The federal government has more than a thousand departments and agencies, including The White House, the House of Representatives, the Senate, the Supreme Court, the Central Intelligence Agency (CIA), Medicare (CMS), and the Social Security Administration (SSA).
Contrary to popular myth, all federal agencies and departments are funded in precisely the same way: Congress votes, and dollars are created from thin air.
A few agencies are associated with so-called “trust funds.” According to the Peter G. Peterson Foundation:
A federal trust fund is an accounting mechanism the federal government uses to track earmarked receipts (money designated for a specific purpose or program) and corresponding expenditures.
The largest and best-known trust funds finance Social Security, portions of Medicare, highways and mass transit, and pensions for government employees.
Federal trust funds bear little resemblance to private-sector counterparts; therefore, the name can be misleading.
A “trust fund” implies a secure source of funding. However, a federal trust fund is simply an accounting mechanism that tracks inflows and outflows for specific programs.
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.
Instead, the receipts are recorded as accounting credits in the trust funds and combined with other receipts that the Treasury collects and spends.
Further, the federal government owns the accounts and can, by changing the law, unilaterally alter their purposes and raise or lower collections and expenditures.
Read that last sentence carefully, for it is the heart of this discussion. It consists of three truths:
The federal government owns the accounts
The government can change the law and unilaterally change the purposes of the accounts.
The government unilaterally can raise or lower collections and expenditures.
This all adds up to a powerful but little-understood fact. The so-called federal “trust funds” operate entirely at the whim of Congress and the President.
These “trust funds were created and operated according to the laws the Congress and the President control. By adjusting laws, Congress and the President can determine how much money each “trust fund” collects, has, and spends.
Congress and the President arbitrarily can decide that any trust fund has $1, or $1 trillion, or $1,000 trillion, merely by passing laws. There is no limit to what laws Congress and the President pass, nor what those laws say regarding money in the “trust funds.”
Keep this total control in mind as you read excerpts from this article, also by the Peter G. Peterson Foundation:
SOCIAL SECURITY REFORM: SHOULD WE RAISE THE RETIREMENT AGE?In their 2022 Annual Report, the Social Security trustees estimate that the program’s primary trust fund — Old Age and Survivors Insurance (OASI) — will spend more on payments to beneficiaries than it collects yearly until it is depleted in 2034.
Driving that impending depletion are the dual demographic trends of retiring baby boomers and lengthening life expectancies, which together have placed considerable strain on Social Security’s finances.
A balanced approach that combined components from each option would likely provide the fairest, most lasting, and least painful adjustment for the future.
Translation: The primary “trust fund” will spend more than it collects –according to current law, which Congress and the President can change at will, but the only law changes being considered are:
Higher taxes
Raising the retirement age, and
Reduced dollar benefits
But here is another, even better approach: Congress and the President should simply vote to give Social Security more money, precisely as they do for the other thousand federal departments and agencies.
There is no need to increase taxes. In fact, FICA should be eliminated. It is unnecessary and a double tax in that it is not deductible, but part of Social Security is taxed. It also punishes lower-income people.
There also is no need to raise the retirement age. Social Security payments can and should be given to every man, woman, and child in America,
Finally, there is no need to reduce dollar benefits. We should even end the faux “trust funds” and simply pay for Social Security the same way the federal government pays for nearly all of its other agencies: By recreating dollars from thin air.
The U.S. federal government is Monetarily Sovereign.It cannot run short of its own sovereign currency.
To pay for your Social Security benefits, the federal government sends instructions (in the form of a wire or check) to your bank or you, instructing your bank to increase the dollar balance in your checking account.
When your bank does as instructed, the balance in your account increases, creating new dollars and adding them to the M2 money supply measure, growing the economy.
Sending instructions to banks is the primary way the federal government creates dollars. The federal government, being Monetarily Sovereign, has the infinite ability to send and clear instructions, thus, the endless ability to create dollars.
(By contrast, everyone who writes a check or sends a wire can sendinstructions but not clear them. Checks that don’t clear are said to “bounce.”)
Your bank then clears the transaction through the Federal Reserve, another federal agency. Thus, the federal government clears its own money-creation transactions, giving it the infinite power to create dollars.
The government also has the infinite power to change Social Security laws, as demonstrated by the 12 benefit changes shown in this chart.
More than half of all Social Security recipients take benefits before the official retirement age when benefits are reduced.
This demonstrates an early need for benefits by those in lower-income groups.
WHAT EFFECT COULD RAISING THE FULL RETIREMENT AGE HAVE ON SOCIAL SECURITY’S LONG-TERM SOLVENCY?Given that more retirees are beginning to collect Social Security benefits earlier in their retirement and that overall life expectancy continues to increase, many policymakers have called for a modification to the program, wherein the full retirement age is gradually raised and ultimately pegged to average life expectancy.
According to an analysis from the Committee for a Responsible Federal Budget (CRFB), gradually increasing the full retirement age by two months per year until it reaches 69 and then indexing it for changes in overall life expectancywould save $90 billion over 10 years,but much more in future decades; CRFB estimates that the change would close over half of the structural mismatch between Social Security’s revenues and spending in the long run.
The above two paragraphs indicate ignorance of the difference between Monetary Sovereignty and monetary non-sovereignty.
If Social Security were private insurance (i.e., monetarily non-sovereign), pegging benefits to life expectancy would be appropriate, even necessary. However, there are zero reasons for the federal government to do this.
