Kelton tried and seemingly failed to educate Sanders about the facts of federal economics, the key one being that a Monetarily Sovereign government cannot run short of its own sovereign currency.
(When you pay taxes to the federal government, money is removed from the private sector [aka “the economy”] and flows to the U.S. Treasury. Because the Treasury has infinite money, your tax dollars effectively are destroyed. (Infinity + any number = infinity. No change.)
Perhaps Sanders is playing politics because he continues to mouth the absurdity that the federal government and its agencies unintentionally can run short of U.S. dollars.
‘Time to Scrap the Cap’: Sanders, Warren Bill Targets Rich to Expand Social Security Posted on June 10, 2022 by Yves Smith, By Jake Johnson, a staff writer at Common Dreams. Originally published at Common Dreams
Yves here. It’s no secret that the assertions that Social Security is in dire financial straits are fabrications.
First, like so much of our Federal government funding, the device of having a trust fund is a convenient fiction.
So far, so good. Despite incessant allusions to the contrary, the so-called Medicare Trust Fund and Social Security Trust Fund are not trust funds. They merely are notations on a balance sheet.
Those numbers are completely controlled by the federal government. The federal government can change the numbers at will — quite different from a trust fund.
In reality, Social Security is a pay-as-you-go program.
She is correct if Susan Webber (aka Yves Smith) means that the federal government pays for Social Security by creating dollars, ad hoc.
Second, for those who nevertheless like the appearance that Social Security is paid for by payroll contributions, the most obvious fix has long been to raise or eliminate the cap on salaries subject to payroll taxes.
The fact that this problem has not been solved strongly suggests some influential parties don’t want it solved.
Those “influential parties” are the very rich, who wish to widen the Gap between them and those below them on any income/wealth/power scale. It’s known as “Gap Psychology.”
Unfortunately, most Americans believe the lie that Social Security is paid for by a trust fund. The solution to a lie is not to accept the lie, as Smith seems to advocate, but rather to tell the truth.
But, she doesn’t seem to advocate for the truth.
Sens. Bernie Sanders and Elizabeth Warren led a group of lawmakers Thursday in unveiling legislation that would expand Social Security’s modest annual benefits by $2,400 and ensure the program is fully funded for the next 75 years.
The benefit boost under the Social Security Expansion Act would be funded by lifting the cap on the maximum amount of income subject to the Social Security payroll tax.
This year the cap was $147,000—meaning millionaires stopped paying into the program in late February.
Lifting the cap would fund nothing because the Social Security payroll tax (FICA) funds nothing. The dollars are destroyed when they hit the Treasury.
President Roosevelt, the creator of Social Security, knew this, but he wanted the tax to make Social Security impossible to end.
He reportedly said, concerning FICA:
“I guess you’re right on the economics (that payroll taxes are unnecessary).
“They are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits.
All federal programs can end, and many do when an opposing party comes into power.
But if the voters believe they have contributed to a program, the opposing party will find it politically challenging to end the program.
If passed, the expansion bill would apply the payroll tax to all income, including capital gains, above $250,000 a year, a change that would only raise taxes on around 7% of U.S. households.
“At a time when half of older Americans have no retirement savings and millions of senior citizens are living in poverty, our job is not to cut Social Security,” Sanders (I-Vt.), head of the Senate Budget Committee and a co-chair of the Expand Social Security Caucus, said in a statement.
“Our job must be to expand Social Security so that every senior citizen in America can retire with the dignity they deserve and every person with a disability can live with the security they need,” the senator continued.
“And we will do that by demanding that the wealthiest people in America finally pay their fair shareof taxes.
It is absurd that a billionaire in America today pays the same amount of Social Security taxes as someone making $147,000 a year.
It is time to scrap the cap, expand benefits, and fully fund Social Security.”
Does Sanders believe that? Does he think raising the $147,000 FICA salary cap will expand benefits and fully fund Social Security?
