STOP THE STUPID. The Pell Grant “reserves” Tuesday, Dec 15 2020 

Just An Introduction
Trump followers claim that Republican judges and SCOTUS justices are cowards who have yielded to mythical “pressure” into denying Trump’s absurd claims.Stop the Stupid Tucker Carlson Boycott - POLITICO Magazine

But, most of the so-called “pressure” is coming from Trump, and as for SCOTUS justices, what sort of pressure can affect them? They are immune.

Nevertheless, Trumpers have taken to the streets to scream, “Stop the Steal.”

I suggest the retort should be “Stop the Stupid,” for only a very stupid person actually believes that 30+ judges and the entire Supreme Court, most of whom are right-leaning, would ignore right-wing evidence.

(The problem is, when people are stupid, they are too stupid to realize they are stupid.)

The Main Idea
The phrase “Stop the Stupid” brings me to an article published by that ever-dependable source of economic ignorance, The Committee for a Responsible Federal Budget (CRFB)

Today’s article, like virtually all CRFB articles, suggests cutting federal benefits to everyone who is not rich.

Whether it be Social Security, Medicare, unemployment compensation, food stamps, or any other financial support program for the middle or poor, you can rely upon the CRFB to come in, all a-twitter, with charts and articles demonstrating the lie that the federal government can’t afford such spending.

And so it is now, with Pell grants.

Today, the Pell Grant program assists undergraduates of low-income families, who are actively attending universities and or other secondary institutions. Before the Pell Grant became what it is today, it went through numerous changes.

In 1965, Congress passed the Higher Education Act of 1965 (HEA). President Lyndon B. Johnson implemented the HEA as a part of his administration’s “Great Society” agenda to assist and improve higher education in the United States.

It was the initial legislation to benefit lower- and middle-income students.

The HEA program included not only grants but also low-interest loans to students who did not qualify for grants.

Universities and other institutions, such as vocational schools, benefited as well from the HEA program, by receiving federal aid to improve the quality of the education process.

Student aid programs administered by the US Department of Education are contained in Title IV of the HEA and so are called “Title IV Programs.”

As you can see, the HEA, like all laws, was created from thin air by Congress and the President. It was a time when Congress and the President cared about helping low- and middle-income families. (Remember those days of yor?)

Congress was able to create HEA, and subsequent Amendments, because being Monetarily Sovereign, the U.S. has unlimited dollars available to it. Even without collecting a single dollar in taxes, the federal government cannot ever run short of dollars. Not ever.

In 1972, Title IX Higher Education Amendments were a response to the distribution of aid in the current grant.

Senator Claiborne Pell set forth the initial movements to reform the HEA. Lois Rice, an American corporate executive, scholar, and education policy expert is known as the “mother of the Pell Grant” for her work lobbying for its creation.

Opportunity Grant Programs (Basic Grant) were intended to serve as the “floor” or “foundation” of an undergraduate student’s financial aid package. Other financial aid, to the extent that it was available, would be added to the Basic Grant up to the limit of a student’s financial need.

Most changes to the federal student aid program result from a process called reauthorization.

Through the process of reauthorization, Congress examines the status of each program and decides whether to continue that program and whether a continued program requires changes in structure or purpose.

Congress has reauthorized campus-based programs every five or six years, beginning in 1972.

In short, the Pell program is completely arbitrary.

It has no intrinsic financial constraints. Pell’s finances are constrained only by what Congress and the President happen to voice on any particular day.

Pell primarily is funded by arbitrary appropriations.

President Donald Trump signed a bill finalizing funding for the government for fiscal year (FY) 2020

The bill provides $72.8 billion in discretionary funding for the Department of Education (ED), a $1.3 billion increase from FY 2019. The bill boosts the maximum Pell Grant award to $6,345, though it relies on a $500 million recession from the program’s reserve fund.

The bill also increases funding for the Federal Supplemental Educational Opportunity Grant (FSEOG) program by $25 million (to $865 million) — which Trump proposed to cut entirely — and allocates $1.2 billion for the Federal Work-Study (FWS) program, a $50 million increase from FY 2019.

In Trump’s proposal, he suggested slashing funding for FWS in half.

To hammer home the central point, the Pell grant, and every other program financed by the government, can be at any cost. The federal government, unlike state and local governments, cannot run short of dollars.

Congress and the President decide what to spend, and create the spending dollars from thin air.  The federal government controls infinite financial resources.

