Good news and bad news for the economy Wednesday, Mar 6 2019 

Today’s Chicago Tribune published a short article containing some good news and some bad news for the economy.

Here are some excerpts:

NEWS BRIEFING
Staff and news services
U.S. budget deficit has jumped 77% so far in this fiscal year

WASHINGTON — The federal government recorded a budget surplus in January.

Federal budget surpluses always are bad news for the economy (the private sector). A federal surplus is an economic deficit.Image result for good news bad news

The federal government, being Monetarily Sovereign, produces all the dollars it needs, simply by the process of paying creditors.

The economy does not have this ability, so it suffers from federal surpluses.

But so far this budget year, the total deficit is 77 percent higher than the same period a year ago.

The Treasury Department said Tuesday that the deficit for the first four months of this budget year, which began Oct. 1, totaled $310.3 billion. That’s up from a deficit of $175.7 billion in the same period a year ago. The surplus in January was $8.7 billion.

The higher deficit reflected greater spending in areas such as Social Security, defense and interest payments on the national debt.

As we said, the January surplus was bad news, because the federal government removed $8.7 billion from the private sector, i.e. from the economy.

But the increased deficit so far this year is good news, as the government added 310.3 billion growth dollars to the private sector.

Meanwhile, the government collected lower taxes from individuals and corporations, reflecting the impact of the $1.5 trillion tax cut President Donald Trump pushed through Congress in 2017.

The GOP $1.5 trillion tax cut was good news for the economy as a whole, though of course, most of the immediate benefits went  to the “haves” and very little to the “have-nots.”

The additional dollars eventually will spread through the economy, but the Gap between the richer and poorer will grow, which is a strong negative.

Individual income taxes withheld from paychecks total $818 billion for the October-January period, down 3 percent from the same period last year. Corporate income taxes total $73 billion over the four-month period, down 23 percent.

Both of the above are good news.

Revenue, however, is up in tariffs — border taxes collected on imports — which totaled $25 billion in the October-January period, up 91 percent from the same period a year ago.

This reflects the higher tariffs the Trump administration has imposed on China and other nations in various trade disputes.

The border taxes are not paid by the countries where the goods are being produced but rather by the U.S. companies importing the products into the United States.

Those cost increases are generally passed on to American consumers.

That is terrible news. The issue is not just that the “cost increases are generally passed on to American consumers” but rather that the tariff’s cost increases always are passed on to the American economy.

Ultimately, American consumers and American businesses pay for all tariffs. This has the same effect as an overall tax increase.

The Trump administration rightfully boasts that its tax cuts will stimulate economic growth and jobs growth, but at the same time, it institutes tariffs that will do the opposite.

Further, the ones hurt most will be the middle and lower income groups, as they are more subject to the costs of tariffs and less rewarded by the tax cuts.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell
Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell

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The most important problems in economics involve the excessive income/wealth/power Gaps between the richer and the poorer.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. 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 you.

MONETARY SOVEREIGNTY

 

What is the complex relationship among inflation, deficits, interest rates, oil prices, tax cuts, and GDP? Saturday, Mar 17 2018 

It takes only two things to keep people in chains:
.

The ignorance of the oppressed
and the treachery of their leaders.

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To answer the title question, we begin with three questions:

  1. What is the primary cause of inflation?
  2. What is the primary cure for inflation?
  3. What do high interest rates do to Gross Domestic Product?

If you ask the media, most economists, and the public to answer question #1, you probably will receive an answer something like the following:

Should we worry about inflation?
The Week, March 3, 2018

“Until recently, inflation seemed to be dead or, at least, in a prolonged state of remission,” said Robert Samuelson at The Washington Post.

Thanks to cautious companies holding down wages and prices in the aftermath of the recession, annual inflation between 2010 and 2015 averaged just 1.5 percent, “often too small to be noticed.” 

Apparently. Mr. Samuelson believes that prior to the “Great Recession,” companies were not cautious, and so were willing to pay employees more. But, having been frightened by the recession, they now refuse to pay employees more — and that has prevented inflation.

Utter nonsense. Caution has nothing to do with it.

Employers are buyers of talent. Like all buyers, employers try to pay as little as possible to obtain the employee quality they want. Isn’t that what you do when you buy anything?

Companies cannot “hold down” wages at will.

And as for prices, they are a reflection of each company’s market analysis. Companies try to set prices at levels that will provide the highest short- and long-term profits, volume, and share-of-market.