Or is his plan simply to make the rich pay so that it appears a Social Security increase will be fully funded? Is that his way of answering the question, “Who will pay for it?
Or does he have an even deeper plot?
The legislation comes a week after the annual Social Security trustees report showed that—contrary to Republicans’ claims that it is barreling toward insolvency—the program is positioned to fully fund benefits until 2035.
Thereafter, even if Congress takes no action, the program is projected to be 90% funded for the next 25 years and 81% funded for the next 75 years.
Social Security is fully funded, not by any fake trust fund but by the full faith and credit of the United States government. Neither the U.S. government nor any government agency can run short of dollars unless Congress and the President want it to.
What is their real plan assuming Sanders and Warren are intelligent and well-informed?
“Social Security is an economic lifeline for millions of Americans, but many seniors are struggling with rising costs,” said Warren (D-Mass.).
“As Republicans try to phase out Social Security and raise taxes on more than 70 million hardworking Americans, I’m working with Senator Sanders to expand Social Security and extend its solvency by making the wealthy pay their fair share, so everyone can retire with dignity.”
That “fair share” hints at the real purpose of Sanders’ plan.
Sanders announced the new bill Thursday during a Senate Budget Committee hearing, at which Republicans—including Sen. Mitt Romney (R-Utah), who has previously voiced support for privatizing Social Security—made clear they would oppose the legislation, which has been endorsed by more than 50 advocacy organizations and labor unions.
The Republicans’ ostensible purpose for privatizing Social Security is the claim that stock market investments will grow enough to safeguard Social Security growth. The claim is false for at least two reasons.
Social Security is funded by the federal government’s money creation, not taxes or any other outside mechanism.
The stock market is not a secure growth mechanism, and if somehow it were made to fund Social Security, the current S&P drop demonstrates the folly of relying on private markets.
The true purpose of Romney’s and other Republicans repeated drumbeat for privatization is simple: To provide another lucrative money-making opportunity for wealthy investment firms.
In addition to increasing annual benefits and lifting the tax cap, the Social Security Expansion Act would also boost the program’s cost-of-living adjustments by switching to a more accurate measure of inflation.
According to the Social Security Administration, the average monthly Social Security benefit payment was around $1,540 as of April 2022.
“With the cost of living at an all-time high, Social Security has never been more important, yet congressional Republicans continue to play games with its funding,” said Rep. Peter DeFazio (D-Ore.), the lead sponsor of a companion bill in the House.
An example of Gap Psychology at work. A wealthy person will spend $12.8 million to distance himself from those who have less, and to come closer to those who have more.
“This legislation would ensure that the Social Security Trust Fund remains solventfor another 75 years, increase monthly benefits for most recipients by $200, and alter the cost-of-living-adjustment formula to meet the everyday needs of our nation’s seniors,” DeFazio added.
Lifting the tax cap won’t accomplish any of those stated purposes. So, what may be the fundamental purpose? Could it be Sanders’ and Warren’s secret plan to narrow the income/wealth/power Gap between the rich and the rest? Is this their Gap Psychology plan?
(Gap Psychology describes the common desire to distance oneself from those below, on any socioeconomic scale, and to come closer to those above.)
The plan implies to those who believe FICA funds Social Security, a direct money transfer from the richer to the poorer, from those whose salary exceeds $147,000 to those whose salary is lower.
Since there are more voters in the latter position than in the former, it’s a pretty good Gap Psychology election ploy.
Because the plan would, though by a minimal amount, help narrow the Gap, I wish I could be in favor. But I simply can’t support the idea of ratifying the Big Lie that federal taxes fund federal spending.
So long as the populace believes the Big Lie, the myth that the U.S. is as financially hamstrung as the states, counties, cities, and euro nations.
We must free ourselves of that myth to have control over our economic future.
The honest plan would be to tell the world that the federal government can’t run short of dollars, federal taxes don’t fund federal spending, and federal spending doesn’t cause inflation.
