Rubio Skips Town Hall, Constituents Replace Him With Empty Suit
Sen. Marco Rubio, best known for not showing up for work, has demonstrated why his absence might be better for America than his attendance.
Here are excerpts from this truly ignorant letter I received today:
Dear Mr. Mitchell,Thank you for taking the time to express your thoughts regarding spending and the federal budget. Understanding your views helps me to better represent Florida in the United States Senate, and I appreciate the opportunity to respond.As of May 20, 2021, the U.S. national debt had reached more than $28.3 trillion. This is an unsustainablecourse that Congress must address.
Why is it “unsustainable”? Sen. Rubio never says, surely because he has no clue.
Back in 1940, the so-called, misnamed “debt” was about $40 Billion, and today he says it is $28.3 Trillion, and yet we are “sustaining” it quite nicely, thank you.
Rather than explaining his position, Rubio goes on to demonstrate his total ignorance of federal financing:
On February 3, 2021, Senator Cindy Hyde-Smith (R-MS) and I introduced S.J. Res. 6 , which would enact a balanced budget amendment to the United States Constitution. The bill has 14 cosponsors and was referred to the Senate Committee on the Judiciary. A balanced budget is based on common-sense principles that should be enshrined in the U.S. Constitution. This would force politicians in Washington to do what every family across the United Statesmust do in balancing their own budgets. This would also prevent us from continuously passing the bill to the next generation.
Clearly, he has no idea about the difference between a Monetarily Sovereign entity like the U.S. government and a monetarily non-sovereign entity like a family.
So he proposes an extraordinarily foolish law, that had it been in place back in 1940, would have doomed the U.S. to a $40 Billion “debt” today — i.e. the deepest depression in world history.
Pitifully, Rubio is joined in his exercise of idiocy by Sen. Cindy Hyde-Smith and “14 cosponsors.” With lawmakers like this, can anyone wonder why the U.S. Congress is perhaps the most inept group of partisan fools in America?
On March 27, 2020, President Trump signed into law the bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), which was a $2 trillion emergency relief package that, among other things, provides small businesses with direct assistance to stay in business and keep American workers employed. As Chairman of the Senate Committee on Small Business and Entrepreneurship last Congress, I was able to include the Keeping American Workers Paid and Employed Act , legislation that made $349 billion in forgivable loans to small businesses and nonprofits available through the Paycheck Protection Program (PPP).
Good grief, this no-show is chairman of a Senate committee!
Furthermore, on December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (P.L. 116-260), which provided $1.4 trillion to fund the federal government through September 30, 2021. While reducing federal spending is one of my top priorities, I believe it was appropriate during the COVID-19 pandemic to help small businesses stay open by providing government assistance, especially when much of their lost revenue came from government public health regulations.
“See, it’s like this. Deficit spending is OK if Trump and I do it, even though it would have been unconstitutional if my dopey balanced budget amendment had passed. “Gee, I never thought of that. I would have violated my own law.”
On March 11, 2021, President Biden signed in to law the American Rescue PlanAct (P.L. 117-2), which was a $1.9 trillion COVID-19 relief package. Unlike previous COVID-19 relief packages, this bill was passed with a solely partisan vote in the Senate.I did not support the bill . . .
“Because I have no idea what was in it, and anyway, McConnell told me not to.”
. . . as it spent hundreds of billions of dollars on items unrelated to COVID-19 recovery . . .
“Because I was told that the only reason for federal spending is COVID. So, not one Republican wanted to add dollars to an economy that was struggling, and desperately in need of help. “Hmm, I wonder why with a Democrat President, we Republicans suddenly are worried about deficits. We didn’t worry when we gave a big tax break to the rich while the wealthy Donald Trump was President.”
In addition to the wasteful spending enacted by the American Rescue Plan, President Biden has proposed even more wasteful spending in his proposed federal budget. Despite having just spent $1.9 trillion in the American Rescue Plan, President Biden has proposed a federal discretionary budget of more than $1.5 trillion.Now that the economy is re-opening . . .
“Because of the federal deficit spending, but I don’t want you to know that . . .”
