Tag: Social Security

–Professor Black and the secret plot to defeat Obama

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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On Monday, December 13, 2010, William Black, associate professor of economics and law at the University of Missouri-Kansas City, wrote a post on his blog, New Economic Perspectives, titled, “Obama haters praise his tax policies because they believe those policies will make him fail” (I once spoke at the UMKC, and have great respect for the professors of economics whom I met there. I still correspond with Professor Randall Wray, one of the more brilliant minds in economics.)

The thrust of Professor Black’s post was summarized in his first paragraph:

Like the Sirens reputed to lure sailors onto rocks, a series of columnists who want President Obama to fail are praising Obama’s capitulation on extending the Bush tax cuts for the wealthy. The motif of these comments has three common characteristics – all designed to destroy the Obama presidency. First, and the chutzpah of this aspect is wondrous, those that hate Obama’s policies are telling Obama he is demonstrating his strength by surrendering on the Bush tax cuts to the wealthy. Second, they claim that Obama “moved to the center” by agreeing to support tax cuts for the wealthy. Third, they claim that Obama’s attacks on his strongest supporters are brilliant politics essential to saving his Presidency.

Professor Black’s fundamental complaint was:

Obama’s promise to end the Bush tax cuts for the wealthy was supported by a strong majority of Americans. . . The people who want Obama to fail consistently push him to abandon policies that are desirable and broadly supported by the public. . .

I commented on Professor Black’s post, and the essence of my comments was:

“A couple of problems. First, because the public does not understand monetary sovereignty, and so does not understand economics, the beliefs held by the public do not necessarily constitute ‘policies that are desirable.’

“Second, increasing taxes on any group, rich or poor, removes money from the economy, and so is anti-growth. There is zero economic benefit from increasing taxes on the rich, despite the emotional satisfaction it may give the poor.

“Obama was dragged kicking and screaming into exactly the right action, i.e. he didn’t increase any taxes other than the ‘death tax,’ and that went up less than feared.

“In total, his ‘capitulation’ is predicted to give us a continuation of the Bush tax rates, a reduction in FICA and a lesser increase in the death tax. Assuming this bill passes, we will have a much better chance of exiting the recession. If that’s ‘losing|,’ I’ll take losing over winning every time.”

I was quite surprised to read Professor Black’s post. Because he teaches at UMKC, I innocently had expected he would have a better understanding of federal finance and monetary sovereignty. Perhaps, the word has not yet had time to float around the hallowed halls.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Democrats eagerly embrace suicide mentality

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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Question: What can save the Democrats in the 2012 elections?
Answer: Economic growth.

Question: What will stimulate economic growth?
Answer: Tax benefits, better unemployment benefits, business benefits.

Question: What will provide tax benefits, more unemployment benefits, business benefits?
Answer: The deal President Obama worked out with GOP leaders. It has lots of tax benefits for everyone. The Bush tax reductions remain. Capital gains and dividend taxes remain at 15%. FICA is reduced. The “death tax” didn’t go as high as people feared. Unemployment benefits were lengthened.

Question: What has the Democrats angry?
Answer: The deal President Obama worked out with GOP leaders.

Question: Why are the Democrats angry at the one bill that can get them re-elected in 2012?
Answer: They campaigned on the pledge to stick it to the wealthy. This bill doesn’t stick it to the wealthy — at least not enough. This bill moderately benefits the entire country. The Democrats now are in the “Cut-my-nose-to-spite-my-face” mode, except they also are willing to spite all of America. There was a time when we all could laugh at ignorant politicians. Today, when they actively aim to harm America, they aren’t quite as funny.

By the way, did you notice how they slid in that reduction in FICA, which we recommended 15 months ago (Ten Reasons to Eliminate FICA ) and which my book, FREE MONEY, recommended 12 years ago. But hey, better late than never. As usual, they did only a partial job, but what can you expect?

Anyway, soon you’ll see all the misguided debt-hawk columnists prattle on about how this FICA reduction will make Social Security go bankrupt sooner. Tell me, who understands economics less, the columnists or the politicians?

