Unfunded Govt. Liabilities — Our Ticking Time Bomb? Nah! Saturday, Aug 10 2019 

On January 10, 2019, RealClear Politics published an article titled, “Unfunded Govt. Liabilities — Our Ticking Time Bomb” by Myra Adams (A media producer and writer who served on the McCain Ad Council during the GOP nominee’s 2008 campaign and on the 2004 Bush campaign creative team.) 

Like all these previous articles comparing the federal debt to a ticking time bomb, the article was utter nonsense.

Here are some excerpts and comments:

Tick, tick, tick goes the time bomb of national doom. Every second the ticking grows louder, but you won’t hear the muffled sound that’s more akin to white noise.

The doom of which I speak is unfunded liabilities — $122 trillion in payments the government owes and has promised its citizens — without the funds to fulfill those obligations.

Across all media platforms, the threat goes largely unreported. Members of Congress from both parties are also deaf to the ticking.

The same is true at the White House, where Donald Trump, like Barack Obama before him, never mentions this impending catastrophe.

Oh, my. “Time bomb of national doom.” Hyperbole usually is used when facts are absent. That is the case with Ms. Adams’s article

Obama said,

“My goal is not to chase a balanced budget just for the sake of balance.  My goal is how do we grow the economy, put people back to work, and if we do that we are going to be bringing in more revenue.

“If we control spending and we have a smart entitlement package, then potentially what you have is balance – but it is not balance on the backs of the poor, the elderly, students who need student loans, families that have disabled kids.

“That is not the right way to balance our budget.” 

In short, Obama believed the debt was too high, but didn’t want to make the middle classes and the poor suffer, which by the way, is the only way to stop the “time bomb of national doom.”

Why? Because that so-called “time bomb,” consists primarily of federal deficit spending — the “unfunded liabilities” for entitlements — Social Security, Medicare, Medicaid, poverty aids, education aids, and everything else the government does to help the middle classes and the poor.

And, Obama knew that cutting these programs would be a political disaster. Sadly, he didn’t reveal that cutting deficit spending also would be an unnecessary economic disaster.

The article continues:

Image result for debt clock

The electric sign of ignorance

Among the hordes of 2020 Democratic candidates, count on the time bomb to be a topic non grata while Medicare-for-all gains momentum and Medicare-as-is remains a lethal bomb component.

Before you call me an alarmist, I refer you to the U.S. Debt Clock. Here you can watch our time bomb tick in real time with that $122 trillion in unfunded liabilities as one of the major “fuses.”

Ah, the inevitable, phony debt clock sign, which is funded, and then referred to, by those least knowledgeable about economics.

And notice those words, “YOUR family share.” Ridiculous and a lie. Your family does not owe a penny.

Your parents never paid a penny for past federal debt; you will not pay for the present federal debt, and your grandchildren never will pay for the future federal debt.

Not one tax dollar ever is used to pay for the federal debt. This is explained later in this post.

Then the article becomes truly childish in its attempts to shock you:

Surely, such an incomprehensible number makes you gasp. But now, get ready to gag because in 2023 the “Debt Clock Time Machine” projects unfunded liabilities will be $157 trillion, a $35 trillion increase in only four years.

I would wager that a majority of citizens have no concept of what “just” $1 trillion looks like or even means. For the record, one trillion is 1,000 times 1 billion.

And, since $1 billion is thrown around Washington like a rounding error, it is instructive to remember that 1 billion itself is 1,000 times 1 million.

OMG! I’ll bet 1 million is 1,000 times 1 thousand! Am I right, Ms. Adams?

The Debt Clock displays federal tax revenue at $3.3 trillion, but spending at $4.2 trillion.

This annual imbalance means that not only are we promising too much down the road, we can’t cover our current costs, and we fall behind even more — every second of every day.

No, what it really means is the federal government is pumping .9 trillion growth dollars into the economy — dollars that go into the pockets of Americans. Without federal deficit spending, the economy would fall into recession or depression.

The so-called, misnamed federal “debt” was only $40 billion in 1940, and now, 80 years later, it is near $20 trillion.