. . . Congress will need to rein in reckless federal spending and prioritize policies that get Americans back to work and help the economy recover . . .
“Which by some magic can be accomplished without federal deficit spending.”
It is an honor and a privilege to serve you as your United States Senator. I will keep your thoughts in mind as I consider these issues and continue working to ensure America remains a safe and prosperous nation.
“I have no idea what your thoughts were. I never read your letter, and I wouldn’t have understood it anyway. But I love being a Senator.”
Sincerely,Marco RubioU.S. Senator
Thank you, Senator, for your most informative letter. It confirms what we long have known.
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:
Economics is a quasi-science that is battered by psychology, philosophy, tenure, reputation, politics, rumor, convoluted jargon, and oh yes, perhaps a touch of actual science.
It is loaded with data, graphs, and charts, all of which tend to be ignored in favor of intuition and prior beliefs. These beliefs constitute the myths that stare you right in the face, so easily seen you only can be astounded that they still exist.
Here is one example from Investopedia:
Debt-to-GDP RatioBy WILL KENTON, Updated June 30, 2021, Reviewed by JULIUS MANSAThe debt-to-GDP ratio is the metric comparing a country’s public debt to its gross domestic product (GDP). By comparing what a country owes with what it produces, the debt-to-GDP ratio reliably indicates that particular country’s ability to pay back its debts. Often expressed as a percentage, this ratio can also be interpreted as the number of years needed to pay back debt if GDP is dedicated entirely to debt repayment.
You would be forgiven for believing that because a country’s public debt/GDP ratio “reliably indicates that particular country’s ability to pay back its debts,” you would assume that lower ratios indicate a better ability to pay debts.
But no, this being economics, the public debt/GDP ratio does not mean that at all. In fact, the ratio has no meaning.
Well, perhaps that’s a bit strong. It must have some meaning, but no one knows what the meaning is. Clearly, it has no predictive or analytical value with respect to a nation’s ability to pay its debts.
If you want a good laugh, look at the following ratios, and try to use them to decide which nations are best able to pay their debts:
Debt/GDP ratios by countryJapan 237.00% Greece 177.00% Lebanon 151.00% Italy 135.00% Singapore 126.00% Cape Verde 125.00% Portugal 117.00% Angola 111.00% Mozambique 109.00% United States 107.00% Djibouti 104.00% Jamaica 103.00% Belgium 98.60% Dr Congo 98.50% France 98.10% Cyprus 95.50% Spain 95.50% Bahrain 93.40% Jordan 92.40% Canada 89.70% Argentina 89.40% Sri Lanka 86.80% Pakistan 84.80% Gambia 81.80% Suriname 81.40% United Kingdom 80.70% Mauritania 79.00% Costa Rica 77.47% Tunisia 76.70% Brazil 75.79% El Salvador 73.30% Croatia 73.20% Sao Tome And Principe 73.10% Austria 70.40% Belize 69.90% India 69.62% Bahamas 66.80% Hungary 66.30% Slovenia 66.10% Morocco 66.10% Albania 65.90% Qatar 65.80% Mauritius 64.60% Trinidad And Tobago 63.20% Yemen 63.20% Sierra Leone 63.00% Montenegro 62.27% South Africa 62.20% Malawi 62.00% Sudan 62.00% Uruguay 61.30% Israel 59.90% Germany 59.80% Finland 59.40% Ghana 59.30% Zambia 59.00% Ireland 58.80% Bolivia 57.70% Vietnam 57.50% Kenya 57.00% Ethiopia 57.00% Gabon 56.40% Seychelles 55.00% Mongolia 55.00% Kyrgyzstan 54.10% Zimbabwe 53.40% Laos 53.34% Namibia 53.30% Guyana 52.90% Nicaragua 52.50% Malaysia 52.50% Serbia 52.00% Dominican Republic 50.53% China 50.50% Ukraine 50.30% Myanmar 49.41% Ecuador 49.40% Iraq 49.40% Netherlands 48.60% Central African Republic 48.50% Azerbaijan 48.40% Colombia 48.40% Fiji 48.00% Slovakia 48.00% Tajikistan 47.90% Senegal 47.70% Oman 47.50% Chad 46.60% Algeria 46.10% Poland 46.00% Armenia 45.60% Mexico 45.50% Australia 45.10% Honduras 44.05% Equatorial Guinea 43.30% Malta 43.10% Georgia 43.00% Thailand 41.80% Philippines 41.50% Rwanda 41.10% Switzerland 41.00% Lesotho 40.90% North Macedonia 40.70% Norway 40.60% Papua New Guinea 39.80% Panama 39.48% Hong Kong 38.40% Iran 37.90% Tanzania 37.80% South Korea 37.70% Iceland 37.00% Latvia 36.90% Guinea Bissau 36.50% Lithuania 36.30% Romania 35.20% Sweden 35.10% Niger 34.70% Cameroon 34.00% Denmark 33.20% Turkey 33.10% Haiti 33.00% Liberia 32.00% Ivory Coast 31.90% Czech Republic 30.80% Nepal 30.20% Madagascar 30.10% Indonesia 29.80% Togo 29.50% Cambodia 29.40% Turkmenistan 29.30% Bangladesh 29.30% Taiwan 28.20% Chile 27.90% Guatemala 27.88% Peru 27.50% Moldova 27.40% Belarus 26.50% Maldives 24.80% Bosnia And Herzegovina 24.80% Bulgaria 24.50% Comoros 23.60% Uzbekistan 23.60% Botswana 23.00% Venezuela 23.00% Paraguay 22.90% Saudi Arabia 22.80% Burkina Faso 22.60% Luxembourg 22.10% Kazakhstan 21.90% Benin 21.60% Eritrea 20.10% New Zealand 19.00% United Arab Emirates 18.60% Cuba 18.20% Guinea 18.00% Nigeria 17.50% Libya 16.50% Palestine 16.40% Republic Of The Congo 15.70% Burundi 15.20% Kuwait 14.80% Russia 12.20% Bhutan 11.00% Eswatini 10.75% Egypt 9.00% Estonia 8.40% Afghanistan 7.10% Cayman Islands 5.70% Uganda 4.00% Brunei 2.40%
Presumably, Afghanistan, Cayman Islands, Uganda, Libya, and Brunei are more financially secure than such “poor nations” as Japan, the United States, and Canada.
And speaking of the US, we are just a touch “better” than Angola and Mozambique, and presumably not quite as solvent as France and Spain.
Idiocy.
The above data are not hidden. They are public knowledge, easily available for anyone to see. Yet repeatedly we see such incredibly uninformed statements as: “The ratio is used to gauge a country’s ability to repay its debt” and “The higher the debt-to-GDP ratio, the less likely the country will pay back its debt and the higher its risk of default, which could cause a financial panic in the domestic and international markets.”
The problem with the Debt/GDP ratio is that it does not consider the differences between Monetary Sovereignty and monetary non-sovereignty, nor does it consider what really is “debt” and what erroneously is termed “debt.”
The US, United Kingdom, China, Canada, Australia and Japan, among others, are Monetarily Sovereign (MS). They never can run short of their own sovereign currencies. By contrast, France, Spain, Italy, Portugal are monetarily non-sovereign. They do not have a sovereign currency.
They are users of the euro, which is the currency of the European Union, not of any one nation. So, euro nations can and do run short of euros, and have difficulty paying euro-denominated debts, no matter what the ratios show.
Further, because an MS nation has the unlimited ability to create its own sovereign currency, it does not borrow that currency. Why would it?
What erroneously is termed “debt” actually is one or both of:
The net of the difference between tax money received by the government and money spent by the government (aka “deficits”) and/or
The total of deposits into government savings accounts.
As for #1, it is just a balance sheet number that has no debt-like inferences, simply because the federal government does not use tax dollars to pay its bills. It creates new dollars, ad hoc.
As for #2, it is not real “debt.” It is caretaker money, that the government does not touch. The accounts are similar to bank safe-deposit boxes, the contents of which are not the financial obligations of banks.
In short, the federal government pays back “debt” with debt. The higher the debt, the more money there is in debt accounts with which to pay back the “debt.” A “debt” of $25 trillion means the federal government has $25 trillion sitting in Treasury security accounts with which to pay off those accounts.
And, even if “Debt” actually referred to a government’s real debt, governments do not pay what they owe with GDP (private sector) money. They pay with government money. No government is able to foist its debts onto the private sector.
Finally, the Debt/GDP ratio is the classic apples/oranges comparison. The first term (“Debt”) has to do with a net historical accounting over the life of the nation, while the second term (GDP) is for one-year only.
For all the reasons mentioned above, the Debt/GDP ratio is meaningless, having zero predictive or analytical use, yet economics, politicians, and the media refer to it continually, as though it had some special power.
Though the myth stares them in the face, they continue to fall for it, like a mouse repeatedly caught in the same trap.
“Deficits” which actually should be called “surpluses,” because they mostly are an accounting of the dollars the central government pumps into the economy.
GDP is a common measure of a nation’s economy, and by formula, the greater the “deficit” (economic surplus), the greater is GDP.
This easily can be seen in the following graph:
Red line indicates deficits. Vertical gray bars indicate recessions.
The graph indicates that:
Recessions are preceded by reductions in federal “deficit” (economic surplus) growth
Recessions are cured by increases in federal “deficit” (economic surplus) growth.
Despite the well-known and obvious positive effect that federal “deficits” (economic surpluses) have on economic growth, economists, politicians, and the media almost universally decry anything that will “increase the deficit” or “increase the debt.”
Why is adding dollars (aka “deficits”) to the economy so disliked, when it is the only way an economy can grow?
Why is the federal government’s infinite ability to create dollars so misunderstood, when it has demonstrated this ability for the past 80 years?
Why is the obvious such a mystery?
There are only two possible answers. Either the vast majority of economists, politicians, and media people are too lazy and stupid to recognize simple fact, or the vast majority of economists, politicians, and media people are too bribed by the rich to admit simple fact.
This ignorance, whether feined or real, truly is disgusting. It hurts you every day as it denies you the benefits you could and should receive from the federal government.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
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:
The Big Lie in economics is, “Federal taxes fund federal spending.”
While state and local taxes fund state and local spending, federal taxes do not fund federal spending. The difference is that state and local governments are monetarily non-sovereign, while the federal government is Monetarily Sovereign.The Big Lie steals your money and your benefits
Either the authors of the following article and the entire Congress of the United States are lying, or they really don’t understand the differences between monetary non-sovereignty and Monetary Sovereignty. Both possibilities are disgraceful.
The differences are described in detail here, but fundamentally, a Monetarily Sovereign government is the creator and issuer of its own sovereign currency, in this case, the U.S. dollar.
The U.S. is Monetarily Sovereign because it created the U.S. dollar from thin air by passing laws from thin air. Just as it never can run short of laws, the federal government never can run short of its dollars.
Even if the federal government collected zero taxes, it could continue spending forever because it has the infinite ability to create its own sovereign currency.
By contrast, state and local governments did not create the U.S. dollar.
They, like you and me, simply are users of the dollar. And unlike the federal government, they and we all can run short of dollars.
These differences mean that federal government financing is nothing at all like personal or state/local government financing, but the purpose of the Big Lie is to make you believe federal financing and personal financing are similar.
Just one of the dozens of examples: While state/local governments use tax dollars for spending, the federal government destroys tax dollars upon receipt.
Here’s what’s in the bipartisan infrastructure packageBy Katie Lobosco and Tami Luhby, CNN, November 15, 2021It will deliver $550 billion of new federal investments in America’s infrastructure over five years, touching everything from bridges and roads to the nation’s broadband, water and energy systems. Experts say the money is sorely needed to ensure safe travel, as well as the efficient transport of goods and produce across the country. The nation’s infrastructure system earned a C- score from the American Society of Civil Engineers earlier this year.Democrats claim the legislation pays for itself through a multitude of measures and without raising taxes.
