I’ve been wondering when you would come around to MMT, being an economist and showing a unique grasp of how money works in a modern economy. You aren’t quite there yet, but are definitely much closer than the average economist, even those with Nobel prizes.
Do you see why I say that we could print enough money tomorrow to pay off the national debt and it wouldn’t make much difference to the average person’s plight?
This is “almost” true, but only if one thinks the “debt” is only the part of the money supply represented by Treasury bonds. Congress spends money all of the time that isn’t required to be matched by issuing Treasury bonds. It is specifically authorized to do so in cases of war and disasters. This is why the war authority is routinely granted to the Executive by bi-partisan votes, as it allows money creation without “debt”. Ditto for spending to recover from natural disasters, as it’s seen as predatory to allow investors to make interest on those items.
An informal audit of the Pentagon was done by the econ department of the University of Michigan a few years ago. It showed that just receipts of spending by our military in excess of Congressional appropriations totaled in excess of our national debt at that time. W Bush and Cheney alluded to this several times when Cheney stated that deficits don’t matter and Bush referred to his spending on the Iraq war as “off the books”.
Treasury bonds require existing excess currency to exist to purchase them, so deficit spending “funds” bonds, not the other way around. Bonds are simply an asset swap for excess reserves that were used to defend the now non-existant gold reserve by making deficit spending non-convertible to gold for a specified period of time to allow “policy space” to spend in anticipation of tax collections or fiscal gains from spending.
Paying off those bonds would accomplish little more than moving their value back to reserves, after which they would likely be used to purchase bonds again. This was essentially what the Fed did with QE, only it didn’t have the anticipated results of creating private bank loans as banks don’t lend from reserves, and haven’t since we left the gold standard domestically in ‘34. Since the Fed shares a balance sheet with Treasury it can do this all day long without actually costing anything.
The Fed has money and Treasury has debt which is why the Fed must remain a quasi-private entity to preserve a boundary between the sectors. Any money entering the government sector (Treasury) will be canceled by the matching debt waiting there for it and cannot survive that accounting function to “fund” anything. Ditto for tax “revenue” (an oxymoron for the private sector) requiring “new money creation” for all spending.
Now, only a fool would say “the debt doesn’t matter.” Sure it does. Debtor states implode into authoritarian-fascist collapses.
This is only true for those states that take on debt denominated in a currency they can’t control or create. A nation that creates its own currency and only has debt in that currency can never fail to pay any obligation it owes. It can also “afford” anything that is for sale and priced in that currency. It is the power to tax in that currency that gives the currency value to denominate trade. It wasn’t lavish retirement and social benefits that got Greece into trouble. It was allowing its investor class to scoff at their tax bill with rampant cronyism. That was compounded when it adopted the Euro and gave up its monetary sovereignty.
Bernie’s estimated his universal healthcare plan would cost…$1.4 trillion a year. Pffff. That’s barely a drop in our $30 trillion bucket.
If Bernie were to be honest about answering the “pay for” question he would state that a single-payer system is more likely to require a “tax cut” or considerable spending above the dollar cost of healthcare, even if no taxes or premiums are collected for it. One doesn’t remove a $trillion of economic activity from the economy, even if it isn’t very productive, and cause some million people now working in insurance or administration for providers to be unemployed and not crash the economy.
I know he knows this stuff, because I know his econ advisor and she has stated this numerous times. It should be noted that Bernie’s answer to the question always involves taxing those who need to be taxed heavily, single-payer or no, to protect our democratic process. He has no intention of actually paying for the program because he understands that taxation cannot “fund” anything. Single-payer healthcare will be a deflationary event for America until the people made unemployed can be retrained and secure “productive” work. We will owe them that much.
What about Elizabeth Warren’s plan to give everyone free college? $1.25 trillion over…ten years. That one’s not even a drop in the bucket. How about Bernie proposing canceling “medical debt” to the tune of $81 billion?
It is hoped that all of these together will overcome the deflationary effect of single-payer healthcare, plus they will keep America competitive in the world market. We must concentrate on what makes us productive as a society, not what makes our wealthy people wealthier. The world may take away our currency of trade status and prevent us from taking whatever resources we want by force soon, I hope. Anything that enables us to stand as a strong economy without those will be to our benefit.
That failed paradigm, call it neoliberalism if you like, says: the government should always run a surplus. Society must invest itself as little as possible. If society invests, then the private sector gets “crowded out”, and interest rates rise, and incomes fall, and capital flees the country
Simple dual entry spreadsheet accounting says the government cannot run a surplus without the private sector running a deficit. One doesn’t even have to be an economist to understand that. Federal spending is new dollars flowing into the private sector and taxation is dollars being destroyed to pay down a mostly meaningless debt in the government sector. It really is that simple.
Interest rates are always what the Fed wants them to be and it has unlimited leverage available to accomplish that in its shared balance sheet with Treasury. It can produce unlimited dollars to buy bonds at whatever rate it wishes at no cost. Increased federal deficit spending produces excess reserves which produce a demand for the bonds Treasury creates to match deficits. The only option is to leave those reserves to sit at the Fed unproductive. The natural rate for a fiat currency is always zero and the Fed must manipulate that upward to achieve its target rate.
They spend half of their national income of public goods — healthcare, education, transport, retirement, and so forth — while we spend just a quarter.
Now, of course, that also means that Europeans pay roughly half their income in taxes, while we pay just a quarter. But they are getting a better deal. Their living standards are vastly higher than ours
This is still a backward view of the process. Their governments decide what is needed to accomplish the goals the people desire for their society and they create the funding required for those. They then use taxation to prevent inflation in the general economy. The fact that this percentage is so high is only proof of how well their goals are achieved via social spending. Leaving more than half of the national income would create inflationary pressure considering how much of basic needs are supplied by their social contract.
I’m sure that the citizens see taxation as a “funding” mechanism, just as those in the US do, but they have come to have high expectations of their governments and have no desire to pay for the social contract themselves, regardless of how much “saving” they might see in their tax bill. Their taxes are considerably more progressive to lessen income inequality and businesses pay their share as well.
Most of the countries there also don’t have a competitive relationship with their local governments for funding such as we see in the US with continual rumbling of secession and vitriol against the larger government in many states. Hating and promoting distrust of the federal government is seen as “patriotic” in this Bizzaro world libertarians have created.
I’m not sure where they believe the US dollar comes from, but it isn’t the states or business. The GOP has tapped into this insanity to the great benefit of their wealthy donors and the corporations that it allows to rape and pillage the resources while abandoning the people as one would a broken tool when they are no longer able to provide profits.
