Your town, county, or state is running short of money. It may not be your politicians’ fault.

When you live in, or merely visit, the U.S., you not only are governed by U.S. laws, but you also deal with state, county and city/village laws.

How To Prepare To Send Your Child To Kindergarten — **Local taxes fund most local government spending.**

The idea is that ultimately, we all exist locally, and by geography and custom, all localities are different. State and local governments are tasked with many responsibilities — police, fire, education, streets, employment, poverty, courts, jails, etc. — and all of these are funded in whole or in part by local taxes. The federal government, being Monetarily Sovereign, has the unlimited ability to create dollars at the touch of a computer key. It cannot run short of dollars. Federal taxes do not fund federal spending. In fact, federal tax dollars are destroyed upon receipt by the U.S. Treasury.

(Federal taxes generally are paid from checking accounts, where the money comes out of the M1 money supply. The these M1 dollars are sent to the federal government, they disappear and cease to be part of any money supply measure. They are destroyed.

To pay its bills, the federal government creates new dollars, ad hoc.)

How the US military has failed to address white supremacy in its ranks | US military | The Guardian — **Federal taxes do not fund federal spending.**

The state and local governments, being monetarily non-sovereign, can and do run short of dollars, yet at least nine states send net dollars to the federal government! Because the federal government spends without relying on taxes, federal deficit spending adds growth dollars to the economy. State/local government spending, which relies on taxes, does not add any dollars to the economy. Thus, from the standpoint of economic growth, federal spending is far more stimulative than local government spending. For many years, my home state was Illinois. It perennially was and still is short of money. So are many of the towns and counties in Illinois. For instance:

Chicago Faces $1.2 Billion Budget Shortfall in 2021: Lightfoot Heather Cherone | August 31, 2020 On top of that colossal shortfall, the city’s financial picture worsened significantly during the past three months because of an “economic catastrophe caused by the coronavirus pandemic,” Lightfoot said. The city’s budget for the current fiscal year is now $799 million in the red.

Is Illinois’s main financial problem COVID was an “economic catastrophe”? Or, Is it because the crooked politicians are stealing so much? Well, we certainly have had our share of rascals. Wikipedia was kind enough to supply this list:

Illinois politicians convicted of crimes: Roger Agpawa, Patricia Bailey, Edward J. Barrett, William Beavers, James E. Bish, Rod Blagojevich, Louis F. Capuzi, Isaac Carothers, Donald D. Carpentier, Willie Cochran, Frank Collin, G. Bradford Cook, Jerome Cosentino, Bill Cox, Rita Crundwell, John A. D’Arco Jr., James DeLeo, Bruce A. Farley, Keith Farnham, Morgan M. Finley, La Shawn Ford, H, John F. Harris, Dennis Hastert, Orville Hodge, Constance A. Howard, Douglas Huff, J, Jesse Jackson Jr., Sandi Jackson, Thomas E. Keane, Otto Kerner Jr., John McCandish King, Joe Kotlarz, James Laski, Terry Link, Betty Loren-Maltese, William Lorimer, M, William P. MacCracken Jr., Pat Marcy, Walter C. McAvoy, Robert F. McPartlin, Edward Nedza, Charles Panici, Sandra M. Pihos, Jacob Rehm, Mel Reynolds, Edward J. Rosewell, Dan Rostenkowski, Fred Roti, Andrew Russel, George Ryan, Martin Sandoval, Nick Sauer, Aaron Schock, Edward T. Scholl, William J. Scott, Derrick Smith, Roger Stanley, Ron Stephens, Arthur Swanson, Donne Trotter, Arenda Troutman, V, Edward Vrdolyak, Dan Walker, Jack E. Walker

Yes, whatever they stole came from the taxpayers. So, if not for these criminals, would Chicago be solvent? Well, what about this:

MORE THAN 2,200 COOK COUNTY, IL WORKERS RECEIVE SALARIES OVER $100,000 Ted Dabrowski, John Klingner A review of the county’s payroll database finds that more than 2,200 Cook County workers receive salaries over $100,000. For career county workers – those who’ll work for 30-plus years – that means pension benefits worth millions of dollars over the course of their retirements.

