We have a troubled second-rate social democracy, with limited benefits, here in America because we want to pay 80 cents for each dollar’s worth of “free” entitlements and borrow the rest from your kid’s and grandkid’s future.
Why would the monopoly issuer of the currency, the US government, ever need to borrow its own currency back to enable its spending?? Here’s a clue, it doesn’t, and it also doesn’t “borrow” anything so it’s a moot point, or would be if conservatives and neoliberals didn’t weaponize your ignorance against you. and me in the process. The government doesn’t even use your tax dollars to spend, for anything. It uses them to pay down the debt that created the money and spends in newly created money, creating new debt as well. It’s called dual entry spreadsheet accounting, or maths. Every dollar in the private sector has an offsetting “debt” entry in the government sector waiting to be canceled by “revenue” and they will always balance to zero.
The government has to spend more than it collects or the economy would quickly tank and the people would realize that their government has been stealing resources and labor from them by clawing back all payments for them in taxes. Whatever it spends in excess of what it collects (deficit) becomes someone’s assets in the private sector, enabling the store of value necessary for commerce. Only the US government has the power to create the nation’s money (Article 1: Section 8). Banks and businesses simply shuffle that money around between winners and losers (them and us).
The US Treasury, by order of Congress, then offers interest-bearing investment vehicles equal to deficit spending by Congress, because that’s the only uncommitted money in the system able to purchase them since we got rid of the gold reserve. Bonds really have no purpose since we no longer have a gold reserve to defend and are not a “funding” mechanism for spending because the money to purchase them must already exist, having previously been created from thin air by Congress. The US dollar is self-funding by the authority of the Constitution, not some “liberal” conspiracy to give everyone free stuff.
Bonds were retained in the fiat monetary system to offer people the security of knowing their savings are safe, protected by the government’s ability to repay them on time and as promised. They are not a mortgage on future generations. They are capital previously created in the private sector, but not clawed back to pay a federal tax obligation. They represent the current “net” money supply at any given time, not a “debt” taxpayers are on the hook for.
Bonds are no harder to pay back, with interest, with new dollar creation than is any other spending. It’s just replacing dollars that were canceled when the bonds were sold. The monopoly issuer of the currency can never involuntarily fail to pay any obligation denominated in the currency it creates at will. All we owe China in exchange for the dollars they gained in trade for real resources and labor and used to purchase bonds is a bank statement and their money back when the bonds mature. One only has to wonder why they do it, except that US dollars can purchase many things they need, such as oil.
Problem: the numbers just don’t work, even if you take all their money. People in thriving social democracies cheerfully pay really high taxes (never gonna happen here) because they understand that you do get what you pay for and that there ain’t no such thing as a free lunch.
She knows the numbers don’t work, because they never have. She, like Bernie, simply doesn’t know how to explain economics to the average voter that can barely balance their checkbook and have been taken in by neo-liberal and neo-conservative fear propaganda for decades, so they point to people who should be paying much higher tax rates just because they have too much money and use it to manipulate our political system. Both the “real” unemployment rate and income disparity are currently at levels we haven’t seen since just prior to the ’29 crash, so some pre-emptive stimulus that provides benefits may be what keeps us from another crash. If we can end the very real suffering in this rich country and save humanity we should try.
Where do you think FDR got the money for the New Deal and to ramp up production for WWII when the country had no money to tax or lend in the depression? He forced Congress to create it by using the bully pulpit to gain the people’s trust and support. Bonds couldn’t “fund” the war any more then than they could now. The war bonds were a way to convince people to put off consumption until the economy cooled off after the war and men were coming home looking for jobs when there were lots of things to buy. The money was then recreated to “fund” those purchases and the many GI programs and infrastructure projects that transitioned us to the new peacetime economy and the best decades of growth in history.
Perhaps those social democracies don’t have such high tax rates to “pay for” the many benefits the people enjoy there. Perhaps their economies work so damn well that high taxes are necessary to avoid inflation, as the people’s earnings have little to cover in the way of necessities.