And every year, for those last 80 years, writers like Ms. Adams have been calling it a “ticking time bomb.” (See: “It is 2019, and the phony federal debt “time bomb” still is ticking.”)

Strangely, it never seems to occur to the Myra Adamses of the world, that the “bomb” never explodes.

Being wrong for 80 consecutive years is a strong signal to change your mind. But they just keep on shoveling the bullsh*t.

And now we come to the “solution” that the rich want you to believe is necessary: Cut benefits to the middle and the poor.

Here it is, as delivered by Ms. Adams:

Reducing Social Security benefits — the main driver of unfunded liabilities — will be painful now, but even more painful in 2034 when present inaction forces draconian cuts.

What if every news network continuously displayed the $122 trillion unfunded liabilities debt clock — all 15-digits rapidly ticking in real time — at the same corner of the screen?

Perhaps then, when the public is fully aware of the problem, our leaders will be forced into discussing very tough and real solutions followed by legislative action.

But doing nothing is not an option.

What a marvelous idea. Every news network continuously displaying the most misleading piece of crap imaginable, just so the rich can get richer.

How does that make the rich richer? By making the middle classes and the poor poorer. “Rich” is a comparative term. The greater the Gap between the rich and the rest, the richer that makes the rich.

If you have $1 million are you rich? Yes, if everyone else has $1 thousand; no if everyone else has $10 million. It’s the Gap that determines whether or not you are rich.

Widening the Gap is exactly what the rich want. It’s called Gap Psychology: the desire to distance oneself from those below, and to approach those above.

Here are the facts:

1. The U.S. Federal government is Monetarily Sovereign. It has the unlimited ability to create its sovereign currency, the U.S. dollar.

Former Fed Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Former Fed Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

2. Get it? No matter how much the federal government owes, it simply creates the dollars to pay its creditors. Even if federal tax collections were zero, the federal government could pay its bills, forever.

3. Not only that, but the so-called federal “debt” isn’t a real debt. It is the total of deposits into Treasury Security accounts (T-bills, T-notes, T-bonds).

The government doesn’t touch those dollars, because having the unlimited ability to create dollars, the federal doesn’t need to use the deposited dollars. So these accounts are paid off upon maturity, simply by returning the dollars to their account owners.

Thus, the sole effect (and possibly the sole purpose) of the “National Debt Sign” is to fool you, the public, into docilely accepting cuts to your federal benefits, just as the rich want.

People who use that debt clock sign to “prove” the supposed unsustainability of the federal debt either are ignorant of economics or are being intentionally deceptive.

It’s one situation or the other.

Ask Ms. Adams which is hers.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

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

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

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

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

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

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

 

Why nations pretend not to understand Monetary Sovereignty Tuesday, Aug 6 2019 

Preface: Monetary Sovereignty means just what it says: Being sovereign over your form of money.

The U.S. government is Monetarily Sovereign over its sovereign currency, the U.S. dollar. The federal government created the very first dollars out of thin air.

It continues to create dollars at will. Even without collecting taxes or receiving any other form of income, the federal government can pay any debt denominated in dollars. It never can run short of dollars. It can control the value of the dollar by controlling interest rates.

U.S. cities, counties, and states are monetarily non-sovereign. They have no sovereign currency. Instead, they use the U.S. dollar.

They cannot create dollars at will. They need taxes or other forms of income, in order to pay their debts. They can run short of dollars with which to pay their bills.

England is Monetarily Sovereign over the British pound. Germany is monetarily non-sovereign. It uses the euro, over which it has little control. It can run short of euros and be unable to pay its debts denominated in euros.

Japan and China are Monetarily Sovereign over their currencies. They never can run short. Italy and Greece are monetarily non-sovereign. They use the euro.

For reasons I will explain, Monetarily Sovereign nations pretend they are monetarily non-sovereign.

They pretend to borrow, when they really don’t. They collect taxes, though they have no financial need for income. They strive to export more, though increased importing would be more beneficial.

They allow poverty, though they easily could cure it. And they allow the Gap between the rich and the poor to be excessive, though they easily could cure that, too.

