“We can’t pay for it.” Did you fall for it?

Image result for bernanke and greenspan
It’s our little secret. Don’t tell the people we don’t use their tax dollars.

Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

Alan Greenspan: “Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. A government cannot become insolvent with respect to obligations in its own currency.”

St. Louis Federal Reserve: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e.,unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational. ………………………………………………………………………………………………………………………………………….. …………………………………………………………………………

Federal financing is different. It is different from your financing and mine. It is different from your state’s and local government’s financing.

The federal government uniquely is Monetarily Sovereign.

That means it created the original dollars from thin air, and gave those dollars the value it wished, simply by passing laws. Today the federal government retains the right to keep passing laws and creating dollars, forever.

It can give the U.S. dollar any value it wishes, relative to other currencies or to precious metals. It can change the dollar’s value at the stroke of a pen, which it has done many times over the years. 

Unlike you, and me, and unlike your state, your county, and your city, and unlike any corporation, the federal government never unintentionally can run short of U.S. dollars. It can service any debt, of any size at any time.

So long as the federal government does not run short of laws, it will not run short of dollars.

Having the unlimited ability to create its dollars, the federal government has no need to ask anyone else for dollars, that is, it has no need for income. It simply creates all the dollars it needs. So, when you send your federal tax dollars to the U.S. Treasury, they are destroyed upon receipt.

(Why federal tax? The real purpose of federal taxation is to control the economy — to tax what the government wishes to discourage and to cut taxes on things it wishes to encourage.)

That’s right, your precious tax dollars are destroyed, and the federal government creates brand new dollars, every time it pays a bill. That is why the government is able to run a deficit almost every year, and still have no difficulty paying its bills.

Contrary to popular wisdom, the federal government does not borrow the dollars it can create at will. The issuance of T-bills, T-notes, and T-bonds is not borrowing, in the sense that the government neither needs nor uses those dollars.

Instead, the dollars are deposited for safekeeping into T-security accounts, and upon maturity, the dollars are returned to their owners. Not only does the government not use those dollars, but the government adds interest to the accounts.

(This is unlike the monetarily non-sovereign state and local governments, which do need and use the money paid for their bonds.)

Our Monetarily Sovereign government neither needs nor uses any form of income.

You wouldn’t know it, by the “Big Lie” comments of our leaders:

Dianne Feinstein Lectures Children Who Want Green New Deal, Portraying It as Untenable New York Times, Feb 22, 2019

Senator Dianne Feinstein found herself in a standoff Friday with a group of schoolchildren who confronted her about her refusal to support the Green New Deal.

In a video posted by the Sunrise Movement, which encourages young people to combat climate change, an exchange quickly became tense once Ms. Feinstein started to explain her opposition to the Green New Deal, an ambitious Democratic-led proposal that calls for a radical transformation of the United States’ energy sector.

“There’s no way to pay for it,” Ms. Feinstein told the group of about 15 children at her San Francisco office.

“We have tons of money going to the military,” a young girl responded, only to receive a lecture about the realpolitik of passing bills in a Republican-led Senate.

I don’t yet know enough about the details of “The Green New Deal” to support or denounce it (so far, no one does), but in any event, Feinstein is wrong. No matter what the dollar cost, whether a billion, a trillion, or many trillions, the federal government easily could pay for it.  And yes, the government could prevent excessive inflation, too.

And lest you believe Dianne Feinstein is uniquely ignorant or deceitful, another, even more “reliable” source of false scare headlines is the Committee for a Responsible Federal Budget (CRFB). We have written about them many times.

Excerpts from their latest scare headline: 

As Debt Rises, Interest Costs Could Top $1 Trillion, Feb 13, 2019

Under current law, net interest payments will nearly triple over the next decade, rising from $325 billion last year to $928 billion by 2029. Under the Alternative Fiscal Scenario, which assumes lawmakers extend the tax cuts and spending increases passed over the last two years, interest on the debt will exceed $1 trillion in a decade.

As a share of the economy, interest payments will nearly double – from 1.6 percent of Gross Domestic Product (GDP) last year to 3 percent by 2029. Under the AFS, interest would be 3.4 percent of GDP by 2029, surpassing the post-WWII record set in 1991 when interest payments were 3.2 percent of GDP.

The article is buttressed by a “scare” graph showing the rise of federal debt.

What the article fails to mention is that this rise is accompanied by one of the greater periods of economic growth in U.S. history.

And this growth is no coincidence. Federal deficits, which lead to federal debt, are the additional growth money the federal government pumps into the economy.

In fact, when federal debt fails to grow sufficiently, the U.S. experiences recessions and depressions.

The most common measure of economic growth is Gross Domestic Product (GDP). The formula for GDP is: GDP = Federal Spending + Non-federal Spending + Net Exports.

All three terms reflect increased dollars, and federal deficits pump dollars into the economy. The graph you never will see from the debt fear-mongers is this one:

Reductions in federal debt growth (red line) lead to recessions (vertical bars) which are cured by increases in federal debt growth.

And though the CRFB may be among the better funded of the Big Lie purveyors, consider this from Reason.com:

Forget Paying for Medicare for All—We Can’t Pay for the Medicare We Have, Peter Suderman|, Feb. 22, 2019

How would Medicare for All, which even under rosy assumptions would require more than doubling individual and corporate income taxes, be financed?

Today, Medicare and Medicaid are widely acknowledged as the biggest drivers of the federal government’s long-term debt. Broadly speaking, America’s biggest fiscal problems are health care spending problems.

And America’s health care spending problems are largely problems stemming from increasing spending on Medicare.

The article lies. Federal taxes do not fund federal spending. (If they did, there would be no federal deficit, the federal debt would not have grown into the many trillions, and the federal government would have had difficulty paying its bills.) 

The federal government does not have a fiscal problem other than the ignorance being spread by our opinion leaders.

What the article does not mention is, all those deficit dollars and interest dollars the federal government has pumped into the economy, are in fact growth dollars that have wended their way through every town, county, state and business in America, enriching our entire nation. While the federal government doesn’t need any infusions of U.S. dollars, the private economy does in order to grow.

But, here comes USA Today, quoting from debt-fear mongers. Let’s take it line-by-line:

The national debt and the federal deficit are skyrocketing. How it affects you

More debt and higher deficits not only harm the economy. They dip into the pocketbooks of average Americans.

Why the debt-fear mongers are wrong: The deficit adds dollars to the economy, thus adding dollars to the pocketbooks of average Americans.

For starters, they drive up interest rates, which leads to slower economic growth. Slower growth leads to lower wages, which results in a lower standard of living for Americans.

Why the debt-fear mongers are wrong: Interest rates are set by the Federal Reserve, which raises rates by fiat, to combat inflation, not to attract buyers of T-securities. If buyers are needed, the Fed itself can buy. Higher interest rates cause the government to pay more interest dollars into the economy, which is stimulative.

To pay for years of deficits, the federal government must borrow money. Roughly half of the U.S. debt is held by foreign countries, such as China, Japan and Saudi Arabia. China alone holds more than $1 trillion in U.S. debt. 

Why the debt-fear mongers are wrong: The federal government, having the unlimited ability to create dollars, has no need to borrow dollars, so does not borrow dollars. It accepts deposits into T-security accounts. The purposes of offering T-securities are not to obtain dollars, but rather to:

  1. Provide a safe “parking place” for unused dollars, which helps stabilize the dollar, and
  2. Assist the Fed in setting interest rates, with T-bill rates at the bottom.

Borrowing at that level is financially irresponsible, because the more we borrow, the more we pay in interest to those countries.

Interest on U.S. debt is projected to total $7 trillion over the next decade and, by 2026, will become the third largest category of the federal budget. That’s $7 trillion going out on the door.

Why the debt-fear mongers are wrong: Paying interest helps grow America’s economy by adding dollars to the economy. The U.S. government has the unlimited ability to pay interest. Those dollars are not “going out the door.” They are being added to the U.S. and world economies, enriching domestic America and future importers of American goods and services.