Here for instance is what Congress appropriated for Pell during a 5-year period, 2007 – 2011.

Fiscal Year 2011: $41,674,180,000
Fiscal Year 2010: $21,772,000,000
Fiscal Year 2009 : $19,378,000,000
Fiscal Year 2008 : $16,256,000,000
Fiscal Year 2007 : $13,660,711,000

Why the hugely different amounts? Congress simply voted for whatever it pleased. There are no financial limits placed on Congress or the President. You wouldn’t know that, however, if you read the latest CRFB histrionics:

Now’s Not the Time to Raid the Pell Surplus
December 14, 2020

With 2020 college enrollment down as a result of the COVID-19 pandemic, the Pell Grant program may add more to its reserves than previously estimated.

A lie. There are no “reserves.” They are a financial myth.

Think: Of what purpose would “reserves” be, when the supply of dollars is infinite. Creating “reserves” is just a way to con the poor and middle-income people into believing that federal money is tight.

It is a lie, and I have come to the conclusion that, after all these years, everyone at the CRFB knows it is a lie.

Policymakers may be tempted to spend these additional reserves in the end-of-year omnibus bill by expanding Pell Grants, for example, to cover short-term educational or training programs. They should avoid this temptation.

As recent experience from the Great Recession shows, economic downturns can quickly increase the costs of the Pell program and lead to large shortfalls.

A lie. “Shortfalls” only will come if Congress unnecessarily votes to create shortfalls. Fictional “reserves” can’t cover “shortfalls” or anything else. The federal government never unintentionally faces financial shortfalls.

Spending funds now on low-priority, questionable initiatives will leave less room to weather the economic downturn or target future funds where they are truly needed.

A lie. The “room to weather an economic downturn or target future funds” is infinite. This year, Congress voted to spend an additional $3 trillion in stimulus money.

No problem. It could (should) have voted double or triple that amount, and still there would be no problem. The federal government simply creates money by spending money. That is the federal government’s standard process for creating dollars.

The Pell Grant program, which provides financial aid to low- and middle-income college students, has a unique budgeting structure.

Program costs are based on the number of eligible applicants, and all eligible applicants automatically receive their award based on a formula.

It is mostly funded, however, through the annual appropriations process.

Exactly. Congress votes; the President signs; and the money is created from thin air, at the touch of a computer key.

When appropriations exceed costs, the program can essentially save the unspent dollars to expand its reserves. This has been the case in recent years, leading to an $11 billion reserve in 2020.

Prior to the COVID-19 pandemic, CBO projected reserves would continue to grow to $18 billion by 2030.

A lie. The “reserve” is a  bookkeeping fiction. Totally unnecessary.

At the whim of Congress, the reserve could be $0 or $1 trillion, and nothing would change. Whenever it wishes, Congress merely can vote to increase the reserve, eliminate the reserve, or do anything else it wishes. The reserve is financially meaningless, meant to fool the uninformed.

CBO previously projected the Pell program would generate $850 million of extra funds in 2021; the actual amount is likely to be higher.

As a result of the pandemic, college enrollment for the 2020-2021 academic year is down 4 percent for all students and 16 percent for freshmen.

A lie. The Pell program generates nothing. Congress spends whatever it wishes to spend.

If Pell costs fell just 5 percent as a result, the Pell reserve would grow an additional $1 billion per year; if they fell 10 percent, it would expand by more than $2 billion per year.

A lie. The reserve is neither more nor less than what Congress and the President want.

The “reserve” is just numbers on a balance sheet that the government has the infinite ability to change at will. It’s like a game of Monopoly™, where the players can change the rules any time they wish.

Politicians may view these extra reserves as an opportunity to expand the Pell program. Given current economic uncertainty, however, this would be a mistake.

A lie. One cannot say what Congress viewed, but the reality is, “extra reserves” provide no opportunity to expand the program.

The opportunity to expand the program comes from Congress’s and the President’s acknowledgment that unlimited dollars are available.

While pandemics tend to reduce college enrollment, recessions often boost enrollment substantially.

During every recession since the 1960s, college enrollment has increased as unemployed workers looked to learn new skills and saw college as a more attractive option given the lack of available jobs.

This was particularly evident during the Great Recession, when the number of people collecting Pell Grants jumped 70 percent from 5.5 million in 2008 to 9.4 million in 2012.