So is the problem due to high salaries and monster pension deals for Illinois government workers? Yes, that may contribute to the problem. Or, is this the real problem:

After decades of historic mismanagement, Illinois is now grappling with $15 billion of unpaid bills and an unthinkable quarter-trillion dollars owed to public employees when they retire.
The budget crisis has forced Illinois to jack up property taxes so high that people are leaving in droves. Illinois may soon have to take the unprecedented step of cutting off sales of lottery tickets because the state won’t be able to pay winners. by Matt Egan

Lotteries are supposed to make money for the state. How is it possible that Illinois’s lottery loses money? So, is that the problem? Sheer mismanagement? Well, what about this:

We’re being squeezed, Pritzker Stop siphoning money away from towns and villages Chicago Tribune, By Kevin Wallace For the past decade, Springfield has been taking a substantial portion of revenue from Illinois municipalities, arguing that state government needs the money more than local taxpayers. These funds can amount to up to 20% of a town’s operating budget. In 2011, Springfield increased the state income tax and also started taking a larger share of the local pie — dropping the agreed-upon 10% it gives back to just 6.06%. This year, Gov. J.B. Pritzker has proposed taking an additional $152 million to fill the state budget gap. But local mayors are facing their own budget challenges. To make up for continued losses, towns will face the option of cutting services, laying off personnel, or raising property taxes. Making matters worse, keeping payments at current levels places a heavier burden on towns that can least afford it — those already hurting from weaker tax bases and sky-high property taxes.

So is there a problem with states taking too much from local taxpayers, yet still aren’t able to pay their own bills? Or, perhaps this is part of the problem:

The states with the lowest net federal funding per resident are:

New Jersey (-$2,368)

Massachusetts (-$2,343)

New York (-$1,792)

North Dakota (-$720)

Illinois (-$364)

New Hampshire (-$234)

Washington (-$184)

Nebraska (-$164)

Colorado (-$95)

Nine states send more dollars to the federal government than they receive from the federal government, which is ridiculous on the face of it. But it gets worse. Much worse. The following is from the uber right-wing Washington Examiner:

Red states should revolt against the ‘blue state bailout’ by Stephen Moore | March 04, 2021 Congressional Democrats are a runaway train with a drunk-on-power conductor in House Speaker Nancy Pelosi. No matter how much evidence pours in that the economy doesn’t need $1.9 trillion more in debt spending, the Pelosi locomotive keeps crashing down the track toward the financial cliff. Generations will have to pay for the joyride.

Can you imagine Trumpers’ pulses racing after reading that? After we get past the hyperbole of “runaway train,” the “drunk on power,” the “locomotive” that keeps “crashing down the track,’ the “financial cliff” and the generations who will “pay for the joyride,” let’s see if we can find anything of substance. There is the claim that the economy “doesn’t need $1.9 trillion more.” It’s the word, “need” that puzzles me. What does it mean? Does it mean that all the financial problems facing us Americans are now solved and no further money would improve our lives? No, of course not. Does it mean the federal government can’t afford to spend an additional $1.9 trillion? No, the federal government can afford anything. Or, does it really mean:

One of the worst features of the bill is the “blue state bailout.” Twenty-one Republican governors and one Democrat complained that the bill “punishes” states that did the right thing by keeping their economies and businesses open during the pandemic.

Hmmm. How are red states being “punished” by receiving money, whether or not the amount is less than blue states? And, I don’t recall the red state complaints about them receiving more money from the federal government, year-after-year than do the blue states. And as for doing “the right thing,” one could doubt that risking your citizens’ lives for the sake of business is “the right thing.” But the real ignorance comes with Florida’s Gov. Desantis:

Florida Gov. Ron Desantis said the bill “loots” the red states to pay for Democratic governors who have locked down their economies.

In truth, his comment is no more wrong-headed than what’s coming from virtually all the other politicians. He claims that somehow the red states are paying for federal spending. Let’s be clear. No one pays for federal spending, not the red and not the blue. The federal government creates all of its spending dollars from thin air. Federal taxes pay for nothing. In fact, they are destroyed upon receipt. Those precious dollars you send to DC cease to exist the moment they are received. The federal government creates brand new dollars ad hoc, to pay all its bills.

Desantis has good reason to complain. Florida has a slightly higher population than New York, but New York gets $2,799 per person, or twice as much money as the $1,355 per person that Florida receives. In other words: Floridians are paying for New York Gov. Andrew Cuomo’s incompetence. That is precisely what is happening because the main factor in determining how much money each state gets is not its population but how high its unemployment rate has risen.