I mention all this because recently I read the following article excerpts:

Quantitative Easing vs. Currency Manipulation
1. In general, countries prefer their currency to be weak because it makes them more competitive on the international trade front.

A lower currency makes a countries exports more attractive because they are cheaper on the international market. For example, a weak U.S. dollar makes U.S. car exports less expensive for offshore buyers.

2. Secondly, by boosting exports, a country can use a lower currency to shrink its trade deficit.

3. Finally, a weaker currency alleviates pressure on a country’s sovereign debt obligations.

After issuing offshore debt, a country will make payments, and as these payments are denominated in the offshore currency, a weak local currency effectively decreases these debt payments.

Consider the Monetarily Sovereign United States. It has the unlimited ability to create U.S. dollars.

Exports are a method by which the U.S.  sends goods and services, created by the natural assets and labor of its citizens, to a foreign nation, in exchange for dollars.

The article says countries wish to make exports more attractive and shrink their trade deficit. But why?

It’s easy to understand why a monetarily non-sovereign nation, like Portugal for instance, would want to acquire money in exchange for natural assets. To Portugal, which uses the euro, money is in limited supply.

Portugal needs income to pay its bills.

To all nations, natural assets are limited; labor is limited. But to the U.S., dollars are unlimited. The U.S. needs no income to pay its bills.

Why should the U.S. exchange its limited assets to gain an asset of which it has an unlimited supply?

A common answer is that U.S. exports help U.S. businesses grow and profit, and with those profits, pay employees. But the answer is illogical.

“Grow and profit” means to acquire dollars, of which the federal government has an unlimited supply.

The easier and more sensible plan would be for the federal government to do what businesses are designed to do, i.e. provide dollars to employees. This would cost the government nothing (remember that unlimited money supply), and more importantly, no scarce natural resources would be expended.

One such method would be to implement the Ten Steps to Prosperity. (See below.)

The article says,

“A weaker currency alleviates pressure on a country’s sovereign debt obligations.

“After issuing offshore debt, a country will make payments, and as these payments are denominated in the offshore currency, a weak local currency effectively decreases these debt payments.”

The whole idea is illogical and factually wrong.

First, federal so-called “debt” actually is nothing more than deposits into Treasury security accounts. When you “lend” to the federal government, you don’t really lend. You make a deposit into your T-bill, T-note, or T-bond account at the Federal Reserve Bank.

Your dollars remain in your account, gathering interest, until your account matures, at which time your dollars are returned to you. Your dollars never leave your account until maturity.

The exchange rate of those dollars is irrelevant. Whether a dollar is worth one pound, two yen, or three partridges in a pear tree makes no difference. To pay off the misnamed “debt.” the government returns whatever is in your account.

The federal government does not use your dollars, but even if it did, giving you your money back would be no burden on a government that has the unlimited ability to create its own sovereign currency.

Third, making a currency weaker is inflationary because imported goods instantly become more expensive. (Fortunately, the U.S. government has the unlimited ability to strengthen the dollar, simply by increasing interest rates.)

This increases the demand for dollars, which makes them more valuable.

Bottom line:

  1. Increasing the level of exports does not benefit a Monetarily Sovereign government
  2. Shrinking the trade deficit similarly does not benefit a Monetarily Sovereign government
  3. Federal “debt” and federal finances are substantially different from personal (monetarily non-sovereign) debt an finances. Unlike you and me, the Monetarily Sovereign federal government needs no income, can produce dollars at will, can control the value of those dollars, and never can run short of dollars.

Why then does the federal government pretend dollars are scarce to it? Why does it pretend that total deposits in T-security accounts are a burden and a threat? Why the claim that a trade surplus is superior to a trade deficit.

United States Balance of Trade

For the past 10 years the U.S. has run persistent trade deficits.

For the past 10 years the U.S. has run persistent trade deficits. During that same period, Gross Domestic Product has risen from $14.5 trillion, to $21.3 trillion, a massive 47% increase.

In the past 10 years, GDP has risen from $14.5 trillion, to $21.3 trillion, a massive 47% increase.

Clearly, trade deficits have not prevented GDP growth. The reason is that federal deficit spending has more than made up for the dollar loss trade deficits cause.