While Robert Samuelson wrongly seems to believe that business “caution” has prevented inflation, most people wrongly believe that federal deficit spending causes inflation.

The green line is inflation. The blue line is federal deficit spending.

Federal deficit spending does not parallel inflation. 

Inflation is a general increase in prices, and if there is one thing that generally increases (or decreases) prices it’s oil.

The green line is Inflation; the silver line is the price of Oil.

Oil prices parallel inflation.

No other factor so closely parallels inflation as does oil — not food, not housing and certainly not wages:

The green line is Inflation; the violet line is Wages

Contrary to popular wisdom, wage increases do not parallel inflation increases. 

In January, the Consumer Price Index, which tracks everything from the price of groceries to education costs, surged 0.5 percent; at that pace, annualized inflation would hit 6 percent by the end of the year.

It almost certainly won’t go that high, but it leaves newly installed Federal Reserve chairman Jerome Powell “facing a tricky task”: to contain inflation “without killing the economy.”

Traditionally, the Fed would respond by raising interest rates, said  The Wall Street Journal in an editorial.

Yes, while inflation primarily is caused by rising oil prices, inflation is controlled by increasing the value of the dollar, which is accomplished by raising interest rates.

(Value of the dollar = Demand/Supply; Demand=Reward/Risk; Reward=Interest)

But the corporate tax cut and President Trump’s deregulatory agenda could rapidly accelerate economic growth.

That could further fuel inflation, prompting the Fed to raise rates faster than anticipated. In the worst-case scenario, this will severely roil markets and darken the economic outlook.

Contrary to popular wisdom, economic growth does not cause inflation:

The green line is inflation. The orange line is GDP growth.

GDP growth does not parallel inflation.

The Fed’s most potent tool in fighting downturns is cutting interest rates. “Total cuts of 5 to 6 percentage points have been the norm in recent recessions.”

Wrong, again. Low interest rates do not stimulate economic growth:

The blue line is GDP growth. The red line is interest rates.

As interest rates fall, economic growth falls. There are several reasons for this, but the point is that low rates are not stimulative. In fact, by increasing the amount of interest money the government pumps into the economy, high rates can be stimulative.

Goldman Sachs expects the Fed to raise interest rates eight times over the next two years, largely to head off higher prices.

Each time the Fed raises rates, the stock market will respond negatively, only to rebound within a few days.

The negative response will be due to traders’ predictions that the market will respond negatively, not to any fundamental factors.  It is a self-fulfilling prophecy.

Finally, we come to tax cuts. Although business tax cuts ostensibly help businesses grow, by cutting business costs, tax cuts actually help shareholders profit. The real, net effect of business tax cuts is to widen the gap between the rich and the rest. 

BUSINESS The news at a glance
Taxes: Firms spend tax windfall on buybacks
The Week (US)

U.S corporations are spending most of their (tax cut) windfall not on higher wages or investment but on “buying their own shares,” said Matt Phillips in The New York Times. Over the past month, nearly 100 U.S. corporations have announced more than $178 billion in share buybacks—“the largest amount unveiled in a single quarter.”

Cisco is devoting $25 billion to buybacks; PepsiCo has announced $15 billion for shares; and Alphabet, home-improvement company Lowe’s, and chip equipment maker Applied Materials are each devoting between $5 billion and $9 billion.

“Such purchases reduce a company’s total number of outstanding shares, giving each remaining share a slightly bigger piece of the profit pie.”

“If the buyback frenzy continues, the administration is going to have some explaining to do,” said Jennifer Rubin in The Washington Post.

Part of the problem is that the Trump administration predicted that tax reform would boost U.S. household income by at least $4,000 a year.

Business tax cuts will stimulate the economy and will boost total household income, because tax cuts add dollars to (or remove fewer dollars from) the economy.

However, the benefits will go primarily to the upper-income groups.

In summary, contrary to popular opinion:

  1. Inflation has not been related to federal deficit spending but rather to oil prices.
  2. Wage increases have not been associated with inflation
  3. Inflation and economic growth have not been related
  4. Interest rate cuts have not stimulated economic growth, nor have interest rate increases slowed economic growth
  5. While business tax cuts do stimulate overall economic growth, the benefit primarily goes to the upper-income groups, thereby widening the gap between the rich and the rest.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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THOUGHTS

•All we have are partial solutions; the best we can do is try.

•Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

•Any monetarily NON-sovereign government — be it city, county, state or nation — that runs an ongoing trade deficit, eventually will run out of money no matter how much it taxes its citizens.

•The more federal budgets are cut and taxes increased, the weaker an economy becomes..

•No nation can tax itself into prosperity, nor grow without money growth.

•Cutting federal deficits to grow the economy is like applying leeches to cure anemia.

•A growing economy requires a growing supply of money (GDP = Federal Spending + Non-federal Spending + Net Exports). Federal deficit spending grows the supply of money

•The limit to federal deficit spending is an inflation that cannot be cured with interest rate control. The limit to non-federal deficit spending is the ability to borrow.

•Until the 99% understand the need for federal deficits, the upper 1% will rule.

•Progressives think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.

•The single most important problem in economics is the Gap between the rich and the rest.

•Austerity is the government’s method for widening the Gap between the rich and the rest.

•Everything in economics devolves to motive, and the motive is the Gap between the rich and the rest..

MONETARY SOVEREIGNTY

GOP: Cut spending? Add spending? Cut deficits? Add deficits? Increase debt? Cut debt? All of the above. None of the above. Saturday, Sep 16 2017 

Image result for the truth will set you free
It takes only two things to keep people in chains:
The ignorance of the oppressed and the treachery of their leaders.

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Which of the following do you believe the federal government should do? Think carefully before you answer.Image result for many choices

  1. Reduce federal spending?
  2. Increase federal spending?
  3. Reduce federal deficits?
  4. Increase federal deficits?
  5. Increase the federal debt?
  6. Reduce the federal debt?
  7. All of the above?
  8. None of the above?

Members of the GOP seem to believe very strongly in all of these options. Many individuals actually believe in two or more opposing directions.

No kidding:

Tax cuts quiet once-deafening GOP call for fiscal discipline
ANDREW TAYLOR, Associated Press, September 16, 2017

When Democrat Barack Obama was president, conservatives demanded financial discipline and deep spending cuts in the face of the country’s fast-growing debt.

With Republican President Donald Trump pressing for politically popular tax cuts and billions more for the military, few in the GOP are complaining about the nation’s soaring debt.

Tax cuts in the works could add hundreds of billions of dollars to the debt while bipartisan pressure for more money for defense, infrastructure and domestic agencies could mean almost $100 billion in additional spending next year alone.

The bottom line: The $20 trillion national debt promises to spiral ever higher with Republicans controlling both Congress and the White House.

In short, the GOP has become fiscally (though not socially) more progressive than was Barack Obama.  And that is a good thing for America. Here is why:

Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports.

All three terms, Federal Spending, Non-federal Spending, and Net Exports show that a growing GDP, i.e. a growing economy, requires a growing supply of money.

    • Federal Spending grows the money supply because the federal government creates dollars, ad hoc, every time it pays a bill.
    • Tax cuts, which allow more dollars to remain in the economy, increase Non-federal Spending.
    • Finally, Net Exports increase the money supply by bring dollars into the U.S. economy.

“Republicans gave up on caring about deficits long ago,” bemoaned Republican Sen. Rand Paul of Kentucky, who was elected in the 2010 tea party class.

One might say the Republicans finally have recognized the fact that a growing economy requires a growing money supply.

By formula, it mathematically is impossible for GDP to grow, unless Federal Spending, and/or Non-federal Spending, and/or Net Exports grow.

And since Federal Deficit Spending stimulates Non-federal Spending, by adding net dollars to consumers’ pockets, the fundamental stimulus for economic growth is federal deficit spending, i.e spending increases and tax decreases.

But if “Republicans gave up on caring about deficits long ago,” as Rand Paul claims, why all the discussion of the debt ceiling?

It’s a far cry from the Newt Gingrich-led GOP revolution that stormed Washington two decades ago with a mandate to balance the budget and cut taxes at the same time.

To balance the budget and cut taxes requires cutting the military (which the GOP always opposes) and/or cutting social benefits (which the Democrats and the American voters oppose).

Further, because the U.S. federal government (unlike state and local governments) is Monetarily Sovereign, it never can run short of its own sovereign currency. It can pay any bill of any size, instantly, simply by creating dollars.

The federal government’s method for creating new dollars is to spend dollars. In that sense, the federal government always spends dollars it doesn’t have. If you did that, you would be reckless, but the federal government’s finances are different from yours.