Aside from conveniently forgetting that year-after-year, New Yorkers send net dollars to the federal government while Floridians receive net dollars, the whining right also seems not to understand the purpose of unemployment compensation. It’s to help people who need help, a concept that seems to be alien to those oh-so-compassionate conservatives. And now comes the fact cherry-picking.

The governors’ joint statement declares: “A state’s ability to keep businesses open and people employed should not be a penalizing factor when distributing funds. If Congress is going to provide aid to states, it should be on an equitable population basis.”

Said another way, “A person having lost his job should not receive unemployment compensation.” That is known as right-wing logic.

Most red states have already balanced their budgets. So how will Republican governors use their free money?

WAIT! Now, after all the complaints, the Republicans acknowledge they are receiving “free money”??

Here’s a better idea: Rather than squander the money with more bureaucratic spending and the risk of inflating a financial bubble in their state budgets in the years ahead, devote every penny of these funds to finance tax reform and relief.

This phrase makes no sense: ” . . .inflating a financial bubble in their state budgets . . . ” Someone please explain it to me.

Five states are now examining eliminating their state income taxes. Those states are Mississippi, Nebraska, North Dakota, Utah, and West Virginia. Florida, Tennessee, and Texas already have.

Or could they, as a last resort, improve the lives of their residents? Improve their schools? Reduce hunger? Improve housing? Eliminate regressive sales taxes? Provide Medicare for All? No, they would prefer to assist the rich by eliminating state income taxes, which are far less regressive.

It would be rough justice for the blue state bailout. If Democrats take the red states’ money, Republican governors should make their states income-tax-free havens and steal the blue states’ families and businesses. The states without income taxes create twice as many jobs as the high-tax blue states.

First, Democrats are not taking “red states’ money.” The money is created by the federal government. Second, why would this influence whether or not Republican governors make their states income-tax-free? Should receiving less money from the government encourage red states to reduce taxes!!? Makes no sense. IN SUMMARY A lake should not take water from a desert. The well-fed should not take food from the starving, The rich should not take money from the poor. And, the Monetarily Sovereign federal government should not take money from monetarily non-sovereign entities like the states, the counties, the villages, the businesses, or the people.

If you think California, Illinois, New Jersey, and New York are melting down now, wait until they have to compete against regions of the country in the South and the mountain states with no income taxes. Will the last person in New York please turn out the lights?

Try to forgive the obvious joy right-winger Stephen Moore displays at visualizing left-wing Americans suffer. Apparently, for him, this is known as “patriotism,” “love of country,” and “concern for your fellow citizens.” At the next Olympics, we hope he doesn’t cheer only for red-state Americans while booing those from blue states. Unus pro omnibus, omnes pro uno Economic growth is achieved when dollars are added to the economy. Federal deficit spending adds dollars to the economy. Local government spending does not. A healthy economy requires the federal government to support, where possible, and not resent, state/local government expenses. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell ………………………………………………………………………………………………………………………………

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics. Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest. MONETARY SOVEREIGNTY

The Medicare for All mystery

I have been with Medicare for twenty years. Four months ago, following a 12-year fight with cancer, my wife spent three weeks in the hospital. The medical bills just for those three weeks exceeded $650,000. My out-of-pocket cost was less than $1,000. Medicare and the supplement paid the rest. Based on my personal experience with Medicare, which has been excellent, I believe all Americans — not just those who are 65+ years old — should be able to avail themselves of this program. Our Monetarily Sovereign government easily could pay for a comprehensive, no-deductible version, that not only would pay for everything but be generous-to-providers so as to attract more people into the healthcare professions. My sense is that this belief is shared by the vast majority of those who already have Medicare. And there surely is a need. Here are excerpts from a health care report that though admittedly is old (2010), I feel quite certain very little has changed:

Among seven nations studied—Australia, Canada, Germany, the Netherlands, New Zealand, the United Kingdom, and the United States—the U.S. ranks last overall, as it did in the 2007, 2006, and 2004. Most troubling, the U.S. fails to achieve better health outcomes than the other countries, and as shown in the earlier editions, the U.S. is last on dimensions of access, patient safety, coordination, efficiency, and equity. The Netherlands ranks first, followed closely by the U.K. and Australia. Quality: The indicators of quality were grouped into four categories: effective care, safe care, coordinated care, and patient-centered care. Compared with the other six countries, the U.S. fares best on provision and receipt of preventive and patient-centered care. However, its low scores on chronic care management and safe, coordinated care pull its overall quality score down. Access: Not surprisingly—given the absence of universal coverage—people in the U.S. go without needed health care because of cost more often than people do in the other countries. There is a frequent misperception that such tradeoffs are inevitable; but patients in the Netherlands and Germany have quick access to specialty services and face little out-of-pocket costs. Efficiency: On indicators of efficiency, the U.S. ranks last among the seven countries,. The U.S. has poor performance on measures of national health expenditures and administrative costs as well as on measures of the use of information technology, rehospitalization, and duplicative medical testing. Equity: The U.S. ranks a clear last on nearly all measures of equity. Americans with below-average incomes were much more likely than their counterparts in other countries to report not visiting a physician when sick, not getting a recommended test, treatment, or follow-up care, not filling a prescription, or not seeing a dentist when needed because of costs. Long, healthy, and productive lives: The U.S. ranks last overall with poor scores on all three indicators of long, healthy, and productive lives.

Clearly, the American private insurance industry has been failing Americans, especially those in the lower half of the income/wealth measure. Before we continue, please remember that of the seven nations compared, five are Monetarily Sovereign and two (Netherlands and Germany) are monetarily non-sovereign. Why is this important? Because the Monetarily Sovereign nations like the U.S. have the unlimited ability to create their own sovereign currency. They never can run short of money. Monetarily non-sovereign nations must rely on taxes to pay for things. Contrary to popular myth, the FICA tax does not pay for Medicare or Social Security. It pays for nothing. Even if our U.S. government were to collect zero taxes, we have the infinite ability to fund healthcare insurance, indefinitely. Though the U.S. government has this ability, it provides less service than do the two monetarily non-sovereign nations that must rely on taxes. Because the U.S. private insurance industry has been unable or unwilling to support Americans, various plans under the label “Medicare for All” have been suggested. Because of Gap Psychology (the desire to distance oneself from those below, on any social measure), the wealthy right-wing opposes such plans, just as it opposes all forms of federal aid to those who are not wealthy. So, in describing a Medicare for All plan, they intentionally reference plans with shortcomings, then falsely declare those shortcomings are a necessary part of all plans. Here is an example:

J.D. TUCCILLE: Let ’em eat cake.
Medicare for All Is Bad Medicine A better prescription would be to get the government entirely out of health care. J.D. TUCCILLE Opponents of choice in medicine are at it again, promoting Medicare for All with the U.S. government as the single payer and private alternatives outlawed.

“Private alternatives outlawed” is not a necessary feature of all Medicare for All plans. It is not even a necessary feature of today’s Medicare. For no good reason, today’s Medicare doesn’t pay 100%. Rather, there are deductibles, that can be covered by private Medicare Supplement insurance. To my knowledge, the sole purpose of “private alternatives outlawed” is to prevent people from double-dipping, i.e. receiving two payments for the same procedure. But since the U.S. does offer Medicare, and private alternatives do exist, presumably double-dipping is not a true problem.

The push comes as health care systems around the world try to catch their breath from the stress test inflicted by the pandemic—and by normal demand for expensive services. While American medicine has its share of problems, single-payer supporters would take all of the flaws in the system and make them universal and mandatory.

No, single-payer supporters would take all the benefits of Medicare, and make them universal.

H.R.1976, the Medicare for All Act of 2021 makes it “unlawful for … a private health insurer to sell health insurance coverage that duplicates the benefits provided under this Act” or for employers to offer alternative coverage. Providers wouldn’t be forced to participate; the proposed law lets Americans pay non-participating physicians out of pocket for services—subject to regulations. Why would Americans pay for services covered by a hypothetical Medicare for All? To answer that question, look north of the border, where Canada’s single-payer system, commonly called Medicare, struggles to meet patients’ needs. “With COVID-19 fuelling a surge in hospitalizations, the latest data provided by the Ministry of Health shows that as of December 31, 2020, there were 29,650 people on a waiting list for surgery” in Saskatchewan, the Canadian Broadcasting Corporation (CBC) reported earlier this month. The CBC noted similar delays in other provinces. “Specialist physicians surveyed report a median waiting time of 22.6 weeks between referral from a general practitioner and receipt of treatment,” which is the longest wait recorded, according to the free-market Fraser Institute.

