It takes only two things to keep people in chains:
The ignorance of the oppressed
and the treachery of their leaders.
Here is a letter, written by Dr. Joseph M. Firestone, a kindred spirit who understands that the so-called “national debt” is a gigantic lie, created by the rich to keep you from receiving federal benefits.
Dr. Firestone asks that you send your version of this letter to your Senators and Representative:
Firestone says, “Please remember that it’s important that everyone do their own letter. That’s why I call this a sample letter:”
At one time or another you and nearly every one of your fellow Representatives (or Senators) have expressed great concern, even alarm, at the size of the national debt and the often increasing debt-to-GDP ratio.
Many of you have pointed out that if the national debt were broken down into how much each American owed that would add more than $50,000 to our individual debts, even though the national debt is not an obligation of each American citizen, but of our government.
You and your political allies have also pointed out that in view of the size of the national debt it is important for the Government to either reduce spending, raise taxes or both.
You have said doing this is necessary to be “fiscally responsible”, and, at least, to reduce the annual deficit, and the debt-to-GDP ratio.
You have voted for and supported legislation in order to be “fiscally responsible” in this way, and in doing so you have cut many programs of long standing that were delivering great benefits to people, harming them and their families.
Some of you have expressed regret and sorrow about this, while insisting on the need for sacrifice in order to be fiscally responsible.
I, your constituent, have heard this fiscal responsibility story from you for many years now, including your sentiments about how much you hate “the national debt,” what an evil it is, and how much we have to lighten its burden on our grandchildren.
In view of all this from you, it surprised me greatly to learn recently, that the very existence of the national debt is Congress’s fault, including your own and your colleagues. I say this for a very simple reason.
That reason is that you and your colleagues can, in an afternoon, make it standard legislative practice to include the following clause, or an alternative formulation meaning the same thing, in every appropriations bill or continuing resolution for Federal Spending. The clause is:
Now here comes the key part:
“Upon passage of this appropriations bill, the Federal Reserve is directed to fill the Treasury’s spending account at the New York Federal Reserve with the addition to its Reserve Balance necessary to spend the appropriation.
“In addition, the Federal Reserve is directed to fill the Treasury spending account with the additions to the Treasury Reserve balances necessary to repay all outstanding debt instruments including principal and interest as they fall due for the fiscal year of this appropriation.”
In short, the Federal Reserve would pay off T-securities, making the so-called “debt” disappear.
The Fed simply would create U.S. dollars from thin air, just as it always has been authorized to do, and just as it does when it buys federal bonds with its Quantitative Easing (QE) programs.
The first sentence provides the reserves necessary for the Treasury to spend its mandate from Congress without issuing new debt.
And the second provides the reserves necessary for the Treasury to pay down the existing outstanding Treasury debt instruments as they fall due within the time period of the appropriation or continuing resolution bill.
If this or similar language were included in every such bill it would mean that (1) deficit spending by Congress would no longer involve issuing new debt instruments, so the debt would no longer grow and (2) that all outstanding debt instruments would be paid off as they fall due as long as Congress continues to include the new language in all its appropriations bills and continuing resolutions.
So, it seems to me that the sole reason why the national debt exists at all in 2017 is that when President Nixon took the United States off the gold standard in 1971, the Congress did not adjust to the new reality of fiat monetary sovereignty by funding Federal spending using language like the above.
I believe that Congress made a grievous mistake in not changing its funding language immediately after the change to a fiat currency in 1971, and mandating the Federal Reserve to fill Treasury’s spending account with the reserves needed to spend its appropriations.
That mistake has led to the whole situation of debt terrorism we see around us now, and to all the damaging propaganda and horrible legislative outcomes we have suffered at the hands of Republicans and Democrats alike.
You have all been very wrong about the need to sacrifice. There was no need to sacrifice!
You have been all wrong about all of that for 40 years now, and you should all wear sackcloth and ashes and hang your heads for the damage you have done to America.
Since the Administration of President Carter we have been treated to these meaningless harangues about a faux financial problem that is purely one of politics and messaging and not one of public financing at all.
And this faux problem, solely of Congress’s own making has led to much suffering among most of the American people, including decades of less than full employment, the denial of universal health care coverage, deteriorating public spaces and infrastructure, refusal to deal with a life-threatening climate change problem, increasing economic inequality, a declining educational system, decreasing life expectancy, and a host of other problems too numerous to mention.
Well, I have had enough of all this, and especially of the pretense that the Federal Government doesn’t have enough money to buy any goods or services for sale using US currency.
I know that using the words above or words very like them, you and a majority of your colleagues in Congress can appropriate funds for anything you want to spend on.
So, never let me hear from you ever again that we can’t afford this good program or that good program or any other program that will benefit a majority of the people of the United States.
I now know that is a lie. And I insist that you never tell that lie again in public, and that from now on you advocate for and insist on legislative language similar to the above, being included in all appropriation bills and continuing resolutions passed by Congress.
I demand, that as my representative, you vote against any bill that lacks that language.
And I tell you now that if you fail to comply with this demand of mine, I will do all I can to defeat you in the next election and will work for and vote to elect any opponent of yours who is willing to promise that she or he will include such language in all appropriations bills or continuing resolutions.
In closing, I hope I have made myself abundantly clear. I insist that the lies and propaganda advancing faux fiscal responsibility stop immediately.