And that is the whole point and the reason why trade deficits do not harm a Monetarily Sovereign nation. Any dollar loss easily is overcome by federal deficit spending.

The question then is, “Why do nations pretend not to understand Monetary Sovereignty?” Why everywhere you turn, do your information sources — the politicians, the media, the economists — tell you that the federal deficit and debt are so high as to be “ticking time bombs“?

The answer is this: The rich run America.

“Rich” is a comparative word. The farther distant one is from the poor the richer one is.

Owning a million dollars makes one rich if everyone else owns one dollar. Owning a million dollars does not make one rich if everyone else also owns a million dollars.

Being “rich” depends on the Gap between the rich and the rest.  To be richer, the rich want to widen the Gap between the rich and the rest. That is called, “Gap Psychology.

So:

–The rich bribe the politicians via campaign contributions and promises of lucrative employment when their political careers end.
–The rich bribe the media via advertising dollars and via ownership.
–The rich bribe the economists via gifts to their universities and employment in “think tanks.”

The rich do not want you to learn that the federal government has the unlimited ability to provide you with free medical care, free schooling, fine housing, food and clothing, and the other benefits that the rich receive.

The rich don’t want you to know you can have all these benefits, without paying a penny in taxes.

If you understood that you could have a much better life, you naturally would want it. But, that would narrow the Gap between the rich and the rest. And narrowing the Gap would make the rich less rich.

So, in addition to trying to gather more for themselves, the rich also want you to have less, thus widening both sides of the Gap.

We’ll finish with a few excerpts from an article in the TILJournal,  a massive exercise in ignorance, demonstrating the point:

The National Debt: America’s Ticking Time Bomb
By D.T. Osborn
Each taxpayer in America owes approximately 250,000 dollars to places including China through its state-controlled institutions of finance. Here comes the worst news of all; 22 trillion is only a small part of the real National Debt.

That’s because the official dollar amount does not include America’s unfunded liabilities. Unfunded liabilities are those items the Federal government must pay for by American law.

By far the largest and most significant of these are Social Security, Medicare, and Medicaid. Together they currently total more than 50 trillion dollars. When added to the Debt, the total becomes slightly more than 73 trillion dollars… for the moment.

The final figure also includes items such as Federal pensions for workers and elected officials and interest paid on the Debt. The grand total of America’s real debt is about 130 trillion dollars!

This means each American taxpayer owes over 1 million dollars of the real debt as it exists today. So, what do you say, fellow taxpayer? Got an extra million to chip in for poor old Uncle Sam? Yeah, me neither.

This is a path which will lead to the eventual bankruptcy of America.e

And that lie, that you owe someone over 1 million dollars, is the ridiculous scare tactic being fed to you and the rest of the American public. It wrongly assumes that federal financing is similar to personal financing.

It isn’t.

Personal financing requires a person must have some form of income — salary, interest, borrowing, inheritance, etc. — in order to acquire the dollars with which to pay his bills. That is known as “monetary non-sovereignty.”

By contrast, the federal government is Monetarily Sovereign. It needs no form of income — not even taxes — because it has the unlimited ability to create its own sovereign currency, the U.S. dollar, to pay an infinite number of bills.

Former Federal Reserve Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency.”

Former Federal Reserve Chairman, Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.

And here, in one sentence, By author D.T. Osborn expresses the big lie the rich want you to believe:

“Any real solution to stave off national insolvency requires massive changes in how unfunded liabilities are handled.”

The rich want the federal government to cut Social Security, cut Medicare, and cut Medicaid, thus widening the Gap between the rich and the rest.

That is how they make themselves richer.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

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

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

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

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

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

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

 

The words of (History can’t teach me anything) Peter Suderman Tuesday, Jun 18 2019 

Anytime I encounter the irresistible urge simultaneously to feel superior to someone’s else’s ignorance, while shaking my head in wonderment (Yes, that’s a real thing; you should experience it, sometime) I read an article by Peter Suderman.

Image result for peter suderman

— Forget facts. Forget history. He knows what he knows.

