Time Magazine and the Big Lie in economics

The Big Lie in economics, very simply, is: “Federal taxes fund federal spending.”

Nearly all the popular misunderstandings in economics devolve from that five-word statement, or rather, misstatement.

While state taxes fund state spending, and city taxes fund city spending and euro-nation taxes fund euro-nation spending, U.S. federal taxes most assuredly do not fund federal spending.

In fact, even if all federal tax collections ceased, and not one tax dollar was sent by the private sector to the federal government, the government still could continue spending, forever.

The reason: The U.S. federal government, unlike the states, cities, and euro nations, uniquely is Monetarily Sovereign.

It has the unlimited ability to create any amount of its own sovereign currency, the U.S. dollar. It never can run short of dollars.

Faced with an invoice of a trillion dollars or even a trillion, trillion, trillion dollars, the U.S. government could pay it today, simply by creating dollars, ad hoc.

Because tax collections have zero effect on the federal government’s ability to pay, we taxpayers are not liable for federal debts.

Even if the government were faced with that above-mentioned, theoretical bill of a trillion, trillion, trillion dollars, we U.S. taxpayers would not owe one cent. Nor would our children and grandchildren have any liability whatsoever.

Yes, you and your kin, and all your neighbors and friends, and everyone in your state, and in the entire country could cease paying federal taxes today, and that would have no effect on the federal government’s ability to pay its bills. (You’d have to keep paying state, county and city taxes, however. They are monetarily non-sovereign.)

Those are the facts, the absolute facts of economics. How then can you explain the persistence of such misleading articles as this one by James Grant and Time Magazine:

The Big Lie Time Magazine

The United States of Insolvency
James Grant, the editor of Grant’s Interest Rate Observer
$13,903,107,629,266. Can the nation afford this much debt? James Grant offers his view

This much I have learned about debt after 40 years of writing and study: It is better not to incur it. Once it is incurred, it is better to pay it off. America, we have a problem.

We owe more than we can easily repay. We spend too much and borrow too much. Worse, we promise too much. We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop.

I don’t know the date, but I believe that I know the reason. It will stop when the world loses confidence in the dollars we owe.

Come that moment of truth, the nation will resemble Chicago, a once prosperous polity now trying to persuade its once trusting creditors that it is actually solvent.

There, in a couple of short paragraphs, you see the commonly promulgated Big Lie about our economy — some half truths leavened with a giant dollop of lies.

Begin with the misleading title of the article: “The United States of Insolvency.” Grant and Time immediately tell you a lie.

The United States never can become insolvent — i.e. unable to pay its bills — unless Congress and the President want it (via the misleading “debt limit” game they play to confuse you).

Grant/Time said, “It is better to pay (the debt) off.” They lied to you.

The debt is nothing more than the total of T-security accounts at the Federal Reserve Bank. In short, bank deposits. There is no reason to pay off these bank deposits, though the federal government could do it tomorrow, if it wished.

The purpose of the so-called “debt,” i.e. T-securities, is to twofold: To help the Fed control interest rates and the money supply, and to provide a safe investment for the private sector.

Grant/Time said, “. . . more than we can easily repay.” They lied to you. We could repay those deposits today, simply by transferring them back to the owners’ checking accounts. No new dollars needed.

Grant/Time said, “We conjure dollar bills by the trillions–pull them right out of thin air,” which is absolutely true. It’s what we always have done, for the past 240 years of our existence. It is what all Monetarily Sovereign nations, like Canada, China, Australia, Japan, the UK, et al do. Creating money from thin air is what grows our economy.

In the past, whenever we stopped “conjuring” dollars, the economy stopped growing and we went into recessions and depressions.

Grant/Time said, “It (growing debt) will stop when the world loses confidence in the dollars we owe.”

This is a more subtle form of the Big Lie. The world simultaneously would have to lose confidence in China’s, Australia’s, Canada’s, the UK’s, and Japan’s money, as well as the euro and the money of all other governments for the U.S., the wealthiest nation on earth, to have difficulty issuing dollars.

Grant/Time said, “. . . the nation will resemble Chicago . . . ” They lied to you.

The U.S. government is Monetarily Sovereign. Chicago’s government is monetarily non-sovereign. The former has the unlimited ability to create dollars. The latter does not.

It’s as though Grant/Time don’t understand the difference between butter and a butterfly. The false comparison between federal financing and personal financing is an often-used lie.

Through wars, recessions, depressions, and inflations the U.S. government never has run short of dollars, and indeed, cannot run short of dollars.

