[Why would any sane person take dollars from the economy and give them to a federal government that has the infinite ability to create dollars?]
The Committee for a Responsible Federal Budget (CRFB) is a fountain of misinformation, or should we say, “disinformation”?
Clearly, they are providing misinformation, i.e. wrong information, but the real question is, do they know it’s wrong, i.e disinformation?
Because they do extensive data analysis, I believe they simply must know their information is wrong. So why do they promulgate so much nonsense?
Before we answer that question, let’s see what they get wrong. Here are some excerpts from their website.
Gas Tax Holiday Would Take A Wrong TurnFEB 15, 2022 | TAXESThe White House and some in Congress are reportedly considering suspending the 18.3 cent federal gas tax for the remainder of 2022. The Committee for a Responsible Federal Budget recently estimated that such a proposal would reduce gas tax revenues by $20 billion and, without the general revenue transfer proposed in recent legislation, would advance the Highway Trust Fund insolvency date from 2027 to 2026.
Assuming their numbers are correct, what they really are saying is: “The proposal would reduce the amount of money taken out of the private sector (also known as ‘the economy’) by $20 billion.”
Adding dollars to the private sector is stimulative: taking dollars out of the private sector is recessive. In short, the reduced gas tax revenues would be a $20 Billion economic stimulus.
The CRFB seems to hate anything that stimulates the economy, especially if it directly benefits the middle- and lower-income groups as a reduced gas tax would do.
Further, the so-called Highway Trust Fund is not a real trust fund (see “The Phony Trust Fund Controversy”) and it cannot become insolvent unless Congress and the President want it to become insolvent.
The U.S. government, the creator of the U.S. dollar, cannot run short of dollars. Thus, no agency of the U.S. governmentcan become insolvent, unless that is what Congress wants.
(Former Fed Chairman, Alan Greenspan:“A government cannot become insolvent with respect to obligations in its own currency.”)
To prevent the insolvency of any agency, Congress merely passes a law that provides the agency with more dollars. Congress has the infinite ability to pass such laws.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:With inflation at a 40-year high, policymakers are appropriately focused on how to bring prices under control. But new tax cuts aren’t going to stop this inflation; after all, excessive tax cuts and spending are part of what caused high inflation.
Contrary to popular wisdom, no inflation in history ever has been caused by excessive tax cuts or spending. All inflations are caused by shortages of key goods and/or services.
Interest rates (blue) and inflation (green) have trended down, while federal debt (red) has increased.
For the past 10 years, federal deficit spending has increased massively, with minimal inflation. Now, suddenly, inflation has increased. Why?
Clearly, the cause is not deficit spending, otherwise it would have happened sooner.
Inflations are caused by shortages of key goods and services..
Today’s inflation is caused by the sudden confluence of several factors, all shortages: Labor, food, gasoline, computer chips, transportation, sand, among others.
(Yes, I said “sand.” U.S. Shale Production Hindered By Sand Supply Crunch.)
While massive federal spending has been with us for at least a decade, what has changed recently to cause the sudden change in inflation from low to high?
The answer: COVID.
The worldwide impact of the disease has caused the shortages that lead to inflation.
The only thing that will cure the inflation is to cure the shortages. And that can be accomplished by more federal spending to obtain the needed goods and services:
More federal spending to encourage oil drilling and/or renewable energy.
More federal spending to support farming
More federal spending to support chip manufacture
More federal spending to support transportation
More federal spending to support hiring (i.e. the elimination of FICA taxes and the reduction of income taxes at the lower end)
Reduced federal deficit spending will lead only to recessions, as it always has.
When federal deficit spending (blue) is reduced, we have recessions (vertical gray bars), which are cured by increases in federal deficit spending.
While a gas tax holiday might provide some temporary relief, much of the benefit may flow through to oil producers or lead to higher prices in other sectors of the economy.
It makes no sense for low gas prices to cause price increases elsewhere. While low gas prices may cause an increase in demand for cars, every industry would see lower production costs, which will ease inflation.
Benefitting oil producers is not something to be avoided. Financially encouraging them to pump more oil will ease the scarcity of oil.
By boosting demand in an already over-stimulated economy, the holiday would likely boost inflation in 2023 once it ends. The holiday will also undercut the Administration’s efforts to address climate change.
The CFRB would like you to believe the economy is “overstimulated.” No one knows what an “overstimulated” economy means, but it sure sounds terrible, doesn’t it?
Presumably, it means companies are making more profits so that they will hire more people and pay more salaries to the lower- and middle income people, thereby narrowing the income/wealth/power Gap between the rich and the rest.
Presumably, it means unemployment is low, so there are fewer impoverished children and their parents, again narrowing the Gap between the rich and the rest.
“Gap Psychology” is the desire to widen the Gap below and to narrow the Gap above. All groups are subject to Gap Psychology, but the very rich are the most expert at effecting it.