There is no fiscal reason why the federal government should try to extract $90 billion from the private sector. If one wishes to grow the U.S. economy, it is the worst possible course of action.
This is what happens when the federal government “closes the mismatch between revenues and spending“(i.e., runs a surplus). Federal surpluses extract dollars from the economy, causing depression or recessions:
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.
Even without surpluses, just reducing federal deficits leads to recessions:
Reduced federal deficits (red line) lead to recessions (vertical gray bars). Recessions are cured by increased federal deficits.
Economic growth requires the federal government to spend more dollars into the economy than it extracts via taxes and fees (i.e., run deficits). Without federal deficits, we have depressions and recessions.
As federal deficits (spending and taxes) increase, the Gross Domestic Product increases—and that includes real (inflation-adjusted) Gross Domestic Product.
Those who argue against federal deficit spending may admit it grows the economy but sometimes claim it causes inflation. However, as the above graph indicates, the economy grows, even when adjusted for inflation.
All evidence indicates that inflation is caused not by federal spending but by scarcities of critical goods and services.
Inflation usually is cured by federal spending to obtain and distribute the scarcities that caused the inflation.
Federal taxes reduce non-federal spending (mostly private sector spending). Thus, no matter how one calculates it, increasing FICA and/or decreasing Social Security benefits will reduce economic growth.
And it’s all unnecessary; the federal government has infinite money. It cannot become insolvent.
Not understanding the differences between a Monetarily Sovereign government and the monetarily non-sovereign state/local governments, businesses and individuals is the single most significant cause of economic misery and self-defeating government spending decisions.
In summary, if the White House, Congress, the Supreme Court, and hundreds of other federal agencies and departments are financially sustainable, so is Social Security and Medicare. There is no need for benefit cuts. There is no need for FICA tax increases. There is no need for FICA at all.
The federal government can provide all its agencies and departments with every dollar they need at the touch of a computer key.
Why Don’t They?
Question: If the government can fund all its agencies and departments without taxes, why doesn’t it just do it?
Answer: The very rich, who run the government, want you to believe the government can’t afford to give you benefits.
“Rich” is a comparative term. A person having $1,000 would be rich if everyone else had only $100. But that person would be poor if everyone else had $10,000.
You can grow richer if the income/wealth/power Gapbelow you widens and the Gap above you narrows. So, one major goal of the rich is to narrow the Gap below them, which requires limiting the benefits you receive from the government.
To keep you from screaming about that, the rich bribe your sources of information — the media, the politicians, and the university economists — to convince you of the Big Liethat federal spending is funded by federal taxes.
It’s a Big Lie because the federal government, being Monetarily Sovereign, creates all the money it uses. The only true purposes of federal taxes are to:
Control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward and
Assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
That’s it. Federal taxes don’t fund anything. In fact, your precious tax dollars are destroyed the moment they are received by the U.S. Treasury.
You pay with dollars that are part of the M2 money-supply measure. When your dollars reach the Treasury, they cease to be part of any money-supply measure and are effectively destroyed. Because the government has the infinite ability to create dollars, there is no point in trying to measure the government’s supply of dollars.
Suppose you are made to believe the federal government is like monetarily non-sovereign state governments, relying on taxes. In that case, you won’t complain when your Social Security, Medicare, poverty aids, college tuition aids, etc. are cut for lack of money.
The less you receive from the government, the richer are the rich. The rich still receive their federal benefits in the form of tax breaks. There never is a complaint about benefits for the rich being “unsustainable,” “unaffordable,” etc. Those terms are reserved for your benefits.
When you read articles telling you the Social Security age requirement must be raised, benefits must be decreased, or the FICA tax must increase, know this: It’s all part of the Big Lie fostered by the rich to make themselves richer.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
I long have favored a federal plan in which every man, woman, and child in America would receive a monthly stipend from the federal government. (Some call it UBI—Universal Basic Income. Others call it GI—Guaranteed Income, or Social Security for All.)
A federally funded Social Security for All program was described in a post published seven years ago.
Today, that post was brought to mind by the following article:
An Illinois Senate appropriations committee would review “the landscape of cash supports available to low-income residents” and identify “populations without significant access to cash supports.”
The bill, as filed, says after the board is dissolved at the end of 2027, DHS would administer the program with monthly cash payments of $1,000 to Illinois residents, regardless of immigration status, who provide care for a child or specified dependent, recently gave birth or adopted a child or is enrolled in an educational or vocational program.
By law, the Monetarily Sovereign U.S. government is an infinite horn of plenty, capable of creating an unending stream of dollars at the touch of a computer key without collecting a penny in taxes.
Mike Buehler, an opponent of the measure, said it’s irresponsible to discuss such a program without knowing how much it will cost taxpayers.
You may be surprised that I oppose this and other similar plans.
Here is why:
1. Localgovernments are monetarily non-sovereign (unlike the federal government, which being Monetarily Sovereign, has the infinite ability to create dollars).
With few exceptions, local governments get their spending money from taxpayers.
That is why it can run trillion-dollar deficits with no funding problem at all.
State, county, or city taxpayers pay for local government-funded UBI programs.
Most local tax dollars come from sales taxes and/or local income taxes, most of which are paid by middle—and lower-income residents. Extracting dollars from middle—and lower-income taxpayers is exactly the opposite of the UBI plan’s basic purpose.