Even if federal taxes were $0 and spending tripled, the federal government could pay its bills, endlessly. So there is no purpose to a “balanced” federal budget.

Or even from Republicans of 2001, who enthusiastically cut taxes under President George W. Bush, but only at a moment when the government was flush with money.

The federal government never is short of dollars, nor is it ever “flush with money.”  The federal government has the unlimited power to create brand new dollars from thin air, every time it pays a creditor.

Now, Medicare and Social Security are drawing closer to insolvency.

Fiscal hawks and watchdogs like the Congressional Budget Office warn that the debt is eventually going to drag the economy down.

Neither the U.S. federal government, nor any of the thousand agencies of the federal government, ever can be insolvent. Such federal agencies as Congress, the White House, the Supreme Court, the CIA, the FBI, the NSA, Social Security, and Medicare, etc., etc, cannot go insolvent unless the Congress and the President want them to be insolvent.

Have you ever heard of the Navy being “insolvent”?  The Army? Name a single federal agency that ever has been insolvent.

The notion that Medicare or Social Security can become “insolvent,” ironically is based on a special tax, FICA, being collected supposedly to support them.

But FICA supports nothing and no, there is no “Social Security Trust Fund.” It is an accounting fiction designed to make you believe your Medicare and Social Security benefits must be limited.  It’s all a great big fat lie.

And as far as federal debt “eventually dragging the economy down,” this too is a lie, promulgated for the same purpose — to make you believe the federal government is unable to help you.

The so-called debt actually is the total of deposits in T-security accounts.

If the federal government wished, it easily could pay off the entire “debt” today, simply by transferring existing dollars from those T-security accounts, back to the checking accounts of T-security holders. No new dollars needed.

There is no mechanism by which deposits in T-security accounts (aka “savings”) can drag down the U.S. economy.  Anyone who says otherwise is a great, big, fat liar.

But like Obama and Bush before him, Trump isn’t talking about deficits. Neither much are voters.

“Voters, frankly, after these huge deficits, are saying, ‘Well, how much do deficits really matter?’” said former Sen. Rick Santorum, R-Pa., a two-time presidential candidate. “We’re not Greece yet, right?”

Deficits do matter, but not in the way most people think.

Deficit growth reductions have led to recessions, and deficit growth increases have cured recessions.

Far from being a problem, federal deficits are absolutely necessary for economic growth.

And as for the U.S. ever being “Greece,” that unfortunate nation surrendered its most valuable asset, its Monetary Sovereignty, when it gave up the drachma and adopted the euro.

Chicago, Florida, General Motors, you, and me and Greece do not have a sovereign currency. None of the aforementioned has the unlimited ability to pay bills. All can become insolvent.

By contrast, the U.S. government has the unlimited ability to pay any bill, of any size, at any time, simply by creating dollars. There is no economic reason to cut deficits or debt.

Top Capitol Hill Republicans such as House Speaker Paul Ryan of Wisconsin and Senate Majority Leader Mitch McConnell of Kentucky had promised for months that a tax overhaul would not add to the deficit, with rate cuts financed by closing loopholes and other steps.

Instead, Republicans are talking about tax cuts whose costs to the debt — still under negotiation — would be justified by assumptions of greater economic growth.

Yes, tax cuts are justified by greater economic growth, but not in the way the GOP once has claimed.

Under President Reagan’s bogus “trickle-down” economic plan, tax rate reductions for the rich were supposed to “pay for themselves” by expanding the economy so much, tax collections actually would rise.

Not only didn’t this happen, but it wasn’t necessary. Tax cuts do stimulate the economy — especially tax cuts for consumers, i.e. the 99% (not tax cuts for the rich), because federal taxes (unlike state and local taxes) destroy dollars. And the federal government neither needs nor uses tax dollars.

Federal taxes no longer are part of any money supply measure, i.e. they effectively are destroyed upon receipt.

“We want pro-growth tax reform that will get the economy going, that will get people back to work, that will give middle-income taxpayers a tax cut and that will put American businesses in a better competitive playing field so that we keep American businesses in America,” Ryan said in an AP Newsmakers interview this past week. “That’s more important than anything else.”

He backed off months of promises that the Republicans’ tax plan won’t add to the nation’s ballooning deficit.

Ryan, the “new liberal Democrat,” is absolutely correct in what he says. Tax cuts for the middle- and lower-income groups, and for businesses, will grow the economy.

