Megan McArdle: Ignorance or willful ignorance? by Rodger Malcolm Mitchell Twitter: @rodgermitchell; Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell Mitchell’s laws: ●Liberals think the purpose of government is to protect the poor and powerless from the rich and powerful. Conservatives think the purpose of government is to protect the rich and powerful from the poor and powerless. ●The more federal budgets are cut and taxes increased, the weaker an economy becomes. ●Austerity is the government’s method for widening the gap between rich and poor, which ultimately 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. ●The penalty for ignorance is slavery. ●Everything in economics devolves to motive, and the motive is the gap. According to her bio: Megan McArdle is a Bloomberg View columnist who writes on economics, business and public policy. She is the author of The Up Side of Down. McArdle previously wrote for Newsweek-the Daily Beast, the Atlantic and the Economist. She founded the blog Asymmetrical Information. She has a bachelors degree in English literature from the University of Pennsylvania and an MBA from the University of Chicago. What her bio doesnt say is that she is a dedicated deficit hawk, continually preaching what has become known as the Big Lie -- the supposed dangers of deficits for a Monetarily Sovereign government. That, of course, is akin to preaching the dangers of scoring for a football team. Readers of this blog may have seen our Oct 12 2013 post, The Recession Clock ticks; the recession draws closer It contains the same graphs that appear at the bottom of this page, demonstrating that reductions in deficit growth repeatedly lead to recessions. And those recessions repeatedly are cured by increases in deficit growth. Its a pattern common to the last nine recessions. The reason is quite clear: Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports. To reduce the deficit, one either must cut spending or increase taxes (The later reduces non-federal spending). So by simple algebraic formula, deficit reduction cuts GDP growth. Keep that in mind as you read, Megan Mcardles latest article in Bloomberg: Dont Care About the Deficit? Now You Should I’ve said it before and I’ll say it again: Outside a few lonely hawks, no one cares about the budget deficit -- at least, not as long as they have any chance of getting some tax cut, or some spending, that they favor. Liberals were huge budget hawks in 2007, outraged about the George W. Bush deficit that was, by that point, running a little more than 1 percent a year. Fast-forward to 2014, when the Bush tax cuts have been partially repealed, helping President Barack Obama to slash the budget deficit to its lowest point in his administration -- 4 percent -- and the left is curiously uninterested in deficit reduction. Meanwhile, the Republicans who couldn’t be bothered with the deficit as long as it was going to fund tax cuts have suddenly rediscovered their inner accountants. Should the presidency flip parties, so will the outrage, with depressing predictability. I dont mind Megan rewriting history, but at least she should make it somewhat plausible. The Tea/Republicans -- the party of No -- have been preaching austerity during President Obamas entire administration. This isnt a sudden rediscovery. Unfortunately, as a new Bloomberg News article suggests, in the near future, we may not be able to afford the luxury of not caring. Congressional Budget Office projections currently show the deficit beginning to grow again in 2016, just in time for the presidential election. By 2019, itll be above its historical average, where it will stay until the end of the forecast window -- and that historical average is itself a bit high, as it includes the post-war record deficit of the Obama administration, which ran close to 10 percent for several years. Note the assumption that Deficits Are Bad, without the slightest attempt to provide evidence. (The reason, of course: There is none.) If the growth in health-care costs continues to moderate, that may help a bit, but mostly, the rising cost of health care is not the problem. The problem is the rising number of aging citizens who will require Social Security benefits, Medicare and, eventually, Medicaid to pay for their nursing homes. For the next decade or so, it is demographics, not compound cost growth, that will account for most of our budget problems. Megan wants you to believe there are problems, apparently because you are supposed to believe our government can run short of dollars. The fact that a Monetarily Sovereign government cannot run short of its own sovereign currency does not seem to disturb Megan any more than facts in general bother her. With the Fed expected to begin tightening next year, and our demographic pressure beginning to press harder, the deficit may once again show up as an issue in the 2016 election. And it will certainly show up as an issue for the next president, who is going to have to make painful spending cuts -- or tax increases -- if they want room in the budget for any new initiatives. Room in the budget?? Megan seems clueless about the difference between federal financing and personal financing. You and I need room in our budgets. So do businesses, state governments and local governments. We all are monetarily non-sovereign. None of us has a sovereign currency. But the federal government has infinite room in its budget, for the simple reason: It has the infinite ability to create the dollars to pay its bills. Those moves will be unpleasant, unpopular and unwillingly undertaken. The days when Democrats could promise to fund everything with tax hikes on a handful of rich people, or Republicans could promise to handle it all by cutting welfare fraud and foreign aid, are now officially at an end. But, as readers of this blog know, federal taxes (unlike state and local taxes) do not fund government spending. Even if federal taxes fell to $0, the federal government could continue spending, forever. All of this leaves us with but two possibilities: Either Megan Mcardle is truly ignorant of economics or she is being paid to be willfully ignorant. Who would want her to be willfully ignorant? Answer: The rich. They are the ones who want those federal deficit cuts. Most deficit spending benefits the non-rich more than the rich, so deficit cutting widens the Gap between the rich and the rest. The Gap is what make the rich rich, and the bigger the gap, the richer they are. Now lets see. Megan works for Bloomberg. Who owns Bloomberg? Is that guy rich? Hmmm . . . . Anyway, I dont think Megan is ignorant. But she may be willful. Rodger Malcolm Mitchell Monetary Sovereignty
Posted on: Fri, 24 Oct 2014 20:29:32 +0000
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