As for climate change, yes, encouraging more oil production will increase climate change, in the short term. But financially encouraging more use of renewables will have long-term climate benefits.
Meanwhile, the federal government would be out $20 billion this year alone – and much more if the holiday were extended.
The federal government has infinite money. Infinite minus $20 billion, still is infinite. The federal government always will have the infinite ability to write laws, and those laws have the unlimited ability to create dollars.
The CRFB cries crocodile tears for the infinitely rich U.S. government, but no tears for you. They want you to pay the infinitely rich government more of your scarce dollars.
The Highway Trust Fund is just five years from insolvency, and the last thing we need is to cut its primary revenue source or paper over shortfalls with yet another general revenue transfer.
No, the last thing we need is liars telling us that the federal government is running short of its own sovereign currency, so you poor folks need to pony up more dollars, or receive fewer, benefits.
“Insolvency” is the big, fake bogeyman with which the rich try to scare you.
The Big Lie in economics is: “Federal taxes fund federal spending.” While state and local taxes do fund state and local spending, the federal government, being Monetarily Sovereign, does not rely on, or even use, tax dollars.
In fact, the U.S. Treasury destroys all tax dollars upon receipt. It creates new dollars, ad hoc, every time it pays a creditor.
(How does the Treasuy destroy tax dollars? The dollars in your checking account are part of the M1 money supply. When the Treasury receives those dollars, they disappear. They no longer are part of any money supply measure.They effectively are destroyed.)
Statement from the St. Louis Fed:“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.
In this sense, the government is not dependent on credit markets to remain operational.”
Thus, the federal government has infinite dollars; it can’t run short; and telling people to give the government more and to accept less is just an example of how the Big Lie works.
As it stands, the gas tax will only cover half of highway and transit spending by the time the trust fund runs out.
In fact, the gas tax covers none of transit spending. Those tax dollars are destroyed. All federal spending, including federal transit spending, is funded by ad hoc, federal money creation.
As inflation subsides, we should either raise that tax or find a new funding source to supplement or replace it.
We don’t need to find a new funding source. And we certainly don’t need to raise taxes. The federal government is the best funding source:
Former Fed Chairman 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.”
As we’ve stated, the CRFB, acts repelled by the fact that federal spending helps narrow the income/wealth/power Gap between the rich and the rest.
A well-designed carbon tax could generate ample tax revenue while substantially reducing carbon emissions and tempering excessive demand.
A well designed carbon tax might be a good idea from an ecological standpoint. But it’s a silly idea if the purpose is to give private sector dollars to a government that has the infinite ability to create dollars.
The pain Americans are feeling at the gas pump – and with rising costs throughout the economy – should be taken seriously and addressed thoughtfully.
The gas price pain will be eased by raising gas taxes??? That’s the utter nonsense the CRFB wants you to believe.
While cutting the gas tax may have political appeal, it would move in exactly the wrong direction, worsening rather than improving our nation’s economic challenges.
The rising costs should be taken seriously, which is why the cost of gasoline should be reduced — by cutting the gas tax.
Inflation takes dollars out of your pocket. The CRFB’s method of taking inflation seriously” is by taking even more dollars out of your pockets via tax increases.
Why does the CRFB act this way?
Because the rich, who run America, also run the CRFB, and support it with donations. The rich and the CRFB want to widen the income/wealth/power Gap between the rich and the rest.
The rich always wish to be richer. The only way to be richer is to widen the Gap. There are two ways the rich can widen the Gap: Obtain more money for themselves and/or make sure you have less money by paying more taxes.
Either one will make the rich richer, and the CRFB seems to be doing everything it can to reach that goal.
In that vein, I just received this Email from CRFB:
Trust Fund SolutionsFeaturing Senators Angus King (I-ME) and Mitt Romney (R-UT)
Maya MacGuineas:Paid by the rich to tell you that the federal government’s trust funds soon will be insolvent.The major government trust funds for Social Security, Medicare, and Highway spending face insolvency in the next decade-and-a-half.Policymakers need to act sooner rather than later to prevent abrupt across-the-board benefit cuts, assure a more sustainable debt path, promote faster economic growth, and achieve a number of important policy goals.
How raising taxes will help “promote faster economic growth” is a mystery the CRFB never really explains.
Trust Fund Solutions will feature opening remarks from Senator Angus King (I-ME) and a discussion between Senator Mitt Romney (R-UT) and Committee for a Responsible Federal Budget president Maya MacGuineas.The event will also feature a panel of experts, one focused on each trust fund. The Committee for a Responsible Federal Budget will also debut its new Trust Fund Solutions website and educational tools.
You can bet that the “solutions” for the mythical “Trust Funds” will involve tax increases (for which the rich will given loopholes) plus benefit decreases, both of which will widen the Gap between the rich and the rest.