2. While the federal government has unlimited access to dollars,local governments have limited abilities to pay for things. So, the benefits must be limited to local governments’ affordability estimates.
This, in turn, requires limiting benefits to specific groups and denying benefits to other groups, which creates two problems:
A. The government must set up a complex and expensive apparatus for monitoring recipients so that people do not cheat.
B. People just outside the limit of qualifications are unjustly deprived of aid, and/or try to find unanticipated ways to qualify.
“I understand that you would have to be a person with a child, or caring for someone in your home or school to be eligible for the benefits.
A local government would have to hire dozens (or thousands?) of people to monitor these qualifications. (Do you have a child? How old? Are you really “caring for” that boarder? Are you still in school, and exactly what is a “school.” How many days or hours do you attend?
Additionally, there would be extensive and expensive paperwork filed, read, and authenticated.
That could be millions of people and the cost could be in the tens of billions of dollars,” Buehler told The Center Square. “And where’s the state going to come up with these funds and the only place to come up with that is to get it from the taxpayers.”
Guaranteed income programs in Chicago and the Metro East St. Louis areas are ongoing, costing taxpayers millions. In 2022, the city of Chicago was in line to spend $31.5 million for $500 a month to go to 5,000 low-income residents.
That same year, Illinois legislators approved a pilot program using state taxpayer fundsworth $3.6 million for the Metro East St. Louis area.
Inevitably, a state-run, money-restricted program would evolve to a “nanny-state,” where the money only could be used for approved purposes. And that would have to be monitored.
Ameya Pawar with the Economic Security Project said there are 150 different programs across the country. He gave examples of people using the money to buy sports goods for their children or even to take a vacation.
There is widespread belief that the poor who receive money from taxpayers, should be told what to do with the money (the poor supposedly being too ignorant to know what is best for them). Buying sports goods and taking vacations is not “good” for the poor.
The nanny preference is only to feedstarving children, not just make them happy with toys and entertainment. Note the hinted outrage Ameya Pewar expresses for recipients buying baseballs to entertain their kids.
“And all of this money that goes into the pockets to stabilize households flows through local businesses,” Pawar told the committee. “So you see some of this money back in sales taxes, and other taxes.”
No buying from Amazon allowed??
Buehler said there could be unintended consequences, like reducing work productivity and more.
“For regardless of immigration status, I think an unintended consequence could be a flood of migrants coming to Illinois looking for benefits and not having to work for it,” he said.
3. If one state, county, city, or village offers better benefits than another, people will tend to go where the money is and the taxpayers will pay. This is true for citizens as well as migrants.
And note the common but false belief that the poor are so lazy and unmotivated, if you give them money, they won’t get jobs.
Pawar said the proposed statewide guaranteed program of “unrestricted cash” should be in addition to other taxpayer-funded safety net programs.
Programs like Supplemental Nutrition Assistance Program funds go to buy food. The Low Income Housing Energy Assistance Program is for heating bills. The Temporary Assistance for Needy Families program provides monthly cash assistance to low-income families with children.
“And to get this income, they may not necessarily spend that in their own best interest or the interest of the citizens at large,” he said.
Again, the taxpayer requirement exacerbated the nanny-state belief that the poor are too stupid to spend in their own best interests. “Why am I, as a taxpayer helping these people to take vacations, if I can’t afford one myself.”
All the above-mentioned problems would be addressed by a federally-funded, Social Security program covering every man, woman, and child in America, regardless of income or wealth.
The rich, poor, citizens, non-citizens, young, old, married, single, renter, homeowner, in or out of school, etc., all would receive the stated benefits — and unlike with state and local government programs, no one would pay a penny.
Federal Social Security payments made to every man, woman, and child, require much less monitoring. Most importantly, affordability would cease to be an issue. The federal government can afford anything, and without collecting taxes.
All of the money spent by the federal government would be addedto the local economy, increasing everyone’s income.
8 Million Have Slipped Into Poverty Since May as Federal Aid Has Dried Up, October 15, 2020. (By Leigh Lynes: New studies show the effect of the emergency $2 trillion package known as the Cares Act and what happened when the money ran out.)
Here are excerpts from another article on the subject.
Actually, there are “strings,” in the form of qualifications.
More than interest — when former US presidential candidate Andrew Yang announced that a UBI program of $1,000 direct payments to citizens every month would be the keystone policy of his platform, he drew an unexpected amount of grassroots support in a crowded primary year.
Guaranteed income programs have been gaining even more traction during the pandemic, which took a particular toll on low-wage workers and threw many Americans into poverty.
At least 11 direct-cash experiments went into effect this year, Bloomberg estimated in January.
Former Stockton, California mayor Michael Tubbs, took the idea to the next level by launching the Mayors for a Guaranteed Income network. As of this year, there are 60 mayors in the program, advocating — and launching pilot programs for — guaranteed income for their residents.
California recently launched the first statewide guaranteed income program in the US, providing up to $1000 per month to qualifying pregnant people and young adults leaving the foster care system.
“Young adults leaving foster care” and “pregnant people” comprise two, very narrow classes, and $1000 a month is a meager amount. The task of verifying qualifications would be costly. (Imagine trying to verify pregnancy for thousands of people, and who monitors when pregnancies end before birth?)
