–The supercommittee “failed,” thank goodness. Now what?

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity breeds austerity and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
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After ‘Supercommittee’ Failure, Burden Falls on Full Congress to Prevent Scheduled Tax Increases, By Pablo Martinez Monsivais/AP

Before lawmakers pack up for Christmas, they must first decide whether to extend the payroll tax break and long-term unemployment benefits, both of which expire Dec. 31.

Extending the payroll tax break and extending long-term unemployment benefits have the essentially same effect on the overall economy. Both keep the deficit from shrinking. A failure to extend these two programs would reduce the deficit, reduce federal money creation and reduce economic growth.

“I find it very hard to believe they would end the benefits all together,” said Dean Baker, the co-director of the Center for Economic and Policy Research. “I don’t think they want to have more people see more money pulled out of their paycheck come Jan. 1.”

President Obama jetted to New Hampshire today to urge Congress, or more pointedly, Republicans in Congress, to extend the 2 percent payroll tax cut that he championed last year. That lower rate, which Obama said put about $1,000 into the average American’s pocket in 2010, is set to rise back to 6.2 percent in 2013.

“If Congress refuses to act, then middle-class families are going to get hit with a tax increase at the worst time,” Obama said. “We can’t let that happen. Not right now. It would be bad for the economy. It would be bad for employment.”

Exactly the same can and should have been said about the supercommittee assignment to reduce the federal deficit. All deficit reductions pull money out of the average American’s pocket. Those who favor deficit reduction, in effect are saying, “I have too much money and assets. I want to pay more taxes and receive fewer benefits from the government.”

In the president’s jobs plan, he not only extends the payroll tax cut, but further decreases the rate from the current 4.2 percent down to 3.1 percent. “That isn’t a band-aid, that is a big deal,” Obama said, adding that the additional cut would save the average taxpayer $1,500 next year.
[…]
The payroll tax break alone accounted for about one-fourth of the 2 percent growth in GDP this year, Baker said. In the unlikely event that Congress decides not to extend the cuts, he said it would be a “fairly big hit to the economy.”

Right. So why is Congress trying to reduce the deficit? Why appoint an economic-growth reduction committee?

Extending them, on the other hand, is not likely to boost economic growth either. “It’s not going to make anything better than it is,” said Roberton Williams, a senior fellow at the Tax Policy Center. “It is just going to keep things from getting worse.”

This is something the debt-hawks, who say “the stimulus didn’t work” should understand. The various stimulus efforts, which as I predicted (way back on April 9th, 2008) were too little, too late, did keep things from getting worse.

“One of the things we know about unemployment benefits is they are spent,” Baker said. “If they are not extended, it could lower [GDP] growth again by about half a percent.”

I don’t know where his calculation of ½% came from, probably thin air, but the concept is correct. Reduce the deficit and you reduce economic growth. Period. Reduce the deficit and you exacerbate unemployment. Period.

Both payroll tax rates and unemployment benefits were expected to be included in the supercommittee’s plan to reduce deficits by $1.2 trillion in five years.

A more correct sentence would be: “Increased payroll tax rates and reduced unemployment benefits were expected to be included in the supercommittee’s plan to destroy economic growth, worsen unemployment and bring on a recession or depression, in five years.”

Now that the committee has abandoned any hope of reaching a deal, these two measures could be rolled into the third, and arguably most important, item on Congress’s pre-Christmas to-do list: to pass a budget. “These are all fairly clear items,” Baker said. “They know what they’re talking about and both sides have probably already thought through the next step. I would be very surprised if they don’t pass.”

“Know what they are talking about?” “Thought through the next step?” “Congress?” Pul-eeeze!

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

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No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. The key equation in economics: Federal Deficits – Net Imports = Net Private Savings

MONETARY SOVEREIGNTY

–“Go Big” on deficit reduction. Send in the clowns

My Senator, Mark Kirk, parrots the latest fad that we should “Go Big” on federal deficit reduction. Here is what he says on his web site:

