–Economic policy that’s stuck in reverse, by Senator Jeff Sessions Tuesday, Jan 25 2011 

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.

Here are some excerpts from an article titled, “Economic policy that’s stuck in reverse,” by Senator Jeff Sessions

Monday, January 24, 2011

As record levels of federal spending bring us ever closer to a tipping point, the Obama administration blissfully continues business as usual. We have seen no real plan, no strong leadership, no apparent willingness to confront the growing danger on the horizon.

At no point in his article does Senator Sessions say exactly what that “tipping point” or the “danger on the horizon” is. Will the federal government run out of money? Will we have uncontrollable inflation? Will taxes be forced up? The Senator never says, perhaps because the answer to all three questions is a resounding, “No.” Or perhaps because Senator Sessions has no idea what the answer is, and enjoys using scare words.

Last month, President Obama would agree to maintain current tax rates only if Congress would agree to increase federal deficit spending. We are headed toward a cliff, yet the president hits the accelerator.

Again, no explanation of “the cliff.” Does he mean he economic accelerator, the last thing the party not in power ever wants?

Meanwhile, others are moving in the opposite direction. England has a plan to cut its deficit by 86 percent in just four years. New Jersey Gov. Chris Christie has a plan to close his state’s funding gap without raising taxes. Even California’s new liberal governor has put forward a plan to cut state spending by 9 percent.

Here Senator Sessions demonstrates he does not understand the implications of Monetary Sovereignty. New Jersey and California are not monetarily sovereign, so cannot survive on tax money alone. They need to reduce spending or increase taxes. England is Monetarily Sovereign, but their politicians know as little about economics as do our politicians. If England ever were to reduce its deficit by 85%, they will have a recession or depression. (Worldwide, the nation with the smartest economists and politicians may be Monetarily Sovereign China, which so far has shown no fear of deficits, and thus has had the fastest recovery.)

Just days ago, former Federal Reserve chairman Alan Greenspan ominously warned that U.S. debt may lead to a bond market crisis in two to three years.

Reminder to Senator Sessions: This is the same Alan Greenspan, under whose financial leadership, the nation went into the worst recession since the Great Depression. He has no credibility, nor do the people who quote him. Imagine a Fed chairman who is unaware the U.S. federal government does not need to create T-securities out of thin air, because it already has the power to create dollars out of thin air.

A debt crisis continues to spread through Europe that could reach our financial markets any moment. Now is the time to act. Yet the president continues to resist any meaningful steps to secure our financial future.

Specifically what has the European monetarily non-sovereign debt crisis to do with U.S. budgets? How will reducing our budgets stave off the European debt crisis? Senator Sessions never says, because presumably he has no idea.

To begin turning the corner, I propose that any effort to raise the debt ceiling be tied to no less than a sustained 10 percent reduction of current discretionary spending. Though this is only a first step, it would finally be a step in the right direction – one the country can easily absorb.

A “reduction in spending” is a synonym for a “reduction in money creation,” which invariably has led to recessions and depressions. See: Growth summary. Senator Sessions doesn’t read history. But, O.K., he has me sold. Let’s start with cutting Congressional salaries and perks. Let’s eliminate Congressional health insurance, and let those folks pay for it themselves. No more “fact-finding” junkets to warm climates in winter. Reasonable, Senator?

On Tuesday, President Obama will deliver his State of the Union address. Soon after, he will come forward with a new budget. This is a defining moment for his presidency. His proposals cannot be timid. And he must demonstrate that he is at last willing to shed his Keynesian worldview.

Guarantee: Senator Sessions has no idea what a “Keynsian worldview” is. But it makes him sound learned.

As we enter the annual budget season, Washington will need to consider the kind of change this country has not accomplished since 1997 – when a strong Republican Congress passed a budget that converted soaring deficits into surpluses.

Hmm. Wasn’t it a Republican president named Reagan, who instituted our greatest post-war deficits? And is he really taking credit for the Democratic Clinton surpluses, which caused the Republican Bush recession? Ah, details, details.

