Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
====================================================================================================================================================
Let’s remind ourselves of the basics. The U.S. federal government is Monetarily Sovereign. It cannot run short of dollars. It can create unlimited dollars to pay any bills. That is what “sovereign” means. It needs to stop spending only in the face of an inflation it can’t cure. Otherwise, it can spend, forever.

You and I and every company are monetarily non-sovereign. We cannot create unlimited dollars. We must stop spending when we run out of dollars. That’s what non-sovereign means.

The same is true of Illinois, Cook County, Chicago, France and Greece. They too are monetarily non-sovereign. Unlike the U.S. government, but like you and me, they can run short of money.

That is the difference between Monetary Sovereignty and monetary non-sovereignty. (If you don’t understand the difference, read: Monetary Sovereignty: The key to understanding economics.)

The difference is what brings me to a Rick Unger article that recentlyappeared in Forbes Magazine:

Nation’s Largest Theater Chain Cuts Employee Hours To Shirk Obamacare Responsibility

Get that “Shirk Responsibility” bit? You see, the federal government, which has the unlimited ability to create its sovereign currency, has passed the “responsibility” hot potato to the private sector. That’s considered fiscally “prudent.”

But, if the private sector, which cannot create dollars at will, doesn’t want the responsibility, Rick Unger calls it “shirking.”

In other words, the theater chain doesn’t care to pick up any additional cost as a result of providing health benefits to employees. Their answer —like much of the fast food industry—is to simply cut back on the hours its employees are permitted to work, denying employees not only reasonable health care benefits but the opportunity to earn a living.

In this way, the company is able to sidestep the requirement of the ACA which obligates employers to provide the benefits to employees working 30 hours a week or more.

Of course, if the government doesn’t care to provide health care benefits, it simply cuts back on federal spending, thus denying citizens reasonable health care benefits and the opportunity to earn a living.

In this way, the government is able to sidestep its obligation to care for its citizens.

Interestingly, a manager who spoke with Fox News blames the problem on the law—not his employer— saying, “Mandating businesses to offer health care under threat of debilitating fines does not fix a problem, it creates one. It fosters a new business culture where 30 hours is now considered the maximum in order to avoid paying the high costs associated with this law.”

That man is smarter than Fox News, Rick Unger, and 99% of Americans, who claim it’s the private sector’s obligation to pay for what the federal government refuses to pay.

I can’t help but wonder if this theater manager is aware of the fact that the company employing him brought in $2.8 billion in revenue in 2011 or that profits were so good in 2012 that the top executives got huge pay increases and bonuses?

How shocking. $2.8 billion! That comes to about 1/1000th of the amount that our “broke,” Monetarily Sovereign government took in last year. Not that it matters, because unlike Regal, which relies on income to pay its bills, the federal government could pay all its bills even if it had $0 income.

I suppose it does become difficult to provide healthcare benefits to those responsible for making the local theaters run successfully when the top executives are taking millions of the profits in annual pay increases.

But not nearly as difficult as it is for President Obama — whose health care is 100% subsidized, who is treated like a king, and who will make many, many millions when he leaves office — to claim that Medicare needs to be “reformed” (i.e. gutted), and to pass the obligation on to the private sector.

As you consider where to watch the film of your choice, you might also keep in mind that many of the people you rely upon to make your movie going experience a good one are doing so without the benefit of health insurance coverage for their own families.

As you consider who should receive your vote, you might also keep in mind how many Americans are doing without the benefit of health insurance, because the government, which easily could afford it, has shirked its responsibilities.

If possible, chose to take the family to a theater that is not a part of the Regal chain. And if the movie you wish to see isn’t playing somewhere else, wait a few months and watch it at home.

By doing this, it won’t take long for the movie studios that supply the films to recognize that Regal’s behavior is bad for business and for the Regal executives to grasp the notion that treating their employees in this way means that their 2013 bonuses and pay raises will not be quite so sweet.

Great idea. Brainwash the private sector into turning on itself, like a pack of snarling dogs fighting for a bone, when their master has an unlimited supply of bones.

The upper .1% has done a wonderful job convincing us the federal government needs our money more than we do. So sure, blame the private sector for lack of health care, lack of education, lack of roads and bridges, lack of retirement income, too much unemployment and too little economic growth — whatever is lacking, blame the private sector.

Then tell me why we pay Congress and the President, if their big plan — their “Grand Bargain” — is to pass more and more of their obligations on to the private sector.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

Erskine Bowles and Alan Simpson are Co-Chairs of what ironically is named, “The Moment of Truth Project.” If ever there was a moment when these two spoke the truth, that time is well past and long forgotten. A more appropriate name would be, “The Years of Deceit Project.”

On April 19, 2013, they published an Email addressed to “Dear Colleagues and Friends.” The entire letter is reprinted in the Comments section of this post, but I’ll discuss a few passages:

This morning, the two of us are releasing a detailed plan to control our mounting debt and grow the economy.

When you read their letter, you’ll see not one proposal for growing the economy. All their proposals are for deficit cutting, i.e. austerity, which has been an economic disaster everywhere in the world it has been tried.

Our plan, the Bipartisan Path Forward to Securing America’s Future, fleshes out the framework we released this February, which built on the negotiations between Speaker Boehner and President Obama in December. Our plan would save an additional $2.5 trillion over the next ten years, address all areas of the budget, and would put the debt on a downward path over the long-term.

Calling something “bipartisan” is supposed to give it credentials. The reality: “Bipartisan means: The right wing demanded it, the President always wanted it and the left wing acceded to those demands.

No discussion ever is made of how removing $2.5 trillion from the economy can possibly benefit America.

The failure to get our debt under control, reform our tax code, and put our entitlement programs on a fiscally sustainable course is robbing us of the ability to invest in our future and will leave us without the resources we need to meet other challenges facing our nation.

Translation: The failure to reduce the money supply, tax the middle class more and gut Social Security and Medicare, is robbing the upper .1% of the ability to widen the gap between the rich and the rest.

Focus on the incredible notion that increasing taxes and reducing federal benefits somehow would help us invest in the future. It’s like saying, “We need to lighten up by chopping off our legs, so we can run faster.”

That is what passes for a “Moment of Truth” to Bowles and Simpson and the rest of those bought-and-paid-for by the upper .1% wealth group.

It is critical that leaders in both parties come together to put our fiscal house in order if they have any hope of addressing the other challenges and opportunities that we face as a nation.

Translation: “Fiscal house in order” means cut social programs and increase middle-class taxes.

. . . despite multiple efforts from Speaker Boehner and President Obama to reach a “grand bargain,” the country has still done nothing to make our entitlement programs sustainable for future generations, make our tax code more competitive and pro-growth, or put our debt on a downward path.

Translation: The “grand bargain” is President Obama’s long time dream of destroying the New Deal social programs. “Entitlement programs sustainable” means gut Social Security, Medicare, Medicaid and aids to the poor, in order to save them.

This entire program is based on the theory that the United States federal government is short of money, but you poor and middle classes have too much money. So you must give more of your money to the government.

Last December, the negotiating parties were as close as they’ve ever been on a plan to put our fiscal house in order.

When you read the full text, you’ll see repeated use of such vague, meaningless euphemisms as, “fiscal house in order,’ “grand bargain,” “sustainable for future generations, “moment of truth,” “more competitive and pro-growth,” “addressing our challenges, “principled compromise,” “better future for our grandchildren.”

These phrases are the Simpson/Bowles equivalent of Orwell’s: “War is peace. Freedom is slavery. Ignorance is strength.”

Taken together, these policies would put our debt on a clear downward path as a share of the economy while protecting the recovery, promoting long-term economic growth, protecting the most vulnerable in society, and ensuring our entitlement programs remain fully available to future generations.

What you will not see is any evidence that tax increases and spending decreases “protect the recovery, promote long-term economic growth,” blah, blah, blah. No, you will not see even one ounce of data showing how this plan would grow the economy, reduce unemployment or in any way at all, better the lives of the poor and the middle classes. The reason: Such data do not exist.

At the end of their letter is a table showing their recommended deficit cuts. Here are just a few. As you read them, ask yourself, “Whom they will impact most, the rich or the rest?”

Health Care: $585 billion
Military health and retirement: $100 billion
Higher education: $35 billion
Increase User Fees: $50 billion
Chained CPI: $280 billion

In summary, here is your “Moment of Truth”: Simpson/Bowles is a lie — a prescription for economic disaster, a destruction of the lives of Americans living and yet to be born, and a spectacular widening of the gap between the rich and the rest.

The names of these men will live in infamy. The program they propose is a disgrace, exceeded only by the disgraceful ignorance of those who believe it.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY

Mitchell’s laws:
●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
=====================================================================

On April 9, 2013, a group called “Chicago Booth” asked professors from MIT, Harvard, Yale, Berkeley, Chicago and Princeton to rate the following statement::

Countries that let their debt loads get high, risk losing control of their own fiscal sustainability, through an adverse feedback loop in which doubts by lenders lead to higher government bond rates, which in turn make debt problems more severe.

The question is so poorly written it cannot be answered. Sadly, these professors, each from a distinguished school, didn’t object. They all answered.

Some of the problems are:

1. It is a three-phrase question, and each phrase changes the possible answer.
2. No definition is given for “their debt loads” (The whole nation’s or just the central government’s?)
3. No definition is given for “high,” nor for “higher bond rates.” (Higher than what?)
4. “fiscal sustainability” is not clear (Ability to pay bills? Ability to prevent inflation? Ability to grow economically? Ability to prevent recession, depression, stagflation, poverty?)
5. “doubts by lenders” (Doubts of what? Repayment? Inflation?)
6. “debt problems” (Specifically, what are the debt “problems” that becomes “more severe”?)
7. In total, the question assumed the answer (“Agree”) and the professors dutifully went along, without thought or concern, like little automatons.