The article continues with a litany of examples demonstrating how, under some forms of single-payer insurance, patients must wait a long time for service. This is supposed to make you believe that long waits are a necessary problem with a Medicare for All plan, but not with private insurance. However, any discussion of Medicare only tells you who is paying, the government or the private insurance companies. It says nothing about services from doctors, hospitals, nurses, et al. Given the federal government’s infinite ability to spend, and no need to scrimp for profits, the federal government has far greater power to pay for any level of service. It could make the entire health care industry so financially attractive that the numbers of doctors hospitals and nurses could double or triple. Taken to an extreme, the government even could afford to fund a private doctor for every man, woman, and child in America. OK, no one recommends that, but it merely demonstrates how the government easily can pay — much more easily than private insurance can — for the world’s greatest service. There would be no need for the long waits with which Mr. Tuccille threatens you.

Such waits cost more than money—although they cost plenty of that. “[T]wice as many Ontarians with heart ailments passed away waiting for surgery during the pandemic than before COVID-19 hit,” according to the National Post. To relieve the backlog, Canadian provincial governments, which manage the single-payer system, are turning to private clinics. In Quebec, “without the private sector contracts, a region like Laval would have delayed 76 per cent of surgeries instead of 31 per cent,” the CBC noted in February.

“Private sector contracts”? Without realizing it, the author, J.D. Tuccille just demonstrated that a Monetarily Sovereign government like Canada’s has the unlimited ability to fund good service. “Private sector contracts” are simply an example of single-payer insurance. The government pays for service. It demonstrates that the private insurance sector was unable or unwilling to provide enough coverage, so the government had to step in and pay what the citizenry could not afford to pay.

As the data suggests, though, the public sector in many places had trouble delivering as advertised long before anybody had heard of COVID-19.

No, Mr. Tuccille, the data demonstrate that the private sector could not and did not deliver health care for all. That is exactly what is happening in America.

In Germany, where those making less than €64,350 per year must participate in the government health insurance system which is funded on a quarterly basis, the system runs out of money on a regular basis.

Unlike the U.S., the German government is monetarily non-sovereign. It can, and does, run short of money.

“State health insurance patients are struggling to see their doctors towards the end of every quarter, while privately insured patients get easy access,” Deutsche Welle reported in 2018. “The researchers traced the phenomenon to Germany’s ‘budget’ system, which means that state health insurance companies only reimburse the full cost of certain treatments up to a particular number of patients or a particular monetary value … Once that budget has been exhausted for the quarter, doctors slow down — and sometimes even shut their practices altogether.” The “budget” acts as backdoor rationing, limiting costs by choking off access for publicly insured patients to all but emergency medical care once the magic number is hit. Single-payer advocates often criticize private medicine for being cost-conscious, but government systems put at least as much emphasis on the bottom line as any corporate accountant.

Again, without realizing it, J.D. Tuccille demonstrates why Medicare for All is necessary for America. You and I and the German government are monetarily non-sovereign. We all can run short of dollars. The U.S. government cannot. The U.S. government has no profit motive — no “bottom line” — to emphasize. Sadly, even some Monetarily Sovereign governments are (intentionally??) as ignorant of economics as is Mr. Tuccille. The Libertarians who bleat and moan about the U.S. deficit and debt, seem to have no memory of the fact that despite massive spending for the past 80 years, and numerous tax cuts, the U.S. government never has struggled to pay its bills. It hasn’t run out of dollars. It hasn’t had to bounce any checks. This all relates to the Big Lie in economics that says: “Federal taxes fund federal spending.” It simply is not true. Federal spending always has been funded the same way: The government passes laws from thin air, and these laws provide for dollars being created from thin air. There is no limit on the laws the government can pass, thus there is no limit on the dollars the government can create.

That’s especially obvious in the United Kingdom, where the National Health Service has a cult-like status. During the pandemic, this took the form of a “Stay Home. Protect the NHS. Save Lives.” campaign. “The NHS is under severe strain and we must take action to protect it, both so our doctors and nurses can continue to save lives and so they can vaccinate as many people as possible as quickly as we can,” Prime Minister Boris Johnson scolded the public.

