Politicians, the news media, and certain economists keep repeating the outdated myth that federal finances work like personal budgets. As a result, they insist that federal spending is restricted to the amount collected in taxes.
As Barack Obama once misguidedly put it, “If you have to live within your means, the federal government should live within its means.”
Sadly, for Obama’s legacy, the Federal Government has no “means.” Being Monetarily Sovereign, the federal government has the infinite ability to create dollars. It never can run short of money.
President Donald Trump says the federal government is spending so much on war that it can’t afford programs like day care and health care.
“The United States can’t take care of day care. That has to be up to a state,” Trump said during a White House event (1). “We’re fighting wars. We can’t take care of day care.”
Not true. The federal government has the unlimited ability to create the dollars to support wars abroad and health and wellbeing at home.
He extended that logic to major health care programs as well.
“Medicaid, Medicare, all these individual things … You can’t do it,” Trump said during a White House Easter lunch (2). “We have to take care of one thing: military protection — we have to guard the country.”
The remarks come as Republicans weigh potential cuts to federal health spending, while the Pentagon reportedly seeks an additional $200 billion to bankroll the conflict.
Again, not true. As the world’s leading Monetary Sovereign, the U.S. can fund it all, and without even collecting a penny in taxes.
The tradeoff between war spending and everyday expenses
Trump framed programs like child care and health care as responsibilities that should shift away from the federal government.
“You’ve got to let a state take care of day care, and they should pay for it too,” he said, calling some federal programs “little scams” that should be handled locally.
Once again, a lie. The states are monetarily NON sovereign. They cannot create unlimited dollars. They can run short of money. The do need to collect taxes. The federal government can fund these domestic programs simply by pressing computer keys.
Pushing the spending obligation onto the states merely obligates taxpayers. The federal government can do it without collecting taxes.
Rather than providing spending funds, federal taxes:
- Control the economy by taxing what the government wishes to discourage and by giving tax breaks to what (or who) the government wishes to reward, and
- Assure demand for the U.S. dollar by requiring taxes be paid in dollars.
That is the purpose of federal taxes.
Critics like Elizabeth Warren pushed back on that framing.
“Imagine if instead of funding forever wars in the Middle East, the United States delivered universal child care and health care for all Americans,” Warren wrote on X.
Sadly, Ms. Warren does not seem to understand Monetary Sovereignty. There is no “instead” needed. The government never is limited by dollars. It can do everything at once, and never borrow or tax.
Elsewhere, lawmaker Brendan Boyle warned that proposed spending changes could leave millions more Americans without coverage if cuts to programs like Medicaid move forward.
“Now, Republicans in Washington want to rip health care away from even more people to fund Trump’s reckless war in the Middle East,” Boyle wrote on X.
“It’s shameful,” he added.
These concerns don’t float in a vacuum. According to the American Psychological Association, cuts will result in 11.8 million individuals losing their health insurance coverage under Medicaid, with another 3.1 million losing out on Medicaid under their marketplace plans.
Given that we know American families will be put under pressure by the cuts, the bigger question is how households will absorb those costs if public support shrinks.
What about inflation?
There’s a common myth that federal spending causes inflation. In reality, inflation historically has been driven by shortages of essential goods—most often oil and food—and has been addressed through federal spending aimed at resolving those shortages.
Increased federal spending increases economic growth, as demonstrated by the formula: Gross Domestic Product = Federal Spending + Nonfederal Spending + Net Exports.
Reduced federal deficit spending leads to recessions. Increased deficit spending cures recessions.
What it could mean for your finances
The federal government currently spends about $9,000 per child each year across programs like Medicaid, nutrition assistance and tax credits.
The government could triple or quadruple that amount and still not tax or run short.
Even without any immediate policy changes, the direction of the conversation suggests that families are going to have to take on more costs in the near future, including the following:
- higher childcare costs, especially if federal support stalls or shifts to states
- more out-of-pocket health care spending, particularly for those relying on programs like Medicaid
- rising cost of living, driven in part by global instability and energy prices tied to conflict
These are likely to hit many middle-income families hard, especially the households balancing childcare, health care and long-term savings simultaneously.
In fact, childcare already cost the average U.S. family about $13,000 in 2024 — or a touch over $1,000 a month — for one child. If support is reduced, even a $300 increase would add up to $3,600 in additional expenses per year.
Add in higher insurance premiums or medical bills, and that financial strain can quickly multiply.
Why do the politicians, the news media, and certain economists keep repeating the lie?
The are two reasons:
I. Ignorance: Politicians, the news media, and some economists misunderstand Monetary Sovereignty. They wrongly assume that the federal government, like state governments must collect taxes or borrow money in order to spend.
II. Bribery by the rich: Most media are owned by the rich.
Many politicians also are owned by the rich. This ownership is in the form of campaign contributions and promises of lucrative jobs after retiring from office.
Some economists are bribed by university endowments and promises of lucrative employment in propaganda organizations.
Why do the rich want to end Medicare and Social Security?
“Rich” is a comparative. The person who has one thousand dollars is rich if everyone else has ten dollars. But that person is poor if everyone else has ten thousand dollars.
To get richer, you either need to earn more money yourself or ensure that others have less.
Cutting Medicare and Social Security ultimately benefits the wealthy while leaving those with fewer resources worse off. Trump, along with the Republican Party (though some Democrats also are at fault), often support policies that favor the rich.
This becomes easier to achieve when the public doesn’t grasp the federal government’s unlimited spending power or hesitates to voice concerns to political leaders.
If you, your friends, and their friends don’t speak up about your complaints and skip voting in the next elections, you’ll face the consequences—unless you’re wealthy and prefer the gap between the rich and everyone else to grow.
Your future is in your hands. Fight today or lose tomorrow.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell
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MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell;
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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 