According to his site: Peter Suderman is features editor at Reason. He writes regularly on health care, the federal budget, tech policy, and pop culture.

Before joining Reason, Suderman worked as a writer and editor at National Review, the Competitive Enterprise Institute, FreedomWorks, Doublethink, and Culture11.

His writing has appeared in The New York Times, Slate, The Wall Street Journal, Vox, Politico, The New York Post, Newsweek, The Washington Examiner, and numerous other publications.

He lives in Washington, D.C.

His latest demonstration of his inability to learn from facts and history is titled, “Deficit Politics May Have Gone Away, but Debt and Deficits Are Worse Than Ever”

This is how his article opens:

“For most of the Obama era, the federal deficit—and, by extension, the debt—was a crisis.

“This was a bipartisan belief, held, or at least paid respectful lip service, by the Tea Party radicals and top administration aides as well as by President Obama himself.

“Hence the battles over the debt limit; the imposition of sequestration cuts that, fully implemented, were intended to reduce spending by more than $1 trillion over a decade; the concurrent increase in tax rates on high earners; the creation of the National Commission on Fiscal Responsibility and Reform, better known as the Supercommittee; and the Simpson-Bowles debt-reduction proposal to which it led.”

Nevermind that the “Great Recession” was cured by massive deficit spending. And never mind that the past 10 years of economic growth have been marked by 10 years of increasing federal debt.

And never mind that every depression in U.S. history has coincided with federal debt reduction (Look it up, here.)

Hey, why let facts get in the way of intuition swayed by profound ignorance?

I won’t go through all the nonsense of his wholly laughable, but overly long, treatise. Rather, I will take you to its ending:

“Sustaining this casual attitude toward fiscal looseness thus requires believing that there is essentially no limit, no meaningful upper bound, to the amount of debt that the federal budget can sustain, an idea that even many of today’s more sophisticated debt-doesn’t-matter boosters don’t subscribe to.

“Alternatively, it requires a high degree of confidence that our nation’s political class will more or less responsibly take our national ledger right up to the brink but no further, finding the precise last moment in which to exercise fiscal restrain.

“If you believe this, I would gently suggest you acquaint yourself with some politicians.

“Otherwise, you have to worry, at least a little, that today’s trajectory is toward crisis, if not now, if not at current debt levels, then at some future date we’ll only discover when it’s too late to prevent, when the consequences can’t be avoided.

“And that worry should be increased a little more by the possibility that today’s free-lunchism is not only increasing the likelihood of an eventual crisis, but making it harder to solve, if and when it does arrive, by seeding amongst voters the idea that hard choices won’t ever be necessary.

“It is making the already challenging project of achieving public consensus harder still.

“So yes, the predicted crisis may not have arrived quite yet. It may even hold off for a while longer.”

“But the nature of politics means it draws ever closer, and ignoring the issue, as we are now, only makes it worse.”

Hmm . . . did his repetition of the words, “crisis,”trajectory is toward crisis,” “an eventual crisis,” and  “the predicted crisis ” remind you of the famous words, “ticking time bomb”?

Here’s a reminder from,“It is 2019, and the phony federal debt “time bomb” still is ticking.”

Back in 1940, the federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.

By 1960: the debt was “threatening the country’s fiscal future,” said Secretary of Commerce, Frederick H. Mueller.

By 1983: “The debt probably will explode in the third quarter of 1984,” said Fred Napolitano, former president of the National Association of Home Builders.

In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”

In 1985: “The federal deficit is ‘a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)

Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb’ that threatens to permanently undermine the strength and vitality of the American economy.”

In 1987: Richmond Times–Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT ‘TIME BOMB’”

Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”

In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS

In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.

Later in 1992: Ross Perot: “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”

In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”

In 2003: Porter Stansberry, for the Daily Reckoning: “Generation debt is a ticking time bomb . . . with about ten years left on the clock.”

In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB

In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.”

In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit we have a real ticking time bomb in our economy,” said Mrs. Clinton.

In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.

In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.”

In 2011: Washington Post, Lori Montgomery: ” . . . defuse the biggest budgetary time bombs that are set to explode.”

