●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity starves the economy to feed the government, and leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
In economics we suffer the BIG LIE. It is a lie, because it is untrue. And it is big, because it adversely affects every facet of our lives. The BIG LIE, in its simplest, most basic form is this:
“A Monetarily Sovereign government unwillingly can run short of its sovereign currency.”
The U.S. became Monetarily Sovereign on August 15, 1971, when it went off a gold standard. The government creates dollars by paying bills. It pays bills by instructing banks to increase the numbers in checking accounts. It can do this endlessly, now that it no longer needs supplies of gold to collateralize dollars. In short, the BIG TRUTH is:
It is not possible for the U.S. government unwillingly to run short of dollars.
Even were all federal taxes and so-called federal “borrowing to fall to $0, the U.S. government could pay any bills of any size, forever. This includes 100% funding of Social Security, Medicare for everyone and every other federal initiative.
Not only is the BIG TRUTH factually true, but it has been proven true. Not only is the BIG LIE factually false, but it repeatedly has been proven false. Yet the BIG LIE is widely believed — so widely believed it seldom even is argued, but rather merely assumed as fact — and he BIG TRUTH is widely derided. There are two reasons.
1. The BIG LIE appeals to ignorant intuition, because though it is untrue about federal finances, it is true about personal finances. While the federal government cannot run short of dollars, we citizens can run short.
2. The BIG LIE benefits the upper 1% income group by increasing the gap between the 1% and the 99%. Most federal deficit spending benefits the 99% more than the 1%. Deficit reductions increase the gap. And most information sources – the media editors and politicians – are part of, or beholden to, the 1%.
Thus the BIG LIE, despite its factual and experiential shortcomings, is repeated everywhere in America and around the world, and seldom even debated. Here are examples of the BIG LIE in the words of the liars:
“We need to stop spending money we don’t have. President Obama has given us four years of trillion-dollar-plus deficits.” Paul Ryan
“Spending money we don’t have” applies to people, cities and businesses, all of which are monetarily non-sovereign, not to the Monetarily Sovereign federal government, which creates money by spending. The only way we can “have” money is via federal spending. No federal spending, no “having.”
“With Medicare expected to go bust by 2024 . . . “ Jan Crawford of CBS News
Medicare, as a federal agency, cannot “go bust,” unless Congress and the President decide not to fund it. Even if FICA were $0, the government could continue paying benefits, as always.
“Canada’s path of great budgetary discipline and a very heavy emphasis on growth and overcoming the crisis, not living on borrowed money, can be an example for the way in which problems on the other side of the Atlantic can be addressed. This is also the right solution for Europe.” Angela Merkel, Germany
For every nation, including Canada, Gross Domestic Product = Government Spending + Private Investment and Consumption + Net exports. So if Government Spending goes down, growing the economy requires something else to go up. That’s simple algebra. Canada’s is a net exporter, otherwise it would be in a depression.
‘Medicare is the second-biggest item in the entire federal budget and one of the fastest-growing. Over the past 30 years, its cost has doubled as a share of our gross domestic product, and over the next 30, it’s on track to double again. But the revenues that pay for it are not keeping pace.” Steve Chapman, Chicago Tribune
The president of AARP recently admitted that FICA does not pay for Medicare or Social Security.
“We need a national sales tax — a consumption tax, like the dreaded but efficient value-added tax — but Mr. Romney and Mr. Ryan don’t have the gumption to support it.” David Stockman, Ronald Reagan’s budget director
Just as federal spending adds dollars to the economy, federal taxes remove dollars from the economy, which by simple mathematics, reduces GDP growth. Taxes depress economies.
Just as a doctor would treat an illness, we must look for the cause of the ailment. In the case of the deficit, that’s government overspending. So the question clearly is, “Where do we cut?” Gretchen Hamel, executive director of Public Notice.
The need to cut federal spending merely is assumed. No evidence ever is provided. The reason: No such evidence exists.
“The issue of the debt and the deficit – and what to do about it – has paralyzed Washington lawmakers. But when it comes to measures for reducing the deficit on which they might reach common ground, they will get little help in building support for an agreement by turning to public opinion.” Andrew Kohut, President, Pew Research Center
While public opinion is nearly unanimous that the federal deficit should be reduced, there can be no agreement about how. The reason: Every plan for reducing the deficit discloses the BIG TRUTH that deficit reduction hurts the economy.
“Was the budget deficit increase in 2008, Rob Portman’s fault?” Published: Saturday, August 11, 2012, By Stephen Koff, The Cleveland Plain Dealer
The headline uses the world “fault” to describe a deficit increase. The correct word would have been “accomplishment.”
“Since 2010, Social Security has been paying out more in benefits than it collects in taxes, adding to the urgency for Congress to address the program’s long-term finances.” Aug. 12, 2012, Associated Press writer Andres Gonzalez contributed to this report.
FICA does not pay for Social Security benefits. The best way to “address the program’s long-term finances” would be to eliminate FICA and support SS out of the general fund.
“You must have a balanced plan that reforms the tax code in a progressive, pro-growth manner and produces additional revenue if you are serious about reducing the deficit by at least $4 trillion without disrupting the country’s fragile economic recovery and hurting the disadvantaged.” August 12, 2012, By Erskine Bowles, in St. Louis Post Dispatch
He wants to increase taxes to grow the economy, a mathematical idiocy.
“The long-term entitlement crisis is seeping into the short term. Social Security slipped into the red last year. Medicare follows suit in roughly a decade. And Europe is demonstrating that creditors’ patience with political and fiscal dysfunction is not infinite.” Michael Gerson (from the Seattle Times)
Gerson does not understand the difference between Monetary Sovereignty (the U.S.) and monetary non-sovereignty (the euro nations). Or at least, he pretends he doesn’t understand. As an employee of the 1%, he is paid to disseminate the BIG LIE.
One could go on and on, with repetitions of the BIG LIE. Is it any wonder the public has come to believe and even repeat the BIG LIE? We read the BIG LIE in our newspapers. We hear the BIG LIE from politicians, on radio and TV, and even from our neighbors. We drown in the BIG LIE. Repetition creates belief, which creates more repetition.
And all these repetitions have one thing in common: They express alarm at the size of the federal deficit, but none provides any evidence the deficit harms the economy. The reason for no evidence: The deficit is absolutely necessary for economic growth.
“It’s bad because it’s big,” is the only “evidence” the liars provide, but that is exactly the same as saying, “Gross Domestic Product is bad because it’s big.”
Abraham Lincoln supposedly said, ” . . . you can not fool all of the people all of the time.” Old Abe might have been wrong about this one. The 1% has managed to fool nearly all the people about the federal deficit.
Rodger Malcolm Mitchell
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. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports