Ocasio-Cortez's "Modern Monetary Theory" is a Fool’s Gamble

The U.S. government predicts that in 2020 it will have a deficit of $1.1 trillion: Revenues of $3.6 trillion and expenses of $4.7 trillion.

Now Rep. Ocasio-Cortez, the new blithe spirit of the Democratic Party, wants to spend an additional $4.3 trillion on:

-- Free College Tuition for All: $70 billion a year.

-- Guaranteed Employment for All: $400 billion a year.

-- Green New Deal: $600 billion a year.

-- Medicare for All: $3.2 trillion a year.

And the best part of her plan is that nobody will have to pay for it! Instead of a $1.1 trillion deficit, the congresswoman would give us a $5.4 trillion deficit.

So exactly how would Ocasio-Cortez pay for her additional $4.3 trillion of goodies?

In the days of the kings, when a government wanted to spend money it didn't have, it would debase its coinage by substituting a bit of lead in its gold coins. In the 20th century, governments found if they needed more money, they could just run the printing presses! Then, when the "great recession" hit in the early years of the 21st century, U.S. Federal Reserve expanded the money supply by something called "quantitative easing."

In an effort to stimulate the economy, our Fed began purchasing assets from commercial banks and other private financial institutions: Treasury bills and notes, bonds and mortgage-backed security paper.

When the government issues a treasury bill, it promises to pay principle and interest to the bank that buys the bill. If the bank buys a bond, the issuer of the bond promises to pay back the purchase price of the bond plus interest to the bank.

Quantitative easing (QE) has been described as an "unconventional monetary policy used by central banks to stimulate the national economy when Conventional Monetary Policy (CMP) has become ineffective.

QE differs from CMP. When the Fed utilizes CMP, it does two things: It lowers interest rates, and it increases the money supply. QE became necessary because the Fed had already lowered interest rates to 0% and couldn't lower them further. QE, therefore, relied on the Fed's only remaining tool: increasing the amount or quantity of money in the system to stimulate the economy. The "quantitative" in QE refers to the "quantity" of money made available.

That's how Ocasio-Cortez plans to give free everything to everybody. She subscribes to something called Modern Monetary Theory.


Professor Stephanie Kelton, a former economic adviser to Sen. Bernie Sanders, has said that in accordance with that theory, “the government can afford to pay for any program it wants. It doesn’t have to raise taxes."

But if we can implement the Ocasio-Cortez $3.2 trillion Medicare-for-All plan without raising taxes, why did Sanders recently tell Martha MacCallum (Fox News) the following?

Sanders: "you're not going to pay any health insurance premiums."

MacCallum: "You're going to pay one way or another. Whether it's in your income tax, or your payroll tax, you're going to pay."

Sanders: "Health care is not free."

MacCallum: "You just said it was going to be free for everyone."

Sanders: "It's going to be free at the point at which you use it."

In comparing Kelton's remarks with those of Sanders, it seems rather clear that the professor and the senator are on very different Modern Monetary Theory pages.

So, is there a real difference between the government running printing presses 24/7, and the Fed creating trillions of dollars by clicking the computer?

If our government has revenue in the neighborhood of $4 trillion, can we have deficits of $5 trillion, $10 trillion, or $50 trillion? Or at some point does inflation set in and utterly destroy the earnings, savings and purchasing power of rich and poor alike?

What happened in the years following 1716 when France subscribed to John Law's paper-money policies? The Weimar Republic? The Soviet Union? Twenty-first century Venezuela?

In each case, the bubble burst. Modern Monetary Theory is a fool's gamble.

Posted: QCOline.com   May 23, 2019

Copyright 2019, John Donald O'Shea

Gov. Newsom: Save the Murderers; Execute Innocent Fetuses!

California Gov. Gavin Newsom has issued an "executive moratorium ... in the form of a reprieve for all people sentenced to death in California."

Does it really apply to "all people?" Or does it apply only to convicted murderers? Or just murderers who have intentionally killed one or more of their fellow human beings and whose convictions have been affirmed on appeal?

Are fetuses "people?" Are full-term babies minutes away from a normal delivery people? Are newborn babies who have survived botched abortions people?

When a California mother directs the abortion of such babies, and when her doctor acts as executioner, are these babies not "people" sentenced to death?


In Newsom's California, it appears you have a choice: You can be logically and morally consistent, or you can be a progressive Democrat. You can't be both.

Let's examine Newsom's justifications for reprieving convicted murderers.


1. Newsom: "I just can't kill on behalf of the state. I have four young kids, and my daughter says to me, 'You teach us not to kill.' Yet here I am in a premeditated way killing other people."

Query: If allowing a convicted murderer to be executed according to law makes the governor guilty of killing on behalf of the state, why doesn't allowing a child to be executed according to California's abortion law make the governor guilty of killing on behalf of the state?

Query: Why is aborting a fetus any less "premeditated" than executing a murder?

2. Newsom: “If someone kills, we do not kill. We’re better than that.”

Query: The child in the womb or who has just been born has killed no one. Why should the governor not also logically say, “If someone has not killed (is innocent), we do not kill them. We’re better than that.”

3. Newsom: "California's death penalty system is unfair, unjust, wasteful and protracted, and does not make our system safer."

Query: Before anybody in California can be executed for murder does he not first have to be tried and convicted? Does he not get seemingly endless state and federal appeals? Can he be executed unless his conviction has been affirmed after that entire appeal process?

Query: Does a fetus or a baby born after a botched abortion have any comparable rights? Or is the baby condemned to die at the whim of its mother, without any semblance of due process? Does the fetus get an attorney? A trial? Any appeal?

If executing convicted murderers after they have been accorded all their constitutional rights is unjust, why isn't killing innocent fetus who have been accorded no constitutional rights outrageously unjust? If killing murderers is wasteful and does not make our system safer, why isn't abortion wasteful? How does abortion make California safer?

4. "The state's bedrock responsibility to ensure equal justice under the law applies to all people no matter their race, mental ability or where they live, or how much money they have."

If the bedrock responsibility is to ensure equal justice to all no matter where they live or how much money they have, what is the state's bedrock responsibility to a person living in its mother's womb, and who has no money? 

5. "Death sentences are unevenly and unfairly applied to people of color, people with mental disabilities and people who cannot afford costly legal representation."

Is not the act of aborting a death sentence? Are not abortions "unevenly and unfairly applied to people of color, people with mental disabilities and people who cannot afford costly legal representation"?

6. "The National Academy of Science estimates that as many as one in 25 people sentenced to death in the United States is likely innocent."

Are not 100 percent of children sentenced to death by their mothers and executed by attending doctors entirely innocent?

7. "I will not oversee the execution of any person while I am governor." 

Is not an abortion an execution? Is he going to resign his governorship?

Is not a fetus in the womb a person? Is not a full-term child minutes away from birth a person? Is not a child born after a botched abortion a person?

Scientists say that of the 3 billion letters (base pairs) that make up the human genome, some 15 million of those (1%) are what distinguish man from our nearest relative, the chimp. If the fetus shares those 15 million DNA letters, is it not as fully a human person as you? As Newsom's murderers?

Or are you a science denier?

4. Newsom: "The state's bedrock responsibility to ensure equal justice under the law applies to all people no matter their race, mental ability or where they live, or how much money they have."

Query: If the bedrock responsibility is to ensure equal justice to all no matter where they live or how much money they have, what is the state's bedrock responsibility to a person living in its mother's womb, and who has no money? 

5. Newsom: "Death sentences are unevenly and unfairly applied to people of color, people with mental disabilities and people who cannot afford costly legal representation."

Query: Is not the act of aborting a death sentence? 

Query: Are not abortions "unevenly and unfairly applied to people of color, people with mental disabilities and people who cannot afford costly legal representation"?

6.Newsom: "The National Academy of Science estimates that as many as one in 25 people sentenced to death in the United States is likely innocent."

Query: Are not 100 percent of children sentenced to death by their mothers and executed by attending doctors entirely innocent?

7. Newsom: "I will not oversee the execution of any person while I am governor."

Query: Is not an abortion an execution? Is he going to resign his governorship?

Query: Is not a fetus in the womb a person? Is not a full-term child minutes away from birth a person? Is not a child born after a botched abortion a person?

Scientists say that of the 3 billion letters (base pairs) that make up the human genome, some 15 million of those (1%) are what distinguish man from our nearest relative, the chimp. If the fetus shares those 15 million DNA letters, is it not as fully a human person as you? As Newsom's murderers?


Or are you a science denier?


Posted: QCOline.com   May 9, 2019

Copyright 2019, John Donald O'Shea

Taxpayers Will Pay for 'Free" Health-care for All

Democratic presidential candidate Bernie Sanders, claiming that "health care is a right," wants the U.S. government to take over the entire U.S. health-care industry.

Sanders promises "Medicare-for-all," a national, single-payer Medicare system with "vastly expanded benefits." The senator admits his plan would exterminate all private insurance companies, so as to eliminate competition with his expanded Medicare program.

Deductibles and co-pays would be eliminated. The Sanders plan also calls for universal long-term care in home and community settings. Medicaid would continue to cover institutional care, and states would determine the standard of eligibility.

The conservative Mercatus Group estimates that the Sanders' plan would cost Americans $33 trillion over the next decade -- $3.3 trillion per year.

Health insurance is traditionally paid for by paying "premiums." But to pay for his Medicare-for-all insurance, Sander instead proposes tax increases.

Sanders states that to pay for Medicare-for-all, new taxes would be imposed on both employers and employees. Employers would pay a new 7.5% payroll tax (with the first $2 million in payroll exempted "to protect small businesses"). Employees would pay an additional 4% tax (but the first $29,000 of income would be exempted for a family of four).

Because these taxes will not be enough, Sanders also proposes raising a marginal tax rate of up to 70% on those making above $10 million, taxing earned and unearned income at the same rates, limiting tax deductions for filers in the top tax bracket, and establishing a tax on extreme wealth and making the estate tax more progressive, including a 77% top rate on an inheritance above $1 billion.

At present, workers in America pay a Social Security/Medicare tax at the rate of 15.3%. Our government tells us that 7.65% of that tax is paid by the employer, and 7.65% is paid by the employee. That is a fiction. The entire 15.3% is really paid by the employee.

It's a tax-accounting gimmick designed to convince the gullible that the employer is paying 7.65% in addition to the worker salary, when in reality the entire 15.3% is taken from the worker's salary with half labeled as a tax on the employer, and the other half as a tax on the employee.

Sanders is engaging in exactly the same legerdemain. He disingenuously claims the employer will be taxed an additional 7.5% and the employee only an additional 4%. In reality, the new 11.5% will be deducted from the employee's pay so that instead of paying 15.3% for Social Security and Medicare, the employee will have the high honor of paying 26.8%.

And, of course, the employee will also have the high honor of paying his federal income taxes with no deduction for what he pays for his new Medicare-for-all.

If the 2018 federal income tax rates remain the same, and if the Sanders' Medicare-for-all plan becomes law, a single man with a taxable income of $50,000 will pay federal income tax of $6,834 plus a real Social Security/Medicare-for-all tax of $13,400 -- 40.5% of his taxable income.


Rock Island County runs Hope Creek Care Center. County Administrator Jim Snider states that running a nursing home is "a tough business." Hope Creek, in three months, has increased its short-term debt from $4.6 million to $5.3 million. Net operating costs are running a loss of about $460,000 per month. The county, which can't print money, has to make up the shortfall.


And how is Medicare presently doing? In 2018, Medicare trustees, reported that the fund would become insolvent in 2026. (In 2017, they estimated insolvency would occur in 2029).


Rock Island County can't run a small nursing home. The present government-run Medicare system is seven years from insolvency. Congress can't get anything done. So why would any rational person risk putting nearly 20% of the U.S. economy in the hands of government bureaucrats who screw up everything they touch?


We have the lesson of U.S.S.R socialism: bankruptcy. We have the lesson of Venezuelan socialism: bankruptcy. We have the lesson of Cuba: a 1950s economy. Sanders goes blithely on, intentionally closing his eyes to the historical realities of Russia, Cuba and Venezuela.


It is argued that our present insurance system is expensive. But you get what you pay for. Before you believe people who claim "our system is the worst among developed countries," check the details, e.g., what is counted as a "live birth" in America? In France? How you count makes a big difference. If you count a child delivered before 22 weeks which quickly dies as a live birth, and France doesn't, we look worse.

Posted: QCOline.com   May 2, 2019

Copyright 2019, John Donald O'Shea

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Sanders is engaging in exactly the same legerdemain. He disingenuously claims the employer will be taxed an additional 7.5% and the employee only an additional 4%. In reality, the new 11.5% will be deducted from the employee's pay so that instead of paying 15.3% for Social Security and Medicare, the employee will have the high honor of paying 26.8%.

And, of course, the employee will also have the high honor of paying his federal income taxes with no deduction for what he pays for his new Medicare-for-all.

If the 2018 federal income tax rates remain the same, and if the Sanders' Medicare-for-all plan becomes law, a single man with a taxable income of $50,000 will pay federal income tax of $6,834 plus a real Social Security/Medicare-for-all tax of $13,400 -- 40.5% of his taxable income.

Rock Island County runs Hope Creek Care Center. County Administrator Jim Snider states that running a nursing home is "a tough business." Hope Creek, in three months, has increased its short-term debt from $4.6 million to $5.3 million. Net operating costs are running a loss of about $460,000 per month. The county, which can't print money, has to make up the shortfall.

And how is Medicare presently doing? In 2018, Medicare trustees, reported that the fund would become insolvent in 2026. (In 2017, they estimated insolvency would occur in 2029).

Rock Island County can't run a small nursing home. The present government-run Medicare system is seven years from insolvency. Congress can't get anything done. So why would any rational person risk putting nearly 20% of the U.S. economy in the hands of government bureaucrats who screw up everything they touch?

We have the lesson of U.S.S.R socialism: bankruptcy. We have the lesson of Venezuelan socialism: bankruptcy. We have the lesson of Cuba: a 1950s economy. Sanders goes blithely on, intentionally closing his eyes to the historical realities of Russia, Cuba and Venezuela.

It is argued that our present insurance system is expensive. But you get what you pay for. Before you believe people who claim "our system is the worst among developed countries," check the details, e.g., what is counted as a "live birth" in America? In France? How you count makes a big difference. If you count a child delivered before 22 weeks which quickly dies as a live birth, and France doesn't, we look worse.