The secret to making the economy rebound.

The secret to making the economy rebound?

It’s no secret. Or rather it is a secret to those who intentionally close their eyes and stumble about.

The secret is to reverse the problems.

Problem #1. Lack of money.

A strong economic rebound likely depends on people and companies being able to preserve their money, so that it can be spent and invested once the gloom begins to subside.

Not only have 16.8 million Americans lost their jobs in the past three weeks, but workers have seen their hours slashed, have seen sales commissions disappear and have accepted salary cuts, such that incomes have declined for half of U.S. working households, according to a survey from The Associated Press-NORC Center for Public Affairs Research.

Congress has been patting itself on the back for pumping a claimed $2 trillion into the economy. Sadly, it’s not $2 trillion, because much of it has be lent, not given, so as the loans are paid off, money will again disappear.

Second, the money is going out slowly, so the effect will be slow.

And third, and most important, it simply isn’t enough. You can’t stimulate the giant U.S. economy with a mere $2 trillion (or whatever). It would be like you giving a dime to a beggar and assuming that would lift her out of poverty.

“Here’s a dime. Buy yourself some food, clothing, and a house.”

The solution: Pump BIG money into the economy. Step #1 of the Ten Steps to Prosperity (below) would be a good start.

Eliminating FICA would pump about $1.2 Trillion into the economy and give it to the right people — the American worker — who would spend the money, thereby lifting the economy.

In fact, Steps 1 through 7 would pump dollars into the economy, and Step 10 might, depending on specifics.

Problem #2. Loss of a generation

Children can no longer attend school, reducing the productivity of their parents.

And not just small children. Tomorrow’s leaders are receiving online classes from their schools or attending digital schools like University of Phoenix.

Yes, it’s much better than Trump University, but being honest, it’s much less educational than in-person classes. It simply isn’t, for the many reasons you can imagine yourself.

So this may turn out to be the poorest educated, least productive generation in recent history. I pray I’m wrong on this, but all the signs point in that direction.

Problem #3. Impoverished states, counties, and cities

On a regional basis, many state economies may take time to claw back what has been lost.

The states (and counties and cities) pay for so much already, and unlike the Monetarily Sovereign federal government, they do not have access to unlimited funds.

Think of grades K-12, where there always is a struggle for money. The states and local communities pay for that education, and with lower sales taxes, lower income taxes, and probably lower property taxes, how will these monetarily non-sovereign governments fund education?

Cut teachers? Cut “unnecessary” programs like art, gym, social studies — cut everything but Science, Technology, Engineering, and Mathematics? (STEM), and I’m not confident that even STE will be saved in all circumstances.)

Remember too, that state and local governments are the primary sources of infrastructure and locally needed funds: Roads, flood control, crime control (courts, police, jails, etc.), many hospitals, many universities, garbage collection, water, building codes,  business inspection, etc.

What are the options for these non-federal governments. Only two, and neither contributes to economic recovery: Increase taxes or reduce services. Two disasters.

Problem #4. Reduced business and technical growth

“Working from home is creating a collapse in investment. All firms I have spoken to have canceled training, new product introductions and R&D projects, while at U.S. universities and laboratories unless you are working on COVID-19 you have stopped work.

So innovation — the main driver of long-run U.S. growth — has stopped.”

Problem #4 is the invisible one. You can see when people lack money, or when education is lacking, or when your local government can’t take care of your street, or when your house floods, but it’s difficult to tell when new inventions are not forthcoming.

If the Internet had not been created, we would have gone on without it, and none would be the wiser. For all you know, the “next great thing” will not happen, or at least it will be delayed because the potential inventor lost the education and/or the money that would have paved the way.

Problem #5. Fear

President Donald Trump has been telling voters that the U.S. economy will leap back to life “like a rocket,” stronger than ever after its bout with the coronavirus.

But there are emerging signs that any recovery will fail to match the speed and severity of the economic collapse that occurred in just a few weeks.

“Anyone who assumes we’re going to get a sharp snapback in activity isn’t thinking about how consumers are going to feel. They’re going to be very cautious,” said Nariman Behravesh, chief economist at IHS Markit.

“Households and businesses have seen their finances deteriorate. People are buying groceries on their credit cards.”

To understand the consequences of a sudden negative shock on the economy, Behravesh studied how many people returned to flying after the Sept. 11, 2001, terrorist attacks.

“It took 2 1/2 years for airline passenger traffic to go back to previous levels,” he said.

No longer able to campaign on a half-century low unemployment rate, Trump has begun to tell voters that he can quickly rebuild the economy. He said measures like the $2.2 trillion rescue package — with more money likely on the way — can send employment and economic growth to new highs.

Paul Winfree, a former Trump White House official who is now director of economic policy at the conservative Heritage Foundation. said in an email. “Things won’t turn around until a significant majority of people decide that we’ve done enough (privately and publicly) and have to move along.”

If Congress used this crisis as a basis for instituting the Ten Steps to Prosperity (below), we would go a long way toward eliminating the terrible losses of 2020.

But so long as the current incumbents continue to dither and argue about which $250 billion program should be funded, rather than sending at least $7 trillion into the private sector, hope for the future is bleak.r

If nothing else, the current crisis is a strong endorsement for Congressional term limits.

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

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THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE.

The most important problems in economics involve:

1. Monetary Sovereignty describes money creation and destruction.
2. 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