The rich will continue to rule until those truths are exposed and understood.
(Every federal spending cut demanded by conservatives is designed to widen the income/wealth/power Gap between the rich and the rest, while the few federal spending increases backed by the conservatives are designed to reward and protect the rich.)
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:
The purpose of government is to improve and protect the lives of the governed.
Is the Medicare Advantage plan an admission that Medicare itself is unnecessarily incomplete?
Free, but with strings.
A story: You receive a call from the wealthiest man on earth. He owns an infinite amount of money.
He tells you he’s in the mood to do a good deed.
He has picked your name randomly, not based on anything but the luck of the draw, and he is giving you a free, no-strings-attached, Rolls Royce automobile.
Well, actually, there are two small strings. You must choose between two Rolls.
One has no heater. The other has no air conditioning.
And you must wait until you are 65 years old before you pick your car.
This puzzles you, so you ask him, “Why would someone having infinite money decide that when does his good deed, he gifts you a car that is missing either a heater or air conditioner?”
And why must you wait until you’re 65?
What’s his purpose?
While you ponder that question, consider this: The federal government, being uniquely Monetarily Sovereign, has infinite dollars. It never can run short of its own sovereign currency.
The government provides you with Medicare, which comes in two basic “models,” Original Medicare and Medicare Advantage.
And you typically must wait until you are 65 to join (with certain exceptions).
But Medicare and Medicare Advantage have different options depending on many of your personal factors.
WHY? Why doesn’t Original Medicare simply cover all medical conditions for everyone?
The American Association of Retired People (AARP) published “8 Reasons to Change Medicare:
1. My prescription costs have jumped. That happens usually due to one of two scenarios: You’ve been prescribed a new drug your Plan D policy doesn’t cover, or your current medicines have fallen off your Plan D’s formulary (list of covered medicines), Neuman says.
Each September, Part D prescription plans will send out a list of changes to drug coverage, giving you time to make sure your medicines are still covered.
If not, you can shop around for another plan or ask your doctor to apply for an exception in covering your favored medicine.
WHY? Why must a person pay extra for Part D, and why must that person shop around for a plan that covers all his medicines?
2. I’ve decided to spend my winters (or summers) in a different state. Advantage plans typically charge more to go to doctors outside of their networks; in some cases they won’t cover any charges if it’s not an emergency.
So a Midwesterner might have to pay more to see out-of-network doctors while in Florida.
You need to read the details of your plan, or talk with a representative, to know where you stand. If you’ll be living a dual-residence existence for years to come, you might consider a switch to original Medicare, with the usual caveats.
WHY? Why the “in-network, out-of-network” rigamarole?
3. I need surgery and prefer a specific doctor. Original Medicare allows patients to choose any doctor or hospital that accepts Medicare.
But if you’re in a Medicare Advantage plan and its surgeons don’t meet your needs, you may need a different MA planor to switch to OM.
The people who really need to focus on whether doctors are in network are those who’ve suffered major problems like cancer and heart attack, says Joseph Antos, health care expert at the American Enterprise Institute.
“A specialist may be key to their treatment,” he says.
WHY? Why does one Medicare plan cover any doctors or hospitals that accept Medicare and the other plan doesn’t?
4. I’m super healthy and rarely need a doctor. If you’re in original Medicare, all should be well: As a “pay-for-service” arrangement, not seeing the doctor isn’t costing you anything extra beyond your mandatory parts B and D monthly insurance premiums.
If you’re in an MA plan in which you’re paying a monthly premium on top of your standard Part B premium, that may be for a plan that offers lots of extras , such as gym memberships.
Consider switching to a lower-cost MA plan that doesn’t offer services you don’t plan to use in the coming year.
WHY? Why are there any premiums, and why does one plan not cover the “extras?
5. I’ve been diagnosed with a chronic condition. A serious medical change should trigger a full review of your Medicare coverage. Make sure your Plan D policy pays for new prescriptions.
