Tag: money

–Sabotaging health care

An alternative to popular faith

It has been a disgrace that the world’s leading, industrial nation, the proudest, most powerful nation in world history, has not provided health care for all its citizens.

Yes, I have voted more often for Republicans than for Democrats, because I felt they were better economists. But today I must give the Democrats credit for doing what is morally right, while taking the big political risk to start the ball rolling.

My Republicans, left to their own devices, would have done nothing. They never have been leaders for social improvements, whether Social Security, Medicaid, Medicare or human rights. While Republicans traditionally have been strong for business, they always have had to be dragged, kicking and screaming, into anything that smacks of human benefits for the less fortunate.

That said, the health care plan is far from ideal. Way too many questions to be answered. Consider it only a start, a prototype; you can expect hundreds of changes. My only hope is that the nay-sayers will not try to gut the bill for political advantage.

The question is, and always has been, who will pay for it? I believe the federal government should, and there exists massive evidence on this blog and elsewhere, to prove the government can afford huge deficit increases that will stimulate the economy, and without inflation.

But what if, despite all the evidence, taxes are increased? Economically, a bad idea, no matter what taxes they are. But, which Americans are willing to say, “I’ve got mine and I’m not willing to help those less fortunate than me?” If that’s your attitude, you’re not really an American, although ironically, it seems those who boast loudest about their patriotism often are least likely to extend a hand.

Now we need to see how the program can be improved for the benefit of all. We’ve taken two hundred years to get this far, because that first step always is the hardest. My Republicans, by trying to do everything to sabotage the plan, are on the wrong side of history.

I say now is the time to work with the plan, not against it. Our best minds, cooperating toward on goal, can make the improvements that will protect Americans for decades.

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

–Health care: The tragic misunderstanding

An alternative to popular faith

On March 20, the Wall Street Journal’s editorial, “The ObamaCare Crosswords” said, “The Congressional Budget Office estimates ObamaCare will cost taxpayers $200 billion per year when fully implemented and grow annually at 8% . . . Soon the public will reach its taxing limit . . . medicine will be rationed by politics. . . “

On March 22nd, the Chicago Tribune editorialized, “The health care reform legislation would raise, not lower, federal deficits by $562 billion . . .(there is time) to craft a more sensible compromise that extends health care coverage to more people without breaking the bank.”

Which bank? Do you mean the federal government, which has increased its debt in the past 30 years an astounding 1,400%, from $800 billion to $12 trillion, yet never has had, and never will have, any difficulty whatsoever in servicing its debt? Or do you mean the taxpayers, already suffering, but whom debt hawks will require to send additional money to a federal government that neither uses nor needs the money?

The Tribune’s solution: “Our choice would require insurers to take all comers but give them a big new customer base: American who now don’t have health coverage but who don’t need an overhaul this expensive in order to get it.” And who are these Americans? They fall into two main categories: Lower income people who can’t afford health insurance and people who have pre-existing health problems.

To assist the former would require insurers to lower rates, thus increasing premiums for everyone else. To cover the later would require insurers to accept greater risk and provide greater payouts, thus again increasing premiums for everyone else.

The strange belief that a federal government, which repeatedly demonstrates it has the unlimited ability to create money without inflation, suddenly would have difficulty servicing additional debt, has caused otherwise intelligent people to lose their ability to reason. Though our government continuously has proved it can service a debt of any size, taxpayers are limited in what they can service. So, why do respected media editors prefer tax increases to federal debt increases, especially when increasing federal debt stimulates the economy?

Contrary to media demagoguery and popular faith, taxpayers do not pay for federal spending. When the government spends, it merely reaches out and credits the bank accounts of its creditors. There is no limit to the government’s ability to activate these credits, which are not in any way affected by tax receipts. If all federal taxes were eliminated today, the federal government’s future ability to spend would not change by even one penny.

The confusion comes because the federal government is unlike you, me, companies and state, county and local governments. We all must obtain money to spend money, and we are limited in our ability to obtain money. By contrast, the federal government creates money out of thin air, with no limits. Taxpayers are not involved in the process.

Astute politicians are aware of the disconnect between taxes and spending, which is why Vice President Cheney, in an unguarded moment, famously said, “Deficits don’t matter.” But politicians, knowing the public believes taxes pay for spending, and not wanting to appear imprudent, go along with the myth.

We could have a health care program in which doctors, nurses and hospitals are well paid, pharmaceutical companies are incented to create new drugs, and all Americans receive optimum health care. Instead, wrong-headed budget concerns have taken precedence over human health concerns, leaving us with a crazy-quilt, inadequate health care bill.

The current plan is to take money from Medicare, from doctors, nurses and hospitals, from employers and from those who currently pay for health insurance. What a terrible, unnecessary human tragedy we have created, all because of ignorance about federal budgets.

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

–How to cure federal tax loopholes

An alternative to popular faith

The March 15, 2010 New Yorker Magazine contained a piece by Mr. James Suroweicki titled “Special Interest.” The article described a quirk of federal tax law in which private-equity fund managers pay taxes on their share of profits (also known as “carried interest”) at the capital gains rate. Mr. Surowiecki says, “If you manage money for a mutual fund or a public company, you pay regular income taxes; do it for a private fund and you pay capital gains.”