The legislation cannot “pay for itself,” nor can spending cuts pay for the legislation, nor can tax increases pay for the legislation.
The legislation will be paid for the same way all federal legislation is paid for:
The involved federal agencies will send instructions, in the form of checks or wires, to the federal government’s creditors’ banks, instructing these banks to increase the balances in the creditor’s checking accounts.
At the instant the banks obey those instructions, new dollars are created, deposited in checking accounts, and added to the M1 money supply.
To balance their books, the banks then clear these deposits through the Federal Reserve which debits the federal government’s infinite supply of dollars. Thus federal deficit spending adds growth dollars to the economy.
Had the federal government levied an equal amount of taxes, these tax dollars would not have “paid for” what was owed — the instructions already paid for it — but the taxes would have removed growth dollars from the economy.
The Congressional Budget Office brushed aside several of those pay-for provisions, ultimately finding the package would add $256 billion to the deficit over the next 10 years.
Translation: The package would have added 256 billion growth dollars to the economy at no cost to anyone — no cost to taxpayers, no cost to our children and grandchildren, no cost to anyone. The dollars would have been created by the banks obeying federal instructions.
The legislation calls for investing $110 billion for roads, bridges and major infrastructure projects. That’s significantly less than the $159 billion that Biden initially requested in the American Jobs Plan.
Translation: But for the Big Lie, an additional $49 billion could have been used to grow the economy,
Included is $40 billion for bridge repair, replacement and rehabilitation, $16 billion for major projects that would be too large or complex for traditional funding programs, $11 billion for transportation safety, $1 billion to reconnect communities, and $39 billion to modernize public transit, according to the text. That’s less than the $85 billion that Biden initially wanted to invest in modernizing transit systems and help them expand to meet rider demand.
That’s $46 billion in growth that will not happen because of the Big Lie.
The legislation provides a $65 billion investment in improving the nation’s broadband infrastructure, according to the text. Biden initially wanted to invest $100 billion in broadband.
Translation: 35 billion new growth dollars will not enter the economy.
And now we come to a flat-out statement of the Big Lie:
How Congress will pay for itThe legislation includes a multitude of measures to pay for the proposal — none of which would raise taxes.But while lawmakers claim the package pays for itself, the CBO score found it would instead add billions of dollars to the deficit over 10 years and that many of the pay-for provisions would not raise as much money as Democrats said they would.
No federal spending can “pay for itself.” The federal government pays for everything by issuing instructions, which it has the unlimited ability to do.
The bottom line is that the legislation would directly add roughly $350 billion to the deficit, when taking into account $90 billion of spending in new contract authority, said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan group that tracks federal spending.
Translation: The legislation would directly add roughly 350 billion growth dollars to the economy.
The Committee for a Responsible Federal Budget (CRFB) is a group that is paid by wealthy people to promulgate the Big Lie. The primary purpose of the Big Lie is to prevent the general public from asking for federal benefits. The goal is to widen the Gap between the rich and the rest, thus making the rich richer.
According to the text and a 57-page summary of the legislation, lawmakers leaned heavily on repurposing unused Covid-19 relief funds to pay for the legislation.
Translation: Rather than creating 22 billion growth dollars for COVID relief, those growth dollars will instead supposedly be used to “pay for” Biden’s programs.
Another item in the text is $53 billion that stems in part from states opting to terminate the pandemic unemployment benefits early in hopes of pushing the jobless to return to work. Some 24 states stopped at least one of the federal unemployment programs before they officially ended in early September.
Translation: Rather than giving the $53 to the lower-income people as unemployment benefits, Congress has decided to starve these people into submission, so in desperation, they will go to poorly paying and/or unpleasant jobs they otherwise would have avoided.
This way, the rich factory owners can rule with iron hands over needy workers.
The agency also found that the Federal Communications Commission’s spectrum auctions would generate far less than the $87 billion originally claimed by lawmakers.
Translation: The agency also found that the Federal Communications Commission’s spectrum auctions would take far fewer dollars from the economy than the $87 billion originally claimed by lawmakers.