Resolved, That it is the sense of the Senate that Congress should pass a deficit reduction measure that-
(1) includes enough deficit reduction to stabilize the Federal debt as a share of the economy, put the debt on a downward path, and provide fiscal certainty;
(2) reduces the deficit by at least $4,000,000,000,000 over 10 years in order to reassure financial markets;
(3) encompasses the principles of reform, shared sacrifice, and compromise;
(4) uses established, bipartisan debt and deficit reduction frameworks as a starting point for discussions;
(5) focuses on the major parts of the budget and includes long-term entitlement reforms and pro-growth tax reform;
(6) is structured to grow the economy in the short, medium, and long terms to create jobs in the United States and increase United States competitiveness;
(7) builds a foundation of investor confidence that preserves the United States dollar and Federal debt securities as the global standard of safety and stability;
(8) works to include the American public and the business community in a broader discussion about the breadth of the issues, challenges, and opportunities facing us; and
(9) includes tax reform that guarantees deficit reduction and economic growth to rebuild America.

In short, it’s the usual, meaningless blah, blah, blah, long on platitudes, but with no specifics, save one: a $4 trillion cut in deficits over 10 years.

Where did he get $4 trillion? He has no idea. Rather than wasting brain energy to think things through, he, like most Congresspersons, has found it far more efficient to parrot the crowd. I Googled “go big” and here is what I found:

*Lawmakers urge supercommittee to ‘go big’ on deficit reduction
*Bipartisan push to ‘go big’ on deficit reduction. November 18, 2011 By Brian Moon.
*Lawmakers look to ‘go big’ on deficit – Seung Min Kim – POLITICO.com
*Go big on deficit reduction | WE Blog | Wichita Eagle Blogs
*Senators offer $4 trillion ‘Go Big’ deficit reduction plan to super …
*Super Committee Urged to ‘Go Big’ on Deficit Cuts | PBS NewsHour …
*McConnell’s about-face: Go big on deficit – TheHill.com
*US Sen Alexander: Big Deficit Plan At Top of Next Week’s Agenda …Bipartisan Pols Tell Super Committee to “Go Big” on Deficit …

Every one of these articles describes “go big” as a $4 trillion deficit reduction over 10 years, so everyone seems to agree: “Go Big” = $4 trillion reduction. And if “everyone” agrees, Mark Kirk agrees, too. That must be what we elected him to do: Not think; just agree.

One little problem. The Federal government projects the total of all deficits in the next ten years to reach $7 – $8 trillion, so that “go big” $4 trillion is quite a cut, indeed.

In fact, a ten-year, $4 trillion cut in federal deficits would guarantee the gosh-darndest depression in the history of America.

But hey, who’s counting? Surely not Senator Kirk. Surely not the media and politicians who have no idea what they are talking about and no idea how they would cut $4 trillion from the deficits, and no idea what would happen to unemployment, Social Security, Medicare, Medicaid, the armed forces and the entire economy, but they just enjoy mouthing what everyone else is mouthing: “Go big, Go big, Go big.”

As a test of this hypothesis, you might write to your Congressperson and your local media, and ask for specifics on how they would cut $4 trillion from the deficit. Either they won’t answer at all, or they will shock you with the identity and scope of the suggested cuts.

I suspect mindlessly mouthing “Go big” makes these people feel big and brave and powerful. I too, love shouting “Go big!” I also love the idea of sending each Congressperson and each media hack a pair of “go big” floppy shoes, and a “go big” red nose that goes “honk!” when squeezed.

Send in the clowns.
Don’t bother; they’re here.

I award one clown to all those who mindlessly chant “Go big,” whenever discussing deficit reduction.

(As a lesson in Monetary Sovereignty, I have decided to substitute clowns for my previous currency, dunce caps. 1 clown = 1 dunce cap.

I can do this because I am Monetarily Sovereign in my new currency, clowns. This is similar to what I have suggested for Greece and the rest of the euro nations: Adopt your own sovereign currency and announce it will be substituted for the non-sovereign euro. I now am running the equivalent of a 1350 clown deficit, with no danger of bankruptcy.)

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–The difference between ignorant and stupid. S&P, supercommittee and Chicago Tribune

I’ve had a continuing correspondence with Bruce Dold, Tribune editor, in which I have offered to explain Monetary Sovereignty to him or to anyone else at the Tribune. All he had to do is name one person at the Tribune who was willing to learn. His response:

9/26/11: Thank you for your note and for your other emails on this subject to Tony Hunter and to me. I want to assure you that I have shared your views with other members of the editorial board and discussed them with Mr. Hunter. The editorial writers understand your position on monetary sovereignty. We respectfully disagree with your views on the likely economic impact if federal policy were based on those views.

Yes, the federal government can print dollars, which state and local governments cannot do. But to do so at will would have staggering inflation implications. To say federal spending does not use borrowed money seems to ignore the $9.5 trillion in U.S. public debt, half of which is held by foreign entities. S&P wasn’t willing to ignore that.

(Previously I had showed him how there has been no connection between federal deficits and inflation. Despite the current circumstances of high deficits and low inflation, right before his eyes, Dold believes that any deficit spending causes inflation.)

And as for his comment, “To say federal spending does not use borrowed money seems to ignore the $9.5 trillion in U.S. public debt,” I agree there is something called “federal debt,” but the federal government does not spend borrowed money (which I repeatedly have explained to him.) Why should it if, as he says, “the federal government can print dollars”?

Apparently not one employee of the Chicago Tribune is willing to learn, which probably is why the Tribune continues to lose readers. And this brings me to their latest (11/22/11) editorial, this one titled, “$3 million every minute”. Here are a few excerpts:

To all those who complained of unfairness when Standard & Poor’s downgraded the creditworthiness of these United States in mid-summer: The rest of us accept your apology. You were wrong . . . As S&P managing director John Chambers said . . .”what we’re seeing is a threat the United States government is slightly less creditworthy.” . . . U.S. leaders needed to unite and deliver “stabilization and eventual decline” of U.S. debt.

Not only do they want a disastrous balanced budget (“stabilization”), but they want taxes to exceed federal spending (“decline”). They, having learned nothing from history, want the money supply to decline:

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.

O.K., so the Tribune editors aren’t the only stupid ones. They copy the stupidity of S&P, who believes a Monetarily sovereign nation has less “creditworthiness” because its “debt” had grown. Of course, as our readers know, the federal debt merely is a reflection of the money supply, and declines in federal debt growth lead to recessions. See Items #3 and #4 in https://rodgermmitchell.wordpress.com/2009/09/07/introduction/

In short, the Tribune editors practice “kitchen table economics,” in which they equate U.S. federal finances with personal finances, demonstrating mind numbing cluelessness about Monetary Sovereignty.

As a group the (supercommittee) have (sic) fiddled as the U.S. declined from a deficit of $161 billion in 2007 to a shortfall of $1.3 trillion in the fiscal year that ended eight weeks ago.

“Declined”? “Shortfall”? Are those words properly attributed to the money growth that is necessary to grow an economy?

. . . more of your tax dollars will go to interest payment on debt held by China . . .

Wrong, again. For a Monetarily Sovereign government, there is zero relationship between tax collections and federal spending. If taxes fell to $0 or rose to $100 trillion, neither event would affect the federal government’s ability to pay its bills, by even $1.

The supercommittee, like Congress in toto, couldn’t even pluck the lowest-hanging fruit, tax reform that would reduce deductions, lower rates and raise some more revenue.

Don’t let the misdirection of “lower rates” fool you. “Raise some more revenue” is a tax increase. The Tribune believes a tax increase, which removes dollars from the economy, somehow will stimulate the economy. “That ol’ black magic has me in its spell.”

Why, then, did we think the Deficits Dozen would confront the real challenge — entitlement programs and other “payments to individuals” that in 2010 devoured 66 percent of the federal budget. We have 50 million on Medicare, 52 million on Social Security, with millions more drawing from disability, nutrition and other programs. All well and good . . . today’s enormous entitlement programs will only explode.

And there you have it. The 1% wants to cut back on dollars sent to the 99% — dollars for health care, retirement, disability, nutrition, etc. This is exactly what #OWS is protesting about. The editors of the Chicago Tribune have generous, company-sponsored retirement programs, generous, company-sponsored health care insurance, and undoubtedly have incomes well above the average. So, they subscribe to the 1% mantra: “99% screw you. I’ve got mine.”

Yet our leaders in Washington, facing these inevitablilities plus the visible plight of drowning-in-debt Europe, have served up next to nothing.

Again, the editors, repeatedly having refused my multiple offers to explain Monetary Sovereignty to them, demonstrate their ignorance of Monetary Sovereignty, by comparing monetarily non-sovereign Europe with Monetarily Sovereign America. This has transcended ignorance and moved solidly into stupid, with the Tribune editors figuratively clamping their hands over their ears and screaming “I can’t hear you; I can’t hear you.”

