“How will we pay for it?” Here’s how.

I have good news for all Americans. (Well, almost all.) We can have everything we need (and that Congress can be persuaded to allocate funds for), without inflation, up to the limit of the real productive capacity of our economy. Not only do we know how to do this, but it’s the system under which all federal "spending" has been done since at least 1971 when Nixon took us off the gold standard. 

Since the Federal Reserve System was created in 1913, our federal government has funded all programs by spending the funds into existence, abandoning the previous “hard money” system where our currency had to be backed by silver or gold, and moving to a double-entry-bookkeeping system of credit/debit, where every “dollar” spent (debt) is entered on the books with a balancing credit entry. These funds are not extracted from a giant money pit somewhere; they have no physical existence. They do, however, have a sort of “virtual backing;” it’s usually called “the full faith and credit of the US government.” Only our federal government (not state or local ones) has the authority (and obligation) to do this, under Article 1, Section 8 of the Constitution. It’s our only national issuer of currency, and the US Congress has the sole “power of the purse.”

So, unless you’re dealing with silver or gold coins, the “money” we use is not “real;” it exists only as debits and credits in a computer. The Federal Reserve Notes we think of as money are really IOUs, promises to pay (that’s what a “Note” is). Legal Tender (by law) yes, money—no.

Getting back to the point: when we think of Congress allocating funds, they’re actually tapping into that “full faith and Credit” thing. Imagine a giant credit card, with every American’s name on it. That’s where the “money” comes from. Here’s another fun fact: everyone seems to imagine that federal spending is funded by federal taxes. That's simply not true.

“WHAT?!” I can hear you saying to yourselves. “Then why do we have to pay federal taxes?” The main reason is to reduce the money supply in order to control inflation. (Another reason is to discourage undesirable spending, as in “sin taxes” on alcohol, tobacco, and firearms (with the possible exception of Texas, where spending on firearms is a virtue).

Let this sink in: federal taxes don’t fund federal spending. However, some powerful interests have made a point of preserving this fiction. How often have you heard, or said to yourself, when it comes to ANY government spending, the plaintive question “But how will we pay for it?” Or, “We must reduce the amount of deficit spending,” or any other scary thoughts totally irrelevant to a sovereign nation like ours that issues (creates) its own currency.

How many times have you said to yourself, "I don’t want my hard-earned taxes to be spent for THAT!" 

Don't worry, they will never be used to fund federal spending. So, stop saying this to yourself, or to anyone else. As John Haldeman was forced to acknowledge in the Watergate hearings, “that statement is inoperative.” 

Don’t be too hard on yourself, however, for these thoughts or words. That’s the way you were taught and encouraged to think all your life. That’s what members of every party I know of still harbor in their minds and say out loud, despite having graduate degrees in economics and/or high positions in government and banking. Fear of inflation or the danger of budget deficits is what you constantly hear whenever federal spending is the subject of discussion…

…Except when the spending is for war or the tools of war. Then, no expense is to be spared. Damn the deficits, full speed ahead! Ask yourself who benefits from this attitude, and who loses. Then, observe who has the lion’s share of power and control in our society, and who funds the campaigns of most of our “elected” officials. Also observe how our choices at the ballot box are effectively restricted to one of two parties, both funded by large contributions from the largest corporations, aided by the Supreme Court’s “Citizens United” decision which made money equivalent to “free speech.” Now, observe the disconnect between polls on the main issues and votes in Congress which vastly increase the profits of those corporations—the correlation is near-zero. How do the ardent desires of those mega-corporations correspond with the way Congress votes? Nearly 100%. I’ve drawn my conclusion. How about you?

Perhaps you agree with me that the kleptocrat corps wants carte blanche from Congress for any and all military spending (that's where most of the money is). But what's their motivation for wanting to choke off spending for anything else, things that would promote the general welfare, such as expanding Social Security, providing universal health care, free higher education, a guaranteed jobs program, paid maternal leave, support for strong unions, and so on? Just this: disallowing all these things makes changing jobs or becoming more prosperous more difficult, and makes it easier for large corporations to keep wages depressed. 

Suppose most voters come to realize that there is no practical limit on federal spending, within the limits of the nation’s productive capacity. We could perform feats not accomplished since we mobilized to defeat the Axis powers in WWII. We could fund what’s needed to feed the hungry, house the homeless (or prevent them from becoming homeless in the first place), provide universal health care (as they do in other developed nations), institute a guaranteed jobs program, stop climate change (within the 8-year window we have left), and much more. If (real) inflation becomes a problem, we have plenty of multi-billionaires to tax (and thereby reduce the money supply). Problem solved.