The fact that more people opt for college during hard times merely demonstrates the wisdom of the populace.

It is no threat, whatsoever, to federal solvency, which is infinite.

Over this period, the Pell finances took a turn for the worse. In 2007, CBO’s projected future Pell costs would roughly match funding levels.

By 2012, the agency projected a ten-year shortfall of nearly $60 billion.

The expansions to the Pell program at the beginning of the Great Recession and subsequent rise in enrollment and average award meant Congress had to inject more than $50 billion above regular appropriations between 2009 and 2014 and cut eligibility and benefits in the latter years.

A lie. Pell finances turn for the worse (or better) based on which political party is in control.

If the Democrats control, Pell usually is given more money. The GOP usually tries to cut Pell.

Note that Congress injected more than $50 billion extra into the program, simply by voting to do so. The money didn’t “come from” somewhere. Congress created it just by voting.

The same deterioration could occur again once an effective vaccine is distributed throughout the population and people are no longer avoiding in-person schooling.

This time enrollment could increase for several reasons – including from enrollment of those who delayed schooling through the pandemic, those who suffered job losses or business closures, and those who continue to enroll in newly expanded online programs.

Until these enrollment pressures are better understood, policymakers should avoid spending what is likely a very temporary source of excess funding.

A lie. If the Democrats regain control over Congress, there is a greater chance funding will increase. It’s that simple.

It has nothing to do with job losses and business closures. It has to do with the desire to support the more needy Americans.

Instead of expending a temporary Pell surplus on a questionable new policy, policymakers should save it for rainy days that could be soon to come.

As we monitor enrollment in the post-pandemic portion of the recovery, we will have a better sense of what resources are available and more time to deliberate on how to use them effectively to best achieve the goal of ensuring higher education access and affordability for low-income students.

A massive lie. In federal finances, there is no such thing as a “rainy day.”

For the federal government, every day is financially sunny. The federal government should not just expand Pell. Rather it should fund college for everyone who wants it, regardless of personal wealth and income. (See: Ten Steps to Prosperity, below)

Each dollar spent on college educations funds greater American brainpower, economic growth, and international competitiveness.

In Summary

CRFB is one gigantic lie, composed of numerous half-lies, innuendos, false comparisons, fear-mongering, and flat-out dishonesty.

It is funded by the very rich to provide the government with false excuses for not helping the middle and the poor.

The purpose is to widen the Gap between the rich and the rest.

If you want to know who the liars are, here’s a list.

You can tell them: STOP THE STUPID.

Rodger Malcolm Mitchell

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


The most important problems in economics involve:

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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


Will people still work if the government gives them money? Saturday, Oct 17 2020 

There is a rather widespread belief that if the government simply gives people money, they won’t work. Instead, they will be satisfied with the money they are given.

Long days, hard labor another day at the office for Oregon firefighters -

Forest Fire Fighter: Median pay, $40,815 a year.

The variables in this hypothesis are: The amount of money, the people’s needs, the jobs available, the salaries available, and perhaps most importantly, the psychology of the people with regard to work.

There is a strange paradox that the people who labor hardest or at the least appealing jobs are paid the least.

It’s a paradox only because, for instance, one would think an employer would have to pay more to get someone willing to dig in a windowless, damp, dark, dreary, dangerous mine than to a teacher sitting in a comfortable, clean, often air-conditioned room, with windows to the outside.

Where would you rather be: A mine or a classroom?

Yet the median coal miner’s salary is about $29 per hour and the median elementary school teacher’s salary is about — right, that same $29 per hour.

When those coal miners, school teachers, forest fire fighters, et al are out of work, Modern Monetary Theory(MMT) refers to them as “buffer-stock.”

When you are nothing more than “buffer-stock,” you have no ambitions, preferences, or human needs.

You are just a peg to be fitted into an appropriately-sized government hole.

And having none of those aforesaid ambitions, preferences, or needs, you will be satisfied with whatever amount of money you have and/or receive.

So, if you are a buffer-stock person formerly making $50,000 a year, and the government was to pay you $30,000 a year, you will be satisfied, and not work to earn even more. At least, that is the belief of MMT and others with similar views.

California construction firm buys Lunda Construction

Highway construction worker: Median pay: $45,940 per year

And that is why MMT suggests its Jobs Guarantee.

Rather than having the government simply give you money, MMT et al would give you a minimum wage job, that you may or may not (probably, not) like, to prevent you and the other lazy slugs from just lolling about, doing nothing but collecting the dole.