In 2014: CBN News: “The United States of Debt: A Ticking Time Bomb

*On Jun 18, 2015: The ticking economic time bomb that presidential candidates are ignoring: Fortune Magazine, Shawn Tully,

*On February 10, 2016, The Daily Bell“Obama’s $4.1 Trillion Budget Is Latest Sign of America’s Looming Collapse”

*On January 23, 2017: Trump’s ‘Debt Bomb’: Deficit May Grow, Defense Budget May Not, By Sydney J. Freedberg, Jr.

*On April 28, 2017: Debt in the U.S. Fuel for Growth or Ticking Time Bomb?, American Institute for Economic Research, by Max Gulker, PhD – Senior Research Fellow, Theodore Cangeros

Feb. 16, 2018  America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole.

On April 18, 2018 By Alan Greenspan and John R. Kasich: “Time is running short, and America’s debt time bomb continues to tick.”

On January 10, 2019, Unfunded Govt. Liabilities — Our Ticking Time Bomb. By Myra Adams, Tick, tick, tick goes the time bomb of national doom.

On January 18, 2019; 2019 Is Gold’s Year To Shine (And The Ticking US Debt Time-Bomb) By Gavin Wendt

Keep in mind that the phony “time bomb” began to “tick” at least as far back as 1940, when the total debt was $40 Billion. Today, 80 years later, it has risen 52,500% (!) to $21 Trillion, and still the bomb ticks.

In eerily Trumpian fashion, Suderman doesn’t seem embarrassed by being wrong, wrong, wrong, over and over and over again.

Like Trump, he just knows in his gut that he is right, and let the facts be damned.

Well, at least it gives me the wonderful chance again to “feel superior to someone’s ignorance, while shaking my head in wonderment.”

Thank you, Peter.

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

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

Ten Steps To Prosperity:

1. Eliminate FICA

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

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

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

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

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

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

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

MONETARY SOVEREIGNTY

Good is bad. Up is down. Other “truths” the authorities are telling you Friday, Feb 9 2018 

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

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

——————————————————————————————————————————————————————————————————————————————————————————–

Let us begin with some real truths, after which we can move on to the fake “truths” you have been hearing.

Real truths:
1. The U.S. federal government, being Monetarily Sovereign, never can run short of dollars. Even if tax collections fell to $0, the federal government could continue spending, forever. It creates dollars, ad hoc, by paying creditors. Federal taxes do not pay for federal spending; dollar creation pays for federal spending.
2. Federal spending stimulates Gross Domestic Product growth by adding dollars to the economy. (Federal Spending is part of the basic GDP formula: GDP=Federal Spending + Non-federal Spending + Net Exports).
3. The federal government has absolute control over the value of its own sovereign currency, which gives it control over inflation.

Now, let us move to an article from 2/9/18 Chicago Tribune, an article typical of what you will see in your own local paper, and see on TV, and hear on the radio:

Budget deal would pour gas on an economy running hot
By Don Lee Washington Bureau

WASHINGTON — If the GOP’s $1.5 trillion tax-cut package powers the American economy like rocket fuel as President Donald Trump predicts, the new congressional budget deal could, if passed, become the extra boost that causes the engine to overheat.

“Overheat” means inflation. The prediction, very simply, is that deficit spending will cause inflation.

Image result for time bomb

78 years and the fake bomb still is ticking.

 

That has been the concern for the past 78 years. In 1940, when the “Debt Held by the Public” was 40 Billion, it was called a “ticking time bomb.” Every year since, it has been termed some variation of “ticking time bomb.” Yet today, inflation is low and controlled.

Seventy-eight years of being wrong have not taught the economists and pundits humility.

The budget compromise that was struggling late Thursday to win passage provided a bipartisan answer to the latest fiscal crisis. But lawmakers did so by raising spending caps on military and non-defense programs that would add $300 billion to $400 billion to the deficit.

Coming on top of the tax cuts passed late last year, the increased spending caps — plus tens of billions of additional money for hurricane relief — would throw more fuel to an economy that is already perking up.