Ignorance of Monetary Sovereignty, and the stupidity that prevents even the attempt to understand it, is the single, most serious problem in the world, today. This combination of ignorance and stupidity has destroyed and continues to destroy the lives not of thousands, not of millions, but of billions of people around the world.

I award you editors of the Chicago Tribune a solid 5 dunce caps, for the ongoing, intentional stupidity of the 1%. One day, with the help of my readers, and other of similar bent, we will awaken the world to the lies you tell, and then you’ll pay. Oh yes, you’ll pay.

Readers, make ready the chopping blocks. Meanwhile, keep writing to your politicians, media types and economists. The truth will out.

(I now am running a 1,349 dunce cap deficit. The Tribune editors have no clue about what that means.)

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

–So you think it couldn’t happen in America: The wages of “law and order”

A recent poll says a majority of Americans have a negative view of #Occupy Wall Street,” more negative even than of the Tea Party. Perhaps you are one who believes #OWS is a bunch of lazy, rabble-rousing troublemakers, who would rather camp out, make a mess, smoke pot and cocaine, have sex and disturb honest, hardworking Americans, than become honest, hardworking Americans themselves. If the poll represents America, I think the people are wrong. But let’s say they’re right.

Let’s say these people protesting against the huge wealth gap between the 1% richest people and the other 99%, are all of the above and worse. What should be done about them?

Should we admire them for putting their lives on the line, for protesting the clear injustice of the growing gap, not only in wealth but in political power? Or shall we condemn them for inconveniencing us and for being dirty, messy beasts?

Here is the city of Tampa’s expensive answer:

What is this thing, who owns it, and what is its purpose?

For a complete description, see: Militarization Of Police Exemplified By Virtually Unstoppable Armored Personnel Carrier At Occupy Tampa. Check a few excerpts from that article.

Madison Ruppert, Contributing Writer, Activist Post

One of the many disturbing trends in America in the post-September 11th, 2001 era is the steady militarization of domestic police forces who are supposed to “protect and serve” not “intimidate and attack” the people of the United States.

A glaring example of this steady march toward de facto martial law in which police are so militarized there is little to no difference between them and the military itself occurred at Occupy Tampa recently.
[…]
The (photo is of) “Rescue 2,” a massive “12-ton Armored Personnel Carrier (APC)” according to the official city of Tampa website, but the question remains, why on Earth does a domestic police force need a 12-ton APC at a small-scale peaceful protest?

The behemoth vehicle is bullet resistant and “virtually unstoppable,” can drive through five feet of water, handle winds up to 130 miles per hour, carry 13 passengers, and reach 60 miles per hour.

The Rescue 2 is billed to be used for “search and rescue during a natural disaster or a terrorist attack.” Yet, there was neither a terrorist attack nor a natural disaster justifying the deployment of the Rescue 2, instead it was done in a clear attempt to intimidate the protesters.

This wholly unnecessary item is a “one of a kind APC” which “was purchased from the military and it was paid for with a Federal security grant,” according to the City of Tampa website.
[…]
. . . it represents just one instance of police across the nation buying tanks and other military vehicles to carry out ordinary activities.

These are deployed for one reason and one reason only: to strike fear into the hearts of peaceful protesters attempting to express the fact that they are fed up with the police who protect the corporations and not the people whom they are sworn to serve.

Now this weapon exists, and when a weapon exists, it will be used. One day you will read how the “Rescue 2” ran over some protesters, or at minimum, ran over their belongings, destroying everything in its wake. And one day, those protesters will not be #OWS, but people protesting some other losses of freedom, like the use of tanks against civilians.

And one day, laws will be changed to outlaw protesting altogether — which effectively is the purpose of the “Rescue 2.”

And many will cheer these losses of our freedoms, for by its nature, protesting is messy, inconvenient, loud, and not done by the 1%, but rather by the 99%, who tend to be rude, unpleasant creatures.

And then you’ll wonder what happened to America, what happened to freedom, how did we get to this police state? You’ll grieve at the loss of liberty and the perversion of the Constitution that makes corporations=people and money=votes. You’ll grieve at the tyranny of the police and of their masters.

Oh, you may not like being ruled by the iron hand of the military, but you won’t protest. You wouldn’t dare.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

MONETARY SOVEREIGNTY

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