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–An “investigative” newspaper comments on the new tax agreement

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.
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For reasons I cannot even begin to imagine, the Chicago Tribune, which prides itself on being an investigative newspaper, refuses to investigate facts before or even after, writing about the economy. I have contacted them often, and they never have displayed even a modicum of interest in learning anything about how the economy works. Instead, they rely solely on popular myth.

Here is a verbatum copy of an Email I sent to editors and others at the Tribune:

“Today’s (12/7/10) Chicago Tribune editorial titled, “Tax Dealing” contains a mixture of truth and myths.

1. Truth: “ . . .raising marginal (tax) rates, especially with the tax year ending an a matter of weeks, would hurt an economic recover still on life support. Obama knows he needs all the growth he can get.” Translation: Yes, taxes hurt the economy because they remove money from the economy. A growing economy requires a growing supply of money.

2. Myth: ” . . . nobody is reducing the cost of government to make up the lost revenue.” Fact: Federal spending is not constrained by taxes, nor do taxes pay for federal spending. Tax money is destroyed (i.e. “lost”) upon receipt and is not stored anywhere.

3. Truth: “The (commission on debt reduction) work can be a catalyst for historic change.” Yes, if we follow the commission’s debt reduction advice, we will have a depression of historic proportions. See item #1, above.

4. Truth: “The panel’s plan involves cutting everything from defense to Social Security . . . Everyone from senior citizens to post-office customers have complained about the pain involved if the plan were enacted.” Yes, it’s a plan that hurts everyone and benefits no one. It’s all pain and no gain.

5. Myth: “That’s unavoidable. Everyone is going to feel some pain when the nation makes its government live within its means.” Fact: Causing economic pain neither is unavoidable nor praiseworthy. As for the government “living within its means,” the Tribune demonstrates it does not know the difference between monetarily sovereign finances (U.S. Government) and monetarily non-sovereign finances (everyone else). You and I have “means.” We must have a source of money before we spend. We are limited in how much we can spend. The federal government is not limited. It creates money by spending. It alone has the unlimited ability to pay any bills of any size. It has no “means.”

6. Myth: You repeated Sen. Durbin’s comment, “Borrowing 40 cents out of every dollar we spend for missiles or food stamps is unsustainable.” Fact: The federal government does not need to borrow even one cent. Borrowing the money the federal government originally created, and can continue to create endlessly, makes no economic sense. It is a relic of the gold standard days, when federal borrowing was necessary. The government does not spend borrowed money. As for federal spending being “unsustainable,” this myth has been bandied about since 1980 (See: Unsustainable) It is no more true today than it was 30 years ago.

7. Myth: “It’s irresponsible for our nation to go on accumulating unaffordable debts that will force even more painful cuts down the line.” What makes the debt “unaffordable”? The Tribune has no idea. In fact, “federal debt” merely is a synonym for “federal money created.” Without federal debt there would be no money and no economy. The Tribune makes the nonsensical complaint that money is unaffordable.

8. Myth: “The coming agreement on tax cuts will avoid an unwelcome shock to the U.S. economy. It will buy time. But it has to lead to an agreement on long-term deficit reduction.” The Tribune editors do not realize that the first part of this paragraph contradicts the second part. If increasing deficits will help the economy, why do the Tribune editors want to decrease deficits? Ever?

In summary, the Tribune editors continue to parrot the myths of the day. Not once do they even make an attempt to provide evidence supporting their beliefs. So I’ll leave you with a couple of questions, you may or may not wish to answer:

–Exactly what do you mean by “make up for lost revenue.” Do you mean that without this “lost revenue” the federal government will be unable to pay its bills?
–Why do you feel economic pain is beneficial. Has the economic pain we already have felt proved beneficial?
–Why do you feel cutting defense will benefit the economy and American security?
–Why do you feel cutting Social Security benefits will benefit the economy?
–Why do you feel reducing postal service will benefit the economy?
–What is the definition of “means,” when you say the government must live within its means. What has happened because the government has not lived within its “means.”
–What do you mean by ‘unaffordable debts.” Do you think a government with the unlimited power to create money, cannot afford to pay for the T-securities it creates out of thin air? Similarly, what do you mean by “unsustainable”?
–Does the Tribune feel any concern about spreading false information that could damage your readers and the entire American economy?
–Is the Tribune interested in learning the facts?