“Throw more fuel” means to grow the economy. Aside from inflation fears — the same false fears expressed for the past 78 years — why is growing the economy considered a bad thing? I’ll tell you later in this post.

Analysts say that raises the odds of higher inflation and interest rates, precisely the concerns that in recent days have stoked investor fears and stock market volatility.

The budget deal also means that the United States probably would be returning to trillion-dollar annual deficits next year — much sooner than expected and under a government controlled by Republicans who traditionally had identified themselves as the party of fiscal probity.

The fear is threefold:

  1. That increased federal deficit is inflationary, and
  2. In response, the Fed will raise interest rates to combat the inflation, and
  3. Higher rates slow the economy, by making borrowing more difficult.

Let’s discuss each:

I. Is increased federal deficit spending inflationary?

The formula is Value = Demand/Supply. So if the Supply of money increases and/or the Demand for money decreases, the Value of money will be reduced, which means more money will be required to buy the same goods, i.e. inflation.

That is the formula. Here is the reality:

Blue line = inflation; Red line = deficit

For at least the last 45 years, there has been no relationship between our huge deficits and inflation, but why? Is something wrong with the formula?

Well, actually there is a relationship between deficits and inflation, but that relationship is overshadowed by a far more important relationship:

Blue line = inflation; Orange line = oil prices

The price of oil also is determined by the formula, Value = Demand/Supply. When the Demand goes up and/or the Supply goes down, the price of oil falls, and oil is far more influential on inflation than are federal deficits.

The price of oil affects the prices of nearly every product and service in the world.

That is why federal deficit spending has not caused inflation. Oil prices have, on average, gone down.

II. In response to inflation, will the Fed will raise interest rates?

Although we have shown that federal deficit spending has not caused inflation, even the suspicion of a coming inflation will cause the Fed to increase interest rates. Why?

Because of this formula: Demand = Reward/Risk. 

To combat inflation, the Fed wants to make dollars more valuable, and one way to do this is to increase the Demand for dollars. The Reward for owning dollars is interest.

The higher the interest rate, the more people want to own interest paying forms of money — savings accounts, bonds, notes, and bills. The demand for money increases, which increases the value (aka, the “strength”) of the dollar, thus reducing inflation.

III. Do higher rates slow the economy, by making borrowing more difficult?

This is widely believed, and this belief alone is one of the reasons why the stock market falls when the Fed raises rates. Traders sell just because they expect a downturn.

The other reason the stock market falls: Raising rates makes bonds more attractive, so investors sell stocks to purchase bonds.

That’s how the stock market operates, but what about the economy? Do higher rates slow economic growth?

Green line = Gross Domestic Product growth; Purple line = Interest Rate

There seems to be either no relationship between interest rates and GDP growth, or there actually is a reverse effect, with higher rates coinciding with higher GDP growth.

How can that be?

Two reasons: Federal deficit spending causes the issuance of more Treasury securities, which increases the amount of interest the federal government pays into the economy. And this interest payment increase is compounded by higher interest rates.

All that additional federal deficit spending is stimulative. Therefore:

Far from being a danger or a burden, growing deficit spending grows the economy, and reduced deficit growth is deflationary.

For instance:

Recessions (vertical gray bars) are introduced by reduced deficit growth, while recessions are cured by increased deficit growth.

Recessions are introduced by reduced deficit growth, while recessions are cured by increased deficit growth.

Extreme reductions in deficit growth (i.e. federal surpluses) tend to cause extreme recessions (i.e. depressions):

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

When Trump took office about a year ago, the Congressional Budget Office projected that the nation’s deficit would run between $500 billion and $700 billion annually for a few years, not breaching $1 trillion until 2022.

With lower tax revenues expected and now additional spending and an accompanying agreement to lift the debt ceiling, some experts reckon the deficit would blow past $1 trillion in fiscal 2019 and keep rising.

Said another way:

“The Congressional Budget Office projected that the federal government would add between $500 billion and $700 billion in stimulus growth to the economy, annually for a few years, not breaching $1 trillion until 2022.

“With lower tax revenues expected and now additional spending and an accompanying agreement to lift the debt ceiling, some experts reckon the federal government will add a $1 trillion worth of economic growth in fiscal 2019 and keep adding growth dollars, thereafter.”

