Whoa, you say. Where is this money coming from? From the Federal Reserve. It’s the part of the government that makes currency.
The Fed is nothing more than the clearing bank for Treasury payments and receipts. Does your bank "make" the money in your account? Only Congress can create net monetary assets/US dollars, and it instructs Treasury in what to fund. The Fed then just makes sure that the checks don't bounce.
The confusion here results from viewing the spending and budgeting process of the monopoly "issuer" of our currency, Congress, as if it were just a "user" of that currency, like a household. It is nothing like a household, and most often just the opposite.
It neither has nor doesn't have money at any time, as it can create an infinite number of US dollars on demand. There is no "infinite+1" in math, so it never "needs" our money back to enable spending. Treasury bonds are simply an asset swap of Fed reserves for interest bearing Treasury's "promise to pay" meant to remove reserves from the banking system.
This is easily proven by the fact that Social Security would be one of the benefits cut if the debt ceiling isn't raised, in spite of it being "funded" by bonds. The reserves required to purchase bonds, like all "revenue" of the federal government, are cancelled by the debt that created them. Treasury holds the debt (representing our net money supply after private bank debt is factored out) and the Fed holds the actual money. The Treasury can't hold money and the Fed can't hold debt as they would cancel each other out as a first order accounting function of dual entry accounting.
The middle class has enough tax pain already. The payroll tax is regressive.
FDR created the payroll tax because he knew that the people would need a "legal claim" to benefits that would make it more difficult for Republicans to simply eradicate the program entirely. He argued with Eccles, The Fed board chairman, and Ruml, the New York Fed chairman, about having the tax at all since bonds don't really "pay for" anything.
Ruml even wrote a paper later titled "Taxes For Revenue Are Obsolete", which is a good deep dive into Fed and Treasury processes if you are a serious policy wonk.
https://modernmoneynetwork.org/sites/default/files/biblio/BeardsleyRuml.pdf
In any society that didn't contain a faction dedicated to eradication of the federal government (Republicans) there would be no need for such foolishness of taxes that don't pay for anything, but that isn't our luck. Between Social Security and Medicare payroll deductions the working class American is the most heavily taxed entity in modern society, having over 15% of his/her earnings removed before income taxes are deducted.
I believe in presenting the issues facing us in honest and clear language that the average person can understand. That means not using the language of our enemy when speaking of how our government funds itself and our society. The enemy is formidable enough, with most politicians, media pundits, and establishment economists spreading the lies, without us adopting their language and giving ground because it is easier.
Write on and keep spreading the truth.
