Second, even more strikingly, is the fact that even if you knew nothing about the law at all, it’s a matter of simple logic that if you expand coverage to millions more people, the money will have to come from somewhere, which means higher taxes.
Only if you assume the accepted rhetoric surrounding taxation and spending is correct, which it isn’t. I’ll prove it with the simple logic you alluded to if you’ll bear with me.
Firstly, I think we can agree that one cannot collect (or borrow) what doesn’t yet exist. The government can levy a tax but will have a hard time collecting it until it creates and spends its money into the economy to “fund” the tax payments. The government, specifically Congress, creates money from thin air as it spends to provision itself and never needs revenue prior to spending. Taxes don’t do anything to make spending possible, or even easier, at the federal level because the federal government is the monopoly holder of the patent on the US dollar which was made a no-cost commodity by the Constitution to enable management of the economy. That also included a mandate on Congress that it do so “for the common welfare”. (Article 1: Section 8)
In fact, by accounting identity in any dual entry spreadsheet accounting system, an opposing entry must be made in the government’s sector for every dollar spent into the private, non-government, sector. That entry serves for tracking and error checking and is labeled “debt” because Treasury “owes” a tax credit to anyone who holds its currency. Because spending must precede collecting of taxes it is just cleaner, and compliant with spreadsheet accounting, to balance tax payments with the debt entry created when the money was and create “new” money for all spending.
It was especially important that Treasury didn’t hold any “money” when it also held the gold reserve the money represented. This is why the Federal Reserve, the clearing bank for Treasury, is not technically a government entity. It is also why Treasury bonds cannot be a funding mechanism and only served to draw down currency reserves until taxes could be collected to offset the “deficit” spending above the value of the gold reserve. Without the gold reserve as a buffer “deficit” is now defined as any amount above tax collections. Both taxes and bonds “cancel” money as soon as it enters the government accounting sector. Sans a gold reserve to defend, Treasury bonds serve little purpose beyond providing a floor for investors and allowing the Fed to manipulate interest rates by purchasing and selling bonds on the secondary market to hit its target rate. Having a combined balance sheet with Treasury means that it can purchase an unlimited quantity of bonds at no net cost.
While the government doesn’t “need” our taxes to spend, it does need us to “need” its money and that is the primary purpose of taxation, not funding anything. Its secondary function is, of course, regulating the base money supply to respond to the business cycle’s ups and downs to prevent inflation or to allow more currency to remain in the private sector to preserve supply chains from collapse. Its goal should always be maximum employment, not using the people’s misery to balance a mostly meaningless number.
If there is involuntary unemployment the government has taxed consumers too much. Inflation would indicate the opposite or too much spending. Given that trade deficits and wealth accumulation are both drains of currency from the economy the “budget” should always be in deficit of tax collections to compensate and fund growth. A “balanced” budget, while the holy grail of politicians, is simply another way of saying 100% tax rate, or theft of the resources and labor government uses which the people would soon realize without available private sector debt to fund their lifestyle in the absense of public money. Several “very” good macroeconomists lay fault for the housing crisis on Clinton’s surplus budgets that promoted the use of the people’s homes as ATM cards and offered no secure parking for wealth in Treasury bonds. Loose credit and money looking for a home naturally met in the US housing/mortgage market and Wall St ran with scissors until everyone got hurt.
The reason I went into such depth is to point out that “paying for” Medicare 4 All with taxation may be the worst possible way to approach its funding given that some 700k+ people will be made unemployed over four years with Bernie’s plan as insurance is phased out. That number may not include those who are currently working in administration for healthcare providers that will no longer be needed to navigate the various insurance company forms and rules, each with layers of plans. One set of forms and one guidebook of regulations to follow is going to cut costs for providers considerably, but the people made unemployed will not realize the gain from that, so some effort should be made to transition them into productive employment beyond the normal unemployment benefit of their respective states.
This effort cannot be funded, and likely made more difficult, with federal taxes for the reasons I laid out above, so it will have to be placed on the states where the economic boost of so many people no longer having premiums and out of pocket expenses to cover isn’t sufficient to employ them all. We all know how that will work in GOP dominated states. It will be seen as an opportunity to blame some misery on the “socialist” program and the libruls. The best approach would be a federally funded retraining/reemployment program administered through community colleges along with extended unemployment benefits that offer close to the pay and benefits they had with their jobs.
Looking at federal taxes from the perspective of a “user” of the currency, which we all are, is a natural trap that most fall into, but is often wrong to the point of causing great harm. It does, however, push a lot of activity to private sector banks and privatized services. No matter how one dices it though, private lending cannot “net” retire itself and can only be rolled over with constant GDP growth to prevent systematic failures and widespread defaults, which we see each time the economy takes a downturn. No amount of bank credit can change the fact that the “net” money supply is always equal to the national debt.
