Monetary Sovereignty is the foundation of modern economics — but babies?
Here is a short article that appeared in the May 21, 2021 issue of THE WEEK Magazine:
America’s declining birth rate
The Week (US)21 May 2021
A “baby bust” points to “a grim economic future” for America, said Noah Smith. U.S. births fell 4 percent in 2020 to their lowest rate since World War II, the federal government reported last week.
“This puts an increasing financial and physical burden on the young,” who must pay the soaring costs of Social Security, Medicare, and caring for their own aging family members.
Contrary to what the media, the politicians, and heaven help us, even the economists have been bribed to claim, there will be no financial burden (i.e. tax burden) on future taxpayers.
The reason: Unlike state and local taxpayers, the federal taxpayers do not fund anything.
The U.S. government is Monetarily Sovereign, meaning it has the unlimited ability to create its own sovereign currency, the U.S. dollar, at the touch of a computer key.
The federal government can pay for anything simply by creating dollars, and never can run short of dollars. Even if all federal tax collections fell to $0, the federal government could continue spending forever.
Think of all those trillions the federal government now is spending for COVID relief. No new taxes were levied. In fact, the most recent tax law changed involved tax cuts.
So, if federal taxes don’t pay for anything, why are they collected? Two reasons:
- To tax what Congress and the President wish to discourage, and give tax breaks to what they wish to encourage, and
- To fool you into believing that federal money is scarce so you won’t ask for federal benefits.
“In 2010, the number of working-age adults per older adult was 4.8; by 2060, it’s projected to be only half that”—meaning that the tax burden on workers will need to double.
The only “tax burden on workers” is the legal requirement to pay taxes, and those tax dollars are destroyed upon receipt by the Treasury.
To pay for Social Security and Medicare, the federal government uses the same system it uses to pay for Congress and the Supreme Court, the same system it uses to pay for the White House and the FBI, the same system it uses to pay for the military — it presses computer keys and creates dollars ad hoc.
Being Monetarily Sovereign, the federal government never can run short of dollars, never needs to ask anyone for dollars, and never borrows dollars.
The graying of the population will also lead to lower productivity and economic stagnation.
We assume they mean that old people are less productive than young people. While that is a questionable proposition, it is irrelevant.
It advent of smart machines makes each worker of any age far more productive than the previous working populations. There will be no stagnation so long as the federal government continues to pump dollars into the economy.
And it will put the U.S. at a marked disadvantage in our competition with China, which has four times our population. Increased immigration would help, but it’s not enough to keep our population growing.
All the above means is that China has four times as many people to support, a vast number of whom are impoverished by U.S. standards.
“Americans need to have more children,” and surveys show they want to—but are held back by the high costs of housing, education, and child care.
This would not even be an issue for debate, if the federal government would begin to institute the Ten Steps to Prosperity (below).
America has a choice to make: to be a graying nation in decline or a great nation, “confident enough in ourselves to believe that there should be more of us.”
It’s not clear what Noah Smith is suggesting. More sex? Fewer condoms?
The “solution” to the nonproblem of a declining population is simply to stop pretending that federal finances are like state/local government finances.
Yes, future taxpayers will have serious problems. Global warming is one. The proliferation of guns and other killing machines is another. Environmental poisoning and pollution are yet another.
But lack of workers is not one of those problems. In fact, smart automation making human labor obsolete is a far more likely scenario than the low birthrate in America.
Rodger Malcolm Mitchell [ Monetary Sovereignty, Twitter: @rodgermitchell, Search: #monetarysovereignty Facebook: Rodger Malcolm Mitchell ]
THE SOLE PURPOSE OF GOVERNMENT IS TO IMPROVE AND PROTECT THE LIVES OF THE PEOPLE. The most important problems in economics involve:
- Monetary Sovereignty describes money creation and destruction.
- Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
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 Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps: Ten Steps To Prosperity:
- Eliminate FICA
- Federally funded Medicare — parts A, B & D, plus long-term care — for everyone
- Social Security for all
- Free education (including post-grad) for everyone
- Salary for attending school
- Eliminate federal taxes on business
- Increase the standard income tax deduction, annually.
- Tax the very rich (the “.1%”) more, with higher progressive tax rates on all forms of income.
- Federal ownership of all banks
- 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 the rest.
5 thoughts on “The Monetary Sovereignty of — babies?”
It’s interesting that Evolution is trying to make us a success with all the labor/sweat saving technology, and no end in sight. But old fashioned, anti-evolution economics insists on full employment, stay busy, keep struggling.
And for what? Just so people at the top can remain in control and feel superior. This is EGOnomics, not economics.
You’re preaching to the choir. I’ve argued with MMT folks about their ridiculous JG goal of full employment.
Sadly, America makes a quasi-religious demand that financial aid be given only to people who work, or actively seek work — except for the rich who are allowed to do nothing without criticism. Rich idlers are acceptable. The poor must sweat.
The real problem of a declining and greying population has nothing to do with Social Security and Medicare funding, but rather that neoliberal finance capitalism has no answer for the long term impact it will have on its own economic model.
Capitalism relies on increasing sales year over year, which is not a problem if the population is increasing; however, with a decreasing population, demand falls, and so GDP is flat, housing prices are flat, security markets are flat, bank lending and income decreases, standards of living are reduced, and so on. As I mentioned in comments to a previous post, one only has to look to Japan to see the effects (see link below).
The only solution is through increasing long term government fiscal intervention into the economy; basically what the conservatives misrepresent as evil “socialism”. It is ironic (or perhaps moronic) that conservatives these days are simultaneously pro-finance capitalism and anti-immigration, which are mathematically untenable positions.
Agreed, your final paragraph, especially.
Negative interest rates are to finance as deficit reduction is to the economy: Horrible ideas.
Interest is a financial engine. High rates make the government pump dollars into the economy. Interest raises GDP. For no good reasons, people think low interest is stimulative. So the stock market reacts negatively to rumors of higher interest rates. I buy SCHG.
Rodger Malcolm Mitchell
Very well-said, Rodger! In a nutshell, the non-problem of a “birth dearth” and the resulting shrinking and aging population can literally be solved by Monetary Sovereignty and modern technology. And of course the supposed economic problems caused by a shrinking and aging population really pale in comparison to the very real ecological problems caused by the opposite problem, overpopulation, which we ignore at our peril.
Some people gingerly dance around the latter issue by claiming that it is entirely *overconsumption* and not overpopulation that is the real ecological problem, lest they break some sort of taboo. But yet in the same breath, they also nearly always note that if everyone in the world lived like average Americans we would need 6 or 7 Earths, and if everyone lived like average Europeans we would need 2 or 3 Earths. And even if everyone lived in an eco-village, we would still need at least 1.5 Earths and counting. Thus, if we want everyone in the world, particularly future generations, to have anything even remotely close to a decent standard of living, high birthrates and the resulting population growth are utterly unsustainable in the long term. And according to the best evidence, the two most effective (and ethical) ways to do this are 1) female empowerment and 2) poverty reduction.
Thus at this juncture of history, I would have to argue that a moderately falling birthrate and moderately shrinking population is a good thing on balance until the population is rightsized within a few generations.
That said, it is unfortunate that much of this trend is due to financial insecurity and an excessive cost of living and cost of raising children these days. But again, that can easily be solved with a Monetary Sovereignty financed UBI and related programs.