Consider the care you’ll need . If you want disease-specific programs, find an MA plan that offers them.
But if you will need lots of specialists, there’s an argument for OM. Making critical changes early can “really affect your pocketbook and save you money,” says Gretchen Jacobson, a vice president with the Commonwealth Fund.
WHY? Why the difference in plans? Why doesn’t one plan cover everything?
6. My income has dropped sharply. If you are in original Medicare, your Part B monthly premium is locked in, but your Part D drug plan isn’t.
And there’s a chance you can find a lower-cost policy that covers the medicines you are on.
If you’re in an Advantage plan, consider a switch to a plan in which there is no extra paymenton top of the mandatory Part B premium.
And you might qualify for help. Ask your state Medicaid office about Medicare Savings Programs. Find the state offices here or call 800-MEDICARE (800-633-4227).
WHY? Why is there a monthly premium? Why does one plan not even lock in premiums? Why the difference in costs?
7. My former employer is changing its retiree health benefits. Some companies provide retirees with Medigap supplemental insurance, which covers many health costs not covered by OM.
If you have changes to your retiree benefit coverage, or for some reason that coverage no longer is offered, contact Medicare’s Benefits Coordination & Recovery Center (855-798-2627).
Someone can tell you whether you fall in the window in which Medigap insurers cannot deny you coverage based on preexisting conditions.
WHY? Why are some retirees not covered by Medigap supplemental? Why is there even a need for supplemental?
8. My regular doctor is no longer in network for my plan. If you deeply want to stay with a doctor, ask directly whether he or she is moving to a different MA plan, accepting OM patients or dropping out of Medicare completely.
If you decide to make a change, make sure a short-term decision won’t affect your long-term coverage (for example, switching to original Medicare to temporarily stay with one doctor but sacrificing Medigap coveragefor the long term).
It might be safer to ask your doctor to recommend a colleague in your current plan.
I’m in need of serious dental care. Original Medicare doesn’t cover routine dental care costs, but many Medicare Advantage plans do.
If you don’t have your own dental insurance and can’t afford dentistry costs out of pocket, consider finding an MA plan that will cover a portion of the costs of your needed work.
Antos warns that figuring out what portion of your dental bills an MA plan will cover is complicated, so it helps to know what services you will use in the coming year.
WHY? Why does a person need to consult a crystal ball to guess what medical coverage will be needed at some unknown time in the future?
Thus, the federal government has the unlimited ability to fund comprehensive, no-deductible Medicarefor every man, woman, and child in America. There is no financial reason why you, your family and everyone you know does not have free, total healthcare protection.
But . . .
At the behest of the very rich, who run America, our information leaders promulgate the Big Lie that taxpayers fund federal spending, and that the federal government is in danger of running short of dollars if spending increases without tax increases.
You have been sold the bill of goods that “there is no such thing as a free lunch,” and that federal spending causes inflation, and that the phony Medicare “trust fund” is running short of money.
The rich do this to widen the Gap between the rich and the rest, for it is the Gap that makes them rich. The wider the Gap, the richer they are.
Better “Medicare for All” plans have been proposed, but they have been rejected supposedly because tax dollars are needed to pay for it.
They aren’t. It’s the Big Lie, the sole purpose of which is to make the rich richer.
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:
If the Washington Post and the other major media were honest, this is what tomorrow’s front pages would look like
For those who wish to see a classic example of the Big Lie (that federal deficits cause inflation and are a burden on taxpayers) read this article from the Washington Post.
Translation: “. . . the third-largest monthly economicgain on record.” (When the government pumps more money into the economy than it takes out in taxes, that is an economicgain for the economy.)
Stimulus plan and $1,400 checks drove spending much higher as the White House and Republicans clash over where to spend money next. By Jeff Stein, April 12, 2021 at 2:00 p.m. EDT
The federal government spent $660 billion more than it collected in tax revenue this March, the Department of Treasury said Monday, as the Biden administration’s stimulus package pushed the U.S. monthly deficit near record highs.