If any of you are readers of the Chicago Tribune, you may wish to write to them. Perhaps mutiple voices would help. I write to:
Zoll, Yerak, Dold, Japsen, Page, Greising, Letters, Ponpei, Delama, Kern, , Oliphant, Hirt, Business, Knowles, Kass, Lythcott, McHolt, O’Brien, Epodmolik, Lev, Doneal
Hughlett, Nicholas, Widder, Jones, Hunter, Wong

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

–Senator Durbin wanders in Fantasyland

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.

Read about Senator Durbin’s wanderings in Fantasyland. Today, 12/3/10, the Chicago Tribune published an article by Dick Durbin, the senior Senator (D) from Illinois. The title: “Why I’m voting ‘yes.” Here are some quotes from the article, and my comments.

“On Friday, when President Brach Obama’s National Commission on Fiscal Responsibility and Reform gathers to consider a plan to bring our national debt under control, I will be voting yes. . . . America needs to grow our economy and reduce our $13.trillion debt. “

Never mind that almost 30% of that debt is merely one government department owing another government department. (Think of your checking account owing your savings account.) We can forgive that “minor” arithmetic error, because the good Senator makes a much larger one.

It mathematically is impossible to cut the debt and grow the economy at the same time. Money not only is the engine, but also the measure, of economic growth. GDP is a money measure. Cutting the debt requires taking money out of the economy, either by raising taxes or with reduced spending, or both. When you take money out of the economy, there is no mechanism by which you can grow the economy. There are no caveats about efficiency or savings or reducing waste or any other supposedly mitigating concepts. It simply is 100% impossible to grow an economy while reducing the money supply.

It’s like telling someone to take a lower paying job so he can buy a bigger house. The arithmetic doesn’t work.

Apparently Senator Durbin realizes this, because later he says:

“I worked (to) make certain that the (recommended) spending cuts do not start until 2013. We cannot run the risk of hitting the brakes in the midst of this recession, driving more people into unemployment and shredding the safety net to protect our families.”

So let’s see if we understand his thinking. Spending cuts “hit the brakes and drive people into unemployment.” We don’t want to do that now, but we do want to do it in 2013. Huh?

Then he said:

“I also insisted on two things to spark the economy: a payroll tax holiday that can create up to 900,000 jobs and a longer-term investment of $100 billion in infrastructure, education and reserach and development – key investments for long-term economic growth.”

Hmmm. So he wants to cut the deficit, but realizing that deficits stimulate the economy, he wants to increase the deficit with a payroll tax holiday and $100 billion investment.

So tell us again, Senator Durbin why do you want to cut the deficit? Oh sorry, you never told us the first time. Could it be because you have no reason? None at all?

“Borrowing 40 cents out of every dollar we spend for missiles or food stamps is unsustainable.”

Ah yes, the old “unsustainable” line. Back in February 7, 1982, almost 30 years ago, when the Federal Debt Held by Private Investors was $733 billion, President Ronald Reagan referred to the, “rapid, unsustainable expansion of Federal spending and money growth.” (See: Unsustainable) Today, the FDHBPIN is $7.9 trillion, having increased an astounding 1,000% in only 29 years, and politicians continue to refer to it as “unsustainable” – while we keep sustaining it with no difficulty whatsoever. When you say that something we have done, actually since the 1930s, is impossible, at some point you must question yourself. If it’s unsustainable, how have we sustained it?

Senator Durbin is yet another politician who does not understand monetary sovereignty. He does not understand that the U.S. can “sustain” any spending of any amount. Its spending is not constrained by deficits, debt or taxes, but rather by inflation – the inflation the Fed easily controls, the inflation from which we are a long, long way.

And he does not understand the federal government does not need to borrow the dollars it previously created, and does not need to borrow what it can create in unlimited quantities.

How frightening it is that Senator Durbin expresses the false beliefs held by the majority, not only of Congress but of the American people. One only can imagine how Galileo felt.

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

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”