And just when I began to feel so good about Congress and the President at long last beginning to understand and tell the truth about economics, then I am splashed by ice water coming from the Committee for a Responsible Federal Budget.
You know the CRFB.
They are the ones who run interference for those in Congress who want you to believe the common myth that federal finances are just like your finances.
Here’s what they say:
Important to Pay For Child Tax Credit Expansion
Democratic lawmakers are planning to unveil legislation to substantially boost the child tax credit from $2,000 to $3,000, providing monthly payments to households and higher payments for younger children.
While this thoughtful proposal to expand support for children deserves consideration, it cannot legitimately be classified as COVID relief and should be fully paid for under the House PAYGO rules and normal principles of budgeting.
Briefly, “PAYGO” is an ill-considered concept that requires federal spending to be matched by taxes or T-security deposits.
It’s part of the myth that federal finances are like personal finances (and state/local government finances), where outgo must be funded by income. That’s why CRFB speaks of “normal principles of budgeting.”
Those “normal principles” are normal for you, normal for your state, county, and city, and normal for businesses. But they are not normal for the federal government, and this is what CRFB does not want you to understand.
When you pay for your spending, you must have a money source.
You must have a paying job, or you must borrow, or you must have savings. That’s because you are monetarily non-sovereign.
State and local governments, and businesses operate the same way. They too are monetarily non-sovereign.
The federal government is different. It is Monetarily Sovereign. It uses neither income nor borrowing. It creates, ad hoc, every dollar it spends,, each time it pays a creditor.
The federal government does not borrow and the taxes it collects are destroyed upon receipt.
The federal government does not have money; it creates money. Last year, it was able to spend trillions of dollars it did not have, and yet never ran short, and never bounced a check.
You can’t do that, nor can any other monetarily non-sovereign entity.
Soon, the Biden administration will spend another $2 trillion the government doesn’t have, and still no checks will bounce. That is Monetary Sovereignty.
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
We are still in the midst of a pandemic and economic crisis, and more borrowing will be needed to provide necessary relief and support the economic recovery.
However, emergency borrowing authority must be reserved for pandemic-related needs, not for enacting long-sought-after policy priorities.
It’s amazing how many misstatements the CRFB can pack into three short sentences:
- What they call “borrowing” (T-bills, T-notes, T-bonds) merely consists of accepting deposits into T-security accounts. The government does not use those deposits. They remain in the accounts, accumulating interest, until maturity, at which time they are returned. You do not lend to the federal government. You make deposits into your own T-security account.
- There is no need to “reserve emergency borrowing authority.” The government can accept as many dollars into T-securities accounts as it wishes, any time it wishes (though again, it doesn’t use the dollars in those accounts. That’s why it isn’t “borrowing.)
- I’m not sure why the CRFB tries to differentiate between “pandemic-related needs” and “long-sought-after policy priorities.” Spending is spending. All federal spending is funded exactly the same way: Via money creation.
House PAYGO rules make clear that new spending increases and tax cuts not related to the COVID response or climate change must be paid for.
Expanding the child tax credit clearly doesn’t qualify under either of these exemptions, as it is clearly meant as a permanent policy and is in many ways duplicative with the proposed $2,000 per child recovery rebates.
All federal spending is “paid for.” Apparently, the CRFB falsely means, “paid for via borrowing or taxing.” This demonstrably false statement has been disproven every year. In 2020 alone, trillions of dollars of federal spending easily were “paid for” without the need for tax increases or borrowing.
Replacing the current $2,000 child tax credit with a more broadly available $3,000 to $3,600 credit would help address the disadvantages that kids face in the federal budget.
But we shouldn’t borrow from our kids in order to pay for their care when there are plenty of offsets available.
This mixed-up sentence speaks of “borrowing from our kids,” which probably means future (totally unnecessary) tax increases. But then it talks about “offsets.” And what are those so-called “offsets” that don’t “borrow from our kids?
Overall, this policy will cost over $100 billion per year and more than $1 trillion over a decade if made permanent. Reducing child poverty is a worthy policy priority and one worth paying for.
Senator Mitt Romney’s recent proposal to consolidate existing support for children and workers and repeal regressive tax breaks represents one possible package of offsets.
The $5.8 trillion of tax increases and budget savings proposed by President Biden during the campaign also offers many alternatives.
Offsets could also be phased in to avoid imposing tax increases during a pandemic or disrupting a fragile recovery.
So, to help reduce child poverty, we should “consolidate existing support for children and workers”?? Ah, that lovely little word “consolidate” which in CRFB language means an even smaller word: “Cut.”
And, of course, “repealing tax breaks” is a synonym for “increasing taxes.” (Historically, the breaks the CRFB has seemed to favor eliminating are those that benefit the poor and middle classes.)
It is the “children and workers” who would have to pay the increased taxes and suffer the reduced support.
Offsets could also be phased in to avoid imposing tax increases during a pandemic or disrupting a fragile recovery.
This is a worthy policy aimed at achieving a worthy goal. That’s no reason to throw budget discipline out the window. Borrowing for the pandemic isn’t an excuse for unrelated tax cuts, nor is it a reason to enact permanent policies that aren’t properly financed.
So let’s see. The recovery is “fragile,” but we should have “budget discipline,” which means increasing taxes during this fragile recovery. How wise.
So the government should do something temporary — cut taxes and increase spending — and when we recover the government can increase taxes and cut spending.
“But we shouldn’t borrow from our kids.” Except that “borrowing from our kids” is exactly what future tax increases and spending cuts would do.
If empty-headed claims were dollars, the CRFB would be the wealthiest organization in the world.
Rodger Malcolm Mitchell
Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- 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:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all or a reverse income tax
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- 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.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 