What should this man do?
A normal person might say that the man should simply get off the track. But sometimes, politicians, economists, and media writers are not normal people.
They sometimes eschew normal solutions to problems and present complex, non-solutions. A politician probably would say, “It’s too late for the man. We could raise his taxes to cover the cost of installing brakes on the train, or we could stop service altogether. Walking will do people good.”
Consider Social Security and the federal government. Social Security is running short of dollars. The government has infinite dollars.
Fed Chairman, Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.
Fed Chairman, 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.” It’s not tax money… We simply use the computer to mark up the size of the account.
Fed Chairman, Jerome Powell stated, “As a central bank, we have the ability to create money digitally.
Secretary of the Treasury, Paul O’Neill: “I come to you as a managing trustee of Social Security. Today we have no assets in the trust fund. We have promises of the good faith and credit of the United States government that benefits will flow.”
Paul Krugman (Nobel Prize–winning economist): “The U.S. government is not like a household. It literally prints money, and it can’t run out.”
Given that Social Security is facing funding issues and the federal government has the ability to create unlimited money, one might suggest that the government should simply fund Social Security.Ah, but no. That is not the way of our information leaders, as the following article will attest:
Social Security: Insolvency date keeps getting closerBy The Week US
A new report has projected that Social Security funds could be depleted by 2033
Time is running out to avert a Social Security cataclysm, said William A. Galston in The Wall Street Journal. The program’s trustees warned in a recent report that the Social Security trust fund “will be exhausted in the first quarter of 2033″—nine months earlier than they predicted a year ago—at which point benefits will be cut by 26%.
Is Mr. Galston a “normal person”? Does he suggest that the entire “cataclysm” would disappear if the federal government simply funded Social Security? No.
A few factors explain why the coffers are being drained:
How much money is in the federal government’s “coffers”? Actually, it doesn’t have coffers. It creates dollars, on demand, by paying creditors. The process is quite straightforward:
- Congress and the President pass a law, funding a project
- The chosen agency of the federal government writes checks to suppliers
- The Federal Reserve clears the checks based on the law passed by Congress and the President.
- Dollars appear in the checking accounts of creditors.
Where did those dollars come from? Thin air, the same place the very first dollars came from in the 1780s. Congress votes. The President approves. Numbers appear in the government’s books. Those numbers are money. That is all money is: Numbers in the government’s books.
There is no physical money — just numbers. Even dollar bills are not money, They just represent the dollars on the government’s books. And the government controls its books.
The over-65 population has nearly doubled since 2000, beneficiaries are living longer, and declining fertility rates mean there are fewer workers to support each beneficiary.
It widely, and falsely, is believed that the FICA extracted from your paycheck funds Social Security. It doesn’t. Even if the government didn’t collect a single penny in FICA taxes, it could continue funding Social Security (and Medicare) forever.
The old saw about “fewer workers to support each beneficiary” is wrong, wrong, wrong. Even if there were no workers, the government could fund Social Security — yes, again — forever.
We’ve known about these trends for decades and could have enacted reforms gradually. Now it’s too late. If lawmakers acted today, “restoring Social Security’s long-term solvency would require a 22% benefit cut for current and future beneficiaries,” or an increase in payroll tax to 16%, from the current 12%.
You have just read an example of the Big Lie in economics: That benefit cuts or tax increases are necessary to “save” Social Security. Three lies in one paragraph:
- The “Now it’s too late” lie. Congress and the President could provide the funds to save Social Security this afternoon.
- The “benefit cut” lie. The government could triple benefits and still maintain Social Security’s solvency.
- The “tax increase” lie. The government could eliminate FICA, and Social Security could continue to be solvent.
But lawmakers won’t act today. President Trump “has repeatedly ruled out cuts to Social Security,” and Democrats didn’t do anything when they were in power. At some point, politicians will have to “level with the American people about the hard choices that lie ahead.”
Yes, at some point, politicians will have to “level with the American people” about the vast sums of money the government could, if it wished, allocate to Social Security and Medicare.
