The economists have failed America by promulgating “flat earth” theories that prevent economic growth or support for the people.
Government can be costly, but it’s worth the expense if it works to protect and enhance people’s lives. Unfortunately, today’s economists have completely failed in their duty to guide the government’s financial choices.
Economics suffers from a language problem so severe that it reverses cause and effect.
The economists tell us that the federal government “borrows” dollars, can “run out of money,” must rely on taxes for “revenue,” and carries a crushing, unsustainable “debt” burden that someday must be “paid back.”
All of them are false, whether intentional or not. They’re “flat earth” claims showing ignorance at best and malice at worst.
From these assumptions come endless false claims that America cannot afford Medicare for All, universal education, infrastructure renewal, or Social Security expansion.
The United States government is not a household, business, or state government. It is the issuer of the U.S. dollar. It creates dollars every time it spends, which uniquely, it can do endlessly.
Federal spending occurs when the government instructs the banking system to credit bank accounts. New dollars are created by that process. Taxes do not provide those dollars.
Federal taxes serve other purposes. They create demand for the currency because taxes must be paid in dollars. They can discourage certain behaviors, and tax breaks encourage other behaviors.
Taxes can shift purchasing power, but unfortunately, current tax laws are regressive, moving money from the poor to the wealthy. Take FICA, for example—it’s collected only from lower earners and, in truth, doesn’t actually fund Medicare or Social Security.
Taxes don’t fund federal spending. The government doesn’t spend “taxpayer money” or wait for tax revenue before making expenditures. Instead, it simply instructs banks to increase the balances in creditors’ checking accounts to pay for goods and services.
Even if the federal government didn’t collect a single penny in taxes, it still could continue to pay its bills, forever.
Treasury securities – T-bills, T-notes and T-bonds – are not forms of borrowing. They are nothing like corporate or even state bonds. They are interest-bearing accounts at the Federal Reserve system. They are better understood as savings accounts than loans necessary for spending.
A T-bill is like a dollar bill. Both “bills” are government financial obligations. Both are equally backed by the full faith and credit of the U.S. government.
The sole difference is that the dollar bill doesn’t pay interest or have an expiration date. So, when someone says they want to reduce federal “debt,” they’re actually saying they want fewer dollars in the economy.
And, by formula, reducing dollars causes recessions and depressions. Gross Domestic Product = Federal Spending + Non-federal Spending + Net Exports. Reduce the dollars in the economy and you reduce GDP, i.e., cause a recession or depression.
The federal government spends first and issues Treasury securities afterward. The purpose of Treasuries is to provide a safe place to store dollars and to help the Fed control interest rates — not to acquire dollars the government supposedly lacks.
This misunderstanding infects nearly every discussion of deficits.
Large federal deficits are not inherently bad; they mostly are necessary and good. Their value depends on what they finance. The government has the infinite ability to fund deficits of any size, and all deficits pump growth dollars into the economy.
A trillion dollars spent on an unnecessary war may produce little public benefit. A trillion dollars spent building hospitals, training doctors, modernizing the electric grid, expanding housing supply, supporting Social Security, or advancing energy technology may increase productive capacity and benefit all Americans.
Debt and deficit size alone tells us almost nothing. The obsession with the numerical size of the federal debt ignores the crucial question: What real resources are being created, expanded, repaired, or consumed?
The often-cited “Debt-to-GDP ratio” doesn’t say anything about the government’s finances. Economists sometimes panic if the ratio goes over some arbitrary threshold, like 100% or more. But in reality, it tells nothing about a nation’s solvency or its ability to pay its bills, which is essentially limitless.
Inflation is routinely misunderstood. We are told inflation results from “too much money” or “excessive aggregate demand.” But demand for what? Prices do not rise in the abstract. Prices rise only where scarcity exists.
Housing prices rise when housing is scarce. Energy prices rise when energy is constrained. Food prices rise when crops fail or transport breaks down. Healthcare prices rise when doctors, nurses, hospitals, or pharmaceuticals are insufficient.
So-called “excess demand” means demand relative to limited supply. The Federal Reserve cannot create oil, build houses, train nurses, repair ports, or produce semiconductors. Its principal tool is the manipulation of interest rates.
The Fed claims that higher rates “cool” the economy by reducing borrowing and weakening spending pressure. But in the real world, “cooling” means slowing construction, discouraging investment, or increasing unemployment.
Ironically, higher interest rates can worsen shortages. In housing, for example, higher borrowing costs may reduce homebuilding, which further constrains supply and keeps prices elevated. Builders facing higher financing costs may simply raise prices.
And higher rates force the government to add more growth dollars to the economy.
The Fed controls interest rates, but it does not control the physical economy. That power belongs to Congress and the President through its spending and, and regulations.
The true constraints on federal spending are not financial. Nothing is “unaffordable” or financially “unsustainable.” Those words are wrongly used as excuses not to fund efforts that aid the people.
