Your cost for federal debt ignorance

Ignorance is expensive. Used car dealers prove that to customers every day.

Unfortunately, so do writers like Caitlin Owens, who is described as “a health care reporter for Axios.

She covers health care politics, policy, and business,” but seemingly doesn’t understand federal finances.

Quick intro: Unlike state/local governments, the U.S. federal government is Monetarily Sovereign.

It has the infinite ability to create its sovereign currency, the U.S.  dollar. It never, unintentionally, can run short of dollars.

Federal taxes do not fund federal spending.

Bills are paid by creating new dollars, ad hoc.

Even if the federal government collected zero taxes, it could continue to pay its bills, forever.

Keep that in mind as you read what Owens wrote:

The next president’s $4 trillion problem
Caitlin Owens / 6.26.2023

Whoever wins the White House next year will quickly face a series of legislative deadlines with impossible price tags:

$3.6 trillion in tax cuts and $350 billion in Affordable Care Act subsidies are expiring. That’s after another debt-limit cliff.

Passing legislation that could be north of $4 trillion is “ridiculous when you already have debt that’s headed to record levels,” said Marc Goldwein, senior vice president and senior policy director at the CFRB.

The so-called “federal debt” is not debt, and it is not a financial problem. It is the total of deposits into Treasury Security accounts, which are easily paid off every day. The  government simply returns the dollars in those accounts to the account owners.

No problem at all. No tax dollars are needed or involved.

Why it matters: The deadlines could force political horse-trading of epic proportions. Alternatively, gridlock or alarm over the nation’s debt may lead to Americans seeing higher taxes and fewer benefits.

There is  no reason for alarm. There is no reason for higher taxes. There is no reason for fewer benefits. This all is a con to make you think federal benefits to you are unaffordable.

The big picture: The 2024 election could very well be a rematch between the same two presidents who signed each measure into law.

Republicans’ 2017 tax law, and the enhanced Affordable Care Act subsidies that Democrats first passed in 2021, are signature policy accomplishments for each party. They’re also both extremely polarizing and became law under party-line votes.

In the past, the coinciding expiration dates may have been fodder for a grand bargain in which both sides etched out wins — and still could be.

But the recent debt-limit fight showed that these days, even a crisis can barely force Democrats and Republicans to agree.

Between the lines: Most Democrats would happily extend the ACA subsidies. But allowing taxes to rise may be a tough political sell — especially since the party increasingly represents wealthier parts of the country.

The above paragraphs show that Ms. Owens believes federal taxes are necessary to fund federal spending. They aren’t.

The federal government could, if it wished, pay a $10 trillion or a $100 trillion bill tomorrow merely by pressing a computer key.

Former Federal Reserve Chairman Alan Greenspan: “There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody.”

Former Federal Reserve Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

The debt-limit fight, mentioned by Ms. Owens, was a charade for the benefit of the public. The sole purpose of a debt limit is to convince the populace not to ask for federal benefits.

Behind the scenes, the very rich, who control Washington, want the Gap between the rich and the rest to widen. The wider the Gap, the richer are the rich. (It’s called Gap Psychology) — the desire of the rich to become richer by widening the income/wealth/power Gap below them.)

Federal benefits narrow the Gap, and the rich don’t want that.

Reality check: Budget hawks warn that the nation’s finances are on a disastrous path. Letting at least some of these policies expire — or finding a way to pay for extensions — would be the responsible course of action.

Reality check: The extensions could be paid for merely by passing a law that pays for the extension. That is how all federal debts are financed. Congress and the President simply pass laws.

Political horse-trading could increase the cost of a deal — if the limit on the state and local tax deduction is eliminated, for instance.

Increasing the deal’s cost would benefit America by pumping growth dollars into the economy. Gross Domestic Product = Federal Spending + Nonfederal Spending + Net Exports.

Mathematically, the more the federal government spends, the more GDP grows.

Even one-party control of Congress and the White House wouldn’t necessarily make the process headache-free.

• • The nation’s debt level will only rise over the next two years, forcing Republicans to choose between raising taxes and dropping another $3.6 trillion onto the balance sheet, according to an analysis by the Committee for a Responsible Federal Budget.
  • “I think there will be a faction of the Republican party who would not want to go into a debate, even with significant tax cuts, if it would blow a hole” in the deficit,” Campbell said.

Again, Ms. Owens repeats the false trope that federal finances are like personal finances, where the “balance sheet” should be minimized.

She gets this from that fountain of lies, the Committee for a Responsible Federal Budget (CRFB), an organization devoted to convincing you the federal government should spend less and tax the not-rich folks more.

It’s called “austerity,” a formula for economic disaster. Ask any Euro nation how that has gone.

And while most Democrats would happily extend the ACA subsidies, and nearly all of them have criticized the Trump tax cuts as handouts to the wealthy, allowing taxes to rise may be a tough political sell — especially as the party increasingly represents wealthier parts of the country.

Raising federal taxes should be a hard sell because it’s unnecessary. The sole purposes of federal taxes are:

1. To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government hopes to encourage
2. To create demand for the U.S. dollar by requiring dollars to be used for tax payments

Federal taxes do not fund federal spending.

• • “It could potentially be a really good deal for Democrats if they were to agree to extend the tax cuts and extend the ACA subsidies. Then they don’t get blamed for raising people’s taxes, and they get the subsidies,” former House Budget Committee Chairman John Yarmuth, a Democrat, told Axios.

It also would be a good deal for the economy because both steps would leave more growth dollars in the economy.

Yes, but: Budget hawks warn that the nation’s finances are on a disastrous path, and letting at least some of these policies expire or finding a way to pay for extensions would be the responsible course of action.

That is a bunch of BS. America’s finances are not on a disastrous path. Increased federal spending is absolutely necessary for economic growth. Here’s what happens when the federal government cuts spending to run a surplus.

U.S. depressions tend to come on the heels of federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
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.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

There are also scenarios where political horse-trading could even increase the cost of a deal— like if the limit on the state and local tax deduction is eliminated or if Democrats successfully demand more of their preferred policies to more closely match the cost of extending the tax cuts.

Increasing “the cost of the deal” would add growth dollars to the economy. Remember that GDP = Federal  Spending + Nonfederal Spending + Net Exports formula. Increase federal spending and mathematically, you increase GDP because two terms in the formula (Federal Spending and Nonfederal Spending) will increase.

What we’re watching: One of the simplest ways to bring down the price tag of any of this would be to just pass temporary extensions.

There is no reason to bring down the price tag. None at all.

And so, the article ends with the oft-stated but totally BS notion that federal spending would be paid for by “our grandkids.” Anyone making that claim is demonstrating ignorance of federal finances or being intentionally deceptive.

Federal spending is paid for by federal new money creation. The federal debt is paid for by returning T-security account deposits. Federal taxes pay for nothing. They are destroyed upon receipt.

IN SUMMARY
The nations finances are on a “disastrous path” only if one believes federal finances are like personal finances, which they are not.

Federal taxes don’t fund federal spending; they remove growth dollars from the economy. So tax cuts are inherently good for the economy and for you.

Unfortunately, the Trump tax  cuts mostly were gifts to the rich; they widened the income/wealth/power Gap between the rich and the rest.

The Affordable Care acts (ironically called “Obamacare,” though Obama did virtually nothing to enable its passage), has benefitted millions of Americans. The rich hate it because it narrows the Gap  between the rich and the rest.

Ignorance of federal financing is costly to those who currently benefit, or would benefit, from more federal spending, namely everyone in America, and most of the world’s population.

Ms. Owens would serve her readers better if she learned the facts of Monetary Sovereignty and the diferences between federal financing and personal  financing.

Her misstatements, and the mistatements of those who agree with her, cost you money. They widen the Gap between the very rich and the rest.

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.

MONETARY SOVEREIGNTY