The CBO also said that the legislation will raise about $50 billion by imposing new Superfund fees and changing the tax reporting requirements for cryptocurrencies, among other measures.
Translation: $50 billion unnecessarily will be taken from the public for fees and taxes.
The package leaves out Biden’s proposal to spend $400 billion to bolster caregiving for aging and disabled Americans — the second largest measure in the American Jobs Plan.
Translation: $400 billion would have grown the economy, but why should the aged and disabled poor receive dollars when the rich have tax loopholes to exploit?
His proposal would have expanded access to long-term care services under Medicaid, eliminating the wait list for hundreds of thousands of people. It would have provided more opportunity for people to receive care at homethrough community-based services or from family members.It would also have improved the wages of home health workers, who now make approximately $12 an hour, and would have put in place an infrastructure to give caregiving workers the opportunity to join a union.
None of the above were included because they don’t benefit the rich.
Also left on the sideline: $100 billion for workforce development, which would have helped dislocated workers, assisted underserved groups and put students on career paths before they graduate high school.
Translation: 100 billion growth dollars would have stimulated the economy, but we really don’t care about dislocated workers, underserved groups, and students.
The legislation also leaves out the $18 billion Biden proposed to modernize Veterans Affairs hospitals, which are on average 47 years older than private-sector hospitals.
Translation: There goes another 18 billion economic growth dollars, and really, why worry about our hospitalized veterans? Do they vote much?
What’s also out is a slew of corporate tax hikes that Biden wanted to use to pay for the American Jobs Plan.Biden’s original proposal called for raising the corporate income tax rate to 28%, up from the 21% rate set by Republicans’ 2017 tax cut act, as well as increasing the minimum tax on US corporations to 21% and calculating it on a country-by-country basis to deter companies from sheltering profits in international tax havens.
Sorry Joe, but taxes don’t fund federal spending. The federal government could continue spending forever, even if it collected $0 in taxes.
CNN’s Manu Raju contributed to this report.
Apparently, CNN’s Manu Raju knows as little about economics as do Katie Lobosco and Tami Luhby.
SUMMARY
Not only is the Big Lie eliminating many billions of growth dollars from the economy, but a great many worthwhile projects and people will go unfunded.
Because the rich take advantage of the public’s ignorance about economics, they win and you lose. They manage to widen the Gap, while you lose the growth benefits of federal spending along with the specific benefits that spending could have funded.
Ignorance has its penalties.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
……………………………………………………………………..
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
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:
When you are faced with an unwanted effect, the solution is to find and then solve the cause. If you don’t understand the cause, you will be faced with the same effect again and again.
Washington Post headline:
Inflation emerges as defining economic challenge of Biden presidency, with no obvious solution at handAmerica is emerging from the pandemic facing its biggest inflationary spike in decades, as startling and persistent price hikes threaten to undermine the recovery, while posing an entirely new kind of economic challenge to the Biden presidency.Policymakers are facing the devilish and unfamiliar quandary of booming consumer demand and dramatic supply disruptions combining to push higher the cost of necessities such as food, gas and housing.
I’m not sure why this is such a mystery. All inflations are caused by the same thing: Shortages of key goods and services.
The cure for any inflation is to increase the availability of the scarce goods and services. So when the Washington Post says, “no obvious solution at hand,” they may be talking about no obvious political solution.
This inflationary burst has no single cause and no obvious solution.
The cause is a shortage of key goods and services. The cause is notfederal deficit spending.
This graph shows there is no historical relationship between federal deficit spending (red) and inflation (blue). The graph also shows that reductions in deficit growth lead to recessions (vertical bars) which are cured by increases in deficit growth.
The economic solution is quite plain: Federal deficit spending to increase the supply of energy, food, computer chips, supply-chain methods, and labor.
Trillions of dollars in federal aid approved by Congress in response to the pandemic have led American consumers and companies to purchase more goods than ever before, putting new strains on global supply chains to accommodate the soaring volume. But that higher demand has collided with shortages in workers, supplies and transportation capacity — challenges caused in part by the pandemic as well as long-standing structural deficiencies in the national economy.