The question might have been written by a high school freshman. But, as nonsensical as the question was, the answers were even worse.

Every one of these professors agreed with the statement! Yikes!

The closest anyone came to even approaching reality, was David Autor and possibly David Cutler, both of whom might understand the difference between Monetary Sovereignty and monetary non-sovereignty. But even they agreed with the statement.

The others’ answers were completely clueless. Aaron Edlin was so sure of his wrong answer, he added the supercilious comment, “Does gravity make bricks fall when dropped?” One is left to wonder when he last learned anything new.

And these people, from “top” schools, are teaching our children. What a disgrace for the U.S. educational system, when even our “best” schools turn out such wrongheadedness.

To my knowledge, there is one school (thankfully) in America, that teaches real economics: The University of Missouri, Kansas City.

The rest seem to teach a flat-earth philosophy, and if the following group is typical, our economics students, and indeed our nation, will suffer for many years.

Here are the professors and their responses. The number indicates 1-10 the strength of their agreement. In a few cases, they added a comment:

Daron Acemoglu MIT Strongly Agree 7

Alberto Alesina Harvard Strongly Agree 10

Joseph Altonji Yale Agree 7

Alan Auerbach Berkeley Agree 7

David Autor MIT Agree 6
This is generically true, but we don’t the threshold where it matters. And not clearly true for countries that borrow in their own currency.

Katherine Baicker Harvard Agree 3

Marianne Bertrand Chicago Strongly Agree 3

Raj Chetty Harvard Agree 4

Judith Chevalier Yale Strongly Agree 8
“Risk” is the operative word here; it is hard to forecast ex ante at what point the negative feedback loop will become problematic.

Janet Currie Princeton Agree 4

David Cutler Harvard Agree 3
Lots of particulars matter, including who it is owed to and whether the country has its own currency.

Angus Deaton Princeton Strongly Agree 7

Darrell Duffie Stanford Strongly Agree 10
In perfect transparent markets, the market clears at an appropriate yield in one step. In actuality, price discovery involves feedback.

Aaron Edlin Berkeley Strongly Agree 10
Does gravity make bricks fall when dropped?

Barry Eichengreen Berkeley Uncertain 7
Much depends on other factors like growth of the denominator of the debt/GDP ratio, which will vary with policies & circumstances.

Ray Fair Yale Strongly Agree 5

Pinelopi Goldberg Yale Agree 6

Michael Greenstone MIT Agree 7
Tough question is definition of “high”. See Rogoff/Reinhardt for best evidence. Does “high” differ for country w global currency, like US?

Robert Hall Stanford Strongly Agree 8
Simple math…interesting that it has not happened to Japan, however.

Bengt Holmström MIT Agree 8

Caroline Hoxby Stanford Agree 9

Kenneth Judd Stanford Agree 4
The debt load may be a factor in reputation but the US has experienced great increases in debt in the past without suffering these problems.

Anil Kashyap Chicago Strongly Agree 9
The only question is when the tipping point kicks in. Japan will face trouble after Europe is sorted out, as might the UK and maybe then US

Pete Klenow Stanford Strongly Agree 7

Jonathan Levin Stanford Agree 6
Yes, but clearly conditions vary – right now US can borrow easily with high debt, but some euro countries cannot.

Eric Maskin Harvard Agree 8

William Nordhaus Yale Agree 7

Maurice Obstfeld Berkeley Strongly Agree 10
Government vulnerability will depend on the maturity of its debt (more short term debt means more exposure) and the size of its deficit.

Emmanuel Saez Berkeley Uncertain 5

José Scheinkman Princeton Did Not Answer

Richard Schmalensee MIT Agree 3

Hyun Song Shin Princeton Agree 7

Nancy Stokey Chicago Strongly Agree 10
With debt/GDP around unity, a substantial risk premium can be the difference between the debt load being “sustainable” and “unsustainable.”

Richard Thaler Chicago Agree 3
Yes I suppose so, but what of it?

Christopher Udry Yale Agree 3

Luigi Zingales Chicago Strongly Agree 6

Throughout America, there are continuing efforts to test our students to determine what they are learning. Clearly there needs to be similar testing of teachers, to determine what they are teaching.

If this were our best and our brightest, America would be doomed.

Rodger Malcolm Mitchell
Monetary Sovereignty

====================================================================================================================================================

Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Medicare — parts A, B & D — for everyone
3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
4. Long-term nursing care for everyone
5. Free education (including post-grad) for everyone
6. Salary for attending school (Click here)
7. Eliminate corporate taxes
8. Increase the standard income tax deduction annually
9. Increase federal spending on the myriad initiatives that benefit America’s 99%

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports

#MONETARY SOVEREIGNTY