There is a certain level of socialism baked into our Constitution that becomes evident when one gains an understanding of our monetary system. The US government actually does control the means of production, but that control is not direct as one would normally think of when thinking of “control”. It is the power given to Congress to tax and coin (create) the nation’s currency “for the general welfare”. Politicians, at least since the end of the gold standard in the ’70s, have avoided this mandate (Article 1: Section 8) like the plague, but their cowardice doesn’t alter the operational reality of our monetary system.
Taxation has never directly funded the operations and programs of the federal government, Ditto with Treasury debt (bonds). Both are methods of drawing down levels of currency in the economy, primarily as inflation control. With a monetary system designed around dual entry spreadsheet accounting and defending the gold reserve the government sector couldn’t hold both money and the gold it represented without extreme gyration of normal accounting.
The solution was for the government never to “have” money, balancing it to zero with a “debt” entry in the government sector matching every dollar created from nothing in the private sector. When someone paid their tax bill the money used for that was effectively destroyed by the debt entry the moment it entered the government sector. Keeping the total of the debt entries below the value of the gold reserve assured the currency wouldn’t become “monetarily” inflated and Congress always knew what “policy space” it had to spend by creating “new” money.
This created the appearance that the money was “backed” by gold, but the bare truth is that it has always been a tax credit given value by the ability of the US government to levy and collect taxes only payable in its own currency. Taxes drive the demand for the currency and offer protection from inflation, but never should be considered “revenue” to a government that neither needs or uses revenue to spend. The utlity of the currency in the economy has always been dependent upon the government creating more currency than it demanded back in taxation to enable the economy to satisfy the desire of the people to save/profit with a reliable store of value and to net retire private debt without incurring more debt.
When properly viewed in this context, it becomes obvious that the government can’t actually “balance” its budget, clawing back all payments to the private sector with taxation, if it also allows profit/savings and has a net deficit in trade without seriously depriving the economy. This is proven by the fact that the only seven times we have managed to sustain such a balance for any length of time has resulted almost immediately in recession or depression as the lack of ability to retire private bank debt caused defaults to pile up with the first downturn of the business cycle and bank debt cannot be “rolled over” into GDP growth.
This presents a real danger of cascading collapse of the supply chains if it isn’t mitigated with government spending into the economy. This is the purpose of the safety nets and automatic stabilizers, not just to alleviate unnecessary suffering. Government most definitely controls the means of production, but via funding, not managing. In fact, it is one of the primary functions of government to organize the economy and commerce around its currency to maintain that control. The fact that it can always afford anything that is available for sale priced in its currency without incurring inflation gives it much more power over the economy than the current batch of econ illiterates in Congress realizes or there is a purpose behind their madness.
