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I’ll answer the title question, now: Steve Chapman is a member of the Chicago Tribune Editorial Board. He blogs at http://www.chicagotribune.com/chapman. His Email is:[email protected] His Twitter is: @SteveChapman13.
Here is what he looks like:
And here is what he wrote for today’s newspaper. It received 2/3 of a page in the Opinions section:
Runaway deficits forever
Trump and Congress won’t balance the budget
Immediately, the word “Runaway” tells us this is going to be an exercise in ignorance. The deficits aren’t going to be “insufficient,” “economically stimulating,” “or necessary,” all of which would be correct.
No, they will be “Runaway,” implying not just large, but out of control.
Upon becoming House speaker in 1995, Newt Gingrich decided it was crucial to adopt a plan to eliminate the federal deficit. In a meeting of House Republicans, Budget Committee Chairman John Kasich balked. “Where is it in stone that we have to balance the budget in seven years?”
Gingrich had a quick answer: “Let’s put it to a vote. Who wants to put it in stone?” Everyone but Kasich voted yes. The Republicans had made a commitment they would have to keep.
Translation: The Republicans promised to reduce the amount of stimulus money the federal government will pump into the private sector. Yes, they promised to reduce the amount of money they will add to business balance sheets and to consumers’ pockets.
Why is considered something to boast about?
It’s like promising to take away millions of Americans’ health care. It’s like promising to rig state elections by rampant gerrymandering. It’s like promising to make it harder for minorities to vote. It’s like promising to elect a President whose every word seems to be a lie and/or an attack on the media, the disabled, women, Mexicans, Muslims and all who disagree with him.
See a pattern to their promises?
Contrast that show of determination with the vote last week by Senate Republicans for a budget resolution that projects an increase in the public debt of $9 trillion over the next decade.
The supporters said that for arcane reasons involving budget rules and the repeal of Obamacare, the resolution is needed. But in practice, they insisted, they don’t intend to allow such a flood of red ink.
Just to make this abundantly clear:
1. The federal government cannot run short of dollars.
2. You can run short of dollars.
3. The federal government’s “red” ink is the economy’s “black” ink
“So,” you might ask, “why would anyone want the economy to receive fewer dollars, while the federal government keeps more dollars, when it’s the economy that needs more dollars to grow, while the federal government creates all the dollars it needs?”
The fiscal responsibility upheld by Gingrich and company — which led to a balanced budget not in 2002 but in 1999 — is not visible on either side of the aisle today.
That so-called “fiscal responsibility” led to the recession of 2002.
Between 2009 and 2015, the deficit shrank from $1.4 trillion to $438 billion — but last year it rose, and the Congressional Budget Office expects it to balloon to $1 trillion by 2024.
Chapman “forgot” to mention that in 2008, the deficit rose dramatically, which cured the recession that came as a result of deficit cutting from 2006 to 2008.
He also forgot to mention that every depression in U.S. history, and most recessions, have been introduced with deficit reduction.
Just a slight omission.
Nor is the incoming president likely to accept serious budget discipline as President Bill Clinton did.
President Clinton’s budget “discipline” led to the recession of 2001. (See graph above).
On the contrary, Donald Trump will probably cause a lot of congressional Republicans to stop worrying and learn to love the deficit.
Ah, if only the Republicans (and the Democrats) were that smart. Everyone, including the public, should stop worrying and learn to love the deficit, for it is the deficit that grows Gross Domestic Product.
GDP = Federal spending + Non-federal spending + Net exports
If GDP growth relies on federal spending, non-federal spending and exports, which of those three comes from federal deficit spending. I’ll give you two guesses.
Right, federal spending comes from federal deficit spending. That’s a tautology.
And non-federal spending, which is enriched by deficit spending, also grows from federal deficit spending.
So is there any mystery why federal deficit spending grows the economy?
House Republicans have a plan to balance the budget by 2026, but the details are lacking. Not only that, but they also will have to contend with the next president. The Tax Policy Center in Washington reported in October that his proposals would add $7.2 trillion to the government debt over the next decade — comparable to what has been piled up in the past eight years.
Chapman says the Republicans predict $9 trillion. He also says The Tax Policy Center predicts $7.2 trillion. What’s a lousy $2 trillion, when you’re piling on the bull dung?
Trump’s promises have proven to be as reliable as a teenager’s, “I’ll love you forever” promise.
And $7.2 trillion debt growth over 10 years isn’t nearly enough. It would amount to a debt growth of about 50%. Compare that with the last decade — 2007-2017 — in which federal debt grew almost 300% — and it wasn’t enough.
In short, Chapman is trying to alarm you about what amounts to comparatively slow debt (and GDP) growth, when faster growth is needed.