“If endless borrowing were no cause for concern,” the fix would be easy, said Bloomberg in an editorial. Congress could just change the rules that say Social Security can’t borrow money to pay out benefits and carry on.But with the national debt sitting at $36 trillion and rising fast, that’s not possible.
The government does not borrow dollars. Why would it. It can create all the dollars it needs, simply by pressing a computer key. Who says so? Well, for one:
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.Not being dependent on credit markets means the government doesn’t borrow.The federal government is not financially constrained and does not need to ‘fund’ its spending.”
The writer almost admits the truth: “Congress could just change the rules that say Social Security can’t borrow money to pay out benefits.
Get it? Congress always can “just change the rules.” Congress could fund Social Security the same way it funds the army, the navy, the marines, the air force, the space force, the SCOTUS, the White House, and Congress itself, along with almost every other federal agency: By voting for the money.
So why doesn’t Congress do that? We’ll explain shortly.
So we have to consider the other available options, said David Von Drehle in The Washington Post. One is to raise more revenue, possibly by making the wealthy pay more. “Another choice is to further raise the age of full eligibility,” which has already gone from 65 to nearly 67 for those born in 1960 or later.Or we could “increase the number of workers paying into the system.” But President Trump’s immigration crackdown means the opposite is happening.
We already have discussed these so-called “solutions” and why they neither are necessary nor advisable. And now we get to what Congress would really love to do.
There’s one more idea on the table, said Allison Schrager in Bloomberg. Sens. Bill Cassidy (R-La.) and Tim Kaine (D-Va.) have proposed creating “a separate fund for Social Security” that could invest in “stocks and other investments,” not only Treasurys, as the current trust fund is required to do.
Oh, how the political donors would love to get their greedy hands on your retirement money. Remember the 2008 recession caused by banks selling fake investment products to a naive public? Yes, those are the crooks who thing Social Security should be privatized.
The senators estimate that savvy investing would be enough to fill the fund’s coffers. And maybe they’re right: “In hindsight, the program would not be facing a shortfall” if it had jumped into stocks two decades ago. “But investing is always easy in hindsight.” There’s no guarantee the market will replicate the outsize returns of the past 20 years.
And with Social Security so near to insolvency, some tax hikes and benefit cuts are likely inevitable even with a shift to stocks. “The first rule of investing, after all, is that there is no such thing as a free lunch.”
Yes, it’s all part of the Big Lie, easily seen if one has the sense to look.
So if it’s so obvious that all solvency problems would end if the federal government merely funded Social Security, why hasn’t it been done? And the answer is: The rich donors don’t want a solution.
Here’s why.1. “Rich” is a comparative.
2. Being rich doesn’t just mean one owns a great deal of wealth. It means one owns a great deal more wealth than others.
3. Becoming richer requires widening the income/wealth/power Gap
4. The Gap can be widened by obtaining more for oneself or by forcing others to have less.
5. The rich use their financial power to widen the income/wealth/power Gap below them.
6. The rich discourage benefit-narrowing benefits to those who are poorer
7. They do this by bribing thought leaders to promulgate economic lies.
a. They bribe the media via ownership and advertising dollars.
b. They bribe the economists via school endowments and lucrative jobs in think tanks.
c. They bribe the politicians via campaign contributions and company employment
8. Among the economic lies the rich promulgate are:
a. The federal deficit and debt are too high. Economically, they are too low.)
b. Social Security is funded by FICA (All federal spending is funded by money creation, not taxes)
c. To prevent SS insolvency (and Medicare insolvency, too), FICA must be increased or
d. Benefits must be reduced.
e. The government cannot afford to pay for Social Security (The government can afford anything.)
f. The poor are naturally lazy, and benefits encourage them not to work (On average, the poor work harder than the rich)
g. It isn’t fair for the poor to receive money for not working. (It’s fairer than the current Gap)
h. Federal spending is inflationary (Inflations are caused by shortages, never by spending, which can cure shortages)
You are being conned into believing Social Security (and Medicare) are facing intractable financial problems that only can be cured by giving recipients less and/or taxing them more (or by allowing the rich to handle the money and profit from it).
I cannot say whether William A. Galston and the Wall Street Journal editors are ignorant of the facts or are outright lying. I suspect that, given all the informational resources at their command, they are not ignorant.
The fact that a very rich man, Rupert Murdoch, owns the WSJ, provides one clue.
In the following months, you will continue to hear versions of the Big Lie drummed into your head, again, again, again, in the hopes that repetition alone will make you accept it and not protest at what is being taken from you.
Your best hope is to contact your Senators and Representatives repeatedly, letting them know you’re on to them and will hold them accountable in the coming elections. Do the same with any medium that tells the Lie.
Fight hard enough and maybe, just maybe, we won’t have to keep reading headlines like this:
Trump slashed Medicaid — now he’s got another health care crisis looming
There goes Obamacare.
Rodger Malcolm Mitchell
Twitter: @rodgermitchell
Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell;
MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell;
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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 
FICA taxes were never instituted to “pay” for Social Security. They were based on two factors: one political and the other macroeconomic. From a political standpoint, by citizens paying into Social Security, citizens would view benefits as an earned right rather than a government handout. As FDR was famously quoted: “We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program”.
From a macroeconomic standpoint, FDR was being advised by British economist John Maynard Keynes on how to respond to the depression. Keynes theories basically stated that governments can spend or issue “fiat” currency (i.e. not backed by gold) without limits provided there were sufficient resources in the economy to produce the goods and services that money would employ. Based on Keynes recommendations, FDR went off the gold standard in 1933 in order to increase “fiscal space” to deal with the depression.
The concern of social security in 1935 was that it would increase the consumption of seniors; however, those same seniors would not contribute to the production of the goods and services they would consume, which by Keynesian theory, could lead to long term inflation. By instituting FICA as a payroll deduction, the spending power and consumption of workers would be reduced in order to offset the consumption of retired seniors. Taxes were not implemented on savings or investments as that represented deferred rather than current consumption.
What was not foreseen at the time was the extraordinary increases in worker productivity due to automation and now AI, along with the impact of low cost imports on the productive capacity of the economy. So even from a theoretical macroeconomic perspective there is no need to balance the pay-ins and payouts. There should be sufficient productive capacity to meet the needs of seniors without the need to increase FICA taxes, or even to have FICA taxes at all.
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I agree with you. I am puzzled by the “sufficient resources in the economy to produce the goods and services” caveat. I have no idea how one might measure that. And doesn’t federal deficit spending increase those resources?
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The country’s resources actually can be, and are, measured on a consistent basis with the Output Gap. From Bing Co-Pilot:
The output gap is the difference between an economy’s actual output and its potential output, indicating whether the economy is underperforming or overheating.Definition and Calculation
The output gap is defined as the difference between actual GDP (the total value of goods and services produced in an economy) and potential GDP (the maximum output an economy can produce when operating at full efficiency). It is expressed as a percentage of potential GDP. The formula to calculate the output gap is:
Output Gap=Actual Output−Potential OutputPotential Output×100Output Gap=Potential OutputActual Output−Potential Output×100
Economic Implications
Negative Output Gap: Conversely, a negative output gap indicates that the economy is not utilizing its resources effectively, which can lead to higher unemployment and lower economic growth. Policymakers often use this information to implement measures aimed at stimulating the economy.
Importance in Economic Policy
The output gap is a crucial indicator for policymakers as it helps assess the economic cycle’s current state. By understanding whether the economy is overheating or underperforming, governments and central banks can make informed decisions regarding fiscal and monetary policies to stabilize the economy.
Wikipedia+1
In summary, the output gap serves as a vital tool for evaluating economic performance and guiding policy decisions, reflecting the balance between actual and potential economic activity.
==============
Here’s a more detailed answer from Investopedia: https://www.investopedia.com/terms/o/outputgap.asp#:~:text=The%20term%20output%20%EE%80%80gap%EE%80%81
So, the Output Gap could be used to control inflation from government issued money, which could otherwise be unlimited. The non-partisan CBO issues regular calculations of the Output Gap.
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Thanks Scott. The problem primarily is with the so-called “Potential Output.” It’s 50% bullshit, 40% guesswork, and 10% simply wrong.