Unlike the era of fighting the Axis powers, we will not have the burden of mass mobilization for war. The wars we are fighting now are wars of choice, and the choices are being made by our Military-industrial complex, not to “defend freedom” or “spread democracy,” but to expand an empire that only benefits our masters of war.

How do we spread the word to enough people to make this happen in time? There are plenty of resources to accomplish this, most of them available at, or linked to, realprogressives.org. Their primary mission is to spread knowledge of what’s known as Modern Monetary Theory (“MMT”). Its opponents are primarily those in the current establishment responsible for recent financial crises (like Robert Rubin and Larry Summers) who disparage it as “dangerous nonsense.” In reality, it’s just a new name for the macroeconomic system we’ve used since (I say again) Nixon took us off the gold standard.

Consider, for a moment, what a remarkable feat of thought control it has been, by those who have insinuated themselves as our masters, to keep an entire nation and its federal system of representative government from comprehending (or revealing) these two truths: that Congress creates "money" by spending it into existence, and that federal taxes do not fund federal spending—for over fifty years! They make us baselessly fear economic disaster about funding what we need to survive and thrive, but confidently promote more funding for weaponry than the military asks for, without being called out for deliberate, self-serving deception. 

Isn't it about time we all learned how our federal finances work, forced our "representatives" to acknowledge this truth, and get on with the business of saving our planet from disaster (and from the criminals who profit from that impending disaster)? Perhaps we should rebrand MMT to "Modern Monetary Truth."

So, the next time you hear about our federal government not being able to afford to fund an essential program, not for more efficient killing but to meet human needs and save lives, reduce or end unemployment with a guaranteed jobs program, slow climate change until sea level rise no longer causes islands to disappear and coastlines to recede, provide free higher education as other first-world countries do, end hunger and disease—in short, end rule by kleptocrats—and you hear the begged question "how will we pay for it?!" (The question is begged because it implies a false premise, that the federal government has to "pay for" what Congress allocates.) Reject this criminal gaslighting. When asked this begged question, simply respond like this: "Congress doesn't have to "pay for" anything! Under the Constitution, only Congress can issue our currency, allocating (not "paying for") new funds for all programs, limited only by the productive capacity of the nation. Inflation is limited by federal taxes, which are deleted from the currency supply." 

Currently, the three richest Americans together hold more wealth than the bottom 50% of Americans. The 1% have nearly total control over Congress. The proportion of taxes they pay is so minimal that wealth inequality has risen to an all-time historic high. Taxes must be adjusted so that gains in wealth from higher productivity are shifted away from the extractive class and back to the productive class—for economic justice, not to "balance the budget."

When the wealthy corporate "elite" (the polite term for kleptocrat) pay their just proportion of federal taxes, those funds (deleted on receipt) can limit inflation without burdening the working, productive classes, and we can fix what's been broken for so long. In a sense, higher taxes on the wealthy will go towards needed programs, just not directly.

If this post seems hard to understand (or to believe), please consult realprogressives.org for a complete set of resources to help clarify what is, for most people, a new paradigm of macroeconomics. The perplexity you may feel is no accident: the "elite" have trillion$ of reasons to make the workings of federal finance as confusing as possible. That's how they keep their power and enrich themselves at your expense.

 

The Biggest, Most Harmful Lie (disguised as a begged question)

What is a "begged question?"

Here's the link to the Wikipedia article, "Begging the question." From that entry: 

In modern vernacular usage, however, begging the question is often used to mean "raising the question" or "suggesting the question." Sometimes it is confused with "dodging the question," an attempt to avoid it, or perhaps more often begging the question means simply leaving the question unanswered.

These days, I almost never see it used as Aristotle taught it, as "an informal fallacy that occurs when an argument's premises assume the truth of the conclusion, instead of supporting it." (A comic example of a begged question is that of a prosecutor, in court, asking the accused: "When did you stop beating your wife?")

