Economic Update, for April 19, 2013 - 10:00am
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I also recommend www.NewEconomicPerspectives.org for further heterodox economics perspectives. This is a blog started by the current chair of the University of Missouri-Kansas City's economics department, Dr. Stephanie Kelton alongside Dr. William K. Black, Dr. L. Randall Wray, and others.
Please also consider the recommended reading listed on the home page, especially Warren Mosler debunking The Seven Deadly Innocent Frauds of Economic Policy and Dr. L. Randall Wray explaining why the USA is not broke and can afford full employment and price stability in his important books: (1) Understanding Modern Money, (2) Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems, and (3) also see the free online version of the primer."]
Dr. Wolff advocates a progressive tax rate, like the "91%" upper income tax bracket of the '50s when the spending power of the rich was kept in check by progressive tax rates. It's important to have progressive federal tax rates and to fully tax capital gains, as the rich earn little "income," compared with other revenue sources. But it's also important to break the myth about the federal gov't being constrained in its spending by the amount of taxes it collects or its ability to "borrow." (See Mr. Mosler, Dr. Kelton, Dr. Wray, Dr. Forstater, et al.)
The notion, unfortunately perpetuated by Dr. Wolff, an admirable economist, about the federal budget being like a household budget leads to self-imposed fiscal constraints and gratuitous austerity. "If you drop [tax] rates on wealthy people, much less money is coming in to the government," said Dr. Wolff. Yet, the USA is a sovereign currency issuer, since ending the gold standard, which means the USA doesn't "borrow" dollars from China or anywhere. Bonds are used to control the money supply and target certain interest rates; and when bonds mature they are routinely paid out with interest. The USA faces no insolvency risk. And federal taxes are also used to control the money supply and private sector purchasing power. But federal taxes do not generate revenue, per se. State and local taxes, since states and municipalities are not sovereign currency issuers, do generate revenue. The federal gov't spends dollars into creation because all fiat money exists as an IOU. So, when the federal gov't collects taxes those IOUs (I.e., those dollars) are extinguished/eliminated. Also see Mosler's Seven Deadly Innocent Frauds of Economic Policy on why Social Security is NOT broken.
You are a wonderful teacher I'm sure ,because you speak very clearly and simply. I have been a Union member for many years and am nearing the end of my career as a Land Surveyor. My union recently sent a letter stating our pension fund is in the "critical" stage, that letter was followed by another stating some changes to he plan that they promiss me won't change what i will get when i retire(in a few years). I'm very confused and a bit worried, can I have worked all these years to find out ..oops we got nothing for you?If you could speak about this topic maybe it would clarify, or at least give me a bit of hope..thank you Robert Gomez
Loved todays show! Keep dropping the knowledge Wolffman!
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