Widening the Gap is what the rich pay the CRFB to do.SUMMARY
1. The Big Lie in economics is that the U.S. federal government can run short of its own sovereign currency, the U.S. dollar. Not only does the govarnment itself have access to infinite dollars, but no agency of the government can run short of dollars unless Congress and the President want that.
2. The government neither needs nor uses tax dollars, which are destroyed by the Treasury upon receipt.
3. Federal deficit spending never causes inflations (scarcities are what cause inflations). Federal deficit spending can cure inflations by curing scarcities. Reductions in federal deficit spending lead to recessions or depressions.
4. The rich grow richer by widening the Gap between the rich and the rest. Gap widening has two paths: Gaining more for the rich and/or forcing the rest to accept less.
5. The CRFB is paid to aid the rich by convincing the populace to accept Gap widening.
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.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
Being Monetarily Sovereign, the U.S. government owns infinite dollars.
You reasonably might expect that, of all the newspapers in the world, the Wall Street Journal surely would print articles by only writers who understand federal finances.
Ah, would that it were so.
Unfortunately, some writers published by WSJ either are as ignorant as the general populace or as intentionally ignorant as the bribed-by-the-rich politicians and university economists.
Here is an example saw in a recent WSJ edition (OK, the article printed in several papers, but I read in WSJ, which should know better):
U.S. National Debt Tops $30 Trillion as Borrowing Surged Amid PandemicThe record red ink, fueled by spending to combat the coronavirus, comes as interest rates are expected to rise, which could add to America’s costs.After a protracted standoff last year, Congress agreed in December to raise the nation’s borrowing cap to $31.4 trillion.By Alan Rappeport, Feb. 1, 2022
We can’t even get past the headline and subheads without being subjected to WSJ ignorance.
Federal “debt” is deposits into accounts similar to safe deposit boxes. The federal government never touches those deposits except to return them to the owners.
The so-called “national debt” neither is “red ink,” nor is it debt. It is the total of deposits into Treasury Security accounts.
When you invest in a T-bill, T-note, or T-bond, you do not lend the federal government money. You merely deposit your dollars into your T-security account. It’s an account similar to an interest-paying, safe-deposit box.
As with a safe deposit box, the federal government does not touch your dollars. It merely stores them for you, and allows you to accumulate interest.
Upon the maturity of your account, the government “pays it off” simply by returning to you, the dollars in your account. Since the dollars already exist in your account, and remain yours, this payoff is no burden on you, on the government, or on taxpayers. It’s merely a transfer of your dollars.
If the national “debt” were a real governemnt debt, it would go something like this:
The government needs dollars to pay its bills. Federal taxes are insufficient to pay all the creditors, so the government must borrow dollars, and in return it gives the lenders its IOUs in the form of T-securities (T-bills, T-notes, T-bonds).
Later, to obtain the dollars to pay off the T-securities, the government levies more taxes. This means we taxpayers ultimately are liable for the government’s debts.
You have just read what the Wall Street Journal and the vast majority of Americans believe about the federal debt.
And it is 100% wrong.
Back in the late 1770s, the federal government created the U.S. dollar from thin air. The government simply passed laws (from thin air) that created as many dollars as it wished, and gave those dollars whatever value it wished.
The first U.S. silver dollars were coined on Oct 15,1794. On that day, 1,758 of them were produced, but no more the rest of the year.
In 1794, a new coin called the Draped Bust Dollar, featuring a matronly Liberty of considerable endowment wearing a draped blouse. Over 40,000 Draped Bust dollars were minted in 1795.
Why 1,158 and 40,000? Because the government arbitrarily based its coin on silver. Each coin contained 0.7737 oz of silver. Why 0.7737? Because the government arbitrarily made its dollar similar in weight to the Spanish dollar.
Note the word “arbitrarily.” The government could have produced any numberof dollars, and could have made them equivalent to anything it wished. The base could have been gold, lead, tin, or nothing at all.
Because we were a new country, we tried to create demand for the dollar by making it equivalent to an existing coin. But it was all arbitrary.
The federal government arbitrarily has changedthe metal content of all U.S. coins many, many times over the years.
Today, the vast majority of dollars are nothing more than numbers on spreadsheets, and have no physical existence.
The federal government retains the infinite ability to create laws from thin air, and those laws have the infinite ability to create dollars from thin air.
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.”
Quote from Ben Bernanke when, as Fed chief, he was on 60 Minutes:
Scott Pelley: Is that tax money that the Fed is spending?
Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Statement from the St. Louis Fed:
“As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
Read the above quotes carefully, then ask, what is Alan Rappeport talking about when he refers to the federal “debt” (i.e. deposits) as “red ink?” How can accepting deposits into T-security accounts be considered “borrowing,” when, as Greenspan, Bernanke, and the St. Louis Fed say the federal government has the infinite ability to create dollars? Why would the government ever need to borrow?It wouldn’t and it doesn’t.