Because capital gains are taxed at a lower rate than regular income, Mr. Suroweicki feels this “loophole” is unfair and should be closed. He probably is right, though his solution is maddeningly typical and wholly wrong. He would close this “loophole” by doing away with the tax break, i.e. increasing the tax on carried interest.

Nowhere does Mr. Suroweicki suggest decreasing the regular income tax, though that step equally would close his hated “loophole,” while additionally providing a tax-relief benefit to the public. Instead he follows the popular faith that all our money really belongs to the government, and should any group find a way to send less than others to the government, the solution is to make them pay more, rather than allowing us to pay less.

The very word “loophole” has pejorative connotations: something that begs to be sealed up. Why can’t the carried interest tax rate be considered the “normal” tax, while the regular tax rates are considered the anomaly. Why must every perceived unfairness in taxes be cured by raising a tax rather than by lowering one?

The federal government does not use tax money to pay its bills. It, in fact, destroys all the tax money sent to it, and it creates new money when it credits the bank accounts of creditors. Federal spending is not limited by federal taxes. When your neighbor finds a way to pay less, this does not increase your own tax burden (though the same cannot be said for state and local taxes, as these entities do not have the unlimited ability to create money).

Yes, there is the pathological, human jealousy the have-nots hold for the haves. But, something more harmful exists: The false beliefs that we are the government, anything taken from the government comes from us, and anything given to the government benefits us.

We are not the government. We pay taxes; the government receives taxes. We are limited in our ability to spend; the government is not. We live, lust, feel, fight, work, worry, conceive and care for children. We dream of the future, but eventually we die. The government does none of these things.

It is a giant machine, a remorseless, monster grinder, only more powerful, because it has the unlimited ability to create its own fuel. Some of us fall into the grinder and lose an arm or a leg. Others escape. Mr. Surowiecki would call that escape a “loophole.” His solution: Close that “loophole” by making sure everyone loses and arm and a leg.

How about making sure no one loses and arm and a leg. How about cutting taxes to address unfairness. Has anyone ever thought of that?

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

–Jim Bunning and the populist health care position

An alternative to popular faith

In a March 4, 2010 editorial titled, “Bunning had a point,” the Chicago Tribune wrote: “Bunning had a very good point. Congress won’t pay for what it spends.” What the writer meant is, Congress doesn’t levy as much in taxes as it spends — the old balanced-budget theme. The editorial goes on to criticize President Obama: “‘Congress can only spend a dollar if it saves a dollar somewhere,” ‘President Obama proclaimed.’ But here Congress was spending $10 billion without saving a dime elsewhere.”

If there is one statement that is the uncontested bedrock of truth in economics, it’s this: A growing economy requires a growing supply of money. That statement actually is a tautology, for the very definitions of economic growth are measured in terms of money. Big economies have more money than do small economies, so for any economy to go from small to big, it has to increase its money supply, and for real growth, it has to increase its per capita money supply.

What is money? Every form of money is a form of debt. Bank accounts are bank debts. Credit card accounts are card-holder debts. Money market accounts are money market debts. Travelers’ checks are debts of the issuer. T-bills are federal debts. All are money and all are debt. There is no form of money that is not a debt. Even dollar bills (which have the words “Federal Reserve Note” printed on them) are debts of the U.S. government. ( “Bill” and “Note” are words signifying debt.)

So, to grow the economy, we must increase the money supply, i.e. increase the debt supply. But whose debts should we increase? We can select from personal, bank, business, state or local government and federal debts.

Shall we increase personal debts? That often is part of economic growth, though it can get to dangerous levels, at which time the frequency of bankruptcy increases and the economy suffers. So there is a limit to personal debt. Further, increases in personal debt usually are the result of economic growth, seldom the cause. And finally, what action could America’s politicians take to force increases in personal debt?

Shall we increase bank debt, also known as “savings accounts”? Increased saving sometimes is thought (wrongly) to be beneficial to the economy. Of late we have seen complaints that saving instead of spending slows the economy.

Shall we increase business or state and local government debt? Like personal debt, this can be dangerous debt. Many state and local governments already are over-borrowed, and are trying to reduce their debt.

That leaves the federal government as the safest source of increased debt/money. The federal government has the unlimited ability to create money; it cannot run out of money; it cannot go bankrupt; it has complete control over its debt-creation; it even can control the inflation some feel results from money creation. In short, the federal government is the ideal source of additional money to grow our economy

But the Chicago Tribune wants a balanced budget, meaning the federal money supply does not grow. Worse yet, in a balanced budget, the real money supply shrinks. Say in year 1 the money supply is $10 trillion and inflation is only 2% annually. By year 2, the real value of that $10 trillion has shrunk to $9.8 trillion. By year 10, with the same ongoing inflation, that balanced budget money supply has shrunk in real value to only $8.2 trillion. A balanced budget, with only 2% annual inflation, will cause our real (inflation adjusted) money supply to shrink almost 20% in ten years.

To achieve economic growth, the per capita money supply growth must exceed inflation, the trade deficit (which sends money overseas) and population growth, combined.

So yes, President Obama deserves criticism, but not for wanting to spend too much or tax too little. He deserves criticism for his populist, balanced-budget pronouncements, which by disparaging money growth, hurt America.

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