While I am a proponent of ‘post-scarcity economics,’ we are not there yet. Those who follow the theory known as ‘Modern Monetary Theory’ seem to think we can now move to ‘non-scarce money.’
After multiple rounds of QE to write off the results of the financial system running with scissors, costing upwards to $32 Trillion according to some who are in a position to know those things, it’s bordering comical to assert that money is in any way scarce. We have been managing the economy in a convoluted combination of rules and assumptions that combine the outdated gold standard and chartalism since ’71, mostly according to the political party in power at the moment.
MMT simply offers an accurate description of the processes surrounding money’s creation and flow in the economy. It is non-political and applicable to any monetary system. It does show that our economy is performing far below its potential due to many common misperceptions and political manipulations, so it is naturally attractive to progressives who would opt for more public money creation for their preferred programs. It, however, lends itself just as well to further tax cuts that conservatives would prefer over more spending. Since it describes our present monetary system it is not something that needs to be “implemented”.
I do not agree that our nation can ignore its budget problems. The value of our currency is based on the perception that we can meet our obligations. Hence, it is important that the nation moves toward a more stable financial position. National debt in excess of $20,000,000,000,000.00 is far too much. We need to aspire to keep the national debt below 10% of the nation’s privately held wealth.
Currency, sans a commodity peg or fixed exchange rate, has no intrinsic “value”. It is a unit of measure. To the government sector, it denominates the taxation that drives its acceptance and makes resources available to provision government in the private sector. To the private sector, it denominates prices and contracts and acts as a store of value to satisfy the need to net save, but only if its availability is in excess of government’s demand for tax payments. Otherwise, it is only a method for the issuing government to steal resources.
Your perception of Treasury debt shows you don’t have a complete understanding of the function of bonds, taxes and the Federal Reserve system. You are certainly not alone, as this misperception of “borrowing” is at the base of most of our economic and resource distribution problems. Every dollar spent comes with its own debt that can only be satisfied by the destruction of that dollar when it is used to pay a federal tax obligation or fine.
The debt is an entry made in the government’s sector of the dual entry spreadsheet system used to track money in banking systems worldwide when each dollar is created in the private sector. Whenever the dollars get together with their debt entry in the government sector they balance each other to zero, making it impossible for them to go on to “fund” anything. This debt entry isn’t an actual debt. It is simply an accounting entity that allows error checking and advises Congress of how much currency is in circulation and savings in the private sector, including trade deficits.
Treasury bond issues were only required when we had a gold reserve to defend and are not part of the funding process any longer. Given the low hanging fruit they, and the interest they pay, provide for political propaganda we should probably not issue them any longer. They drain down excess reserves that result from deficit spending and offer a floor for investors, but like taxes, never fund anything. Why would the monopoly issuer of the currency ever need to borrow its own currency? How could it even do so if it didn’t first create the currency to be borrowed, or pay taxes?
Is $20+ Trillion too much money to have in the private sector economy? We can, and should, have that conversation, but only from the perspective of what it really represents, which will surely involve distribution and present a shock to most Americans when they find out who benefited and how much. That shock would likely turn quickly to anger when they discover that the Social Security and Medicare “funds” they paid into for their entire working career did absolutely nothing to enable the payment of benefits, for themselves or the generation currently drawing benefits.
Where will the money come from to correct the problem of income inequality? It just so happens that there is an ‘ocean’ full of money that we can use.
You can, if you can generate the political will, mitigate inequality by taxing wealth, but doing so has proven extremely difficult as you are taking on the most powerful and well-funded opposition in the world. The best way to do so is simply to make the wealthy irrelevant to federal spending by not looking for “funding” for that spending. Once you do that, you can tax them at any level that seems appropriate. As I demonstrated above, taxing them offers no greater ability to spend on whatever can be decided politically than not taxing them. As long as sufficient resources are available to achieve the goals of the spending no “funding” is necessary. We can, without increasing revenue, afford anything that is for sale priced in dollars Congress can create at will.
By transferring a small portion of the wealth accumulated by the wealthiest Americans to the lower income tiers, we could achieve several very positive benefits for our entire economy. With a healthcare system similar to that of the other G-7 nations, we could reduce the cost of labor for our corporations.
Single payer healthcare is a big enough expense to seriously harm our economy if we stay stuck on stupid and focus on how to “pay for” it. Bernie knows this, as his econ advisor, Dr. Stephanie Kelton, is one of the top MMT proponents in the world. He also knows that we need to discourage non-productive investments and tax the wealthy at a much higher rate to protect our democracy, so I think he is wanting to kill two birds with one stone and not have to turn his campaign into an econ 101 class to do so.
Medicare4All will cause a large number of Americans to be unemployed involuntarily. While considerable capital will be made available by eliminating premiums, copays, and deductibles now taking a big bite out of our economy, that may not be enough to properly re-employ that many insurance and health care administrative workers. Many will need retraining to enable them to achieve their present income levels. While it will be beneficial to the larger economy, we can’t abandon that many people in good conscience and they may need a general tax “cut” to generate the economic activity needed to re-employ them productively.
If the wealthy want tax benefits for being ‘job creators,’ then we need to create tax credit programs for the number of jobs created as opposed to tax cuts for all wealthy Americans.
“The wealthy” are not job creators. They are beneficiaries of profits from business via their ability to invest in shares. They should be taxed at very high progressive rates to avoid their influence in our democratic political system, but that shouldn’t apply to the corporations that are their benefactors. Business/corporations “are” job creators and we should consider eliminating all corporate/business taxation. Corporations are politically neutral once their productivity is decoupled from taxation and personal taxes are easier to collect without causing increased price levels from cost shifting taxes onto consumers.
Businesses harming the environment or otherwise harming society should be “regulated” not taxed. They function with infrastructure, including an educated workforce, that they don’t pay for as well as utilize our nation’s currency to conduct commerce. That gives us the legal and moral authority to dictate how they conduct business in spite of protests from Libertarians and conservatives.