(Yes, debt growth isn’t the same as deficit growth. We explain that in numerous other posts. But, since Chapman mixes the two, we’re trying to work from his logic.)
There are other alarming signs. Trump’s border wall with Mexico will cost $8 billion by his calculation and double or triple that by other estimates. He claims Mexico will pay for it. But he and Congress aren’t prepared to wait for him to get the money. They plan to start construction now and send Mexico the bill.
Plenty of money for a ridiculous wall, but not enough money to fund healthcare for the poor. Perfect.
This is the equivalent of taking out a loan that you plan to pay off with the lottery ticket you just bought. In the best (and least plausible) case, we’ll have to wait awhile for the Mexican treasury to cut the check — “a year or a year and a half,” Trump blithely estimated at his news conference Wednesday.
Federal financing is not “equivalent” to personal financing.
This is Trump at his best. He has absolutely no idea what he is talking about, so he gives a cockamamie “year or year and a half,” knowing his backers don’t want or even expect him to tell the truth.
There is Trump and there is the Truth, and ne’er the twain shall meet.
(Ask Trump backers why they settle for lies, and you will receive a one-word answer: “Hillary.” Everything is excused by saying, “Hillary.” When Trump’s Presidency proves to be a horrifying disaster, the Trump-lovers will say, “Hillary would have been worse.” Depend on it.)
In the worst case — which happens to be the one President Enrique Pena Nieto has embraced — we won’t get a single peso and American taxpayers will eat the expense.
No, American taxpayers will not eat any expense for the wall. The federal government does not use tax dollars to fund federal spending. It does not use tax dollars for anything.
Even if all tax collections fell to $0, the federal government could build a dozen walls, plus fund Social Security and Medicare for every man, woman, and child in America, and still not run short of dollars, while controlling inflation.
So go ahead, Donald, build your dopey wall. The money will grow the economy, so long as you don’t cut other spending.
Anyway, either Chapman is ignorant of this fact or he is lying. Take your choice.
Scrapping the Affordable Care Act, it turns out, would be a fiscal loser overall because of the taxes it imposed and the Medicare savings it implemented. The bipartisan Committee for a Responsible Federal Budget recently reported that a full repeal would add between $150 billion and $350 billion to the debt over the next 10 years.
I favor scrapping ACA and replacing it with fully funded Medicare for every man, woman, and child in America. (See Step # of the “Ten Steps to Prosperity,” below.) You should, too.
Under a fiscally responsible approach, the CRFB advised, “savings from repealing parts of the ACA must be large enough to not only finance repeal of any of ACA’s offsets, but also to pay for whatever ‘replace’ legislation is put forward. This is not an easy task, and it will likely require policymakers to retain or replace the majority of ACA’s health and revenue offsets.”
Let’s make the above paragraph easier to understand. It very simply means: “We plan to screw the middle classes and the poor.”
But Congress and the president-elect appear to have every intention of torching the ACA now and fighting the budget fire later. Reducing taxes soon while pledging to cut spending eventually is a familiar tactic, and it functions reliably to enlarge budget problems rather than solve them.
Translation: “Enlarge budget problems” means: “Take fewer dollars out of the economy and add more dollars to the economy.”
This is a problem?
The ongoing retirement of the baby-boom generation puts great pressure on the budget, which has to cover more and more retirement checks and Medicare bills.
Another looming strain is the interest on the debt, which has been pleasantly manageable because interest rates have been so low. But they are bound to rise in the coming years, and if Trump gets his fiscal plans enacted, interest alone could cost taxpayers upward of $1 trillion a year a decade from now.
Both Congress and the president-elect have told Americans they will balance the budget. But that promise is written in sand.
Because the federal government never can run short of its own sovereign currency, there never, never, never is “great pressure” in the federal budget. Never.
This is a problem?
As for interest on the debt (i.e. T-securities), it benefits the public, especially T-security holders. If you own any T-bills, T-notes, or T-bonds, you benefit from interest. You will benefit even more, when rates are raised.
This is a problem?
I’ll tell you what the real problem is: Communicators like Steve Chapman either are ignorant of, or are lying about, the differences between federal finances (Monetary Sovereignty) and personal finances (monetary non-sovereignty).
Either way, columns like his are more harmful to America than the Russian hacking of our secrets. If the public ever figures that out, there will be a revolution.
At the beginning of this post, I’ve given you Chapman’s contact information. Tell him what you think.
Rodger Malcolm Mitchell
The single 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 AN ANNUAL 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 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 CORPORATE TAXES
Corporations themselves exist only as legalities. They don’t pay taxes or pay for anything else. They are dollar-transferring 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 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.
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