WASHINGTON — America’s gross national debt topped $30 trillion for the first time on Tuesday, an ominous fiscal milestone that underscores the fragile nature of the country’s long-term economic health as it grapples with soaring prices and the prospect of higher interest rates.
It’s not “ominous.” On the contrary, it’s a sign of a growing economy. It would be “ominous” if the misnamed national “debt” were declining. That would demonstrate we are in a recession or depression.
In fact, the so-called”debt” isn’t even debt or borrowing. It’s the total of investments in T-securities (T-bills, T-notes, T-bonds).
The government never touches the dollars invested in these securities, and the government pays them off every day, simply by returning the balances in the accounts. No tax dollars are involved. This is not a burden on the government or on taxpayers.
The sole purpose of T-securities is not to provide the federal government with its own dollars, but rather to provide a safe “parking place” for unused dollars. This stabilizes the dollar. It is not borrowing in any sense of the term.
The breach of that threshold, which was revealed in new Treasury Department figures, arrived years earlier than previously projected as a result of trillions in federal spending that the United States has deployed to combat the pandemic. That $5 trillion, which funded expanded jobless benefits, financial support for small businesses and stimulus payments, was financed with borrowed money.
No, no, no. It was NOT financed with borrowed money. Every penny the government pays for anything is created, ad hoc, with the press of a computer key. The federal government never borrows the currency it has the infinite ability to create from thin air. Here is how:
To pay a creditor, the federal government creates instructions. These instructions tell the creditor’s bank to increase the balance in the creditor’s checking account.
At the instant the instructions are obeyed, new dollars are created and added to the money supply measure called “M1.”
That is how the federal government creates money: By using its infinite ability to create instructions telling banks to increase checking account balances.
Why would the federal government borrow, when as Chairman Ben Bernanke said, it can “produce as many U.S. dollars as it wishes at essentially no cost.”
The borrowing binge, which many economists viewed as necessary to help the United States recover from the pandemic, has left the nation with a debt burden so large that the government would need to spend an amount larger than America’s entire annual economy in order to pay it off.
Utter nonsense. The so-called “debt” (that isn’t a debt) is not a debt “burden.” The government pays off all T-securities simply by returning the dollars in T-security accounts. It does this every day.
And the phrase, “entire annual economy” is a non-sequitur based on ignorance. The size of the U.S. economy (i.e. the Gross Domestic Product) does not pay for any part of the “debt.”
That comparison of the so-called “debt” vs. the US. economy — known as the “debt/GDP ratio — often is quoted as a way to shock the reader, though it is a meaningless comparison.
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Do you see any relationship between the Debt/GDP ratio and the economic strength of the nation? Of course not, because there is no such relationship.
The Debt/GDP relationship is meaningless. So why does Rappeport refer to it? Either he doesn’t understand federal finance or he is trying to scare you.
(The Wall Street Journal is designed for the rich, and the rich want to convince the populace that the government cannot afford to give benefits to the not-rich.)
Some economists contend that the nation’s large debt load is not unhealthy given that the economy is growing, interest rates are low and investors are still willing to buy U.S. Treasury securities, which gives them safe assets to help manage their financial risk. Those securities allow the government to borrow money relatively cheaply and use it to invest in the economy.
More nonsense. The so-called “debt load” is not unhealthy, and low interest rates are not a factor. The federal government, having the unlimited ability to create dollars, has no difficulty paying any amount of interest.Totally painless.
And the federal government doesn’t need investors to buy Treasury securities. These are offered as a benefit to investors, not to the government. And in any event, any unsold T-securities are purchased by the Federal Reserve.
For years, presidents have promised to limit federal borrowingand bring down the nation’s budget deficit, which is the gap between what the nation spends and what it takes in. Under President Bill Clinton, the United States actually ran a budget surplus between 1998 and 2001.
Yes, Presidents have made this promise, and every time they actually kept the promise, we had depression or a recession. Mr. Rappeport fails to mention that Clinton’s surplus led to the recession of 2001.
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.
But taming deficitshad fallen out of fashion in recent years, including during the Trump administration, when lawmakers blew through budget caps and borrowed money to fund tax cuts and other federal spending.
Deficits don’t need to be “tamed.” Remember what Greenspan, Bernanke, and the St. Louis Fed said about the government’s infinite ability to pay its bills.
Further, the federal government does not borrow its own sovereign dollars, the dollars it has the unlimited ability to create from thin air.
And all federal spending is funded, not by taxes, but by ad hoc creation of new dollars.
Why does the federal government levy taxes? To control the economy. It taxes what it wishes to discourage, and it gives tax breaks to what it wishes to encourage.
Further, taxes give the impression that federal benefits must be limited. The rich, who control Congress and the President, want the Gap between the rich and not-rich to widen. The wider the Gap, the richer are the rich.
It’s called “Gap Psychology“, the human desire to widen the Gap below and to narrow the Gap above.
“Hitting the $30 trillion mark is clearly an important milestone in our dangerous fiscal trajectory,” said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction. “For many years before Covid, America had an unsustainable structural fiscal path because the programs we’ve designed are not sufficiently funded by the revenue we take in.”
The Peter G. Peterson Foundation is notorious for crying “wolf” about the deficit and predicting calamity that never happens — until we actually do reduce the deficit, at which time we have the aforementioned depressions or recessions.
Until then, it’s all warnings and hand wringing about the “ticking time bomb of debt.” It’s a “time bomb” that has been ticking since 1940 and still no explosion.
The gross national debt represents debt held by the public, such as individuals, businesses and pension funds, as well as liabilities that one part of the federal government owes to another part.
Right, the so-called debt (T-bills et al) are assets of the private sector. When you own a T-bill, that is one of your assets.
Alan Rappeport doesn’t want you to have that asset. He wants the government, which has infinite assets, to take that asset from you. Smart?
While Republican lawmakers helped run up the nation’s debt load, they have since blamed Mr. Biden for putting the nation on a rocky fiscal path by funding his agenda. After a protracted standoff in which Republicans refused to raise America’s borrowing cap, threatening a first-ever federal default, Congress finally agreed in December to raise the nation’s debt limit to about $31.4 trillion.
It was all political theater — cynical politicians trying to convince the innocent public that they are fiscally prudent. But if they really were prudent, they would spend more on global warming, poverty, healthcare, education, transportation, infrastructure, science, ecology, etc. — not debating about how to spend less.
In January 2020, before the pandemic spread across the United States, the Congressional Budget Office projected that the gross national debt would reach $30 trillion by around the end of 2025. The total debt held by the public outpaced the size of the American economy last year, a decade faster than forecasters projected.
Yes, as usual, the economic forecasters were wrong about the meaningless Debt/GDP ratio. So?
The nonpartisan office warned last year that rising interest costs and growing health spending as the population aged would increase the risk of a “fiscal crisis” and higher inflation, a situation that could undermine confidence in the U.S. dollar.
By “fiscal crisis,” we assume Rappeport means the federal government would be unable to pay its debts — which as we know is impossible for our Monetarily Sovereign government. (It can happen to state/local government, which are monetarily non-sovereign.)
And inflation always is caused by shortages, never by federal deficit spending.
In fact, federal deficit spending is one of the best methods for curing inflation, if the spending is for curing the shortages.
Todays inflation is caused by shortages of oil, food, computer chips, labor, and other needs. The federal government could stop inflation by spending more to support oil drilling, efficient farming, and chip manufacture, and by eliminating FICA (FICA lowers the net income of workers and makes them less willing to accept jobs).
Trillions in federal spending has left the United States approaching levels of red ink not seen since World War II.
Actually, the so-called “debt” is much higher than it was during WWII. And when spending for WWII ended, we had recessions.
The Biden administration has said the $1.9 trillion pandemic relief package the Democrats passed last year was a necessary measure to protect the economy from further damage. Treasury Secretary Janet L. Yellen has argued that such large federal investments are affordable because interest costs as a share of gross domestic product are at historically low levels thanks to persistently low interest rates.
Yes, the $1.9 Trillion in deficit spending did protect the economy, just as cuts to federal spending will injure the economy. So why cut?
Interest costs as a share of GDP are irrelevant, as are low interest rates. In fact, higher interest rates have one advantage: They force the federal government to pump more stimulus dollars into the economy.
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Inflation always is caused by shortages and always is cured by curing the shortages, which the federal government can do by federal deficit spending.
Esther L. George, the president of the Federal Reserve Bank of Kansas City, suggested during a speech this week that the Fed’s big bond holdings might be lowering longer-term interest rates by as much as 1.5 percentage points — nearly cutting the interest rate on 10-year government debt in half. As rates rise, so does the amount that the United States owes to investors who buy its debt. The Congressional Budget Office estimates that if interest rates rise in line with their own forecasts, net interest costs will reach 8.6 percent of gross domestic product in 2051. That would amount to about $60 trillion in total interest payments over three decades.
That’s 60 trillion stimulus dollarspumped into the economy — dollars the federal government easily can create with the touch of a computer key, and dollars the economy uses for growth.
“A larger amount of debt makes the United States’ fiscal position more vulnerable to an increase in interest rates,” the C.B.O. said in its long-term budget outlook.
What does he mean by “vulnerable”? Is he saying that our Monetarily Sovereign government, which has the infinite ability to create dollars, will not be able to pay interest? Nonsensical.
Biden administration officials insist that they view fiscal responsibility as a priority. They have pledged that their economic agenda will be fully paid for through tax increaseson wealthy Americans and corporations and by more rigorous enforcement of the tax code.
Biden wants you to believe that federal taxes fund federal spending. It is a lie. Federal taxes are destroyed upon receipt by the Treasury.
Taxes come out of checking accounts that are part of the M1 money-supply measure. When they reach the Treasury, they cease to be part of any money-supply measure. They effectively disappear.
There is no money supply measure that includes the federal government, because the government has infinite money. No one can answer the question, “How much money does the federal government have?” The only answer is, “Infinite.”
In recent months, the budget deficit has started to shrink as a stronger economy has boosted tax receipts and as government payments of pandemic relief money have slowed.
And this means economic growth will slow. If federal deficits fall enough, we will have a recession or depression.
And some economists argue that a more recent economic phenomenon — inflation — may have a silver lining in that it could chip away at the nation’s debt burden.
The federal “debt” is not a burden on the federal government or on taxpayers or on anyone else. It’s not debt, and even if it were, the federal government has the unlimited ability to pay.
Kenneth Rogoff, a Harvard University economist, said “You would rather have no debt, of course, but compared to other issues at the moment that’s not the principal problem.”
He’s a Harvard economist and he thinks that having no debt (which would require removing $30 trillion from the economy) is something we “would rather have”?? Is this the nonsense they teach at Harvard?
In summary:
A federal deficit is necessary for economic growth. The federal Debt/GDP ratio is meaningless as a measure of economic health.
The federal government creates dollars, ad hoc, by paying creditors, which it can do endlessly.
Unlike state/local governments, the federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar, and instantly can pay any obligation based on dollars.
The government never unintentionally can run short of dollars.
Federal taxes are destroyed upon receipt and do not fund federal spending.
The federal debt is nothing more than the total of deposits in T-security accounts, which are “paid off” by returning the dollars in them. This is not a burden on the federal government or taxpayers.
Federal deficit spending does not cause inflation; shortages cause inflation. A prime way to combat inflation is with federal deficit spending to cure shortages.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
The U.S. federal government is Monetarily Sovereign. Even if all federal tax collections fell to $0, and expenses tripled, the government would not unintentionally run short of dollars.
The government unnecessarily charges you for such services as Social Security and Medicare.
Contrary to popular opinion, Medicare isn’t entirely free.In a video interview, Dana Anspach, the founder and president of Sensible Money, explained the components of Medicare and the costs associated with Part B and Part D.Medicare Part A, often referred to as hospital insurance, is free if you worked enough years in the U.S. to qualify. “Typically, if you’re eligible for Social Security benefits, you’re also eligible for Medicare Part A at no cost,” said Anspach.
This would be true if the federal government hadn’t socked you and your employer for FICA taxes, which purportedly fund Medicare and Social Security.
In reality, these taxes fund nothing. The federal government creates new dollars ad hoc, every time it pays an invoice.
Quote from Ben Bernanke when, as Fed chief, he was on 60 Minutes:Scott Pelley: Is that tax money that the Fed is spending?Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.
Medicare Part B covers other services and supplies, and it has a monthly cost that varies depending on your income.
The money deducted for Part B, like all other payments to the federal government, pay for nothing. All dollars received by the federal government are destroyed upon receipt.
When you pay federal taxes, dollars come out of your checking account. These dollars come from an money-supply measuren called “M1.”
When the Treasury receives your M1 dollars, they cease to be part of any money-supply measure. The reason: It is impossible to measure the amount of money the Treasury “has,” given that the government has the infinite ability to create its own sovereign currency, the U.S. dollar.
So those M1 dollars effectively are destroyed upon receipt.
And there is Part D, for prescriptions, and it is free if your income is low enough, but it has a cost once your income exceeds various threshold amounts.
The following chart outlines the payments — the unnecessary payments — you are forced to make in order to receive medical benefits from the federal government.
You have been brainwashed into believing the federal government, which created the U.S. dollar from thin air, now somehow can short of the dollars it created.
So, you are led to believe it financially is necessary for the federal government to receive your dollars, to pay for services.
It isn’t. The federal government has neither the need nor the use for your dollars. It has the infinite ability to create new dollars.
That is how it is able to sustain a debt of $25 trillion with no worries at all.
You are swayed by reasonable-sounding complexity:
“Like so many things associated with retirement, it’s more complicated than you may think“First, the Social Security office references your tax return data from two years prior to determine your premium level, so if 2022 is your first year enrolling in Medicare, they will use data from your 2020 tax return.”“Let’s assume you are turning 65 in 2022, and your MAGI from 2020 is below $91,000 if single/$182,000 if married filing jointly; in this case, your Part B premiums are $170 per month and Part D will be free. (Your MAGI is calculated by adding back any tax-exempt interest income to your adjusted gross income (AGI).)‘Now, if your MAGI exceeds additional threshold amounts, your premiums will be higher. ‘This is referred to as means testing and is technically called the IRMAA. You are notified of your premium amounts via a letter from the Social Security office called your Initial Determination Letter, said Anspach.The largest premiums of $578 for Part B and $78 for Part D apply to MAGI greater than $500,000 for singles and $750,000 for marrieds.Now if you are not yet enrolled in Social Security, you will receive a quarterly invoice for these premiums, said Anspach. But if you are enrolled in Social Security, the premiums are deducted from your monthly Social Security payment.