Translation: ” . . . pushed the U.S. monthly economicgain near record highs.” (That’s the purpose of a stimulus — adding money grows the economy.)
The U.S. spent $927 billion in March alone — more than double the level from March 2020 — a jump due primarily to the disbursal of tens of millions of $1,400 stimulus payments under the American Rescue Plan. Meanwhile, tax revenues stayed largely flat, with the government only collecting slightly more than last March.
The resulting deficit is the third largest ever in American history, Treasury officials said, eclipsed only by April and June of last year — when the U.S. authorized larger levels of emergency spending to head off the economic crisis caused by the pandemic.
The monthly deficit had contracted relative to the summer months as federal spending expired and the U.S. economy began to heal.
Translation: “The resulting economicgain is the third highest in American history . . . to head off the economic crisis caused by the pandemic.” (Neither you, nor your children, nor your children’s children will ever pay for the so-called “deficit.” Our Monetarily Sovereign federal government funds its payments by creating new dollars, ad hoc.)
The U.S. budget deficit breached $3.1 trillion in 2020 as the pandemic slammed economy
Over the first six months of the current fiscal year, the government’s budget deficit has reached $1.7 trillion, a massive sum.
America’s annual deficit hit $3.1 trillion in 2020, an all-time high that far surpassed the previous record of $1.4 trillion, which came in 2009 during the depths of the Great Recession.
Translation: “The U.S. economicgain breached $3.1 trillion as the pandemic slammed the economy.”
“. . . the economic gain has reached $1.7 trillion, a massive sum.”
“America’s annual economic gain hit $3.1 trillion in 2020, an all-time high . . . ” (And despite all the handwringing by pundits, there is no inflation.)
Democrats and Republicans authorized much of the emergency spending last year as a way to try and stop an economic collapse. They are at odds, though, over spending levels in 2021.
The government has to borrow money to cover deficits, and it does this by issuing debt.
Interest rates are relatively low, which has made it cheaper to borrow, but the federal debt has grown markedly in the past year.
Translation: “The federal government, being Monetarily Sovereign, does not need to borrow money to fund an economicgain, nor does it issue debt.
In an unrelated process, the government accepts deposits into T-security accounts, which are like interest-paying safe-deposit boxes. Unlike “borrowing,” the federal government never touches the dollars in T-security accounts.”
” . . . relatively low, and interest rates have no effect on the federal government’s ability to increase the economic gain.“
Most of the new stimulus payments have already been sent out and are reflected in the March data. Still, budget experts say higher-than-usual deficit totals are likely to continue for the rest of the year.
On a call with reporters, Treasury officials noted that all the funding from last year’s Cares Act and the rescue plan had not yet been allocated.
Translation: “Fortunately, budget experts say higher-than-usual economic gain totals are likely to continue for the rest of the year.”
“This is going to be a big deficityear because we were already running substantial deficits and passed a $1.9 trillion bill,” said Marc Goldwein, a budget expert at the Committee for a Responsible Federal Budget, which advocates for lowering the deficit.
“This is not higher than expected. It’s what you’d expect with a $1.9 trillion stimulus on top of a structural deficit.”
Translation: “This is going to be a big economic gain year, because the economy already was running substantial gains . . . “
“It’s what you would expect with a $1.9 trillion stimulus on top of a structural gain.”
Jeff Stein is the White House economics reporter for The Washington Post.
Translation: Jeff Stein is a White House economics reporter who is paid to promulgate the Big Lie that economic gains are a burden on the federal government and on taxpayers.
Because the federal government is Monetarily Sovereign, it pays for its spending by creating new dollars, ad hoc.
The federal government has the infinite ability to create dollars, so no tax dollars are used for federal spending.
(The sole economic purpose of federal taxes is to allow the government to control the economy. It taxes things it wishes to discourage, and it give tax breaks to what it wishes to encourage.)