The basic income program that Tubbs launched in Stockton in 2019, the Stockton Economic Empowerment Demonstration, has been considered the model for other cities that have followed in its footsteps, offering low-income residents hundreds of dollars a month and measuring their job prospects, financial stability, and overall well-being afterward.
It seems like a massive and expensive project for just hundreds of dollars’ worth of benefits.
According to SEED, participants improved in all those metrics.
“Guaranteed income makes a case for investing in our undocumented neighbors and formerly incarcerated residents. In doing so, it addresses the reality of the nation’s fragmented, punitive welfare structure.”
Will taxpayers consider this a reward for being undocumented or incarcerated? (Want to make an easy few hundred dollars a month? Go to jail for some minor charge.)
This kind of program isn’t a new idea, however. The Eastern Band of Cherokee Indians Casino Dividend in North Carolina has been giving tribal members annual funds since 1997, for instance. Alaska has been paying residents out of its oil dividends since 1982.
The Eastern Band of Cherokee Indians Casino Dividend in North Carolina gets its money from casino revenue. Alaska gets its dividend money from oil. Neither collects taxes to pay recipients. That is a major consideration.
Here are a few of the 33 examples mentioned in the above article.
Compton, California. Duration: December 2020 to December 2022. Income amount: $1,800 every three months for 2 years. Number of participants: 800
Tacoma, Washington,Duration: December 2021 to December 2o22, Income amount: $500 every month for 1 year, Number of participants: 110
Stockton, California, Duration: February 2019 to February 2021, Income amount: $500 every month for 2 years, Number of participants: 1ount: Based on the annual dividend from state-owned oil companies, ranged from roughly $2,000 per person in 2015 to $800 in years with lower gas prices.
Oakland Resilient Families,Duration: Summer 2020 to present, Income amount: $500 per month for 18 months, Number of participants: 600
Alaska Permanent Fund , Duration: Annual, Income amount: Based on the annual dividend from state-owned oil companies, ranged from roughly $2,000 per person in 2015 to $800 in years with lower gas prices , Number of participants: Alaska residents
North Carolina, Cherokee Tribe, The Eastern Band of Cherokee Indians Casino Dividend pays every tribe member annually, Duration: Annual, Income amount: $4,000 – $6,000 per year, Number of participants: Every tribal member.
The Alaska and Cherokee programs succeed long term because they are not funded by taxpayers. A federally funded program would succeed for the same reason. Federal spending is not taxpayer funded.When state and local taxpayers fund a spending program, the result is that a large group of middle- and low-income people transfers some of their money to a smaller group of middle- and low-income people.
The large group includes all those who pay sales and income taxes. The small group is all those who receive those tax dollars. It’s just dollars rotating within the municipality, enriching some residents at the expense of others. The municipality’s economy receives nothing.
By contrast, when the federal government funds a guaranteed income program the government creates new dollars and sends them to the nation’s recipients. The result is that there is no expense to anyone, but the nation’s economy is enriched with net dollars. (GDP = Federal Spending + Nonfederal Spending + Net Exports).
Guaranteed income programs help narrow the income/wealth/power Gap between the rich and the poorer. While reducing poverty, in of itself, is a worthwhile goal, narrowing the Gap also helps address related, social problems:
Wide Gaps affect not only poverty itself, but health and longevity, education, housing, law and crime, war, ownership, bigotry, taxation, GDP, scientific advancement, the environment, human motivation and well-being, and virtually every other issue related to economics.
The most successful guaranteed income programs share several features:
Funded by a Monetarily Sovereign government or by state owned and controlled businesses. This takes taxpayer costs out of the equation.
Minimal requirements for participants achieve voter support by making the plan fairer.
Significant benefits. Trivial payments, i.e. $100 a month, etc. will not generate positive voter sentiment.
Easy entry and supervision. Difficult entry results in negative feelings by voters. Easy supervision lowers costs.
Easily understood goal.
Many good reasons for, and no good reasons why not.
A national Social Security for All plan, with a minimum benefit if $5,000 per year for each adult (18 and over) and $2,500 a year for a child would begin to address the abovementioned social problems.
The Cost:
The U.S. has about 260 million adults (18+) and about 70 million children.
At the $5,000/2,500 level, the benefit cost of the Social Security for All would be $1.3 trillion for adults and $175 billion for children, totaling somewhat south of only $1.5 trillion.
Why do I say “only”? By comparison:
In 2023, the federal government spent about $6.2 trillion.
The Gross Domestic Product (GDP) for the year 2023 had a current-dollar value of $27.36 trillion.
In 2023, the U.S. federal government collected a total of approximately $4.71 trillion in tax revenue.
In fiscal year 2023, the federal government’s spending exceeded its revenues, resulting in a deficit of $1.70 trillion
By the end of 2023, the cumulative federal deficit was $26.236 trillion.
The U.S. M2 money supply is about $20 trillion.
Given that:
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
and
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.”
A Monetarily Sovereign government spending $1.7 trillion to send an additional $5,000 to every adult and $2,500 to every child — and at no cost to anyone — would seem to be a bargain price and a great investment for America.
Further, because of the multiplier effect*, that additional $1.7 trillion in federal spending, would increase Gross Domestic Product far more than $1.7 trillion.
*Per Investopedia:A government increases spending or decreases taxes in part to inject more money into the system.
Such fiscal policy has a multiplier effect. That is, every dollar spent can be expected to cause an increase in the gross domestic product (GDP) by more than a dollar.