The MMT rationale is that having any job, even a crap job, will look good on your resume, and help you find a job.

Puleeeze! I personally have hired hundreds of people, and never have found that make-work on a resume was more attractive than no-work.

Quite the opposite.

The myth of the lazy poor is rampant and ignores the reality that pay scales tend to be inverse to effort or benefit to society.

The laziest people on earth probably are the billionaires who resent having to walk, drive, lift, wash a dish, make a bed, set an appointment, wait in a line, fill out a form, or rear a child.

For those rich, their primary contribution to society is to give falsely appreciated property to charity, thereby gaining more in tax deductions than the cost of the property. (Hello, Donald Trump, who hasn’t paid taxes in most of the past 20 years).

These entitled few are given tax breaks that allow them to pay little or nothing against millions or even billions of annual income.

Yet there is annoyance, even among your fellow buffer-stocks, when a poor person receives any sort of free ride. Taking a few dollars in food stamps receives sneers even from the middle classes.

When there is a mention of Step 3. of the Ten Steps to Prosperity (below) [Provide a monthly economic bonus to every man, woman and child in Americasimilar to social security for all], there is heard in our land, plaintive moans, “Who will pick up our garbage; who will pave our streets; who will mow our lawns, who will do the dirty work the rest of us can’t bear to touch?”

The whole notion of the “buffer-stock” not caring to earn more and lift their standard of living is demeaning, ridiculous, and ignorant.

BUT, let’s say it’s true. Let’s say that if you simply give all those road construction workers the equivalent of their salary, and they decide not to work, what would happen?

First, it would stimulate the economy. When state and local governments pay bills, they use existing, recirculated dollars. No stimulus there.

But when the federal government pays bills, it uses newly created dollars, which increases the nation’s money supply and stimulates Gross Domestic Product.

Second, there would be a shortage of road construction workers, which would lift their salaries, and that would narrow the Gap between the richer and the poorer. A narrow Gap benefits the masses, which should be both a moral and economic goal of any nation.

In Summary, people are not “buffer-stock.” They are humans with hopes and dreams for themselves and their children. Whatever they have, they want more.

If unemployed people need money, give them money, not junk jobs.

Don’t pretend it is morally unsavory to do for the poor exactly what the government does for the rich. The less affluent need money, so give them money.

The inverse relationship between effort and reward is an abomination. If being given money means fewer people will accept junk jobs, good.

That will help force employers to make the jobs less “junky.” Work environments will improve and the pay will increase. Those are good results.

Every man, woman, and child in America should receive Social Security, and the benefits themselves should be increased. The result would be greater economic growth and a narrower Gap between the richer and the rest.

Rodger Malcolm Mitchell

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


The most important problems in economics involve:

Ten Steps To Prosperity:

  1. Eliminate FICA
  2. Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
  3. Social Security for all or a reverse income tax
  4. Free education (including post-grad) for everyone
  5. Salary for attending school
  6. Eliminate federal taxes on business
  7. Increase the standard income tax deduction, annually. 
  8. Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
  9. Federal ownership of all banks
  10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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


Do you know more than a university economist? Friday, Jul 6 2018 

Image result for university economist

It takes only two things to keep people in chains:

The ignorance of the oppressed

and the treachery of their leaders


Federal finances are much different from state & local government finances, and different from business and your personal finances.

Many people find the federal government’s finances to be counter-intuitive, because the federal government is Monetarily Sovereign, while state & local governments, businesses, and people themselves are monetarily non-sovereign.

The purpose of today’s post is to demonstrate a step-by-step logical progression, that will make federal financing more intuitive and defendable.

All science begins with certain propositions or axioms that in themselves, cannot be proved, but are assumed to be true. From these axioms flow the conclusions of the science.

For example, in Euclidian (plane) geometry, there are five propositions:

1. A straight line may be drawn between any two points.
2. Any straight line may be extended infinitely.
3. A circle may be drawn with any given point as center and any given radius.
4. All right angles are equal.
5. For any given point not on a given line, there is exactly one line through the point that does not meet the given line.

None of the above can be proved. They are statements that are felt to be self-evident. From these statements, all of plane geometry flows.


For millions of earth’s years, there was no U.S. government and no U.S. dollar. Finally, in 1792, a group of men arbitrarily created certain laws out of thin air. Like all laws, these laws had no physical existence. They were mere concepts.