In other words, that’s $7 trillion that could be spent on things like roads, bridges, schools and other programs that benefit Americans every day.

Why the debt-fear mongers are wrong: The U.S. government has infinite dollars. It never can run short of dollars. It can pay unlimited interest and still fund “roads, bridges, schools, and other programs that benefit Americans.”

Higher interest rates reduce the amount of private capital available for investments, which hurts economic growth and wages and leaves the U.S. with less flexibility to respond to a financial crisis like the Great Recession of 2008.

Why the debt-fear mongers are wrong:Most interest is paid within the economy. Private lenders lend to private borrowers. The money flows within the private economy. However, when the federal government pays more interest, those dollars go into the private economy, increasing the amount of private capital available for investments.

Online you can find hundreds, perhaps thousands of such wrongheaded articles. We’ll close with excerpts from this Heritage Foundation doozy:

In Boom Times, Unsustainable Debt Levels Threaten Prosperity, Justin Bogie, Senior Policy Analyst in Fiscal Affairs, Oct 3rd, 2018

Washington’s soaring deficit and debt could wipe out the progress being made, hitting working Americans the hardest.

Unless lawmakers make significant reforms to entitlement programs — the driving force behind the deficits — it’s a question of when, not if, the breakdown will occur.

Every disseminator of the Big Lie suggests “significant reforms (i.e. cuts) in entitlement programs.” Your are supposed to think reason is because these programs are big. The real reason is that these programs help the poor and middle classes more than the rich.

The federal government’s fiscal year 2018 is over. In some ways, it was a banner year: Economic growth quickened, average paychecks fattened, and there were more jobs available than there were people looking for work.

But there are clouds on the horizon. Washington’s soaring deficit and debt could wipe out the progress being made, hitting working Americans the hardest.

Why the debt-fear mongers are wrong: Economic growth has been substantial since 2008, because deficit spending added growth dollars to the economy.

The Congressional Budget Office (CBO) projects that the FY 2018 deficit will hit $804 billion, pushing national debt to over $21 trillion. It’s a crushing tide of red ink.

Why the debt-fear mongers are wrong: There is nothing “crushing” about it. Federal finances are different from your and my finances. While large debt could “crush” you and me, the federal debt has no crushing effects.

The federal government could pay off the entire debt today, without creating one new dollar. It merely would return the dollars that already exist in T-security accounts, back to the owners of those accounts.

To put those numbers into context, consider the typical U.S. household, which last year earned $60,336. If that typical family spent like the feds, they would have entered the fiscal year more than $300,000 in debt and piled on an additional $12,000 on top of that.

Why the debt-fear mongers are wrong: The Heritage Foundation disseminates the Big Lie by equating Federal Monetarily Sovereign finances with personal monetarily non-sovereign finances. Whether this is ignorance or intent, it is wrong.

For years, budget experts have warned Congress that high deficit and debt levels are not sustainable and will eventually lead to an reconomic breakdown. Unless lawmakers make significant reforms to entitlement programs — the driving force behind the deficits — it’s a question of when, not if, the breakdown will occur. 

Why the debt-fear mongers are wrong: Actually, so-called experts have warned that the federal debt is a “ticking time bomb,” ready to explode. They have promulgated this lie every year since 1940.

In 1940, the federal debt was $40 Billion. Today, it is above $20 Trillion, a 50,000% increase (!), yet here we are, after 80 years of lies, with a strong economy and none of the predicted disasters.

There is also the real risk of sharply higher interest rates and inflation. 

Why the debt-fear mongers are wrong: So where are the ” sharply higher interest rates and inflation”? Both have been low for the past decade. The Fed, not deficits, sets the interest rates..

Some analysts argue that last year’s tax cuts are what’s driving up the deficit, but that’s not true. It’s out-of-control spending, not insufficient revenues, that’s driving the country toward fiscal disaster.

Why the debt-fear mongers are wrong: No disaster, but The Heritage Foundation reveals its bias favoring the rich. These folks love tax cuts for the rich, but hate benefits for the poor and middle classes. So they say, tax cuts are O.K. but benefits should be cut.