It is those shortages, not federal deficits, that have caused inflation. Cure the shortages and you cure the inflation.
A record 4.4 million Americans quit their jobs in September as labor market tumult continued.
The labor shortage exists partly because people quit their jobs for a variety of reasons including:
Need for child home care
Low wages
FICA cost
Bad hours.
Virus fear
There are others, but these all could be solved by federal deficit spending — a kind of “Manhattan Project” to cure the shortages that cause inflation.
Federal pay for child home care
Higher minimum wage together with the elimination of business taxes, to help fund the higher wages
Elimination of FICA and reduction of income taxes at the low pay scales
Standard 4-day week and/or shorter workday
Federal support for vaccination rewards in selected industries.
The federal government also should reduce the need for human labor by funding more development of Artificial Intelligence (AI) and mechanization along with other labor-saving initiatives.
This inflationary burst has no single cause and no obvious solution.
The single cause is shortages. The obvious solution is to cure the shortages.
Trillions of dollars in federal aid approved by Congress in response to the pandemic have led American consumers and companies to purchase more goods than ever before, putting new strains on global supply chains to accommodate the soaring volume. But that higher demand has collided with shortages in workers, supplies and transportation capacity — challenges caused in part by the pandemic as well as long-standing structural deficiencies in the national economy.
In the Eisenhower years, the federal government spent billions to improve highway traffic. Today, not only do highways need to be improved, but all other elements of the supply chain need similarly to be improved.
Our railroads are a mess. Our ports are inadequate. The quasi-privatized postal service is struggling. Shipping itself should be funded. These all are critical national needs, surely as important as weapons development.
Gas prices are at a seven-year high amid a global energy crisis, exacerbated by unusually high demand in Europe and a coal shortage in China.
Solutions: Temporarily fund increased oil drilling while funding more research and development of renewable, non-carbon fuels.
Food prices are rising at the highest level in 12 years amid severe droughts and spiking demand from families and restaurant reopenings. Meat, fish and egg prices are up nearly 12 percent from a year ago — the highest increase since 1979 (other than the early days of the pandemic) — partly fueled by processing plants’ struggle to find workers.
While other industries have mechanized, food processing remains in the electronic dark ages. Federal funding of computerization would help, significantly, as would federal financial support for raising wages.
Droughts are being caused by climate change, which has been denied by the right wing and largely ignored by the left. Federal support for non-carbon energy sources would help solve the problem.
The longer inflation lasts, the greater the political problem for the White House and congressional Democrats. Already news of the October inflation spike spurred new head winds for President Biden’s signature and key legislative initiative — the roughly $2 trillion Build Back Better package — exacerbating fears that other moderate Democrats may echo the concerns raised by Sen. Joe Manchin III (D-W.Va.) this past week about more spending. Congress won’t use their infinite supply of water to put out our economic fire.Meanwhile, Republicans have sharpened their attacks over inflation, seeing it as among their best arguments against the Biden’s presidency.
In other words, our boat is burning, but the politicians won’t put out the fire because they don’t want to use water.
Yet many economists say that the inflationary pressures hitting the U.S. economy were necessary to avoid the far worse scenario of a prolonged downturn and that focusing on rising prices risks obscuring the healthy facets of the current rebound such as the rapid rebound in jobs.Most families have more financial resources than they did before covid, especially among the bottom third. Even when accounting for inflation, disposable income has been roughly 9.5 percent higher in 2021 than it was before the coronavirus pandemic hit in 2019, according to Julia Coronado, president and founder of MacroPolicy Perspectives.“It’s safe to say the bottom 40 percent of Americans are definitely better off in the past year from a combination of rising wages and government aid, even with inflation,” said Arindrajit Dube, economics professor at the University of Massachusetts Amherst.
The Democrats are laughably (or “cryably”) bad at telling their story. Somehow, they expect the public to see “the obvious,” but history shows that the public would rather believe the words of a personality than the facts.