Thus, the whole reason for calling it a federal “deficit” is to mislead. The purpose of the misrepresentation is to dissuade you, the public, from demanding more benefits from the government.
Because those benefits tend to narrow the income/wealth/power Gap between the rich and the rest, the rich pay the politicians, the media, and many economists to promulgate the Big Lie.
Shame on Mr. Stein, and shame on the Washington Post, and shame on all the other media, the politicians, and the economists who disseminate the Big Lie. Shame, for doing the dirty work of the very rich.
…………………………………………………………………………
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:
Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless.
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Evolution requires that for any physical feature to last a long time it either must be harmless or a benefit. Over the eons, harmful features tend to disappear.
Consider toenails. Once we came down from the trees, toenails were of no imaginable use, but they require so little energy to grow, they have not been an evolutionary inhibition. So we still have them.
Poverty too, has been with our species for thousands of years. But one is reluctant to say it is harmless. So that leaves the possibility that poverty is a benefit.
Or, because it is a social feature, rather than a physical feature, rather than a physical benefit, might it only be a perceived benefit?
Regarding perception, the Democrats are about to pass what can be one of the most meaningful bills in many years — meaningful because that one bill can change common economics perceptions.
WASHINGTON (AP) — The massive ($1.9 trillion) coronavirus relief plan making its way to President Joe Biden’s desk includes a plan to temporarily raise the child tax credit that could end up permanently changing the way the country deals with child poverty.
The American Rescue Plan, expected to receive final approval this week, temporarily raises the child tax credit, now at a maximum of $2,000, to as much as $3,600 per child annually.
The plan also expands the credit so it’s fully available to the poorest families, instead of restricting it based on the parents’ tax liability. And it will be paid out in monthly installments, to offer families struggling during the pandemic a more consistent lifeline.
If the Democrats are smart (big “if”), they will resist the calls to raise taxes to “pay for” the bill. The Democrats simply should allow the federal debt to rise significantly. Let debt fear-mongers wring their hands, and offer up dire predictions, none of which will occur.
The legislation gives families up to $3,600 annually for each child under age 6 and as much as $3,000 for those up to 17.
The benefit is aimed at providing support to millions of families affected by the coronavirus pandemic. Democrats have embraced an analysis that found the proposal would cut child poverty 45%.
Republicans charge the move amounts to an expansion of the welfare state that will disincentivize parents from seeking work.
But Democrats hold out the proposal as a fundamental rethinking of the way the country approaches child poverty and an opportunity to address the income inequality that’s been exacerbated by the pandemic.
The old “disincentivize” myth simply means: “Give poor people some money, and they won’t work.”
Thus poverty is wrongly portrayed as a benefit to the economy in that it supposedly stimulates labor. That false belief provides a ready excuse to widen the Gap between the rich and the rest.
It’s utter nonsense of course, as demonstrated by all the middle, upper-middle, and even rich people who have plenty of money yet still work. It’s the common “laziness” slur on the poor, most of whom actually labor much harder than do most of the rich.,
Connecticut Rep. Rosa DeLauro, a Democrat who has been advocating for an expansion of the credit since 2003, said in a statement that “this legislation forever changes the way that our nation supports both middle-class families and children in poverty.”
DeLauro and other Democrats on Capitol Hill see the current legislation as laying the groundwork for a permanent expansion of the credit.
Indeed, Biden himself told House Democrats during a private call last week that he supports legislation that would permanently increase the child tax credit to $3,000 per child.
While Republicans broadly support the idea of expanding benefits for children, some have opposed the Biden plan for its price tag, and others have criticized it for divorcing the benefit from any work requirement.
“Price tag” is an argument that takes several forms, among which are the false notions that:
1. Federal taxes fund federal spending. FALSE
The Federal government uniquely is Monetarily Sovereign. It never can run short of its own sovereign currency. Even if it collected $0 taxes, it could continue spending, forever.
