The United States had plenty of money half a century ago. Where did it go?
If you’re referring to the federal government, it never “had” money. It never needed it, as it created the currency as needed when it spent in the private sector. When it guaranteed to convert that currency to gold at a fixed exchange rate on demand it was limited in how much it could create, but that didn’t change the nature of the currency itself.
The US dollar has always been a fiat currency that is self-funding by decree of the Constitution. The gold standard simply balanced the debt to zero, but Congress was always free to create more than the value of the gold reserve, and it often did in times of war or disaster. Since we left the gold standard the creation of debt (Treasury bonds) to match spending has been a choice of Congress to provide secure savings, not a funding mechanism.
Yet every time someone proposes new investments in our future, they are told that the nation is broke, massively in debt, and cannot afford new investments.
Somewhere in our nation’s timeline, the people became convinced that “they” fund their government with their taxes and bond purchases. When every dollar in circulation is a product of decree of Congress and is tracked by an accounting entity labeled “debt” on the government’s ledger the impression that it is “broke” is easy to sell to those whose only frame of reference is their personal budget process as “users” of the currency.
The truth is that our taxes only serve to regulate the currency in circulation and don’t “pay for” anything beyond canceling the debt that created them. Treasury debt that lights all politicians’ hair on fire is mostly just welfare for banks and the uber-wealthy. It never was “funding” for government spending, given that existing dollars are required to purchase bonds, but it is even less so since we are no longer restrained by an archaic gold standard. Basic logic should tell us that a “balanced” budget, while sounding wise and the holy grail of politicians, is a 100% tax rate that steals resources and labor from the private sector, leaving no store of value for our commerce or way to retire private debt.
The major focus must be on removing the tax subsidies and loopholes that large corporations use to avoid paying taxes.
Taxing business has many useful purposes, but none of those is “paying for” spending on the public purpose. The monopoly issuer of the currency needs no revenue to fund its spending and should only tax to avoid inflation or to achieve social goals, such as minimizing income inequity or punish undesirable behavior.
We would then have the money to pay down our debt and make needed investments in our future.
This is the household budget thinking that is dooming us to failure at the moment. The currency-issuing government “CANNOT” be in debt in its own currency because it must first produce/create the currency before it is available to borrow. The national debt politicians use to beat us about the head and shoulders anytime we demand nice things like other countries have is not a debt in the normal use of the word. It is our national savings and the accumulated store of value from our past commerce, not a mortgage on future productivity. Is $20+ Trillion too much to hold in savings in our economy? WE can, and probably should, have that conversation. However, it must include a perspective that reflects our monetary reality and will inevitably include the distribution of wealth.