The U.S. economy is growing at a very fast clip, especially compared with the rest of the world, and could recover the lost economic output from the pandemic by the end of next year, according to some projections. Workers at the bottom of the income distribution are seeing meaningful wage increases, even factoring in inflation. Job openings are plentiful. The stock market has continued its meteoric rise under Biden, with the S&P 500 jumping by more than 20 percent since he took office. Inflation is up globally, not just in the United States, and the supply chain dysfunction reflects a decades-long trend of companies scattering their production sources across the globe.
All of the above is true, but who is telling the story? Certainly not Biden. And not the Vice President, whatever her name is and wherever she is hiding.
The old saw is, “If you’re defending you’re losing”, and the Dems aren’t even defending.
The approximately 50 percent rise in gasoline prices from last year — and 6 percent jump in October alone — has proved one of the most visible burdens on American families, spurred by a mixture of factors from Chinese manufacturing and an acute energy crisis in Europe.
To the average American voter, gas prices = inflation. The federal government has the financial ability to lower gas prices, although it may not have the political ability, unless someone in the government figures out how to tell the story.
Sadly, a personality like Donald Trump could do it, and he would do it, if it benefited him.
Supply chain backlogs also show little sign of easing before early 2023, said Phil Levy, chief economist at freight company Flexport. While shipping rates from Shanghai to Los Angeles came down modestly from their September peaks and auto companies report slightly easier access to semiconductors now, a record 81 container ships were sitting off the southern California coast on Tuesday, according to the Marine Exchange.
A “Manhattan Project” for America’s supply chain could fix the problem.
Rent prices also jumped 0.4 percent from September to October, continuing an upward trend, while the sales price of a single-family home jumped by 16 percent over one year, according to the National Association of Realtors.A red-hot housing market has been spurred on in part by low interest ratesand shortages in supplycaused by a freeze in construction during the pandemic.
Annual interest rates (purple) vs. annual growth of Gross Domestic Product. Rate reductions do not stimulate GDP growth.
Shortages in supply always cause price increases.
However, as with so many myths in economics, the myth that low interest rates are stimulative has no basis. In fact, there is evidence, as you can see from the above graph, that high interest rates are stimulative.
The reason: High rates cause the federal government to pour more interest dollars into the economy.
New housing construction (green) does not correlate with reductions in 30-year (brown) or 15-year (gold) mortgage rates.
New housing construction does not correlate with reduced mortgage rates. Both 30-year and 15-year mortgage rates have drifted downward since 1982, yet new housing construction (green) has changed wildly.
One reason for the lack of correlation may be that interest rates are not the deciding factor for home buyers.Since 1980, the average sales price of a house has increased from $80,000 to $450,000. A 1% drop in mortgage rates for a $450,000 house (less 20% down) comes to $3,600 per year or $300 per month, not nearly enough to encourage or discourage the purchase of a $450,000 house.
Thus, contrary to common knowledge and Federal Reserve dogma, reducing interest rates is not stimulative, and in fact, the argument could be made that rate reductions are recessive.
Interest rates should be raised and home construction, especially the construction of modestly priced homes, should be federally aided.
Raising interest rates also would mitigate against inflation, by increasing the value of the U.S. dollar.
If price increases continue, the Federal Reserve may raise interest rates, which would not only slow the pace of inflation, but also the pace of job and economic growth.
Yes and no. Yes, it would slow the pace of inflation, and no, it would not slow economic growth, as the above graphs indicate.
SUMMARY
The single greatest asset of the U.S. federal government is its Monetary Sovereignty. Yet myths and politics both have prevented the efficient use of this asset.
The federal government has the infinite ability to create U.S. dollars, and the addition of dollars is economically stimulative. Further, there is no evidence that federal deficit spending causes inflation, and massive evidence that it does not.
In short, there scarcely is an economic problem facing America that cannot be addressed by the wise addition of federal dollars, and there are no economic problems that can be solved by reductions in federal spending.
Rodger Malcolm Mitchell
Monetary SovereigntyTwitter: @rodgermitchellSearch #monetarysovereigntyFacebook: Rodger Malcolm Mitchell
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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.
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:
Marco Rubio U.S. Senator
#Monetary Sovereignty - Mitchell 