The complaint seems to be that growth is a bad thing, though as we have seen (above), economic growth does not cause inflation.

Treasury Secretary Steven Mnuchin has said that the president is concerned about the increasing debt. And on Thursday, deputy press secretary Raj Shah said the budget the White House plans to release Monday will show a “path” toward declining deficits.

A “path” toward declining deficits is a path toward more frequent recessions and depressions.

“Economic growth is essential to cutting deficits,” he said. “We are committed to fiscal discipline.”

The above is like saying, “Financial growth is essential to lower income,” completely senseless. “Fiscal discipline” means to reduce the income of the economy, also senseless.

The U.S. debt held by the public, including foreign investors, is currently about $15 trillion.

“We’ve already entered a period where we have these structural deficits, and to answer that with a new round of tax cuts that are unpaid for, and a new round of spending that’s unpaid for, is just adding insult to injury,” said Michael Peterson, president and chief executive of the Peter G. Peterson Foundation, a non-partisan organization focused on the country’s fiscal challenges.

First, to say that the Peter G. Peterson Foundation is “non-partisan” is like saying the GOP is non-partisan. It’s a right-wing foundation.

Second, the federal government does not use taxes to pay for spending; it uses money creation. Every time the federal government pays a creditor, it does so with newly created dollars, not with tax dollars.

Therefore, neither spending nor tax cuts can be “paid for.”

Some Republican lawmakers balked at the budget deal, calling it fiscally irresponsible.

No, “irresponsible” is to cut deficit spending and sink the nation into yet another unnecessary recession or depression.

The Great Recession severely shrank government revenues, and spending surged in 2009 as President Barack Obama and Congress responded with a huge economic stimulus package.

The federal deficit spiked to $1.5 trillion in 2009 and remained above $1 trillion for the next three years, then went back down to an average of around $575 billion a year in Obama’s second term through 2016, representing a little over the 3 percent share of gross domestic product that economists consider a maximum sustainable rate.

The politicians agree that deficit spending stimulates economic growth, but ignore that fact when we are between recessions.

The Republican tax cuts and new budget package amount to a similarly massive fiscal stimulus, but it is coming at a time when the economy is not faltering.

We have a recession every five years on average because the politicians drive the “economic car” by switching from gas to brake to gas to brake, forcing the economy to lurch forward in growth, then fall back in recession, again and again, and again.
Economists warn that the rising national debt will choke growth as more public money ends up going to support deficits instead of economically productive uses.

“You already have deficits growing too fast, you cut the (tax) revenue out from under us, you increase the spending, and on top of that you rule out making changes to entitlement programs,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget (CRFB). “It ultimately spells fiscal disaster.”

The CRFB is the ultimate “Debt Henny Penny” organization, continually warning about debt-disaster, that never has come, and never will come. Instead, the disasters come when we cut deficit spending.

For 78 years we have been warned about that “ticking time bomb.” That fake bomb still is “ticking,” and the Henny Pennys still are warning. Wrong for all these years and still crying “Wolf!”

Why? Notice that phrase “entitlement programs” in the CRFB comment?

The real goal is to widen the Gap between the rich and the rest by cutting Social Security, Medicare, Medicaid, and all poverty aids.

The Gap is what makes the rich, rich. Without the Gap, no one would be rich. (We all would be the same.) And the wider the Gap, the richer they are.

So the rich bribe the politicians (via campaign contributions and promises of lucrative employment later), the media (via ownership and advertising dollars),  and the economists (via contributions to universities and lucrative “think tank” employment) to spread “The Big Lie” that federal financing is like personal financing.

But federal financing is unique. Debt is not a burden on the federal government or on federal taxpayers, and it does not force inflation on us.

Our opinion leaders are paid to make you believe that good is bad, and up is down, so they can keep you down and lift the rich up.

And that is what all the “ticking time bomb” lies are about.

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

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

Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.

Implementation of The Ten Steps To Prosperity can narrow the Gaps:

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

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

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

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

MONETARY SOVEREIGNTY

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