Utter nonsense. Boris Johnson either doesn’t know what he’s talking about, or more likely, he is conning the British public. England, being Monetarily Sovereign, never unintentionally can run short of British pounds. Never.

The campaign worked. Even people with medical concerns stayed home, resulting in a drop in doctor visits and a 90 percent plunge in hospital admissions.

Truly sad that sick people are being lied to by their elected leaders. One might say, it’s sickening. And now comes the overt statement of the Big Lie:

It’s difficult to imagine Americans venerating government bureaucracy (although feelings about Social Security come disturbingly close).

American’s love Social Security because it provides something they otherwise could not afford to obtain on the private market: Financial support in their old age.

But it’s impossible to pretend that Medicare for All could escape the concerns that plague all tax-paid medicine.

Again, the Big Lie. Medicare is not “tax-paid medicine.” It is government-paid medicine.

“A doubling of all currently projected federal individual and corporate income tax collections would be insufficient to finance the added federal costs of the plan,” the Mercatus Center’s Charles Blahous pointed out about an earlier Medicare for All proposal.

WRONG! WONG! WRONG! FEDERAL TAXES DO NOT FUND FEDERAL SPENDING. PERIOD.

Health care in the United States requires reform, without doubt. But rather than emulate the heavy state involvement that evokes headaches elsewhere in the world, a better prescription would be to get government entirely out of medicine and encourage more competition and choice.

What a pitiful close to a pitiful article. Mr. Tuccille wants your healthcare to rely on the profit motive of American business. Mr. Tuccille blithely omits the central issue: The unaffordability of healthcare for millions of Americans. If you are not rich, and you do not have a job that pays for your healthcare, you better not get sick. You either will suffer physically and die early from lack of care and/or suffer financially from trying to pay for your care. I am retired. I am not poor by any measure, but my wife’s $650,000+ medical bills in January, plus those huge bills we received for all previous12 years of her cancer, would have been financially painful. As you contemplate Mr. Tuccille’s (and the entire conservative wing’s) thoughtless comments, ask yourself: “What would I do about a $650,000+ hospital bill. And what would my private insurer do about it?” The federal government not only could afford to pay that bill, but it even could afford to pay a $6 million, or $60 million bill, and never blink an eye. Could your private insurance company afford that? If you lost your job, would you even be able to find a private carrier who would accept you? Let us all pray for Mr. Tuccille’s continuing financial ability to afford his private insurance so he can close his eyes to those less affluent than him, and continue his “Let ’em eat cake” articles. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell ………………………………………………………………………………………………………………………………

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

MONETARY SOVEREIGNTY

Does deficit spending cause inflation and unemployment?

The Republican Party has assumed three tasks:

Oppose the Democrats wherever possible on any subject at any time.
Oppose anything that benefits the lower half of the income/wealth/power population.
Support the rich

This unofficial, but very real, platform is referenced in the following article from the May 23rd, 2021 Chicago Tribune”

Biden betting big on wage growth
GOP: President’s policies are already spurring inflation
By Josh Boak Associated Press
WASHINGTON — The Biden administration recently gave a bit of simple advice to businesses that are unable to find workers: Offer them more money.

Businesses are coping with spiking prices for goods such as steel, plywood, plastics and asphalt.

Yet workers, after enduring a year of job losses, business closures and social distancing, are no longer interested in accepting low wages.

Administration officials say the White House is not trying to target a specific wage level for workers. But officials say higher wages are a goal of President Joe Biden and a byproduct of his $1.9 trillion relief package and at least $3.5 trillion in additional spending being proposed for infrastructure and education.

Boosting wages gets at the central promise of the Biden presidency to improve the lives of everyday Americans and restore the country’s competitive edge in the world.

Republicans say that Biden’s policies have already let loose a torrent of inflation that will hurt the economy.

Several economic factors are pushing toward inflation, but wages probably are the least of them.

**Changes in average wages (blue line) do not correspond with changes in inflation (red line).**

For companies that have become more automated, wages have been assuming less and less importance.

Industries vary markedly by expenses as a percentage of revenue. See: HERE. Low margin, low automation business obviously would be affected most by salary increases.

Most businesses should shoot for salaries in the 30 percent to 38 percent range, according to Second Wind Consultants.

Taking a mid-point of 35%, your business grossing $100, would pay $35 in salaries. Giving every employee, say, a 25% raise, would cost you $8.75 per employee.