So many caveats; so many details. And it’s all a lie. The federal government destroys your FICA dollars and deductions from Social Security the moment they are received.
The federal government easily could and should pay for Medicare Part A, Part B, and Part D without charging you anything.
So why does the government force you to send it dollars that it destroys?
The following chart, from the aforementioned article, contains a hidden clue:
Did you see the clue?
Look at the last line. There is a ceiling on payments above a certain amount of income. That is, the person who makes a half million, or a million, or a hundred million dollars a year pays the same.
The increases in payments stop at a certain level.
This is the same trick the government uses when calculating FICA payments. In 2021, employees pay a 6.2% Social Security tax (with their employer matching that payment) on income up to $142,800. Any earnings above that amount are not subject to FICA tax.
The very rich are never satisfied. They always want to be richer.
“Rich” is a comparative. There are two ways to become richer: Obtain more for yourself or widen the income/wealth/power Gap between you and those below you by forcing them to receive less.
Because the very rich control the U.S. government, Congress and the President are only too happy to oblige by setting a ceiling on payments to the government.
As a share of disposable income, the rich pay far less than do you.
This effectively widens the Gap, thus making the rich richer.
2. It collects an unnecessary and huge FICA tax from salaried employees and their employers, not from dollars earned in non-salaried remunerations — more representative of the rich.
3. Employers count the FICA they pay as being part of salaries, thus reducing paid salaries.
4. Despite the fact that Social Security is quasi-insurance, ostensibly paid for by FICA, the government collects proportionately more taxes from lower-income people.
5. Lower-income people generally work for salaries that are taxed at the highest rates. Other forms of income, more usual for the rich, are taxed at lower rates or not taxed at all.
6. Wealth generally is not taxed.
7. Tax loopholes available primarily to the rich.
7. Tax complexity is intentional. It allows the rich, who can afford expensive tax accountants and lawyers, to take advantage of arcane tax laws, not understood by the general public.
8. Student loans.The rich can pay tuition. The not-rich are burdened by loans.
Keep in mind that all of the above taxation and fees, together with limits on federal benefits, are unnecessary. The federal government neither needs nor uses tax dollars, and its spending is not financially limited.
The rich want you to believe that federal finances, which are Monetarily Sovereign, are the same as state/local government finances, which are monetarily non-sovereign.
The fundamental difference is that the spending by state and local governments is limited by income from tax receipts and borrowing. Federal spending is not limited by any form of income.
The Federal government doesn’t need your hard-earned dollars. Ignorance is expensive.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
I continually am puzzled by the misunderstanding (“disunderstanding”?) of Monetary Sovereignty. It is both simple and obvious, yet many (most?) people have trouble comprehending it.
MS is based on just four simple facts:
In the 1780s, the U.S. federal government created the laws that created the U.S. dollar from thin air — as many dollars as it wished – and gave them the value it wished.
The government’s own laws give it the power to continue creating dollars, infinitely
The government’s own laws give it the power to continue changingthe valueof the dollar — a power it has used many times.
The government can change its laws at will.
Really, what could be simpler, more obvious, and less controversial?
Derived from these simple, obvious facts comes the following:
The U.S. federal government never unintentionally can run short of U.S. dollars.
No agency of the government can run short of dollars unless the government wishes it.
Federal taxes are not used or needed to fund federal spending.
By changing the value of the dollar, the government has absolute control over inflation
And that’s it. Monetary Sovereignty.
Intuition is powerful. Many of us prefer to believe our intuition than believe facts.
Interestingly, where fiction parallels facts, you might not believe the facts about the fiction, while still believing fiction about the facts.
That is, you might read a historical novel of fiction, and not believe the background facts presented. Yet, you might be fooled by a conspiracy theory website presenting fiction as fact.
So here is the explanation that may appeal to intuition as well as to facts.
You probably have played the hugely popular board game, Monopolytm. As a game, it’s fiction, but you believe and understand the facts (i.e. “rules.’)
Here are some of the facts.
The game is played with multiple players plus a Bank. The Bank pays Monopoly dollars to the players for various benefits.The Bank collects taxes, fines, loans and interest from the players.The Bank “never goes broke.” If the Bank needs money, it may issue as many dollars as needed by printing on scraps of paper or simply by creating a bookkeeping tally.
Example of a Monopoly running tally
A sample tally is demonstrated by the illustration at the right.
It reveals three things:
I. Monopoly money is not physical. Those printed $500, $100, $50, $20 $10 $5, and $1 bills aren’t dollars in of themselves.They merely representdollars, just as the numbers on a tally represent dollars.II. The Bank can createan infinite supply of Monopoly dollars.
