OMG! Would you think the editor of the Wall Street Journal understood finance?

Yes, I’m talking about the great Wall Street Journal, the veritable bible of the finance class, the paper that money-dealers read before breakfast, quote at lunch, then rely on during the day as they invest billions — that Wall Street Journal.

And I’m talking about an editor, not just a reporter or copy boy — an editor!

Well, if you think the editor, whoever he/she may be, understands finance, you can disabuse yourself of that belief. The following was reprinted in THE WEEK Magazine, December 13, 2019.

How Europe pays for its welfare state
Editorial, The Wall Street Journal

Some Democratic presidential candidates “insist that America could afford a European-style welfare state if only it taxed the rich more heavily,” said The Wall Street Journal.

But a close look at Europe’s taxation policies shows that countries have “learned the hard way that the rich aren’t rich enough to pay for their entitlements,” and balance their budgets by heavily dunning the middle class.

Germany, for example, imposes a 42 percent rate on married households earning $124,000, whereas in the U.S., such a couple pays 22 percent.

Sweden’s top rate of 55 percent kicks in with individual earnings as low as $47,000, and in the U.K., taxpayers earning just $64,000 pay a 40 percent rate.

Governments also slap workers with hefty payroll taxes they call “social insurance contributions” that are far higher than America’s Social Security and Medicare deductions, and impose a Value Added Tax of 21 percent on all consumer purchases, regardless of a buyer’s income.

As a result, Europe’s tax system takes more than half of most people’s wages and is far less progressive than the U.S.’s.

Beware politicians who claim they can finance free college, day care, and health care for all by taxing billionaires. “The middle class will pay, because that’s where the real money is.”

Oh, dear lord, where does one begin to address such ignorance?

The headline, “How Europe pays for its welfare state,” is thoroughly misleading. “Europe” does not pay for anything. Individual nations pay for different things under different circumstances.

And Europe is not a “welfare state.” It is not even a state. But the WSJ uses the term “welfare state” for its pejorative effect. It’s a not-so-subtle attempt to tell you, “Don’t ask for anything from the government. Only the rich are entitled to benefits.”

The Wall Street Journal editor clearly does not understand, or does not want to understand, the differences between Monetary Sovereignty and monetary non-sovereignty.

Germany is monetarily non-sovereign. It has no sovereign currency. It uses the euro, which is the sovereign currency of the European Union (EU).

Germany voluntarily surrendered its most valuable asset — its Monetary Sovereignty — in exchange for . . . what? Financial submission to the non-elected bureaucrats of the EU? Permanent austerity for its people?

Being monetarily non-sovereign, Germany’s government resembles the U.S. state and local governments, and you, and me, all of which also a monetarily non-sovereign.

Not having a sovereign currency, all we monetarily non-sovereign types cannot create our own currencies, and so we can run short of whatever currency we use.

You and I, and our cities, counties, and states all can run short of dollars. Germany can run short of euros.

We all need income in order to spend. That is not true of such Monetarily Sovereign entities like the U.S., Sweden, and the UK, which have the unlimited ability to create their own sovereign currencies.

“But wait,” you might object. “If the U.S., Sweden, and the UK have the unlimited ability to create their own currencies, why do they levy taxes on their citizens? And especially Sweden and the UK — why do they levy such high taxes?”

For Monetarily Sovereign entities, taxes do not fund spending, but taxes do have other purposes.

Taxes help a government control the economy by taxing things the government wishes to discourage and by giving tax breaks to things it wishes to encourage. For example, U.S. homeowners receive tax breaks that renters do not receive. For whatever reason, the federal government wishes to encourage homeownership.
Because the very rich run America, they receive tax breaks that the middle- and lower-income people do not receive. These breaks help widen the Gap between the rich and the rest. (It is the Gap that makes the rich rich.
Levying taxes provides the illusion that federal taxes are necessary to fund federal spending. This illusion helps prevent the populace from demanding more federal benefits.
Mandatory tax collections add to the demand for a currency.

Point #3 is exemplified by the controversy over Medicare-for-All. What sane person would not want free, no deductible medical services for life? Yet nearly half of Americans object to receiving this marvelous benefit, because of the false belief that taxes will have to pay for it.

Sweden and the UK, which easily could pay for their healthcare without levying taxes, constitute a combination of monetary ignorance and wilfulness — items #3 and #4, above.

Apparently, Sweden and the UK want to hide this fact from their citizens. And speaking of Sweden, glance at this article from Wikipedia:

Sweden and the euro
According to the 1995 accession treaty, Sweden is required to join the eurozone and therefore must convert to the euro once the convergence criteria are met.

Notwithstanding this, on 14 September 2003, a consultative Swedish referendum was held on the euro, in which 56% of voters were opposed to the adoption of the currency, out of an overall turnout of 82.6%.

Some of Sweden’s major parties continue to believe it would be in the national interest to join, but all parties have pledged to abide by the results of the referendum, and none have shown any interest in raising the issue again.

As of 2014, support for Swedish membership of the euro among the general population is low. In September 2013, support fell as low as 9%. The only party in the Riksdag that supports Swedish entry in the euro (as of 2015) is the centrist Liberal Party.

For whatever good reasons, the people of Sweden have chosen not to surrender their Monetary Sovereignty. Despite paying high taxes, at least they control their money. Image result for same wall street journal story different headlines

The editors of the Wall Street Journal surely must know all this. They simply must.

But the very rich want to widen the income/wealth/power Gap between the rich and the rest, and they find the tax code a convenient way to accomplish their goal.

So they support wrong-headed articles that dissuade the populace from demanding healthcare and other social benefits.

As a result, millions of Americans cannot afford healthcare, millions of Americans suffer needlessly, and millions of Americans die too young.

It is a national disgrace, exceeded only by the misinformation campaign being conducted by America’s media, politicians, and economists.

Shame on you, Wall Street Journal. You should know better and if you do, shame on you even more.

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

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The most important problems in economics involve:

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

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

Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:

Ten Steps To Prosperity:

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 the rest.

MONETARY SOVEREIGNTY

–Europe and the welfare-entitlement state

An alternative to popular faith

Today, the Wall Street Journal’s editors managed to pack one sentence with more misleading inferences than I thought possible. The sentence was: “Greece’s problems are familiar across Europe: a welfare-entitlement state that is unaffordable given the country’s anemic economic growth.”

First, Greece’s economic problems are familiar across Europe, because most of Europe is in the European Union, an ill-conceived, economically doomed arrangement. These nations have essentially the same problem, and it has nothing to do with a welfare-entitlement state. It has to do with each EU nation’s inability to control its own money supply — a charter requirement for belonging to the EU. So when one nation encounters its individual economic crisis, it is prohibited from creating the money necessary to save and rebuild its economy.

The EU nations are on a “euro standard,” similar to a gold standard, in that the supply of their money is controlled by the EU. In this, the EU nations resemble California, Illinois, Cook County and Chicago, which are on a “dollar standard.” None can create the money needed to rebuild its economy.

Because a political entity on a “standard” cannot arbitrarily create money, it eventually will need to receive money from outside, either in the form of export payments, or payments from the owner of the money. For Greece, the owner is the EU. For California et al, the owner is the U.S. government.

For Greece to survive, it must receive money from the EU. It cannot survive on taxes alone, because taxing does not add money to the state. California, to survive, must receive money from the federal government.

The so called “welfare-entitlement” state merely is description of what every nation is and must be: A source of funds for the common good. Since all countries are “welfare-entitlement states, to greater or lesser degree, at what point does the state offer too much welfare?

–When the government pays for its army?
–When the government pays for roads, bridges, levees and docks?
–When the government pays for police and fire protection?
–When the government pays unemployment benefits? Food stamps? Medicaid? Housing?
–When the government pays for primary education? Secondary education? Advanced education?
–When the government pays to rebuild parts of a city that has flooded or hit by a hurricane or volcano?
–When the government provides FDIC insurance?
–When Social Security and Medicare benefits are provided to people over the age of 95? 55? 35? 10? All?
–When the government pays for vaccines? Inspects food? Supervises investments? Makes medical expenses tax deductible? Creates and enforces laws?

Where should a welfare entitlement state begin and end? I’d guess the WSJ editors, who criticize the “welfare-entitlement” state, have no idea. But, the term makes for a handy whipping boy, like “socialism” and “bailouts” and “big government” and “activist judges,” that everyone dislikes in general, but wants in the specific.

Finally, the “welfare-entitlement” state is not unaffordable because of the nation’s anemic economic growth. The government doesn’t pay its bills with Gross Domestic Product. Of course, some argue that increased GDP growth begets increased taxes, making government spending more affordable. But high taxes cause anemic economic growth, so in essence you have a circular argument and a self-fulfilling prophesy.

What makes EU governments’ spending unaffordable is the EU system, which prevents unilateral money creation. By contrast, no amount of U.S. spending is unaffordable for the U.S. government.

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

No nation can tax itself into prosperity

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