Tag: money

–Let’s destroy the food, clothing and shelter of the rich

The debt hawks are to economics as the creationists are to biology.

Here’s an idea to help our economy. The rich have access to more food, more clothing and better shelter than have the poor. So let’s take some food, clothing and shelter from the rich and destroy it.

What? You don’t see how that can help the economy? You think it’s a stupid idea? Well, maybe. But isn’t it identical with what the politicians want to do right now?

You see, money is the food that makes the economy run. Today’s economy is starved for money. Yet, the politicians want to increase federal taxes on the rich, which will destroy some economic “food.” That’s right, federal taxes destroy money. The federal government doesn’t use taxes for spending. There is zero relationship between federal taxes and federal spending. (This is different from state and local governments, which do rely on taxes for spending.)

So, if you understand that taking food, clothing and shelter from the rich, and destroying it is useless and harmful, then you also understand that increasing federal taxes on the rich is equally useless and harmful. And if you understand it, why don’t your federal government representatives understand it?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Britain’s grand experiment: The debt hawk agenda

The debt hawks are to economics as the creationists are to biology.

This should be interesting.

Here are some quotes from The Economist:
“The budget, unveiled by George Osborne, the new chancellor of the exchequer, in June: To balance the books, he raised some taxes, notably VAT, but three-quarters of the savings will come from spending cuts. Most government departments will shrink by a quarter, though Mr Osborne excluded the National Health Service from his savagery. In the heated debate between Keynesian economists (who worry that a weak world economy needs more government spending) and fiscal hawks (who believe deficits must be tackled now to stave off Grecian disaster), Britain is the prime exhibit for tough love.”

“Mr Osborne plans to get the job essentially done by 2014-15. If all goes to plan, the deficit will fall from 11% of GDP in 2009-10 to 2.1% in 2014-15. The structural deficit, which strips out the effects of the economic cycle, will drop from 8.7% of GDP to 0.8%. On a similar basis, the government will by then be running a small surplus on the current budget, which excludes net investment (due to be slashed anyway over the next couple of years). This is a much faster retrenchment than the previous Labour government envisaged. It planned to return the cyclically-adjusted current budget to balance in 2016-17. Labour’s fiscal consolidation would have amounted to 4% of GDP by 2014-15; Mr Osborne is aiming at 6.3%.”

Never mind that Britain can’t have a “Grecian disaster.” Britain is monetarily sovereign. Greece is not. Completely different situations. Raise taxes; cut spending. Government runs a surplus. That is the debt hawk mantra. If Britain actually follows through on these steps (doubtful), it will suffer terribly.

All you debt hawks out there; what is your prediction?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Quick prediction for the next two years

The debt hawks are to economics as the creationists are to biology.

Here is a quick, overly simplistic prediction about what is likely to happen in the next two years. If you disagree (or even agree), feel free to add your own predictions.

1. The Democrats, fearing the weak economy will cost them the House and Senate, urgently will try to stimulate the economy before November.

2. However, stimulating the economy requires federal spending and/or reduced taxes, both of which add to the federal debt. Republicans, not wanting the economy to recover before the November elections, will object to any increases in the federal debt, falsely claiming it’s “unsustainable” and “our children will pay for it.”

3. Every stimulus plan put forth by the Democrats will be met with the threat of a Senate filibuster, plus objections by the media, the Tea Party and all others who have been hypnotized by the debt hawks.

4. The Democrats, paralyzed with fear about the federal debt, then will talk about increasing federal taxes on the “rich,” so as to be revenue neutral. This will add to the Democrats’ stigma as the “tax and spend party.” Small business owners, the primary economic engine in America, will find themselves defined as “rich,” so will become even more reluctant to hire and invest. Worse, because revenue neutral plans do not add money to the economy, they will not prove to be stimulative.

5. The economy will not recover significantly, and may even regress. The voters and the media will blame the Obama administration for not creating more jobs, but will offer no non-debt solutions, as there are none. Voters, wanting stimulus without deficits (in other words, magic), will vent their frustration on incumbents, giving Republicans enough representation in both Houses to stifle any Democratic initiatives, but not enough representation to advance Republican initiatives. Further, since the Republicans have been vociferous about deficits, they will have left themselves no way to stimulate the economy.

6. Within two years, President Obama will blame the lack of economic growth on Republican recalcitrance, thereby setting the stage for a Democratic comeback in 2012.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–There is no wasteful federal spending

The debt hawks are to economics as the creationists are to biology.

As usual, some stimulus spending has been criticized because it is “wasteful” and doesn’t create jobs. Here are a couple examples published recently:

“ $1.9 million spent to photograph ants has created two jobs.. Other ant research stimulus projects: $451,000 has created one job, $276,000 created six one-hundredths of a job, and $800,000 created no jobs. The $144,000 spent to study the behavior of monkeys on cocaine created four-tenths of a job. To study why monkeys respond to unfairness cost $677,000 – and has created no jobs yet.”

I am reminded of former Wisconsin Democratic Sen. William Proxmire, who published his monthly “Golden Fleece” awards for what he considered wasteful spending. He often was criticized for opposing basic research he did not understand, for instance NASA, SETI and the Aspen Movie Map. Many worthwhile, federal research projects have been killed because some politician thought they were frivolous. This is especially true of basic research, where the ultimate benefits are yet to be determined.

The notorious Mansfield Amendment prohibited the Defense Department from carrying out “any research project or study unless such project or study has a direct and apparent relationship to a specific military function.” Such Congressional meddling in research virtually eliminates discoveries based on serendipity.

Whether or not you consider ant research to be wasteful, it is highly unlikely that $1.9 million created only two jobs. Let’s speculate on where that $1.9 million might have gone. Photographers, photographic equipment, rent, researchers, travel, computers, chemistry equipment – all of which helped various businesses and people. Then those businesses and people spent the money they received on things like food, clothing, shelter and transportation, all of which helped more people and businesses. And on and on and on. In a similar vein, the monkey research expenses were paid to people and businesses.

In short, when the government spends money, that money costs you nothing. (Taxes do not pay for the spending of a monetarily sovereign nation.) In fact, that spending adds money to the economy, and that money circulates throughout the economy, stimulating as it goes. Every time the federal government spends, people and businesses benefit, and in turn these people and businesses spend, which benefits more people and businesses. Ultimately, all federal spending creates jobs.

There always will be a politician who tries to look heroic and prudent, by pointing out what he considers to be wasteful spending. While state and local governments, which do not have the unlimited ability to create money, can spend wastefully, it almost is impossible for any federal spending to be wasteful, even in cases where the original expenditure seemed frivolous in some eyes. Even spending for the notorious Alaskan “Bridge to Nowhere” would have benefitted the economy by pumping money into the hands of people and businesses.

Good rule of thumb: The more federal spending, the healthier the economy. Reduced growth in federal spending has resulted in nearly every recession and depression, and increased federal spending dragged this economy out of the recession.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity