A better way to budget federal spending: The only sensible way.

Infinity is a big number. It’s so big you can’t even visualize it, much less count it.

Infinity is bigger than all the atoms in all the molecules in all the dust grains in the entire universe, which is estimated to be 10^82 — that’s 1 with 82 zeros behind it — way bigger.

It’s bigger than a googol, which is 10^100, which is one followed by one hundred zeros. Infinity is bigger than a centillion, which is one followed by six hundred zeros, and bigger even than a googolplex, ten^googol.

I mention these staggering numbers, all of which are far smaller than infinity, to give you an idea of the U.S. federal government’s capability, which is this: The U.S. government can create infinite U.S. dollars any time it chooses, merely by deciding to do so.

Ben Bernanke, former Federal Reserve Chairman: “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.”

Scott Pelley (60 Minutes): Is that tax money that the Fed is spending?
Ben Bernanke: It’s not tax money… We simply use the computer to mark up the size of the account.

Statement from the St. Louis Fed:
“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.”

Given that infinite capability, the U.S. government cannot run short of dollars, no matter how many it spends, how little it taxes, or how big its deficits are.

Even if the federal government levied zero taxes, it could continue spending forever (the same as infinity, but on a time scale).

And what is true for the U.S. government also is true for any agency of the U.S. government.

The Army, Navy, Marines, Air Force, Space Force, the Senate, the House, the White House, the Supreme Court, Medicare, Social Security, and all the other 1000+ agencies of the federal government — none of them can run short of dollars unless that is the desire of the President and Congress.

So why do we concern ourselves with meaningless concepts such as federal deficits, debt, and borrowing when determining how much to spend on various projects? Why do we talk about “affordability” and “sustainability”?

Everything is affordable and sustainable for an entity with access to infinite (more than a googolplex) dollars, and there never is a reason to borrow.

With affordability, sustainability, and borrowing off the table, what criteria should the government use to plan expenditures?

Need and effect are the only criteria that have a purpose.

Take any federal agency, for instance, the House of Representatives: How much money does the House need to run most efficiently, and what are the overall effects of giving them that money?

Or think about America’s healthcare. How much money would a comprehensive, no-deductible Medicare plan covering every man, woman, and child in America need, and what would be the overall effect of providing that money?

The U.S. government can “afford” and “sustain” any numbers you can mention without either borrowing or taxing. Just press those computer keys Ben Bernanke mentioned.

Social Security for All: How much money is needed to eliminate poverty, hunger, homelessness, and most crime in America? Develop a number and press those computer keys.

Or education: How much money is needed to provide everyone with the education they desire, whether it be high school, college, advanced degree, or research facility?

There are no financial limitations. So, what are the limitations? Planning, know-how, and labor.

We need to know how to spend those unlimited dollars to achieve our goals, and we need enough educated labor to make it all happen.

Despite the bleating and moaning about deficits and debt, money truly is no object. We can do it all, and now, with AI (Artificial Intelligence), our capabilities have expanded massively. We really can create a paradise on earth.

Of course, when all objections have been satisfied, we come to the last refuge of the debt worriers: Inflation.

They tell you that if the government spends “too much,” we’ll have inflation.

That is what many people have been taught to believe, despite one small fact: Historically, there is no relationship between federal spending and inflation.

In the massive inflation years of the late 1970s, federal spending ranged between $300 Billion and $700 Billion annually.

In the 1980s, while inflation dropped to 2% and below, federal spending kept rising, reaching a high of $6 Trillion annually, still with low inflation.

Then suddenly came the COVID shortages, and just as suddenly, inflation rose to 8%+.

Now, as federal spending continues at massive levels and shortages decline, inflation, too is coming down.

The reason: Inflation, far from being a result of federal spending, is the result of national shortages, most often shortages of oil and/or food.

The famous Zimbabwe inflation was caused by a food shortage. The government took farmland from farmers and gave it to non-farmers. Government spending was an inept follow-up to the already existing inflation. Had the government spent to aid production and acquisition of food, there would have been no inflation.

Argentina: Food, clothing, and, surprisingly, energy shortages caused by the Russia/Ukraine war.

America: COVID-caused shortages of oil, food, shipping, computer parts, metals, lumber, labor, and other essentials. Before COVID, inflation was near zero despite massive federal spending for many years.

Then came COVID, and its shortages caused inflation to hit double digits.

SUMMARY

Congress, the media, and even economists worry about government spending when they should worry about private sector needs. That is the fundamental purpose of government — to provide the private sector with what the private sector needs.

Worrying about spending is a reasonable approach for households, businesses, and local governments, all monetarily non-sovereign. They do not have the infinite ability to create dollars. They can, and often do, run short of money. They require taxes and borrowing to remain solvent.

By contrast, this approach is wrongheaded for our Monetarily Sovereign federal government, which can create money and needs neither taxes nor borrowing to remain solvent.

As I write this, the federal government is about to shut down over worries, not about economic needs but about federal spending, the exact opposite of what the government should consider.

The Republicans have forgotten about needs. The Democrats consider needs but are hypnotized by the false analogies with household finances.

The situation today resembles a billionaire refusing a life-saving cancer medicine because it costs $1 per year. Nonsensical.

I look forward to the day when people understand that federal money is an unlimited resource. If used correctly, it will solve most problems facing this nation and create a paradise on earth.

Rodger Malcolm Mitchell
Monetary Sovereignty

Twitter: @rodgermitchell Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

MONETARY SOVEREIGNTY