So, you either would have to cut your profits, raise prices by 8.75%, or find some means to lower costs (via efficiencies, automation, etc.)

But wait. Most of your employees pay the government 15% for FICA, (your business technically pays half, but that cost is passed on to employees as salary costs) so if the federal government merely stopped collecting FICA, that immediately would give each worker a 15% raise paid for by the federal government.

Further, because FICA takes dollars from the private sector (aka “the economy), the elimination of FICA would stimulate economic growth by leaving more dollars in the pockets of consumers.

You would benefit; your employees would benefit; the entire economy would benefit — all at no cost to anyone.

But wait again.

The total cost of health care, including premiums and out-of-pocket costs for employees and dependents, was estimated to average $14,800 per employee in 2019.

And again, because employers consider healthcare costs to be “pass-through” (considered as part of the cost of compensation), that’s another $14,800 each employee does not receive.

And that problem could be eliminated by a federally funded, Medicare for All program.

White House economic adviser Jared Bernstein said the goal is “to pull forward a robust, inclusive recovery that provides good employment opportunities to people who are in the bottom half, who went to work, often in unsafe conditions, or had to stay home to take care of their families and deal with school closures and childcare constraints.”

The New York Federal Reserve reported a 26% increase over the past year in wage expectations by noncollege graduates. The lowest average salary they expect for a new job is $61,483, up more than $12,700 from a year ago.

The wage pressures feeds into some anxiety about inflation.

The Biden team sees the 0.8% month-over-month jump in consumer prices in April as temporary, a sign of consumer demand and the bottlenecks that naturally occur when an economy restarts.

But newly released minutes from the Fed’s April meeting suggest the U.S. central bank could raise interest rates earlier than previously indicated to stamp down inflation and potentially limit economic growth.

We have three primary controls over inflation.

First, there is the month-to-month incremental control: Interest rates. Raising rates makes money more valuable to own, which instantly dials down inflation in small, targeted steps.

Second, for large-scale inflation, which is caused by shortages of key assets like oil and food, we have the federal government’s ability to purchase these assets abroad or to fund their creation domestically, and to distribute them to the populace.

The third control is federal fiat. The government merely says something on the order of, “From now on, the dollar will be worth [a specified exchange rate]. The fiat approach was used on several occasions with regard to the gold exchange rate, but nothing says it couldn’t be used with regard to any basket of foreign currencies.

The popular myth is that raising interest rates “limits economic growth,” and that myth is why the stock market temporarily reacts negatively to interest rate increases.

However, raising rates requires the federal government to pump more interest dollars (i.e. stimulus dollars) into the economy.

So, as is all-too-frequent in economics, this myth is directly in opposition to reality.

**Changes in interest rates (blue line) very closely correspond to changes in GDP (red line). When interest rates go UP, GDP goes UP.**

The Senate’s Republican leader, Mitch McConnell of Kentucky, has told voters that Biden’s decision to provide an additional $300 a week in unemployment benefits and the spending in his relief package are hurting the economy.

He said Thursday on Fox Business that the package “Democrats jammed through on a party-line vote” is “producing both people not wanting to work and raging inflation.”

“People not wanting to work” is the right-wing meme that actually means, “Poor people are lazy. They don’t want to work in the grueling jobs and for the slave wages our wealthy supporters want to pay.”

It is the GOP version of “Starve ’em until they are so desperate they will take any awful job and accept any awful wage.”

Slave wages and slave conditions are why growing cotton was so profitable in the old South.

And as for “raging inflation,” that is a typical, Trump/GOP misstatement unless one considers a 10 year interest rate average below 2% to be “raging.”

To no one’s surprise, rates shot up in the past month, as COVID vaccinations finally freed people to mingle and shop.

But if rates don’t drop, the government still has the unlimited ability to control inflation.

The GOP approach is to give tax reductions to the rich, while starving the rest of the population to whip them to work.

Part of the dispute between Biden and Republicans is on how economies grow. The administration has embraced a philosophy of investing in workers and providing them with benefits to make it easier for them to juggle life responsibilities and jobs.

Republicans believe the key is to minimize taxes and other barriers for employers so that lower operating costs lead them to invest and hire.

In other words, if you give people no benefits, and the only available jobs are sweat labor at starvation wages, people will have to take those jobs, and the corporate executives will grow richer.