Further, the concept of producing more than the potential is, on its face, ridiculous.
This description is about as wrong as is the claim that the federal debt is too high: The output gap is a crucial indicator for policymakers as it helps assess the economic cycle’s current state. By understanding whether the economy is overheating or underperforming, governments and central banks can make informed decisions regarding fiscal and monetary policies to stabilize the economy.
It’s not a crucial indicator. It’s not even a good indicator. And there is no economic cycle. The economy does not move in cycles. It changes, but not in cyclical fashion. The notion of “cycles: is an excuse for not preventing recessions.
As for the economy “overheating” that is the silly term often used by the Fed to justify raising interest rates which, quite obviously, increases prices. It’s like applying leeches to cure anemia.
Belief in that “underperforming,” “overheating” concept is why we have, on average, a recession every five years.
I hope you realize that the Fed does not have the tools to prevent/cure recessions or inflations. Only Congress has those tools. Inflation is caused by shortages and Congress can prevent/cure shortage by voting to support production of the scarce goods.
Tell me, are we overheating or underperforming today, why, and what should be done about it?
Has it ever occurred to you that economists don’t know what the hell they are doing and are politically influenced? Wait until Trump gets his Sharpie pen going, now that he has fired our chief economist.
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Well, being a Georgist myself (Henry George also believed in Monetary Sovereignty and promoted the idea of government created money, aka Greenbacks/U.S. Notes in his time in the late 19th century), I know about the Land Cycle. And the Land cycle is real, and consistent, mostly, except for extreme events like the world wars and 1907 crash that J.P. Morgan personally bailed the economy out of, that led to the Federal Reserve in 1913.
Here’s a discussion with the late Mason Gaffney, one of the leading Georgists, and some others who CAN and did predict the cyclical downturns: https://georgistjournal.org/2012/08/26/the-eighteen-year-real-estate-cycle/. Some of this work is based on Homer Hoyt in the 1930s, which Gaffney expanded upon. The 18-year real estate cycle is due to bottom starting next year, and is already showing signs of weakness in the South. As goes real estate, so go the banks, because of all the mortgage (mortgage means literally “death pledge”) exposure they have. Land, unlike true capital, like buildings can’t be made more of, but without a full rental value land value tax, it CAN be speculated upon, leading to repeated and predictable booms and busts. Capital goods, from oil to cars, etc. can be manufactured to meet demand, or reduced accordingly. They alone, don’t cause “cycles.” For that, we need economists, and more so, politicians.
Some economists are better than others. Paul Krugman is pretty good. Joseph Stiglitz is better. Michael Hudson and Yanis Varoufakis, both of whom I’ve interviewed or sponsored (Hudson) at debates through my Georgist group, have a lot of important things to say too. The basic problem with economics is you can’t run controlled experiments; there’s no “Control Earth” to compare policies against. And it’s fiendishly complex too.
I’m not sure how Congress can control shortages in the real world. They can barely pass laws to actually promote the general welfare, and often do the reverse. We don’t have fair elections anymore, maybe never did, and even if we did, the public is too easily misled and angry to elect rational, coherent and fair politicians. I’m amazed anything works even as well as it does.
Christine Romer, Obama’s main economic advisor at the beginning of his first term, recommended a $1.3 trillion stimulus package. Obama was only able to pass about half that, after the Republicans insisted on tax cuts that went mainly to the already wealthy. So the economy only gradually recovered from the GFC. It turned out later that $1.3 trillion was about exactly what the Output Gap was during those years, so Romer was spot on with her calculations.
I have no doubt that Trump will screw up the calculators (people) in the so-called “deep state” and Krugman has been saying for some time that we soon won’t be able to trust the numbers; many others are saying so now too. He’d mess with the Output Gap if he knew what it was or thought it was in his interest to do so. He doesn’t have to if it’s just ignored.
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At the time, Keynes work was entirely theoretical and the concept of GDP was only just being introduced. It was also Keynes that introduced the concept of demand-pull inflation.