I insist that the issue of the national debt be taken off the table by including the language suggested above or a similar formulation, followed by gradual pay-off of all outstanding Treasury debt instruments. And I insist that you represent me in this way going forward and for as long as you serve.
I want Job 1 for you to be seeing to it to the best of your ability that this language is in all appropriation bills or continuing resolutions coming out of Congress. I will want other things from you too.
But, as I say, this is Job 1, and if you want my vote in the future you will see to it that it is well done, so that the various lies and fables surrounding Federal spending are at last ended, and so our nation may move forward to true fiscal responsibility, which is Government spending for public purpose.
Sincerely Yours, Your Constituent,
The above letter is way too long to send as is. Further, I disagree with two of the points it makes:
- I disagree that all “debt” (i.e. T-securities) should be allowed to expire. T-s and not replaced. T-securities serve useful purposes. They help the Fed control interest rates and they provide a safe place to hold large amounts of money.
- I disagree that “. . . Treasury Reserve balances (are)necessary to repay all outstanding debt.” Maturing Treasuries are repaid by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security holders.
That said, the fundamental idea of having the Fed buy enough T-securities to reduce the outstanding “debt” would change the dialog, and ease the drive to cut social benefit spending.
In summary, edit the letter your way to send your demand that the part shown in blue be included in all future appropriation bills, along with your statement that the federal “debt” is a fraud.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
10 thoughts on “How to cut the fake “national debt””
If the Fed were to set a support rate instead of a target rate then it would not need to buy and sell bonds to hit its target. This too would eliminate the need for treasuries as part of monetary policy. The fiscal side of things you have covered.
I agree that treasuries can be useful as a saving option for conservative investors however the whole concept of treasuries and national debt has been so misunderstood and weaponised that they cannot be allowed to remain for political reasons. At best they need to be rebadged and relaunched and never again referred to as debt or borrowing by the federal government and used as an excuse for not spending for the public good, widening the gap etc.
Yes, if they properly were called “deposits” or simply “securities,” the whole problem would disappear.
Hello Roger, am I mistaken in my belief that when people and institutions save by purchasing any U.S. Treasures their asset or account is debited, in effect reducing the money supply available for economic growth? In effect, the U.S. Government and the Federal Reserve thru private lending create dollars, dollars that pass thru the economy and eventually are destroyed by taxes and the Federal Reserve retiring assets they have purchased.
Depending on how you wish to define “money supply (There are many definitions),” the dollars remain like CD dollars and savings account dollars do. Unlike federal taxes, which are destroyed, T-security dollars remain available to the security owner. They still exist; only the liquidity changes.
U.S. dollars are created in two ways and destroyed in two ways:
1. Bank lending
2. Federal deficit spending.
1. Bank loans repaid
2. Federal taxing
Thanks Roger. I do not understand how repaying a bank loan destroys dollars. When the loans are paid back to the bank doesn’t allow the bank to increase their reserve at the Federal Bank, which in turn allows more dollar creation for bank loans. I use the “dollar “ as a loose term signifying available debt that is in the economy. Thanks again.
First you must understand how a bank loan creates dollars.
Let’s say you take out a mortgage. Your bank simply will increase the balance in your checking account. Those dollars do not “come from” anywhere. The bank does not take the dollars from anyone’s else’s account. It simply creates brand new dollars, and puts them into your account. Those dollars, which you owe the bank, are added to the nation’s money supply.
Then, to pay down the mortgage, you must get dollars from somewhere. Let’s say you pay your mortgage from your salary. First you put your salary into your checking account. Then you transfer some of those dollars back to the bank, where they disappear. The bank does not “put them” into anyone’s account. They simply disappear in the same way, the original mortgage dollars appeared.
The original dollars came from thin air, and now they disappear back into thin air.
There is a collusion between our top gov’t officials and the private banking cartel to keep the big lie going. It is in the interest of the banking cartel (Goldman Sachs, Citigroup, Chase, BofA etc.) to perpetuate the lie because they don’t want the power and ability to create money be taken away from them. They have co-opted the monetary sovereignty of the federal gov’t and they are doing it in a way that enslaves the rest of us. They own this place, they own America, heck, they even own the rest of the world.
97% of all money in circulation were created by private banks out of thin air. Consequently, the US federal gov’t is only 3% monetarily sovereign.
As Nomi Prins revealed in her book, All The Presidents’ Bankers, the plan to establish a system that will legitimize the scam had been hatched a long time ago in Jekyll Island led by JP Morgan.
If we want to restore full monetary sovereignty to the federal gov’t and thus end the useless bickerings by legislators over debt, taxes, and deficits, we need to, first of all, cap the greed and power of the private banking cartel. Because as it is now, they are the ones who hold real power in Washington. They are the ones who, thanks to Citizen United, draft and dictate policies. It’s not a coincidence either that most, if not all, of our Treasury secretaries and economic advisers to the President were either Goldman Sachs or Wall Street alumni.
See Step #9 of the Ten Steps: Federal Ownership of all banks.
Indeed, at the very least, the FERAL Reserve, as I like to call it, needs to be fully nationalized and no longer owned by the big private banks. Then it will be truly FEDERAL in both theory AND practice. No more ceding any of the federal government’s Monetary Sovereignty to private entities. And if all big banks were federally owned, that would also in turn result in the same outcome as well. Congress gave the Fed its power in 1913, and can just as easily take it away.
Amen to that!