If you are in the majority, you know for sure the federal debt is too high, federal taxes fund federal spending, Social Security and Medicare are near insolvency, the federal government should run a balanced budget, Federal spending causes inflation, raising interest rates fights inflation, and the federal government is deeply in debt.
And not one of them is true. They all “just ain’t so.” Not even close.
Here is the reality:
1. Unlike state/local governments and the American people, the U.S. government is Monetarily Sovereign. In the 1780s, the government created the first U.S. dollars from thin air by passing laws, which it also created from thin air.
The federal government’s infinite ability to create laws gives it the infinite ability to create its sovereign currency, the U.S. dollar.
2. The government continues to create U.S. dollars from thin air, by pressing computer keys. The government has the unique ability to create as many U.S. dollars as it wishes.
(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.”)
Thus, the federal government cannot run short of dollars unless it wishes to. Even if the federal government collected zero taxes, it could continue spending, forever. 3. The federal government never borrows dollars.(Statement from the St. Louis Fed: “The U.S. government is not dependent on credit markets to remain operational.”)
The deposits into T-security accounts (T-bills, T-notes, T-bonds), mistakenly referred to as “debt,” neither are owned nor owed by the federal government. The deposits are owned by the depositors and never used by the federal government. Upon maturity, these deposits are returned to their owners, which is not a financial burden on the federal government. It is a simple money transfer like a transfer from your savings account to your checking account. 4. Federal taxes do not fund federal spending. Tax dollars are paid out of accounts that are part of the M1 money supply measure. When they reach the Treasury, they cease to be part of any money supply measure, thus federal tax dollars effectively are destroyed upon receipt by the Treasury. 5. The purposes of federal taxes are:A. To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward.
B. To assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
C. To foster the myth that such benefits as Social Security, Medicare, poverty aids, etc. are limited by tax collections. This myth is funded and propagated by the rich to widen the income/wealth/power Gap between the rich and the rest. Widening the Gap makes the rich richer and the rest, poorer.
6. To propagate the myth of potential Federal insolvency, the rich bribe these sources of information:A. The media are bribed via advertising dollars and ownership.
B. The politicians are bribed via campaign contributions and promises of lucrative employment after leaving office.
C. The university economists are bribed via donations to universities and promises of lucrative employment in think tanks and other enterprises.
5. State/local governments, euro nation governments, businesses, and people are monetarily non-sovereign. They can, and often do, run short of U.S. dollars. They do not have the infinite ability to create dollars. Thus, state/local taxes fund state/local spending. Equivalences between personal finances and federal finances are misleading. 6. Scarcity makes prices rise. Inflation is a general increase in prices. Federal deficit spending does not cause inflation. All inflations are caused by scarcities of crucial goods and services, most often energy and food. Today’s inflation resulted from COVID-caused scarcities of oil, food, shipping, computer chips, labor, metals, lumber, and other goods and services. Contrary to popular wisdom, “excessive” federal spending did not cause the scarcity of these goods and services, so is not responsible for inflation. 7. Increased federal spending cures inflations by aiding the acquisition, production, and distribution of scarce resources. 8. High interest rates have a contradictory effect on inflation. They strengthen the value of the dollar, which means fewer dollars are needed to purchase goods and services. And high rates force the federal government to pump more growth dollars into the economy. But interest is added to the costs of all goods and services, so high rates exacerbate inflation. On balance, curing scarcities, not cutting federal spending, or raising interest rates, cures inflations. 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.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
Good post, whenever I try to explain these concepts the response is usually how stupid I am or the eyes glaze over as they start looking for the exits. Only about 1 in 5 actually seem interested in learning how federal finances actually work.
A couple of added points:
One of the “theoretical” purposes of Federal taxes and treasury securities is to reduce aggregate demand in the economy to allow the Federal government to spend without over allocating resources, with the intention of preventing so called demand-push inflation. This doesn’t seem to be an issue under normal conditions, but certainly was a factor during WWII and might need to be a an initial consideration if the federal government were to fully fund an expansive program such as the “green new deal” or “Medicare for all”, at least until the resources adjusted to the new level of demand created by federal spending.
Also, while deficit spending does not cause inflation, it can exacerbate it if the spending is used to prop up demand rather than address supply. This was the case during all of the modern hyperinflations.
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WWII inflation, like all inflations, was caused by shortages of oil, food, shipping, food, and cars. People bought less gas and food because of inflation.
In essence, the shortage inflation cured the mythical demand-push inflation. The government tried to prevent the pain of inflation by causing the pain of austerity.
Of course, it didn’t work. ALL inflations are caused by shortages and eliminated by federal spending to cure the shortages.
Inflation is a GENERAL increase in prices. Demand-push inflation is a “logical idea” that happens in NARROW SECTORS but not in the overall economy.
Rather than taxing the private sector, the government should have done the opposite — given people money so the poor wouldn’t go hungry and homeless. The war bond thing was as ridiculous as the Saving Paper and Saving Fat programs.
(I am old enough to remember bringing cans of fat to the butcher and bales of newspaper to the school to aid the war effort. It was all psychological BS).
Luckily, the WWII federal leaders all had died by 2020, so the COVID inflation was softened by MORE, not LESS, federal deficit spending. It’s now essentially an oil inflation –a Saudi inflation.
As for “Medicare for All,” I assume you’re talking about inflation in the medical care sector, not overall inflation which usually involves oil, food, shipping, etc.
If that is what you mean, Medicare for All
1. Is unlikely to cause inflation because Medicare sets the prices and
2. If it did cause inflation in the medical care sector, it wouldn’t matter because Medicare would pay the bills, so the people wouldn’t notice, and increased federal spending would grow the economy.
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Pitiful: https://reason.com/2023/11/01/87-of-americans-want-politicians-to-do-something-before-social-security-runs-out-of-money/
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