The laws created, also from thin air, a legal entity known as “The United States dollar.” Although some U.S. dollars are represented by printed paper, dollars themselves have no physical existence. Dollars are nothing more than bookkeeping entries.

The men who created the U.S. dollar created as many dollars as they wished. They could have created many more or fewer.

The original dollar arbitrarily was given a value related to 371 grains of silver, and since then, Congress and the President have retained the power to give the dollar any value they chose. 

Just as a car title is not a car, and a house title is not a house, the dollar bill, being a title to a dollar, is not in itself a dollar. The vast majority of U.S. dollars are not represented by paper dollar bills.  All dollars — indeed all forms of money —  are nothing more than bookkeeping records.

The popular belief that gold or silver are money or once were money, is false. Gold never has been money. It is a barter commodity. In world history, many commodities have been used for barter: Cattle, horses, wheat, diamonds, land, buildings, silk, etc., though none is money.

Money is the debt of an issuer. Dollars are the debt of the U.S. government. All debt has collateral, and the collateral for the U.S. dollar is the full faith and credit of the U.S. government. See: Full faith and credit.

Six propositions, a basis for U.S. Monetary Sovereignty, are bolded:

  1. All money is debt.
    (Money is a debt of its issuer, backed by the issuer’s full faith and credit. Debts are bookkeeping entries, having no physical existence.)
  2. The U.S. dollar bill is a title to a U.S. dollar, not a dollar in of itself.
  3. The U.S. Congress and the President retain the unlimited ability to create as many sovereign dollars as they wish.
  4. The U.S. dollar, like all commodities, is valued according to its Supply and Demand [Value = Demand/Supply].
    (In 1971, President Richard Nixon arbitrarily decided that the Value of the dollar no longer would be related to gold or to silver, and the Supply of dollars no longer would be limited by the federal government’s Supply of gold or silver.)
  5. The Demand for a U.S. dollar is based on Risk and Reward. [Demand = Reward/Risk]
  6. The Risk of owning a dollar is inflation. The Reward for owning a dollar is interest.
    The dollar not only is a “good” in its own right, but also is an exchange medium. Its market Value is related to the market Value of Goods & Services. The formula for the market Value of the dollar):
    Dollar Value = (Demand/Supply of dollars) / (Demand/Supply of goods & services)

The U.S. government is Monetarily Sovereign. It is sovereign over the dollar, and has the unlimited ability to create, destroy, or change the value of the dollar.

Other Monetarily Sovereign governments include Canada, Japan, China, Australia, and the UK.

Governments that are monetarily non-sovereign include those of euro nations, and U.S. cities, counties and states. These governments do not have the unlimited ability to create their sovereign currency, as they have no sovereign currencies.

They can run short of money and be unable to pay their financial obligations.

The six propositions lead to the following conclusions:

  1. Every form of money is “fiat,” i.e. created by the fiat of an issuer. (Contrary to popular belief, “fiat” does not mean “paper” as opposed to gold. There is no “paper” money, nor is gold money. Unlike barter commodities, money has no physical existence. )
  2. The U.S. government can pay any obligation denominated in U.S. dollars. It is impossible for the U.S. government unintentionally to run short of its own sovereign currency.
  3. No agency of the U.S. government can run short of U.S. dollars unless that is the intent of Congress and the President. (This includes such agencies as the White House, the Supreme Court, the military branches, Social Security, and Medicare.)
  4. The U.S. government neither needs nor uses tax dollars nor borrowing to pay its bills. (Because the Monetarily Sovereign U.S. government cannot unintentionally run short of its own sovereign currency, it has no need to obtain dollars from outside sources.)
  5. FICA does not pay for Social Security of Medicare benefits. (Even if FICA  were $0, the government could pay unlimited benefits, forever.)
  6. The federal government does not borrow. (It accepts deposits in Treasury Security accounts. It does not use the dollars in those accounts. The dollars remain in the accounts until maturity, at which time they are returned to the account owner.)
  7. Deposits in T-security accounts provide a safe depository for U.S. dollars (which stabilizes the dollar), and assist the Fed with its interest rate (and inflation) controls.
  8. Raising interest rates increases the Demand for dollars (to purchase dollar-denominated debt.)
  9. All dollars received by the U.S. government are destroyed upon receipt. (They disappear from any money supply measure.)
  10. There are two ways to create dollars and two ways to destroy dollars:
    Create Dollars