What the GOP does may be a different story, as their leaning always has been tax cuts for the rich and for “broadening the tax base” (tax increases for the poor).

Among the few deficit hawk holdouts is Sen. Bob Corker, R-Tenn., a key vote on the Senate Budget Committee, who says he doesn’t want to “let this just be party time that just takes us no place but massive deficits down the road.”

The real danger to America is that Corker, who has so much power on the Senate Budget Committee, completely misstates federal financial reality.

Image result for time bomb

Since 1940, the “time bomb” of federal debt has been ticking. Still ticking.

This deficit hawk cannot explain the simple fact that the federal debt in 1940 was $40 billion, and deficit hawks then were calling it a “ticking time bomb.

Today, after 77 years, the debt $14 Trillion debt has risen 35,000%  (yes, that’s 35 thousand percent), and here we are:

The federal government is not insolvent; no federal agency is insolvent; the “time bomb has not exploded, the sky has not fallen; and we are discussing tax reductions.

Trump’s election has GOP military hawks pressing to shovel enormous amounts of money into the Pentagon — about $90 billion over the stringent spending limits set by the hard-won 2011 deficit control effort.

Don’t call it “hard won.” Call it the “foolish, counter-productive, based-on-the-Big-Lie, deficit control effort. Call it “hard lost,” as it reduced GDP growth to its lowest level in many years.

Deficit growth cured every recession, but the “hard-won” deficit control effort of 2011, resulted in the lowest GDP growth we’ve had in many years. 

The unpopular leftover from the 2011 agreement are those spending limits, which if violated would be enforced by across-the-board spending cuts. Republicans want to scrap them, at least for military money.

“There’s so much pressure on our side for additional defense spending,” said Rep. Tom Cole, R-Okla. “Believe me there’s more defense hawks than budget hawks in the Republican conference right now.”

Republicans believe in spending reductions unless there’s something on which they want to spend. Then suddenly, spending reductions aren’t important any more.

Conservatives demanding that spending cuts accompany any extension of the government’s borrowing ability were undercut by Trump, who agreed last week to add temporary borrowing approval to a must-pass Harvey relief bill.

See, it’s like this. Spending cuts help the economy except when spending increases help the Texas economy, which then helps the U.S. economy.  Got it?

Anger over Trump’s debt bargain, though, has conservatives vowing that issues of spending and deficits won’t be kicked to the curb for long.

“It’s not going to be shoved aside much longer because this (debt limit) deal last week … has got people all riled up, and justifiably so,” said longtime GOP Rep. Joe Barton of Texas. “We’ll be ready next time.”

Translation:

“O.K., we’ll agree to increase the debt this time, because Texas needs the money, and I’m a Texan, and the government can afford anything. But next time, if it’s just the poor or the middle classes who need the money, we won’t give it to them, because the government can’t afford it.

“What? Oh, you say that Florida and Puerto also were hit by a hurricane, and they too need the money.  O.K., I guess we have to give it to them, but we’ll be ready to screw America NEXT time, because as you know, the government is running short of dollars it creates every day, from thin air.

Huh? There is another hurricane, this time threatening the northeastern states, a couple of which are ‘red’ states, so FEMA will have to help them, too? Well, so long as they’re red states, we’ll give them money, even though the federal government is totally destitute, although in the entire history of this nation, the government never has run out of dollars.

“Huh? The military also needs more money. Well, of course we can’t be without a military, and we might want to bomb North Korea, so give the military more money, too, even though the federal government doesn’t have any money at all. Not a penny, even though the government creates dollars by spending dollars.

“Oh, the President needs more money to build a wall that will protect us against drugs, even though drug dealers know how to avoid walls and don’t bring drugs across areas where we don’t have a wall. But if the President wants more money, we have to give more money, even though the government is so broke the sky is falling and Congress must live in poverty, which it never has.

But aside from that, the debt has been a ticking time bomb for 75 years, and even though we’ve had all kinds of wars, recessions, inflations, terrorism, and natural disasters, that time bomb hasn’t exploded. But it could. Soon. Any second now. The end is nigh. Here it comes. Hang on. Almost here. 

“And yes, there is zero evidence that the debt is “unsustainable” and that cutting the debt will grow GDP, but hey we’ve been telling the same lie for so many years, we can’t go back how, or we’ll look really stupid.

Right?”

Right. Really stupid.

Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The single most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.

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 The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:

Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012

Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.

MONETARY SOVEREIGNTY

 

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