Rather than using tax dollars, the federal government creates new dollars, ad hoc, each time it pays a creditor.
While state and local governments (which are monetarily non-sovereign) do use state and local taxes to fund spending, the federal government actually destroys federal taxes upon receipt.
That is why no one can answer the question, “How much money does the federal government have?” The best answer is, “Infinite.”
Tax dollars never become part of any money measure (i.e. M1, M2, M3, et al). They simply are destroyed
2. Federal deficit spending causes inflation. FALSE
All inflations are caused by scarcity, usually a shortage of food and/or energy.
Federal deficit spending actually can cure inflation, if the spending is directed toward reducing the scarcity (for instance, by buying overseas and distributing the scarce goods, or by supporting the manufactureof the scarce goods).
3. Federal deficit spending slows the economy. FALSE
The most common measure of the economy is Gross Domestic Product (GDP), the formula for which is:
GDP = Federal Spending + Non-federal Spending + Net Exports
Increases in federal deficit spending increase all three terms in the GDP formula.
4. Federal borrowing competes with private borrowing. FALSE
Though state and local governments do borrow, the U.S. federal government does not borrow. Federal financing is nothing like state and local government financing.
Banks and credit card companies, which do the vast majority of lending in America, do not lend to the federal government.
5. Future taxpayers will have to pay for the federal debt. FALSE
Because the federal government has the unlimited ability to create dollars, it does not borrow. Instead, it allows for deposits into T-security (T-bill, T-note, T-bond) accounts.
When you buy a T-security, you are not lending money to the federal government. You are making a deposit into your own T-security account, held at the Federal Reserve Bank. There your dollars remain, collecting interest until maturity, at which time the government returns your dollars.
The federal government does not use those dollars to pay its creditors or for any other purpose.
No borrowing or taxpayer money ever is involved in T-security transactions. All taxpayer dollars are destroyed upon receipt.
6. Federal interest payments crowd out other federal spending. FALSE
The federal government has the unlimited power to create dollars. It can pay an infinite amount of interest.
Scott Winship, director of poverty studies at the conservative American Enterprise Institute, said his concern is that a permanent child allowance might make parents less likely to work and reduce the number of two-parent households, since there would be a stream of income from the government.
He wants to reduce child poverty but is concerned that doing so this way might worsen factors such as unemployment and single-parenthood that contribute to policy.
“The feeling is we win the battle against child poverty but we lose the war in the long run because we’ve created incentives that make it tougher to reduce poverty,” Winship said.
The conservatives want you to believe that giving the impoverished money increases poverty. Remember that bit of nonsense, every time to make a contribution to charity. According to the conservatives, when you drop a dollar into the bell-ringer-Santa’s pail, you are worsening poverty!
“If pulling families out of poverty were as simple as handing moms and dads a check, we would have solved poverty a long time ago,” Sen. Marco Rubio wrote.
Pulling families out of poverty is as simple as handing moms and dads checks, but ignorant and/or dishonest politicians won’t admit it.
But the expanded benefits included in the coronavirus relief plan set up a precedent that could put Republicans on defense on the issue. Because the benefit currently expires after a year, the Biden plan essentially creates a potential fiscal cliff for child poverty.
This could set up a political showdown during an election year on whether voters believe it’s acceptable for millions of children to lose the added aid and become impoverished once again.
“When it’s up for renewal, Republicans will be in the awkward position of opposing payments to families delivered through a credit that they pioneered, and championed as recently as 2017,” said Samuel Hammond, director of poverty and welfare policy at the Niskanen Center.
“No Republican wants to run on taking money away from families of any income,” Hammond said.
The Republicans never have expressed sympathy for the less-than-rich families. They tend to blame the impoverished for their own poverty, rather than to admit that good or bad fortune are the primary determinants of wealth.
Looking toward the midterm elections, the attack ads aimed at Republicans would simply highlight the party’s votes for tax cuts during the Trump administration in contrast with their votes against the Biden plan.