Republicans see the $300-a-week federal unemployment payment as discouraging people from working because they can earn more money by staying unemployed. Their view is that this limits how many jobs can be created and how high wages will rise.

There are 23 states — all with Republican governors and GOP-controlled legislatures — that plan to block the enhanced federal benefits in June, under the belief that the loss of income will cause people to take jobs.

Yes, that does work. Loss of income forces people to take bad jobs.

Aaron Sojourner, a labor economist at the University of Minnesota, warned that scrapping the benefits could reduce families’ incomes and possibly encourage employers to pay less such that workers’ incomes might be depressed.
“Lower wages is exactly the premise of the Republican position,” Sojourner said.

Sadly, the Democrats have not had the courage to tell what they surely must know:

Taxpayers do not fund federal spending.
The federal government has the unlimited ability to pay for benefits
The economy, and the people living in it, are much healthier during periods of federal deficit spending.
The GOP and their wealthy backers want to starve the populace so that the rich will grow richer.

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

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

The Ten Steps will grow the economy and narrow the income/wealth/power Gap between the rich and the rest. MONETARY SOVEREIGNTY

A good news, bad news, good news, bad news tax story

First, the news, a short article from the May 14, edition of THIS WEEK Magazine: UM-Dearborn College of Business on Twitter: "In April, IRS agents spent the day on campus teaching students. The education and training program, called the Adrian Project, was a daylong simulation of a

President Biden wants to beef up the IRS budget significantly, said Jeff Stein in The Washington Post.

Biden is looking to increase the Internal Revenue Service’s budget by $80 billion over the next 10 years, with the money going toward increasing “the number of agents and giving the IRS new tools and technology to execute collections and crack down on avoidance” by the wealthiest families.

The White House says the extra boost could “raise as much as $700 billion,” helping pay for an expansive child-care and education plan.g

The IRS has lost roughly 18,000 full-time positions since 2010, “with the number of auditors falling to lows unseen since the 1950s.”

The head of the IRS told a Senate committee this month that tax cheats cost the government as much as $1 trillion a year.

In the above news, the good news snippets are: “beef up the IRS budget significantly,” and “increase the Internal Revenue Service’s budget by $80 billion,” That’s $80 billion growth dollars going into the economy, together with more employment (perhaps 18,000 positions?) for agents.

Additional good news: “increasing the number of agents.” That’s 18,000 more employed Americans. More good news: “tax cheats cost the government as much as $1 trillion a year.” That’s $1 trillion a year that is not being taken from the economy.

Yet even more good news: The desire to “crack down on avoidance by the wealthiest families.” That would help narrow the Gap between the rich and the rest, which helps address the biggest problem in economics.

The bad news is: “raise as much as $700 billion.” That means $700 billion growth dollars would be removed from the economy, dramatically cutting into Gross Domestic Product.

The additional bad news is: “ . . . helping pay for an expansive child-care and education plan. Helping pay for child-care and education is good news, but the bad news is that Biden and friends actually believe (or claim to believe) federal taxes pay for those benefits.

In claiming federal taxes pay for federal spending, Biden essentially has set the stage for falsely claiming the government “can’t afford” to pay for benefits to the public. It’s all part of the Big Lie that provides the rich, who run America, with a ready excuse for not supporting such benefits as Medicare for All, Social Security for All, college for all, etc.

The Big Lie is the perfect Gap Psychology tool to widen the Gaps between the have-more and the have-less.

In Summary: Unlike state/local taxes which pay for state/local government spending, federal taxes do not fund federal spending.

The federal government pays for its spending by creating new dollars, ad hoc. It has the unlimited ability to create its own sovereign currency.

Unlike state/local taxes, which immediately are returned to the economy as part of the money supply via deposits into bank checking accounts, federal taxes are destroyed upon receipt.

The sole purpose of federal tax collection is to control the economy by taxing what the government wants to discourage and giving tax breaks to what the government wants to encourage.

Oh, and there is one other purpose: To fool you into believing that certain benefits to you are “unaffordable,” because the federal debt supposedly is “unsustainable.” It’s all a feature of the Big Lie.

…………………………………………………………………………

Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ]

THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:

Monetary Sovereignty describes money creation and destruction.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”

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

MONETARY SOVEREIGNTY

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