This is due to the sheer momentum created by the policy. Consumers spend more so businesses produce more goods.
Businesses have to hire more to produce more goods, so more people have more money to spend on goods.
The same phenomenon occurs for both government spending increases and tax cuts. Either tends to increase GDP disproportionately.
A cut in government spending can reduce GDP by a greater degree than the amount saved by the cut.
The expanded Child Tax Credit had a multiplier effect of 1.25 on GDP in the first quarter of 2021, according to an analysis by Moody’s Analytics. The increase in the Supplemental Nutrition Assistance Program boosted GDP by a 1.61 multiplier effect in the same period. Increased defense spending had a 1.24 multiplier effect.
Infinite benefits at no cost to anyone: Can any knowledgeable person object to Social Security for All?
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
Many federal programs, for instance, poverty aid, foreign aid, global warming prevention, immigration, education, etc., are unaffordable and unsustainable.
How many of these beliefs do you have? Every one of them is wrong, proven wrong by readily available data (here, here, here, here, and elsewhere in this blog).
Yet most people strongly defend one or more of these wrong beliefs, even without any evidence to support them.
Here is an example of the widespread belief that immigrants harm our economy, and our way of life.
Immigration fuels US economic growth while politicians rage.Augusta Saraiva and Enda Curran, Bloomberg NewsWhile the rising number of immigrants in the U.S. has sowed division among politicians across the country — and stoked angst among a swath of voters — there’s one place where almost everyone seems on the same, upbeat page: Wall Street.
Last month, the nonpartisan Congressional Budget Office (CBO) calculated that immigration will generate a $7 trillion boost to gross domestic product over the next decade. The agency came to that conclusion after incorporating the recent surge in immigration.
The CBO release spurred a flurry of fresh number-crunching among investment bank economists to account for the boost those newcomers are giving to the labor force and consumer spending. Goldman Sachs Group Inc. revised up its near-term economic growth forecasts Sunday.
JPMorgan Chase & Co. and BNP Paribas SA were among banks that acknowledged the economic impact from surging immigration in recent weeks.
We’ll pause to remind you that Gross Domestic Product (the most common measure of our economy) = Federal Spending + Non-federal Spending + Net Exports.
Inflation-Adjusted, Per Capita, Gross Domestic Product
Spending by immigrants increases per capita (including yours and mine) inflation-adjusted GDP. In short, immigrants make us all wealthier by working, paying local taxes, and creating and buying stuff.
That is what immigrants have done for decades, and it is what has made America prosperous.
“Immigration is not just a highly charged social and political issue, it is also a big macroeconomic one,” Janet Henry, global chief economist at HSBC Holdings Plc, wrote in a note to clients Tuesday.
No advanced economy benefits from immigration quite like the U.S., and “the impact of migration has been an important part of the U.S. growth story over the past two years.”
“Two years”? More like two hundred years.
Morgan Stanley economists Sam Coffin and Ellen Zentner noted this month that faster population growth fueled by immigration leads to stronger employment and population estimates than initially thought, though they added that the full effect might not be captured by official data.
It’s hard to pin down the exact scale of the inflows of foreign-born people, thanks to many entering without visas or other documentation. But CBO statisticians incorporated data from U.S. Customs and Border Patrol to come up with their higher projected net immigration, according to Morgan Stanley analysis.
Goldman estimates that immigration was around 2.5 million in 2023, a figure that is far above the 1.6 million implied by the change in the foreign-born population in the official household survey from the Census Bureau.
The positive tone among economists contradicts that seen on the campaign trail, as a surge in the number of undocumented immigrants entering the U.S. through the southern border stokes political strife.
The share of Americans who see immigration as the most important problem facing the U.S. is now matching a record high in data going back four decades, according to a recent Gallup poll.
The recent boost from immigration is the result of both more legal immigrants as the U.S. goes through unprecedented visa backlogs and the surge in illegal border crossings.
The nation’s 32.5 million immigrant workers now account for roughly one in five U.S. workers, a record-high in government data going back almost two decades.
They not only are working, but their buying creates jobs. They aren’t stealing jobs as America’s xenophobes often claim. The proof: Unemployment is low “despite” (because of?) massive immigration:
Red line is federal deficits. Blue line is Unemployment. Vertical gray bars are recessions.
This interesting graph reveals several facts:
When federal deficit spending declines, we have recessions.
The recessions are cured by increases in federal deficit spending.
The recessions cause unemployment.
The unemployment, which is caused by decreases in federal deficit spending is cured by increased federal deficit spending.
Thus, unemployment is not caused by immigrants taking jobs. Quite the opposite. Unemployment and recessions have the same cause: Insufficient federal deficit spending, exactly what the conservatives want us to do.
To be sure, the connection between the higher influx of foreign workers and the rapid post-pandemic recovery has been noted by economists and policymakers alike for some time now.
The Trump GOP’s main election focus is to deport undocumented immigrants, the people who help grow America’s economy.
Federal Reserve Chair Jerome Powell has repeatedly cited immigration as one of the reasons behind strong economic growth.
In a reference to the role being played by higher labor supply, Powell pointed on Wednesday to “a strong pace” of immigration as helping on that front.
“The overall picture is a strong labor market — the extreme imbalances we saw in the early parts of the pandemic recovery have mostly been resolved, you’re seeing high job growth, you’re seeing big increases in supply,” Powell said in his press conference Wednesday.