Anytime I’ve had discussions with people who do not understand Monetary Sovereignty, they first claim that federal spending is unaffordable. Then, after more discussion, they acknowledge that the federal government never can run short of dollars to pay its bills, but then they turn to inflation.

They claim that despite the 50,000% debt increase in the past 80 years, “eventually” federal deficit spending will cause inflation. 

In recent years, they have claimed that if the federal Debt/GDP ratio rose above a certain percentage, we would have inflation, but as the percentage kept climbing without inflation, they kept adjusting their figures. 

Today’s ratio is above 100% (depending on how “debt” is calculated), and still inflation is low. (Japan’s Debt/GDP ratio is above 250%, and they have struggled to achieve inflation.)

When all other claims have been disproved by history, the debt fear-mongers final, desperate claim is “What about Zimbabwe?” (or Germany, or some other nation that has experienced hyperinflation?)

But inflations are not caused by deficit spending. Inflations are caused by shortages, usually shortages of food, but sometimes shortages of oil or other goods.

As for Zimbabwe, the government stole farm land from farmers and gave it to non-farmers. The predictable shortage of food caused inflation in food costs, which led the government to respond with money “printing.”

In Germany, the onerous conditions placed on Germany by the Allies, caused severe shortages of most goods and services. The German government responded by “printing” money.

In short, inflations are caused by shortages. Money “printing” and deficit spending is a government’s response to inflation, not the cause of inflations.

Image result for koch brothers
Koch foundations have attaching strings to their massive University contributions, — control over curriculum and professor hiring and evaluation.


The rich are motivated by Gap Psychology, the human desire to distance themselves (“widen the Gap”) from those below them on a social scale, and to come closer (“narrow the Gap”) to those above. 

To widen the Gap below, and to narrow the Gap above, the rich opt for cuts to social programs like Social Security and Medicare. These cuts are called “reforms.”

The excuse for the cuts is the supposed “unsustainability” of federal Social Security and Medicare spending.

It is a lie — a Big Lie.

To promulgate the Big Lie, the rich bribe politicians (via campaign contributions and promises of lucrative employment later), economists (via university contributions and jobs with “think tanks”), and the media (via advertising expenditures and outright ownership).

Thus, the rich pay the main sources of information available to the public to spread the Big Lie, that federal deficits and federal debt are a threat to the U.S. 

Until you tell your Senators and Representatives that you know they have been lying, and that the federal government easily can pay for our benefits, they will keep lying and cutting your benefits.

You are the only thing that can eliminate the lies. 

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereigntyFacebook: Rodger Malcolm Mitchell …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

The single 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

2. Federally funded medicare — parts a, b & d, plus long-term care — for everyone

3. Provide a monthly economic bonus to every man, woman and child in America (similar to social security for all)

4. Free education (including post-grad) for everyone

5. Salary for attending school

6. Eliminate federal taxes on business

7. Increase the standard income tax deduction, annually. 

8. Tax the very rich (the “.1%) more, with higher progressive tax rates on all forms of income.

9. Federal ownership of all banks

10. Increase federal spending on the myriad initiatives that benefit America’s 99.9% 

The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.


30 thoughts on ““We can’t pay for it.” Did you fall for it?

  1. Rodger – In addition to the onerous conditions imposed on Germany after WWI, there was also the French occupation of the Ruhr Valley which encompassed 80% of the German industrial production capacity. Thus, they were severely impaired in their ability to produce products for export, which left them with few ways to earn the foreign exchange they required.


      1. Indeed. And had the Weimar Republic had the intestinal fortitude to fully implement Monetary Sovereignty in 1929-1932, I believe they could have easily prevented Hitler from ever taking over by ending the Depression quickly before he had the chance to exploit it for his own ends. After all, Hitler had successfully wooed the masses with his economic policies (made possible by MS, which was inspired by the famous greenbacker Abraham Lincoln) and was in fact considered a hero by many at first for saving the economy and restoring the country’s military might, before his very dark side became too obvious to ignore any longer. By then, of course, Germany was stuck with an imperialistic and genocidal monster for a dictator, and the whole world was thus in jeopardy until the Allies saved it. Thus, MS is one of the best ways to preempt fascism in all of its forms, by stamping out the fertile conditions (depression, artificial scarcity, extreme inequality, etc.) that allow it to take root in the first place. Food for thought.