We need a budget with a bold vision – like those unveiled in Britain and New Jersey; one that reduces both the size of the deficit and the size of the government. We need a budget that does not require tax increases as the price for spending cuts – because while the spending cuts may disappear, the economic drain of higher taxes will not. And we need a budget that turns us back from the cliff so we can head down a new road – toward leaner government, responsible spending and a thriving private sector.

Again, the cliff? What is that cliff? Will we ever be told? Probably not. Anyway, what we really need is Congressional leaders who understand economics, so we wouldn’t continue to average one recession every five years. Is that too much to hope for, at least from the ranking Republican on the Senate Budget Committee?

By the way, I recently was interviewed on radio station WNZF by Abby Romaine. Click this link to hear the show: Radio Interview

Rodger Malcolm Mitchell

No nation can tax itself into prosperity.

–Arizona tries to gut Medicaid, punish the poor. Who is the bad guy? Monday, Jan 24 2011 

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.

Arizona, seemingly in the front lines in the war against poverty striken, now wishes to increase the eligibility requirements for Medicaid. Hundreds of thousands of desperately sick, poor people would be refused health care. So who is the bad guy, here? Not Arizona, in my opinion.

Here are excerpts from a Washington Post article:

By N.C. Aizenman, Washington Post Staff Writer, Sunday, January 23, 2011; 10:58 PM

Republican efforts to repeal or limit the reach of the new health-care law took a new direction last week when Arizona lawmakers approved a novel and controversial attempt to cut Medicaid for 280,000 of the state’s poor.

The bill, requested and signed by Gov. Jan Brewer (R), empowers her to make a formal request, most likely this week, for a federal waiver to avoid complying with provisions of the law that prohibit states from tightening their eligibility requirements for Medicaid.

Twenty-nine Republican governors, including Brewer, have signed a letter calling on President Obama and congressional leaders to remove the provision from the law.

But Arizona is the first state to, in effect, play chicken with the Obama administration by directly requesting a reprieve and daring Health and Human Services Secretary Kathleen Sebelius to refuse.

Arizona’s move reflects two pressing realities: Many states face large budget shortfalls because of continuing economic difficulties, and Republican governors point to Medicaid cuts as one of the most logical ways to balance those budgets.

Advocates for Medicaid, the health insurance program for the poor and disabled that is jointly funded by states and the federal government, say the Republican argument amounts to political posturing at best and heartless, shortsighted policy at worst. Most of the men and women Arizona wants to cut from Medicaid have to earn less than $10,830 per year to qualify for the program.

“If you’re a family and you hit tough times such that you can only afford to feed two out of your three children, you don’t tell your third child, ‘Sorry, Johnny, you’re not going to eat.’ You go out and find a way to get more food,” said Arizona state Sen. Kyrsten Sinema (D-Phoenix), who has made health care a focus.

Similarly, Sinema said, Brewer should attempt to restore the substantial cuts Arizona has already made to its Medicaid coverage in recent years, not seek new ones.

“This is not a political ploy,” Lazare said. “This is our plan. We don’t see a whole lot of other options.” The economic downturn has been particularly devastating to Arizona, Lazare noted, depleting tax revenues even as it led to newly poor residents who swelled the state’s Medicaid rolls by 46 percent over the past four years.

State lawmakers have already responded with some of the deepest Medicaid cuts of any state in recent years – slashing payment rates to doctors and other providers by 10 percent, freezing enrollment in the state’s supplemental health insurance program for children, and ceasing to pay for Medicaid benefits including certain kinds of organ transplants.

When that last high-profile policy took effect in October, nearly 100 indigent patients who were on the waiting list for a transplant were told that the state would no longer cover the procedure.

Since then, one of those patients has died. Another was forced to give up the liver offered to him by a dying family friend. A third man was able to get funding for a bone marrow transplant from an anonymous donor but died of complications from his cancer before the operation could take place.

The bad guy is the debt hawks, the Tea Party, the politicians who pander to them, and the selfish people who already have health insurance, and so are “against big government,” for reasons they don’t understand.

While the U.S. government is Monetarily Sovereign, Arizona is monetarily non-sovereign. It is a feature of non-sovereign governments that they cannot survive long term on tax money, alone. With the federal government’s taxes and inflation draining money out of the states, massive and ongoing federal infusions are needed by all states. Being Monetarily Sovereign, the federal government easily could and should provide these infusions.