Fed policymakers lifted their growth forecast for this year to 2.1% from 1.4%, their median estimate showed.
Businesses are ramping up calls for changes to bring in more workers through legal channels.
Almost 9 million positions are open across the economy, equal to 1.4 jobs for every job-seeker. Foreign-born workers made up a record 18.6% of the civilian workforce in 2023 and the U.S. approved a record number of work authorizations in the fiscal year through last September.
Immigration is “very policy sensitive,” Feroli cautioned, advising against extrapolating out bigger numbers beyond the end of this year. After all, policy could change after the November election, he noted.
Why does Trump and his GOP harp on immigration as America’s biggest “problem”? His success is as a fear-mongering hate-mongerer.
When he preaches hatred toward Muslims, Mexicans, gays, blacks, people from “shithole” countries — when he lies that they bring crime, drugs to America, he is preaching to people he has frightened with his bigotry. He creates scapegoats, and then claims he will deal with them.
Hitler did it. All dictators do it.
The facts are:
False beliefs, especially those repeated for months and years, are difficult to dislodge with facts. But ultimately, that is all you can do.
Just as a lie gains strength the more it is repeated, so does the truth. Learn the truths and repeat them again and again. It’s the only way to defeat the Hitlers of the world.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
The problem with Libertarians like Eric Boehm . . . where do I begin? They have so many issues.
First, they don’t understand this equation: Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports.
Gross Domestic Product (GDP) is the most commonly used measure of the economy. The equation tells you that the more the federal government spends, the more the economy grows. But Libertarians don’t like government spending.
How does one reason with such people? Mainly, how does one acquaint them with Monetary Sovereignty, which says, “Federal financing is different from non-federal financing.”
If they can’t understand, or more accurately, refuse to understand, those two concepts—GDP and Monetary Sovereignty—how can their opinions be respected?
Here is the latest “Boehmism,” which, remarkably, may exceed all his previous work in ignorance and/or deception (It’s hard to know which:
The National Debt Is a National Security IssueThe growing debt will “slow economic growth, drive up interest payments,” and “heighten the risk of a fiscal crisis,” the CBO warns.ERIC BOEHM | 3.21.2024 1:50 PM
It’s a dangerously addictive habit that threatens to ruin our children’s lives and undermine America’s national security—and this week, Congress finally acknowledged as much. However, it remains unclear if lawmakers have the guts to do anything substantial.
No, I’m not talking about TikTok. I’m talking about the $34.6 trillion national debt.
The Senate unanimously approved a resolution on Wednesday calling the debt “a threat to the national security of the United States” and calling expected future budget deficits “unsustainable, irresponsible, and dangerous.”
1940 “Debt” was called a “ticking time bomb.”
The Senate votes to please voters, and sadly, most voters believe anything called “debt” should not be large. They don’t understand that federal “Debt” is not federal and it isn’t debt.
“We have more than doubled our national debt in just ten years,” said Sen. Mike Braun (R–Ind.), who sponsored the resolution.
“America is moving down a dangerous and unsustainable path of reckless spending, and the federal government has yet to take it seriously.”
“Unsustainable” is the Libertarian’s favorite word when describing the so-called national (or federal) debt, which is neither national, federal, nor debt.
They use that word because it has no specific meaning. They don’t say precisely what is “unsustainable” about it. The federal government, being uniquely Monetarily Sovereign (Libertarians don’t understand that concept, either), can pay any debt denominated in U.S. dollars.
1950 “Debt” was called a “ticking time bomb.”
Whether a debt is $100 or $100 trillion, the federal government could pay it instantly by pressing computer keys.
The federal government pays all its debts the same way. It creates new dollars ad hoc.
To pay any creditor, the government sends instructions, not dollars, to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
Those instructions are electronic or paper (a check), saying, “Pay to the order of _____. ” The instant the bank does as instructed, new dollars are created and added to the M2 money supply measure.
Alan Greenspan: “A government cannot become insolvent concerning obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
That is how the federal government creates dollars and pays its bills. There is no limit to the government’s ability to send instructions, and thus no limit to the government’s ability to create dollars. No debt is “unsustainable.”
1960 “Debt” was called a “ticking time bomb.“
The passage of a nonbinding resolution on the Senate floor is several steps short of addressing the federal government’s addiction to borrowing—but, as they say, recognizing that you have a problem is the first step toward solving it.
The federal (or national) debt is not a debt because the federal government does not borrow.Why would it? Given its infinite ability to create dollars, why would the federal government borrow dollars?
It wouldn’t, and it doesn’t.
Those things called T-bills, T-notes, and T-bonds do not represent borrowing. Although “notes” and “bonds” are evidence of borrowing in the private sector, federal finance is different.
1970 “Debt” was called a “ticking time bomb.“
T-securities are evidence of deposits into savings accounts at the Federal Reserve, the contents of which are wholly owned by the depositors. The government neither needs nor uses those deposits. It merely holds them in safekeeping for the depositors.
The federal government’s main purpose in offering T-security accounts is to provide the public and other nations with a safe, interest-paying place to store unused dollars, which helps stabilize the dollars.
By paying interest, these accounts help the federal government control interest rates.
1980 “Debt” was called a “ticking time bomb.“
The government does not owe the dollars deposited in T-security accounts. The government merely stores them for the depositors.