        Liked by 1 person

      2. I have wondered whether Hitler revitalised Germany’s economy with ideas based on being monetary sovereign, but I have never seen it mentioned. He didn’t take long for the country to recover. Although they also concentrated on getting more tourism etc following on from the 1936 Olympics to get foreign exchange it would never have been enough. It seems they just spent their way to prosperity [?]


        1. That is because it is so rarely if ever mentioned by mainstream historians at all, for obvious reasons. First one is the classic guilt by association fallacy: Just look at all the flack that Ellen Brown got for pointing it out in “Web of Debt”, some even accused her of praising Hitler by doing so. (That is like saying that making the trains run on time is bad just because Mussolini did it.) But even more so, mainstream sources often simply do not want the people to know the truth about Monetary Sovereignty in general, lest they start asking questions. Even when the topic is Abraham Lincoln, they quickly gloss it over if they mention it at all. But the people need to know the truth if we want to have real social and economic justice, and especially if we truly want to prevent another Hitler from ever rising again (if it isn’t already too late, that is.)


          1. I haven’t seen Ellen Brown’s comment about Hitler.Got a link? I once listened to a youtube talk about another Mr Mitchell, When the Commonwealth Bank was founded in 1913 he was appointed the sole director. In 1914 the pollies came to him for how to pay for the war, He said he’d write them a cheque [375 million pounds] All they had to pay him in return was 1/2% interest . In London after the war the other nations were amazed Australia was not buried under a mountain of debt. He had just advanced the money out of thin air. He died in about 1926. The government then appointed a posse of bankers, so no one could repeat what he achieved. No one understood him. Unfortunately I didn’t keep the youtube link so I can only go on recall.


          2. Thanks for the link to Hitler. It’s possible they knew enough about the Rothschilds and being Jewish that got them thinking about another way to grow the economy without Jewish influence[?]


          3. You’re welcome, John. I’m sure such a motive did at least cross their minds more than once, even if only for its massive anti-Semitic propaganda value. The Nazis definitely hated the Rothschilds with a passion, and in fact used them and what they stood for as a stereotypical trope to vilify Jews in general. The irony, of course, is that most of the biggest banksters and oligarchs, both then and now, have been WASPs like J.P. Morgan, Rockefeller, Mellon, etc, while the Rothschilds were more of the exception that proves the rule.


    1. Venezuela is an example of dictatorial thievery. Massive oil reserves disguised the nationalization of industries, but when oil prices, plummeted, the economy went to hell. This had nothing to do with money printing, which was a result, not a cause, of Venezuela’s hyper-inflation. Economies being plundered and mismanaged by crooked dictators cannot be saved by Monetary Sovereignty alone.

      Isn’t it strange how the deniers must use foreign nations as illustrations, when America’s past 80 years are a perfect illustration. Ask your doubters why the U.S. has succeeded for 80 years. That’s an awfully long time in economics.

      Liked by 1 person

      1. BINGO. Very well-said. This is the perfect response to anyone who plays the Venezuela card. It is dictatorial theivery, corruption, and mismanagement, followed by an exogenous shock in oil prices that unmasked it all, that was the real cause of their hyperinflation. That, of course, and being foolish enough to borrow in a foreign currency during it all, and thus open themselves up to speculative attacks against their own currency.


    1. Ian,
      His heart is in the right place, and his ideas are good, but until he understands Monetary Sovereignty and the Ten Steps to Prosperity, he always will struggle to find enough tax dollars to “pay for” his good ideas.

      Good ideas are a dime a dozen. We all have them. But finding a way to execute those ideas is the challenge. Taxes never will pay for his good ideas.

