not need more dollars from China. Being Monetarily Sovereign, we already can create unlimited dollars.

The irony is that the GOP wants China to send us more dollars by purchasing goods and services, but does not want China to send us more dollars by “lending dollars” to us.

The GOP worries about the federal “debt” to China, which is nothing more than China converting yuan to dollars, then depositing those dollars into U.S. Treasury-security accounts.

If China were to increase its purchases from us, that would increase the U.S. dollar supply in the same way that federal deficit spending does. But the GOP worries (wrongly, as it turns out) about increases in the U.S. dollar supply causing inflation.

So, in actual effect, the Trump/GOP debt hawks support the same thing they oppose: An increase in the U.S. money supply.

In summary:

1. Trump’s tariffs will cost you money.
2. Trump’s tariffs will not help domestic employment or businesses.
3. The U.S. is running a trade deficit, but it is not “losing many billions of dollars on trade.”
4. Trade wars not good and not easy to win. No one wins a trade war.
5. In the unlikely event a trade war is “successful,” i.e. adds dollars to the U.S. economy, it does nothing the federal government can’t do without costing Americans higher prices and a poorer selection of products.

After failing to destroy health care for the poor and middle income groups, and failing to make Mexico pay for his wall, Trump is desperate to claim an accomplishment that people care about.

Unfortunately, all he will accomplish is inflation, a poorer availability of products, and job loss.

Now you understand why American banks no longer will deal with Donald Trump, and before he became president, he and his family were forced to go overseas for business funds. He is not trusted by anyone.

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

The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

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

MONETARY SOVEREIGNTY

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