    I. Lend dollars
    II. Federal deficit spending
    Destroy Dollars:

    I. Pay off a loan
    II. Federal taxation
  11. Lending creates dollars. When a loan is supported by a loan document owned by the lender, the loan document is money. Like a dollar bill, it represents dollars owned by the lender, while the borrower receives new dollars. That is the difference between a loan and a payment. Though both are transfers of dollars, loans create new dollars, payments do not.
  12. Federal spending creates dollars. To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank (“Pay to the order of”) to increase the balance in the creditor’s checking account. The instant the bank obeys those instructions, new dollars are created an added to the money supply (M1).
  13. Paying off a loan destroys dollars.  It reduces or eliminates the value of the loan document owned by the lender.
  14. Federal taxes destroy dollars. They remove dollars from all measures of the nation’s money supply.
  15. State and local taxes do not destroy dollars. These taxes are held in private bank accounts (M1 and M2), from which the state and local governments take them for paying creditors.
  16. The purpose of federal tax dollars is to control private spending (i.e. “sin” taxes, tax deductions for businesses, etc.)
  17. The Social Security and Medicare “trust funds” are bookkeeping fictions. (In private-sector trust funds, receipts are deposited and invested. In federal trust funds, receipts are recorded and removed from the nation’s money supply. Spending creates new dollars, ad hoc.)(Medicare Part A supposedly is paid by a fictional “trust fund,” while Medicare Parts B and D are paid out of the Treasury’s “General Fund.” The Medicare “trust fund” supposedly is running short of money; the General Fund never can run short of money.)
  18. The formula for Gross Domestic Product (GDP) is: Federal Spending + Non-federal Spending + Net Exports.
  19. Federal deficit spending stimulates GDP growth by adding dollars to the economy, i.e. by increasing Federal Spending and Non-federal Spending.
  20. Reductions in federal deficit spending lead to recessions. (Vertical bars are recessions. Red line is deficit spending.)
  21. Recessions are cured by increases in deficit spending.
  22. Decreases in federal debt lead to depressions.
    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
  23. The Federal Reserve controls inflation via interest rate control. (Interest rates support Demand for dollars.)
  24. The primary cause of inflation has been an insufficient Supply of goods, not an excessive Supply of dollars.(Most modern inflations have been related to a shortage of oil. Every hyperinflation also has been caused by a shortage, usually a shortage of food.)
  25. Despite endless concerns that the federal “debt” (deposits in T-security accounts)) may be a “ticking time bomb, the federal government has no difficulty servicing its “debt” and inflation has averaged close to the Fed’s 2.5% target.
    Red line is federal “debt.” Blue line is inflation.
  26. The commonly referenced federal Debt/GDP ratio has no function or meaning. It does not indicate economic health, nor does it indicate the federal government’s ability to service its obligations (which is infinite).
  27. Interest rate increases are economically stimulative. They force the federal government to pump more interest dollars into the economy.
  28. A trade deficit is more beneficial to a Monetarily Sovereign nation’s economy than is a trade surplus. In a trade deficit, the Monetarily Sovereign entity receives scarce goods and services, while sending money it has the infinite ability to create from thin air. In a trade surplus, the Monetarily Sovereign nation, receives money it doesn’t need in exchange for goods and services it must create by valuable labor and scarce resources.
  29. People stimulate GDP by being creators, producers and consumers. Political entities (nations, cities, counties, states) that have net immigration grow compared with entities that have net emigration. GDP is a spending measure; adding immigrants increases government and private spending.
  30. Federal anti-poverty spending is economically stimulative. It increases the nation’s money supply, and it helps the poor population to be more creative and productive.
  31. Bigotry is economically depressive. Bigotry marginalizes a population (a gender, a race, a religion, a sexual preference) and prevents that population from being as productive as it otherwise could be.
  32. The sole purpose of government is to improve the lives of the people.  Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

In answer to the title question, now you know more than most university economists. Read the “Ten Steps” below, and you’ll know even more.

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


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

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

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

Ten Steps To Prosperity:

(Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.

(H.R. 676, Medicare for All )

This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”

(The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Guaranteed Income)) Or institute a reverse income tax.

This article is the fifth in a series about direct financial assistance to Americans:

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

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.

Five reasons why we should eliminate school loans

Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.

Salary for attending school. Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.

Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.

7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.

There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.

(Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.

10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

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


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