Instead, Ron Paul (for example) and his government cronies (all of whom are given the best health insurance money can buy) repeatedly vote against federal spending (except for the aforementioned health insurance for politicians).

Never mind the poor. Never mind the sick children. Never mind the unfortunate, who do not have the means to provide even for minimal health care. Let them suffer. Let them die. We just don’t like government spending, because . . . well . . . just because at some unknown time in the future it might cause something bad, though there is no evidence of what. And anyway, I have insurance.

The English have an expression for that sort of selfish heartlessness, “I’m all right, Jack,” meaning “I’m taken care of, so the hell with you.” That is our Congress and our President. “They’re all right, Jack.” Hey, no problem if you have no conscience.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity.

–Another attempt to explain why taxpayers don’t pay for federal spending Tuesday, Nov 16 2010 

The debt hawks are to economics as the creationists are to biology. They, who do not understand monetary sovereignty, do not understand economics.

In my never-ending effort to explain more clearly why federal spending costs taxpayers nothing, here is a new thought that perhaps will make the concept more intuitive. It was precipitated by a question from Mr. Tyler Fairleigh, which is published in the comment section at Monetary Sovereignty.

Imagine John Jones sells something to the federal government for $100. John sends the government a “bill.” A bill is nothing more than a little note containing this instruction: “Please credit John Jones $100.” It costs John nothing to send that note. In fact, John could send such a note (bill) to the government every day for the next ten years, and still it would cost John nothing.

Of course, the government is under no obligation to do as John requests, but the point is, that little note costs John nothing. He need have no money in the bank to send it.

Assume, the government checks its records and finds that indeed it owes John $100, so it sends him a check for $100, which he deposits in his bank. The government’s check is not money; it is an instruction. The check is a little note containing this instruction: “John’s bank. Please mark up the number in John’s account by $100.

The government has the power to send an unlimited number of instructions (aka “checks”) at any time. These instructions do not require the government to “have” any money. They merely are instructions made by a monetarily sovereign government.

So John’s bank obediently raises the number in his account by $100, then informs the Federal Reserve Bank of what it has done. For accounting reasons, all sorts of accounts are credited and debited, some of which may or may not be related to taxes. But in reality, all that has happened was, John’s bank received an instruction from the federal government and did as it was told.

These instructions also cost taxpayers nothing. Taxpayers are not even involved. Even if no one was paying taxes, our monetarily sovereign government still could send an unlimited number of instructions to banks all over the world, and they all would obey. Why? Because they know the Federal Reserve Bank of the United States will mark up their accounts by the exact amount of the check. Why? Because the U.S. government is monetarily sovereign, meaning it has the unlimited power to mark up accounts.

Compare this with Greece, Spain, Illinois, California, General Motors, Chicago, you and me. None of us in monetarily sovereign, so none of us has the unlimited power to mark up bank accounts. Our power is limited by the number in our own bank account or by what we can borrow.

Yes, you too could send an unlimited number of such instructions, but unless your bank account had a high enough number, your bank would not obey these instructions (aka bounce your check). But no bank bounces the federal government’s instructions. Never has; never will. A monetarily sovereign nation cannot be forced into bankruptcy.

And what about that worrisome federal debt? It is the total of the T-securities (aka IOUs) the government creates from thin air. It can do this forever.

To pay the debt, the federal government merely sends notes to the various T-security holders’ banks, instructing them to mark up accounts. Taxpayers don’t owe the government’s debt, nor do your children nor grandchildren. You aren’t even involved.

And as for the federal deficit, it is just a balance sheet entry, showing the difference between taxes collected and money spent, or more accurately, the difference between the number subtracted from taxpayers’ bank accounts and the numbers added to vendors’ bank accounts. Of course, taxes do not pay for spending. The government could add numbers to vendor’s bank accounts without subtracting from taxpayers’ accounts.

So that’s it. Government spending is just instructions to banks. The debt is just IOUs created from thin air. Paying the debt is just instructions to banks to raise numbers in accounts. The deficit merely is an arithmetic difference. And taxpayers neither pay for, no owe, any of this.

Does that make things clearer?

Rodger Malcolm Mitchell

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.”

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