Upon maturity of any T-security, the government merely gives the dollars, that never had left the account, back to their owner, the depositor.
It’s not a federal debt, just as the contents of a bank safe deposit box are not a bank debt.
And the approval of that resolution was timely. Later on Wednesday, the Congressional Budget Office (CBO) published its latest long-term budget projections. The report shows that annual budget deficits are on pace to grow from an expected $1.6 trillion this year to $2.6 trillion in 2034, $4.4 trillion in 2044, and $7.3 trillion in 2054.
A federal budget deficit is much different from a personal budget deficit.
1990 “Debt” was called a “ticking time bomb.“
If you or I were to run a budget deficit, we would have to obtain the money to pay our bills, either by borrowing or from our income or savings.
The federal deficit merely is the bookkeeping difference between taxes and spending. The spending has already been paid for by money creation.
Here again, one must understand Monetary Sovereignty. State and local taxes do fund state and local taxes. The state and local governments are monetarily non-sovereign, like you and me.
2000 “Debt” was called a “ticking time bomb.“
So what is the purpose of federal taxes, if not to fund federal spending?
To help the federal government control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward/
To assure demand for the U.S. dollar by requiring federal taxes to be paid in dollars.
To make the public believe that federal benefits are limited by tax receipts or borrowing. (This last is at the behest of the very rich, who get wealthier by widening the income/power Gap between them and the rest of us.)
As a result of those rising budget deficits, the national debt will continue to accelerate upward.
The misnamed “national debt” is not a threat or a burden on anyone- not the government or taxpayers. Even if the “debt” were hundreds of trillions of dollars, the federal government could continue paying its bills without collecting a penny more in taxes, nor borrowing a single dollar.
2010 “Debt” was called a “ticking time bomb.“
The CBO projects that the federal government’s debt will total $114 trillion by 2054. The debt is already roughly the size of the nation’s economy and is expected to surpass the all-time high of 106.4 percent of gross domestic product (GDP) by 2028.
By the end of the 30-year projection, the debt is estimated to reach 166 percent of GDP.
The oft-mentioned “Debt”/GDP ratio is meaningless for several reasons:
The government does not owe or pay the “debt.”
GDP does not owe or pay the “Debt.”
The ratio says nothing about the health of the U.S. economy.
The ratio says nothing about the federal government’s ability to pay its bills.
“Such large and growing debt would have significant economic and financial consequences,” the CBO warns. “
Among its other effects, it would slow economic growth, drive up interest payments to foreign holders of U.S. debt, heighten the risk of a fiscal crisis, increase the likelihood of other adverse outcomes, and make the nation’s fiscal position more vulnerable to an increase in interest rates.”
The above paragraph is wrong in every respect:
2220 “Debt” was called a “ticking time bomb.“
A large and growing “Debt” merely means our Monetarily Sovereign federal government is pumping more growth dollars into the economy. The larger the “Debt,” the more growth dollars and the faster the economic growth. Remember: GDP = Federal Spending + Non-federal Spending + Net Exports. Federal Spending even increases Non-federal Spending
Our Monetarily Sovereign U.S. federal government has the infinite ability to create the dollars that pay foreign holders of U.S. debt. Paying dollars to foreign nations increases foreigners’ ability to purchase our goods and services (Net Exports).
No “fiscal crisis” has been or can be caused by the growing federal debt. The federal government always will be able to pay all its bills.
The large and growing “Debt” causes no “other adverse outcomes. The Debt/GDP ratio is fiscally meaningless for a Monetarily Sovereign nation.
Our Monetarily Sovereign government’s fiscal position is vulnerable only to the ignorance of those who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty. The government can pay any amount of interest simply by pressing computer keys.
In 1940, the federal “Debt” was only $43 billion. Those who are ignorant about federal finances called it a “ticking time bomb.”
Today, the “Debt” totals more than $33 trillion, and that phony time bomb is still a dud—and always will be.
Higher interest rates are already significantly affecting the federal budget. This year, payments on the existing debt will total an estimated $870 billion, which is more than the Pentagon’s budget. Thanks to higher interest rates and a larger debt load, debt payments have jumped by 32 percent since 2023.
Interest payments have indeed had an effect on the federal budget. They have forced the federal government to spend more, which pumps more growth dollars into the economy and increases GDP.
Again, the Libertarians seem to have forgotten: GDP = Federal Spending + Non-federal Spending + Net Exports. Not only does Federal Spending directly lift GDP, but it also lifts Non-federal Spending, which, in turn, lifts GDP
As federal “Debt” has grown, so has the economy (GDP).As federal spending has grown, so has the economy (GDP).
There seems to be no sign that federal spending or federal “Debt” is “unsustainable,” “slows economic growth,” “heightens the risk of a fiscal crisis,” “causes other adverse outcomes,” or makes the nation’s fiscal position more vulnerable to an interest rate increase.”
On the contrary, increases in federal “Debt,” yield all positive outcomes, while decreases in debt cause depressions and recessions:
U.S. depressions tend to come on the heels of federal surpluses.
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.
Deficit reductions (purple line) lead to recessions (vertical gray bars) which are cured by deficit increases.
GDP = Federal Spending + Non-federal Spending + Net Exports. Not only does Federal Spending increase GDP directly, but it also increases Non-federal Spending by providing the private sector with money.
The new CBO report shows that debt payments will be one of the fastest-growing parts of the budget for the foreseeable future, along with the twin old-age entitlement programs of Social Security and Medicare.