In purely theoretical terms, simply giving money to seniors to spend without them contributing to the production was thought to potentially lead to demand-pull inflation from too much spending chasing too few goods produced.
Whether government investment to expand production could occur fast enough to forestall inflation was probably a big unknown at the time, especially considering any spending had to be approved by congress first.
By balancing the inflows and outflows to the SSI program, inflation could be indefinitely forestalled, as the increase in aggregate demand by seniors from the program would be entirely offset by the reduction in spending power of workers.
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Thanks, B.
I fundamentally agree with you.
I know of no inflation that has been caused by too much demand. Individual products can be affected by excessive demand, but an entire economy? Not only does that SEEM impossible, but historically it hasn’t happened, even during the oft-cited WWII.
All inflations are supply based, and yes, that goes especially for WWII.
Now, some may say that supply shortages are caused by excessive demand, but again, excessive demand for oil and food, the primary inflation instruments, is hard to accomplish.
Inflations come on rather swiftly, so what would cause a quick increase in the demand for oil and food? Possibly a war (for oil), but the world can ramp up oil production rather quickly. The Arabs can do it overnight.
As for the demand for food, are people suddenly going to start eating more? Those old people who get increased Social Security — are they now going to become gluttons?
Both common sense and historical statistics show that the “too much money chasing too few goods” meme is just plain wrong –at least the “too much money” part. The too few goods (especially food and oil) is spot on.
You’re right about Congress delaying, but Trump has proved Congress will do what a strong leader demands. (Mostly.) This is especially true if the demand involves more money coming in to the Congressperson’s state via federal spending.
(Only red states are stupid enough to resist Obamacare, which would have brought billions into those states. But that’s what happens to those who believe Donald Trump knows something.)
I greatly respect Keynes as a real trailblazer in economics, but not everything he preached was correct
Hey, even Einstein was wrong about entanglement. If we deify a leader science couldn’t progress.
Again, thank you and Scott on the Spot for your excellent comments. Much appreciated.
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Thank you for this. I have my own thoughts on the subject.
See attached.
Regards,
Ed.
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No attachment
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Scott, as for cycles, how long are the cycles and which part of the cycle are we in?
The term “cycle” implies some sort of regularity and predictability, which if you have a handle on that, please share it with me so I can invest accordingly.
As for the $1.3 trillion, the key is less “how much” but “how.” The fact that her 1.3 trillion happened to match some other mythical figure is mere coincidence. There is however some merit in the “helicopter” solution of simply spending the money, because a shortage of money is one of the primary reasons for a recession.
As for the prevention/cure inflations, it’s not all that difficult. Biden helped cure the COVID shortages that caused the COVID inflation, and he could have done more if he didn’t have to deal with a recalcitrant Congress whose sole goal was to block anything that could help the country and Biden’s re-election.
Trump doesn’t have that problem.
As far as inflation prevention and cure, here are some suggestions:
And many other things that would lift the poor, narrow the Gap, and improve the world. It’s not really a mystery. I’ll bet you could come up with a great list, maybe a better list. I’d love to see it.
I refuse to believe that the best we can do to solve the world’s problems is MAGA and Trump. If not, we a doomed to become Russia, and the world’s last hope is gone.
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Here is Mason Gaffney’s paper on the land cycle, written in August 2008, so it kinda predicted the great housing crash that was somewhat underway by then: https://www.masongaffney.org/essays/Great_Crash_of_2008.pdf. He made less formal predictions earlier that year and the year before. His colleague, Fred Harrison, who co-authored “The Corruption of Economics” book with him, made the prediction accurately years prior to that and now predicts the same sort of crash for 2026, starting in China this time, though Covid may have already accelerated that housing bubble collapse. Here’s a short review: https://www.landcycleinvestor.com/post/what-can-we-learn-from-the-greatest-names-in-land-cycle-research
Here’s the CATO Institute’s take on the Land Cycle, with a chart going back to 1836: https://www.cato.org/commentary/great-18-year-real-estate-cycle#. Again, there are some exceptions for major world events, so 18 years is an average. More importantly, the steps Homer Hoyt identified and Mason Gaffney expanded upon, describe how to see where we are in the cycle. Since Land plays such an outsized role in economic cycles, because of bank leverage on home (read: land) loans, it’s a major driver of most of the largest booms and busts.