      The tool for implementing his ideas is Monetary Sovereignty. Without the tool, the task is impossible, like trying to build a house without understanding carpentry.


      1. BINGO. Yang really needs to get on board with Monetary Sovereignty. The bubbling VAT of toxin, as I like to call it, is completely unnecessary, regressive, and in fact if the Ten Steps to Prosperity were to be implemeneted in other countries, the first one would likely be “Abolish VAT, as well as any equivalent of FICA”, at least at the national level. Step Zero (for the Euro nations) would of course be “Get off of the Euro”.

        Liked by 1 person

        1. Back in 2010, I gave a talk at the UMKC, in which I said: “Because of the Euro, no euro nation can control its own money supply. The Euro is the worst economic idea since the recession-era, Smoot-Hawley Tariff. The economies of European nations are doomed by the euro.”
          They continue to struggle.

          Liked by 1 person

        2. Venezuela is a lot more complex than just Maduro and his incompetence. woeful though that is. The US encourages nations with assets they covet to use US dollars, and with what looked like a very long term supply of oil revenues they neglected their own agriculture and bought subsidised corn with oil income. I read one US state grows all its corn for export to Venezuela and as with Mexico the imports undercut local growers. NAFTA sent 8 million Mexicans north when that happened to them. Venezuela is in the same situation a lack of self sufficiency.very much to the wishes of Washington’s neo cons. They engineered a coup against Chavez in 1992 and they are trying again now.


          1. Indeed, getting ’em hooked on borrowing in a foreign currency (i.e. the US dollar) so they get way in over their heads in debt is probably the most efficient road to neo-colonial ruin. Then bet heavily against Venezuela’s currency when things go south, stage a coup to replace their own dictator with a new corporate-sponsored dictator, rinse, and repeat. United Fruit would sure be proud of such Diem-ocracy, as the late Phil Ochs would call it.

            Not to absolve Chavez and Maduro, of course, but they are not the only ones with a vested interest in Venezuela’s destruction and subsequent disaster capitalism.


      2. True. Under “Value added tax”, he says “With a VAT of half the European level, we can pay for Universal Basic Income for all American adults of $1,000 per month”.

        But that is just one item on his extensive platform. And since he thinks taxes pay for that benefit, he doesn’t really understand Federal Financing.

        Liked by 1 person

        1. Yang may not understand MS (or federal financing) very well quite yet, but in the meantime it seems that AOC and even Bernie are starting to pick up on MMT at least implicitly, being far less concerned with how to “pay for” things like the Green New Deal and Medicare For All, even if they don’t mention MMT by name. Of course, as Rodger notes, there are significant differences between MMT and MS, and the latter is clearly better than the former, but they do share the same core idea that federal dollars are infinite and that federal taxes do not actually pay for federal spending. It’s just that MMT (for all its flaws) is somewhat more well-known than MS, and it is thus mentioned by name more frequently now in political articles about the current wave of true-blue progressive politicians. We need to spread the word about MS now.


          1. Very well said.
            MMT and MS are brothers under the skin with regard to describing economic reality.
            Unfortunately, MMT’s “big solution” is the Jobs Guarantee, which is a morality-based, bureaucratic nightmare, that solves a non-problem. (Lack of wrong jobs – the jobs JG inevitably would provide – is not a problem. There are plenty of wrong jobs. Look on any jobs site. How many jobs would you take? How many would take you?}
            The real problem is the wide and widening income/wealth/power Gaps between the richer and poorer. The MS “Ten Steps to Prosperity” is designed to address that. JG only solidifies that problem.


    1. I read it yesterday. He doesn’t understand MMT, or MS. He talks about budget surpluses as savings. But the general drive of the article is favourable. We are at the stage where people will target it as it is seen now to threaten the status quo. Then cometh the next stage. They ‘knew it all along’, stage. Still, it’s progress.
      Have you noticed a change in your readership, Rodger? A sign things are changing.


  2. Rodger,
    What’s to keep the federal government from simply asking each state how much it needs to operate, then send X billions of newly created dollars to the states each year?


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s