By 2051, interest payments will be the single largest line item in the federal budget.
If there’s a sliver of good news to be found in the new CBO projections, it is that the situation looks slightly less dire than it did last year. That improvement is due to higher expected levels of immigration and stronger estimates of future economic growth—not because of anything that policy makers in Washington have done.
(If anything, they seem determined to prevent those improvements from coming to pass, whether by limiting immigration or regulating the economy more strictly.)
This is the ultimate of ignorance. The data stare him in the face, but instead of reevaluating his position, he claims the good news comes despitethe data. In essence, Boehm has two conclusions:
If the data support his belief, he calls attention to that.
If the data do not support his belief, he ignores the data.
Thus, he is incapable of learning.
We should also keep in mind the usual caveats here: The CBO does not account for the possibility of recessions, natural disasters, wars, or other unpredictable events that could cause the federal government to borrow more heavily than current law expects.
The past 30 years have included 9/11, the war on terror, the Great Recession, and the COVID-19 pandemic, so it seems pretty likely that the next three decades will include at least a few emergencies that drive deficits higher.
Boehm doesn’t stop to think about why emergencies drive deficits higher: Emergencies, in of themselves, tend to impede economic growth, so the government increases deficit spending to save the troubled economy.
Why does the government need to wait for emergencies before it stimulates economic growth. Why not stimulate growth during non-emergency times, too?
This is a question the Libertarians and the right wing never asks, because the answer goes against their beliefs.
“There is no way to look at these eye-popping numbers without realizing we need to make a change,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for lower deficits, said in a statement about the CBO report.
“And yet we have lawmakers promising what they won’t do: I won’t raise taxes, I won’t fix Social Security, I won’t pay for all the things I do want to do. And so we continue on this dangerous path.”
MacGuineas has been president of the CRFB for many years. She and her group are bought and paid for by the rich, so they espouse beliefs that would make the rich righer by widening the Gap between the rich and the rest.
“I won’t raise taxes.” That is a good thing. Federal taxes remove growth dollars from the economy.
“I won’t fix Social Security.” To MacGuineas, “fix” means cut benefits or raise taxes, both of which are unnecessary and harmful to the economy. The federal government has infinite money to pay for Social Security.
“I won’t pay for all the things I want to do.” The government is perfectly capable of paying for anything and everything. It’s people like Boehm and MacGuimeas who hinder the government from doing what it was created to do: Protect and improve the lives of the people.
Indeed, on Thursday, Speaker of the House Mike Johnson (R–La.) told reporters that he supports plans for a so-called “fiscal commission”—which could propose some solutions to Congress’ budgeting problems—but only if the agency could not suggest tax increases or cuts to entitlement programs.
Obama had a “fiscal commission.” Its “increase- taxes, cut-spending” recommendations would have sent the economy into a depression. Fortunately, Congress didn’t listen.
That approach guarantees that the federal government will have to continue borrowing heavily to make ends meet.
Again, the U.S. government never borrows its own sovereign currency. Boehm does not recognize the differences between a Monetarily Sovereign entity and a monetarily non-sovereign entity. Either he is paid to act ignorant or he does it without pay.
Despite the Senate’s declaration that the national debt is a national security risk and the CBO’s attempts to sound the alarm about the federal government’s fiscal trajectory, there’s still a major shortage of elected officials who want to take the problem seriously.
He is correct that there’s “a major shortage of elected officials who want to take the problem seriously.” Without that shortage, the government could fund such benefits to America as:
Comprehensive, no-deductible healthcare insurance or every American.
More medical personnel at all levels, plus more hospitals with advanced equipment
Social Security for Americans of all ages.
The reduction of poverty and homelessness in America
With the reduction of poverty, there would be a significant reduction in crime.
A greater ability to accept fully vetted immigrants, whose work and intelligence would help America grow.
Education, including advanced degrees, for all those who want it.
More scientific innovation in disease prevention and cure.
More efforts to reduce global warming.
A dramatic reduction in federal taxes, which do nothing but remove growth dollars from the economy.
Pay students a salary so that families would not need to favor dropping out of school to help support the family.
The government can pay for all of it, without taxes and without inflation. Anyone not want it?
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.
The U.S. federal government is Monetarily Sovereign. It cannot run short of its own sovereign currency.
To pay for your Social Security benefits, the federal government sends instructions (in the form of a wire or check) to your bank or you, instructing your bank to increase the dollar balance in your checking account.
When your bank does as instructed, the balance in your account increases, creating new dollars and adding them to the M2 money supply measure, growing the economy.
Sending instructions to banks is the primary way the federal government creates dollars. The federal government, being Monetarily Sovereign, has the infinite ability to send and clear instructions, thus, the endless ability to create dollars.
(By contrast, everyone who writes a check or sends a wire can send instructions but not clear them. Checks that don’t clear are said to “bounce.”)
Your bank then clears the transaction through the Federal Reserve, another federal agency. Thus, the federal government clears its own money-creation transactions, giving it the infinite power to create dollars.
The government also has the infinite power to change Social Security laws, as demonstrated by the 12 benefit changes shown in this chart.
More than half of all Social Security recipients take benefits before the official retirement age when benefits are reduced.
This demonstrates an early need for benefits by those in lower-income groups.
#Monetary Sovereignty - Mitchell 