One can come up with all kinds of worthy expenditures for governments to make. What one cannot do, however, is expand labor beyond the quantity and quality (e.g. skills) of it, or expand Land (capitalized here to mean ALL of nature’s resources, including location, pollution allowances). Only capital, which is manmade, can be increased. These are the 3 factors of production under classical economics (see: “The Corruption of Economics” to learn how Land was deliberately conflated with Capital, which has nearly the opposite characteristics, in order to benefit the landed universities and economists supported by rentiers disguised as capitalists). Money is not wealth, so it can made made infinitely by monetarily sovereign governments, but human and natural resources ARE limited so they can’t be utilized infinitely. If the supply can’t keep up, then, as you’ve said, there is inflation.
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Scott, you said, “What one cannot do, however, is expand labor beyond the quantity and quality (e.g. skills) of it. . . “
You also said, “What was not foreseen at the time was the extraordinary increases in worker productivity due to automation and now AI, along with the impact of low cost imports on the productive capacity of the economy.”
In short we can’t expand labor except when we can, which is all the time.
The notion of “cycles” suggests inevitability. It’s the idea that we will have these regular cycles no matter what we try to do. Alternatively, we can do things to prevent the cycles.
I believe the cycles are an illusion. When one happens, it constitutes proof of the rule, and when it don’t happen there is a “good reason” for the exception to the rule.
But the rule still exists.
That’s not science. That’s quackery.
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I think I have to temper my second prediction about worker productivity with lower expectations of actual profit, which is ultimately what drives continued CapEx. Economist Noah Smith writes that growth in AI spending is now exceeding ALL of growth in consumer spending combined: https://www.noahpinion.blog/p/who-will-actually-profit-from-the.
And it’s unclear, but actually pretty unlikely, that worker productivity leading to profits, and not just “AI Slop” which is increasing exponentially now, will ever sustain the CapEx currently being spent.
Sure, spending can moderate when “enough” AI compute is online, but companies will have to cub Demand by charging for it too (I capitalized “Demand” to distinguish Economic Demand from actual physical demand, which no economic system seems to be able to meet so far, and probably never will; e.g. there are still hungry, homeless, people everywhere, even in the richest countries. It’s just not considered a priority, or, perhaps, cruelty is really the point, as so many commentators are saying of the present Administration. People are a lot darker and meaner than I and may others, used to think).
The real estate cycle is real. There are measurable steps along the way that have consequences in the full economy, and it isn’t just tautological either; e.g. the economy contracts because people stop borrowing and spending. Land is unlike capital in the following ways:
Land is finite (they ain’t making more of it!). Capital is a result of labor acting upon the Land (ALL of nature’s resources), so it can always be increased.
Land is nearly forever (well, even the Earth will vanish someday). Capital degrades, becomes obsolete, etc.
Land was created by nature. Capital is created by human beings to fulfill their needs and desires.
Conflating the too, as Mason Gaffney and Fred Harrison said in their co-authored short book, is really “The Corruption of Economics.” And this conflation has real effects on boom and bust economic cycles. Until that’s resolved, no amount of sovereign money will eliminate those cycles, though it can take the edge off and prevent recessions from turning into depressions.
I still believe using a fairly calculated Output Gap can roughly guide the amount of money that should be produced by a monetarily sovereign government at any given time (quarterly would be best, IMO).
And this money, distributed per capita to the states, perhaps through a system of public banks, would be of benefit to the vast majority of people.
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I guess you really do believe there is a reasonably reliable calculation for “potential GDP.” I don’t. It doesn’t exist for yesterday. It really doesn’t exist for today. And it really, really, really doesn’t exist for tomorrow.
And as far as the “land cycle,” I suspect you’re living in the 1800s. Land is not scarce. There is plenty of land. The “they’re not makin’ it any more” Mark Twainish homily, simply does not apply. America is loaded with land that can be used for everything.