The "modern vernacular usage" of this phrase is an example of "creeping Newspeak," the invented language George Orwell described in his novel "1984." from this blog:

By controlling the language, Big Brother controls the way that the people think. With a limited vocabulary, the people are limited in how much they can think, as well as what they think about. In another passage, Syme says to Winston, “Don’t you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thoughtcrime literally impossible, because there will be no words in which to express it. Every concept that can ever be needed will be expressed by exactly one word, with its meaning rigidly defined and all its subsidiary meanings rubbed out and forgotten.”  With the people’s inability to commit thoughtcrime, the hope of the party is that the people will no longer act out in disruptive or subversive behavior. Big Brother will have complete control of the people in every way, right down to their thoughts, and the people will become, essentially, mindless zombies who are willing to worship and do what they are told with no questions asked. They are able to achieve this by also destroying literature and controlling what the people are able to read."

1984 was supposed to be a cautionary tale of a future dystopia powered by thought control, not an instruction manual for the masters of Newspeak. It seems that the true meaning of Aristotle's "informal fallacy" has been replaced by its "modern vernacular usage," and that this fallacy has been effectively deleted from our language, and thus from our awareness.

What's my nominee for "the most harmful lie of all?" In the context of funding a federal program, this phrase is uttered by almost everyone, whatever their party or ideology:

"But how will we pay for it?"

Why do I consider this question "begged?" It assumes that (as "everybody knows") there are only one or two ways to fund federal spending,  either to raise taxes or borrow money. Therefore, the begged question asks the listener or reader which of these he will choose. Because the question is valid (if the spending is by a state or local government, or that of a family or individual), it's deceptive and misleading, because it simply does not apply to federal spending. 

Federal spending is unique, for under the financial system used in the United States since the Federal Reserve system became law in 1913, funds for federal programs are created as if from thin air (backed only by the "full faith and credit of the United States," which is effectively the credit lines of all Americans in aggregate). Under our Constitution, only the US Treasury can issue our currency.

The only practical limit to federal spending is the total productive capacity of our economy; spending above that limit causes real inflation (as opposed to the price gouging of corporations which think they can get away with it, and usually do).

This raises (not "begs") the question: if federal taxes do not fund federal spending, and they serve a function, what IS that function (or functions)?

There are two: to discourage behavior deemed undesirable by making it more expensive ("sin" taxes), and to shrink the money supply, to limit inflation. That's it.

I see two reasons why this question is asked so often. First, it's a valid question, in the context of personal experience (household spending), where spending is limited by income and savings, and state or local spending, where taxes actually do fund spending, under balanced budget constraints. In the context of federal spending, this question has been begged for over a century, and I see two reasons for this as well. First, financial literacy is seldom taught in our schools; secondly, kleptocrats who benefit from gaslighting us use this Big Lie as a weapon against us.

How do the kleptocrats benefit from the Big Lie? By invoking fear—fear that "deficit spending" will cause inflation, devalue the dollar, cost them (the taxpayers) more money, perhaps funneling money from their pockets to those "less deserving," and so on. These fears allow them to justify denying funds for one of government's biggest reasons for existence, to "promote the general welfare." By doing so, they promote general misery, which helps the kleptocrats maintain their control. People struggling to survive don't have the time or energy to defend themselves, being forced to work multiple low-wage jobs without benefits while having to support dependents who can't work or find jobs.

The Big Lie is so ingrained in the mass psyche that even good-hearted, smart people who should know better (Bernie Sanders comes to mind) fail to challenge it. He rails against "the 1%" and the mega-rich who pay little or no tax, advocating "fair-share" taxes on these folk, as a remedy for "budget shortfalls," when in reality we don't need their money to fund what We the People need to thrive, not just survive. 

Don't take my words as authoritative truth. Discover for yourself what I did, from those who understand and advocate "Modern Money Theory" (MMT). All the proof you need, and the tools to effectuate change, can be found at Real Progressives. (MMT is a "theory" in the sense of "the theory of gravity." It's demonstrably the way our economy actually works. There is more than one theory of gravity, but whatever its true nature, it serves to keep our satellites in orbit, and deters us from dropping hammers on our toes.)

Once the truth you will find there sinks in, I suggest that every time you hear the "Big Lie Question" (in the context of federal spending), you answer that question with this reality-based answer:

"We will pay for it just as we pay for all federal spending: spend the funds into existence." Elaborate as appropriate, using your new-found knowledge of MMT.

Visualize a new world where "we can have nice things:" the things we need, the things we want, the life-affirming, death-defying things the whole planet cries out for. Speak the truth to power, but realize that the power has been ours all along. Help me make that vision a global reality. Stop asking why so much is so terrible, see that vision yourself, and ask "why not?"