“It’s as simple as, when it was a vote on tax cuts for billionaires, Republicans voted yes, and when it was a check for you, they voted no,” he said.
If the Democrats avoid the pressure from the economics-ignorant, unnecessarily to raise taxes, the results might at long last demonstrate the facts of Monetary Sovereignty, and maybe, just maybe, we wouldn’t be subjected to the following Big Lies from such as the Committee For A Responsible Federal Budget (CFRB):
This year, the federal government will spend $300 billion on interest payments on the national debt. This is the equivalent of nearly 9 percent of all federal revenue collection and over $2,400 per household.
Households don’t pay for federal interest payments.
The federal government spends more on interest than on transportation, education, and research and development combined.
The above statement is irrelevant. It only demonstrates that the government could spend more on transportation, education, and research and development.
The household share of federal interest is larger than average household spending on many typical expenditures, including gas, clothing, education, or personal care.
Again, irrelevant. Households do not pay for federal interest.
Growing debt levels add to the cost and risk associated with them.
The federal government has the unlimited ability to fund interest payments, which actually stimulate economic growth. There is no risk associated with federal spending.
Even with exceptionally low interest rates, the federal government is projected to spend just over $300 billion on net interest payments in fiscal year 2021. This amount is more than it will spend on food stamps and Social Security Disability Insurance combined.
It is nearly twice what the federal government will spend on transportation infrastructure, over four times as much as it will spend on K-12 education, almost four times what it will spend on housing, and over eight times what it will spend on research and development.
All the above demonstrates is the that government could, and should, spend more on food stamps, Social Security, infrastructure, education, housing, and research and development.
Interest payments effectively consume more than half of the worker-side payroll tax paid by households and are almost twice as large as total payments received through federal excise taxes and customs duties.
Interest payments do not “consume” any taxes. Federal taxes do not fund federal spending.
If interest rates were one percent higher than projected for all of 2021, interest costs would total $530 billion — more than the cost of Medicaid.
If rates were two percent higher, interest costs would total $750 billion, which is more than the federal governments spends on defense or Medicare. And at three percent higher, interest costs would total $975 billion — almost as much as is spent on Social Security benefits.
On a per-household basis, a one percent increase in the interest rate would increase costs by $1,805, to $4,210.
The CRFB keeps repeating the same lie, that federal taxes fund federal spending. They learned from Hitler that if you repeat a lie often enough, people will begin to believe it.
Trump used the same strategy with his repeat of the lie that the election was stolen. Millions of people believe that lie, too.
The higher the federal debt, the more exposed the federal government is to interest rate risk.
There is no risk to the federal government or to taxpayers. The government has the unlimited ability to pay its bills. There also is no risk of inflation, which is not caused by government deficit spending, but rather by shortages, usually of food and/or energy.
And now, here is the CRFB’s Big Lie in all its glory:
Once the U.S. recovers from the COVID-19 pandemic, policymakers should work to adopt a combination of entitlement reforms, smart spending reductions, and revenue increases that will ultimately put debt and deficits on a more sustainable path.
“Entitlement reforms” and “spending reductions” mean “cut Social Security, cut Medicare, cut all social benefits for the poor and middle-income.”
“Revenue increases” means “increase FICA and other taxes on the poor and middle-income.”
“Sustainable” is the CRFB’s favorite word, that actually has no meaning at all, but it sounds oh, so prudent, doesn’t it?
SUMMARY
The Big Lie in economics is: The Monetarily Sovereign U.S. government uses tax dollars to pay its bills. This lie prevents the government from supplying benefits to those who are not rich.
A corollary to the Big Lie is the notion that spending for social benefits discourages people from working.
The Big Lie and its corollary are disseminated by the media, the politicians, and the economists who are bribed by the rich so as to widen the Gap between the rich and the rest.
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:
#Monetary Sovereignty - Mitchell 