And yes, they even ARE makin’ it.
Before you were born, the City of Chicago created land that became Grant Park and Lincoln Park, the nation’s largest city park system. They just built it in Lake Michigan. No problem then. No problem today. Just ask the Arabs or China who have been building islands in the ocean.
I’ll tell you what is scarce: MONEY. Right, money, that thing the federal government has the infinite ability to create but won’t because of the Big Lie that it will cause inflation. The real reason: It’s the “Who will pick up the garbage?” syndrome. The rich want a ready supply of desperate people who will labor for pennies. Slavery never has gone out of style for the very rich.
Rather than worrying about an “Output Gap” guiding government spending (which falsely implies that “too much spending” is a bad thing), we should let obvious human needs guide us.
America needs more educated young people, so spend on education.
America needs less poverty and crime (most of which is poverty-based) so spend on anti-poverty initiatives and reduce taxes on the lowest 90%.
America needs less power in the hands of the rich, so spend to lift the poor and end tax loopholes that only the rich can benefit from.
America needs better science, better research, better healthcare, more secure retirement, better housing, clean energy, transportation, — so spend on those things.
Let’s not dilly dally with Output Gaps and Potential GDP bullshit that only an economist could love. Do what actually is needed. It’s no great mystery. It’s right in front of our eyes. And don’t worry about spending too much. That never has happened and never will. It’s part of the Big Lie.
I’ll bet you could come up with dozens of things the government could and should do, just by reading the newspaper. Where would you spend the money? I mentioned some things in the post. Give me your better thoughts.
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Here in NYC, our city council dedicates a portion of the city budget to constituents voting what to spend those funds upon, per district. It’s a small percentage, but it shows how referendums could prioritize spending of finite money (it’s finite in non-monetarily sovereign NYC, of course, not in the federal government). That’s how I would do it. Actually, that how I DID do it, as a teenager, when I wrote and illustrated “Impland: An Alien Utopia,” which is now available in a 40th anniversary edition on Amazon. But I digress…
I don’t expect referendums to be useful or practical for complicated federal spending, and probably not wise. People will put provincial needs first and vote to defund the military, which we don’t need…until we do, but then it’ll be too late. We vote on general welfare needs for the country by a representative government, at least in theory. There are too many ways votes are suppressed and ignored to go into here.
The limit is not money, as you’ve said so many times over the years, but actual resources: human and natural. No one knows exactly what those are, but it’s possible to get a rough idea per quarter, then adjust as needed next quarter. If it’s off by a few billion in a multi-trillion budget, or deca-trillion dollar GDP, that’s a rounding error and still better than the current system which is almost entirely political now.
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Scott, I agree with all you have said, with only one slight caveat. Money is a limit — an artificial limit — which the incredibly stupid “debt ceiling” proves every year.
The Trumpers’ mantra is “drill, baby, drill.” The real mantra should be, “spend, baby, spend.” We have the power right in our hands, to make this a better world, and we can do it without collecting even one extra penny in taxes.
It is so sad to watch the misery this nation causes its own people because of ignorance and hatred.
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I’ve been writing about getting rid of the unconstitutional debt ceiling for over a decade. Here’s the last time I wrote about it in Opednews.com: https://www.opednews.com/populum/page.php?f=Debt-No-More-How-Obama-ca-by-Scott-Baker-Banks_Constitution-In-Crisis_Constitution-The_Constitutional-Amendments-131018-391.html. More recently I post to Twitter/X where I’m in the top 1% of posters (it’s a very, very long tail from the bottom of top 1% – around 700 followers – to Elon Musk with his 220m followers).
I proposed Greenbacking, not debt-spending because some people just can’t get their head around debt that is not really debt, and Greenbacking – issuing money directly from the Treasury like Lincoln did during the Civil War – is a way to spend without debt. Like you, I suspect it’s not really the debt people hate though; it’s the government, even when they hurt themselves by voting for politicians who would cut spending. Others connect it to taxes, and they want nothing but lower taxes – the rich are this way.
I wonder if there’s any kind of red line. How much do people have to punish themselves just to prove a point?
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