Now I want to draw your attention to the other side of this equation, the loss in potential revenue due to lowering those taxes. I’ve argued that lowering corporate taxes has no meaningful impact on the health of our economy; however it should be obvious to anyone it has a massive impact on the well-being of every citizen.

There are so many problems with this that it is going to take a while to break them down. Don’t mistake me for an anti-tax libertarian or supply-side conservative and assume I just don’t want to tax the wealthy or the corporations, because that would be 180 degrees wrong. It is just that any plan that starts out from bad information has a lot less chance of success.

First and foremost, neither taxes nor borrowing is “revenue” for a government that creates its own sovereign fiat currency, especially one with a monetary system designed around defending a gold reserve, as ours was. When one’s total money supply is limited by a shiny metal dug from the ground out of some archaic desire of kings to trade in a precious metal that is easily forged and rare it is impossible for the government to hold both the metal and the currency that represents it.

Consequently, our government never “has” or “doesn’t have” money. It simply creates what it needs for “all” spending and deletes any “revenue” it receives to maintain a proper level of currency in circulation. Since spending must precede tax collections or borrowing, or there’s no money to collect or borrow, it is more correct to say that spending “funds” taxes and bond purchases than the other way around. Spending creates high power money in excess reserves that are required to purchase bonds or pay federal tax obligations, not to mention retiring private bank debt or be net saved.

While deficits determine the number and amounts of Treasuries to be issued, both deficit and debt are quite irrelevant to the ability of such a government to spend its own currency into existence, making Treasuries themselves irrelevant to the spending process except as leverage in setting interest rates by the central bank and as welfare for the investment class. In fact, about half of “actual” deficit spending since 2000 has been off balance sheet, as it is rightly seen as poor optics to make profits from both war and disaster spending. A rough informal audit conducted by the economics department of the University of Michigan in 2015 indicated that the expenditures of DOD and FEMA exceeded budget appropriations for both by $21 Trillion (yes, with a “T”).

Once Congress gives the Executive authority to spend for either, the Fed just makes sure the checks don’t bounce and electronically marks up Treasury’s appropriate reserve accounts as needed. This process is only different from normal appropriations in that no “debt” results as no Treasuries are issued to match (not fund) it. The dollars so created are just as real as any and have a similar impact on the economy except their path to some corporate bank account or wealthy person’s pocket is likely shorter.

Now that we know we don’t “need” tax or bond revenue to spend we can figure out what limitations, if any, control that spending. It turns out that it is the same as it always was in reality, inflation. However, without a gold standard or fixed exchange, the control is the real resources, goods and services, and labor, available in the economy. Should we spend on some resource that is in short supply, or is needed by the private sector, in excess of the value of that resource inflation will result. Up to that point, the market will increase production before raising prices. Also, specific item inflation is not due to increases in the money supply. Monetary inflation is when the price of everything increases continually for some period of time, usually considered as three consecutive quarters.

By better understanding how our monetary system works, especially that taxes an borrowing don’t fund any spending at the federal level and are primarily inflation control, we can maximize the benefit of the currency as the founders intended when they mandated that Congress create it for the general welfare (Article 1: Section 8). Once we figure out that “ANY” suffering that can be mitigated with money is strictly a political decision, not a necessary economic trade-off, we can keep politicians from pitting us against each other. Spending for the public purpose is never “our” money from taxation, and is always “public money” created the instant it is spent into the private sector. With the currency supply being unlimited to Congress anything that is for sale priced in dollars is “affordable”. This includes both excess labor the private sector doesn’t fully utilize and any Treasury obligation.