You have been lied to for years and years. President Obama lied to you back in 2011, by making the same false comparison between federal financing and personal financing. He said:

“It comes down to this: We have to prioritize. Both parties agree that we need to reduce the deficit by the same amount — by $4 trillion.

“So what choices are we going to make to reach that goal? Either we ask the wealthiest Americans to pay their fair share in taxes, or we’re going to have to ask seniors to pay more for Medicare. We can’t afford to do both.

“Either we gut education and medical research, or we’ve got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don’t get. We can’t afford to do both.

“This is not class warfare. It’s math. The money is going to have to come from someplace.

He lied to you then, and he continues to lie to you now, boldface, absolute lies.

Yes, the money has to come from someplace. The federal government creates dollars, ad hoc, every time it pays a bill. Obama knows it. His advisors know it. Stephanie Kelton, the chief Democratic economist on the Senate Budget Committee knows it (though she is prevented from revealing it).

Why did Obama lie to you in 2011? Why did Grant and Time Magazine lie to you last April? Why have the media, the politicians and the university economists lied to you for decades?

Because they are paid by and controlled by the very rich, and the very rich want to control you by levying unnecessary taxes, and by restricting your benefits.

Obama is paid by rich contributors who will support him and his family after he leaves office. Grant was paid by Time which is owned and controlled by the very rich.

The rich control America. The Gap between the rich and the rest is what makes them rich (without the Gap, no one would be rich, and the wider the Gap, the richer they are.)

The rich widen the Gap by limiting the amount of healthcare you receive — refusing the free healthcare the government easily could provide.

They widen the Gap by limiting your Social Security — taxing it and by starting it later and later.

They widen the Gap by limiting your educational possibilities (via via the disgraceful student loan program).

They steal your money to impoverish you so you will need to beg them for help, and then you will send them contributions in hopes of getting that help.

You, the people of America are the victims of The Big Lie. You have been so brainwashed by our thought-leaders, that you angrily will defend The Big Lie. Consider the irony of the victims defending the victimizers.

If you understand Monetary Sovereignty, and try to explain it, eventually you will encounter this retort: “Yes the government always can print money, but that will cause inflation; look at Zimbabwe and the Weimar Republic.”

The people, who tell you that, seldom understand they tacitly have admitted the federal government never can run short of money (“. . . always can print money. . . “), so they have dissolved their entire argument about taxes being necessary, and all they have left is their argument about hyperinflation.

They base their concern on the false belief that Dollar Value = 1/Supply, that is, the greater the Supply of dollars, the less their Value (i.e inflation). That is what the rich want you to believe

However, the real formula is Dollar Value = Demand/Supply. The greater the Demand for dollars, the greater the Value of dollars.

And Demand is based on Reward/Risk. And Reward is interest. That is why, for the past century, the Fed has controlled inflation at close to its target rate of 2%, by controlling interest rates.

And as for the bogeyman of Zimbabwe/Weimar hyperinflation:

  1. The U.S. never has had a hyperinflation, despite two centuries of “debt” growth — even today, while Time publishes scare articles, inflation is quite low, and
  2. Hyperinflations are not caused by money creation. They are caused by specific economic factors. Zimbabwe’s was caused by Robert Mugabe’s stealing of farm land from farmers and giving to people who didn’t know how to farm. The resultant food shortage caused hyperinflation. Weimar’s hyperinflation was caused by onerous repayment requirements put on Germany by the Allies.

Excessive money creation is a common response to hyperinflation. In short, hyperinflations cause excessive money creation and not the other way around.

The Big Lie — Federal taxes fund federal spending — has been used for centuries to control you.

So long as you continue to believe the Big Lie, the very rich and powerful will continue to control every aspect of your and your family’s lives, their health, their education, and their finances — from birth to death.

The rich want you to believe resistance is futile, but it’s not. You merely first must understand you are being lied to by The Big Lie.

Then demand the truth and close the Gap.

Begin with the Ten Steps to Prosperity.

Rodger Malcolm Mitchell
Monetary Sovereignty

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.
This article addresses the questions:
*Does the economy benefit when the rich afford better health care than 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 AN ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA, AND/OR EVERY STATE, A PER CAPITA ECONOMIC BONUS (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB) 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 EVERYONEFive 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 benefiting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
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.
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-tranferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the government (the later having no use for those dollars).
Any tax on corporations reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all corporate taxes come around and reappear as deductions from 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 corporate taxes would be an 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.
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.