If needed, the Bank instantly could pay Tom, Dick, Harry, or Bob $1, or $100, or $1,000,000,000 in Monopoly dollars.
In the tally, there is no need to create a column for the Monopoly Bank.
This lack of a column demonstrates the Bank’s ownership of infinite dollars.
It also demonstrates that all dollars sent to the Monopoly Bank are destroyed upon receipt.
If Tom, for instance, sent $100 to the Bank, his $4,400 would be reduced to $4,300. So, what happened to the $100 Tom paid? They simply disappeared. They no longer exist.
Although the Bank can create infinite dollars this creation process does not create Monopoly Bank “debt.” The Monopoly Bank does not borrow dollars nor does it owe any dollars.
Thus, taxes are not levied to “pay off” any Monopoly Bank debt.
By rule, the Monopoly Bank simply creates all the dollars it needs. Although the Bank is not precluded from keeping track of the dollars it receives from players, that record would not indicate how many dollars the Monopoly Bank “owes” or has.
There is no ongoing debt owed by the Monopoly Bank.
All of the above is easily understood by you and by virtually anyone else who has played the game.
Now, in the above paragraphs, substitute the words, “U.S. federal government” for the word “Bank.” And substitute “members of the public” for “players.”
The facts remain essentially the same.
There are multiple members of the public plus the federal government.
The federal government pays dollars to the public for various benefits.
The federal government collects taxes, fines, loans, and interest from the public.
The federal government “never goes broke.” If the federal government needs money, the government may issue as much as needed by printing on paper or simply by creating a bookkeeping tally.
[Former Fed Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”]
Continue reading and substituting until you come to the part that some people have difficulty understanding:
The federal government does not borrow dollars nor does it owe any dollars. Taxes are not levied to “pay off” any federal government debt.
[Quote from Ben Bernanke when, as Fed chief, he was on 60 Minutes:
Scott Pelley: Is that tax money that the Fed is spending?
Former Fed Chair, Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.]
The Monopoly Bank and the U.S. federal government both are Monetarily Sovereign. They both are issuers of their dollars. Neither of them can run short of dollars.
Both the Monopoly Bank and the U.S federal government have infinite dollars.
[Former Fed Chair, 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.”]
Neither the Monopoly Bank nor the federal government borrows or taxes in order to pay their financial obligations. Spending by the Monopoly Bank or the U.S. federal government does not create future taxpayer obligations.
For that reason, Social Security, an agency of the federal government, cannot run short of dollars, unless that is what the government wants. Even if there were no FICA tax (which contrary to popular myth, does not fund Social Security), that agency need not run short of dollars.
The “debt clock.” You have no share.
Medicare for All, college for all, upgraded infrastructure, good housing for all — every imaginable federal benefit — all are easily affordable. The so-called federal debt is not a burden on future taxpayers or on the government.
The famous “debt clock” implies the lie that somehow the federal “debt” is a danger to you, your children, and the federal government.
It is not a debt, and it is not a danger, to you or anyone.
It is just simple deposits by the public into accounts.
The parallels between the Monopoly game and federal financing are stunning.
Yet, though people tend to understand the rules of Monopoly, too many become hopelessly confused by the same set of facts when applied to real life.
Yes, one is fiction and the other is fact, but that difference is not the source of the confusion.
The confusion is caused by the longtime, ongoing, relentless dissemination of false information about the federal government’s finances and by the misnaming of T-securities as “borrowing” and “debt.” They are neither.
The misinformation is promulgated by agents for the rich, who want to prevent you from asking for the benefits the rich already receive: Retirement benefits, medical care, good housing, safe neighborhoods, college education, spending money for a good life.
Neither the government nor you owes the deposits that sit in T-security accounts. These accounts resemble bank safe deposit boxes, which the bank “pays off” simply by returning the contents. No “debt” or tax liability there.
The Monopoly board game is a good analog for the federal finance system. If you understand one, you should understand the other.
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.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
Ten Steps To Prosperity:
You have been brainwashed into believing the federal government, which created the U.S. dollar from thin air, now somehow can short of the dollars it created.
So, you are led to believe it financially is necessary for the federal government to receive your dollars, to pay for services.
It isn’t. The federal government has neither the need nor the use for your dollars. It has the infinite ability to create new dollars.
That is how it is able to sustain a debt of $25 trillion with no worries at all.
You are swayed by reasonable-sounding complexity:
Did you see the clue?
Look at the last line. There is a ceiling on payments above a certain amount of income. That is, the person who makes a half million, or a million, or a hundred million dollars a year pays the same.
The increases in payments stop at a certain level.
This is the same trick the government uses when calculating FICA payments. In 2021, employees pay a 6.2% Social Security tax (with their employer matching that payment) on income up to $142,800. Any earnings above that amount are not subject to FICA tax.
Here are some of the facts.
#Monetary Sovereignty - Mitchell 