The DORPs win again, as expected; economic ignorance has pushed the Deficit-Reduction Committee towards a plan to lower taxes on the super-rich
DENVER, Nov. 22, 2010 — The Following is a statement by J. Moromisato, director of the Reformed Economics Institute at Denver.
6. The Denver Plan: The Solution to the Fiscal Deficit, and More.
The recently released draft-plan by the Deficit-Reduction Committee is based on the fallacy that if the rich pay less taxes they will invest more and that will create more jobs for everybody. In reality, what the rich do with their extra income (which is most of it) is to gamble it in their financial casino; little of that money goes into the marketplace, where jobs remain scarce.
As Paul Krugman said in a recent NY-Times article, "…what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class."
The same economic fallacy would lead Congress to extend the tax cuts on the rich, and lose a chance to actually reduce the fiscal deficit.
The Denver Plan, in contrast, calls for increasing the reserve requirement on all financial institutions to 100%, which would mean, for example, that banks won't be allowed to lend out their depositor's money, and would have to borrow from the Fed all the funds needed to issue loans. Among other advantages, this approach would create a new source of revenue for the government — the interests paid by the financial institutions to the Fed.
How big is this potential source of income? The entire outstanding debt of the nation is about $50 trillion, of which about $15 trillion are owed by the federal government. The Fed would underwrite those loans as they are renewed, and would gradually become the primary source of the total outstanding loans in the country. A decade after the implementation of the Denver Plan, the U.S. government would receive interests amounting to one to two trillion dollars — a quantity large enough to balance the fiscal deficit.
A new plan, announced 11/17/10, from a Domenici-Rivlin panel, is an improvement over the Commission's plan: it proposes a one-year holiday from Social Security taxes for both employers and employees, and a 6.5% national sales tax. The latter is the worst job killer invented by man.
Our economists still don't understand the meaning of money or the power of government to control its circulation:
"Government, possessing the power to create and issue currency…need not and should not borrow capital at interest as a means of financing governmental work and public enterprise." (Abraham Lincoln)
Visit http://www.DenverPlan.com for more details. The Denver Plan is available at BN.com and Amazon.com.
J. Moromisato is the director of the Reformed Economics Institute, and author of The Coming Age of Freed Money (2010), The Denver Plan to End Unemployment (2010), among others.
Contact: J. Moromisato, (303) 321-0577
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