The only spending constraints are available labor, technology, energy, raw materials, productive capacity, transportation, and political will. America cannot run out of dollars. It can run out of doctors, housing, energy and competent governance, and those scarcities only can be cured by deficit spending.
We already possess the productive ability to provide every American with healthcare, food, housing, transportation, education, retirement security, and access to information beyond anything imagined by previous generations. The limiting factor is no longer financial. It is philosophical.
What is the purpose of an economy? Modern economists rarely ask that question directly. Instead, they speak endlessly about: GDP, productivity, labor markets, deficits, interest rates, inflation targets, and “full employment.”
But these are measurements, not purposes. The purpose of an economy should be simple. The same as the purpose of a government: To protect and improve the lives of the people.
That phrase — improve the lives — changes everything.
If the purpose of economics is human well-being, then labor is not automatically sacred. Labor is a tool. Human suffering is not an economic virtue. Artificial scarcity is not moral discipline. Exhaustion is not a measure of worth.
For centuries, human beings spent much of their lives performing backbreaking labor merely to survive: Chopping wood, hauling water, washing clothes by hand, growing food with primitive tools, traveling by foot or horse, dying young from disease.
Technology liberated humanity from much of that misery.
The washing machine did not destroy civilization. It destroyed washboards. The tractor did not destroy civilization. It destroyed endless hours behind plows. The car did not destroy travel. It facilitated local travel and opened the door to airflight.
Yet every technological advance has been accompanied by fear: “If machines do all the work, what will people do?”
The answer is obvious: If machines do all the work that people don’t want to do, people will live the lives they want to live.
They will raise children, study, create art, build relationships, explore ideas, travel, invent, teach, learn, play games, care for one another, and pursue whatever gives their lives meaning. Some will still work hard because they enjoy challenge and accomplishment. Others will work less because survival no longer requires endless labor.
This is not decadence. It is progress. The tragedy is that modern economies often treat labor itself as the goal rather than the means. Thus we have as one of the Fed’s mandates: “Full employment”
It has become a sacred phrase even as automation steadily reduces the need for human labor. Entire industries now operate with a fraction of the workers once required. Artificial intelligence may soon reduce the need for millions more.
Yet instead of asking: “How can technology improve human life?” economists ask: “How can we force people to remain economically necessary?”
That is backwards. The purpose of humanity is not to provide jobs for humans. The purpose of technology is not to preserve labor. The purpose of an economy is not to maximize toil. The purpose of an economy is to maximize meaningful human flourishing within the physical limits of reality.
This does not mean resources are infinite. They are not. Energy matters. Materials matter. Environmental limits matter.
Human skills matter.
But dollars are not the scarce resource.
The United States can mobilize enormous productive capacity whenever it chooses. It proved this during wars, financial crises, pandemics, and technological races. The obstacle is not money. The obstacle is political will and public understanding.
Wars demonstrate this brutally. Whenever nations decide destruction is necessary, suddenly the “unaffordable” becomes affordable: Factories appear, research accelerates, labor mobilizes, deficits explode, and governments somehow “find the money.”
Yet when the subject is healthcare, housing, education, or poverty reduction, society suddenly becomes obsessed with “fiscal responsibility.”
This is not economics. It is priority. The deeper danger is not inflation or deficits. The deeper danger is allowing obsolete myths to prevent civilization from using its productive powers to improve human life.
A society capable of artificial intelligence, robotics, instant communication, advanced medicine, and planetary-scale production should not fear abundance.
It should fear the inability to imagine what abundance is for. We have the money. We have the machines to help us. We even have the intellect. All we need is to understand what our goal really is.
I have not had a paying job in 18 years. My main concerns revolve around mortality. I’m 91. Still physically active. Still interested. Still involved. If machines waited on me hand and foot, and I lived another 18 or 91 years, I would be happy.
But if you were to listen to economists, I should worry about having nothing to do, so I should want full employment so there would be meaning in my life. And I should worry about the federal government running out of money. And I should worry about the Medicare and Social Security trust funds receiving enough money from FICA. And I should worry about the federal debt, and the Debt/GDP ratio.
You have one life. On average you will live about 31,000 days, and be awake for about 2/3 of that time, about half a million waking hours.
How will you spend those relatively few that you have left? How many of those scarce hours will you waste doing things you hate or find boring? How many will you spend working vs. having enjoyment? How many will you spend ill, without proper healthcare? How many will you spend in bad housing in a bad neighborhood?
What is your purpose in life? The economists measure the government’s ability to pay for things (unlimited), but do they measure the pleasure or sadness you will have from your limited years? The economists measure dollars, but not lives.
President Kennedy famously (and wrongly) said, ““Ask not what your country can do for you — ask what you can do for your country.”
But the nation and the economy exist for human flourishing, Humans don’t live for the economy and the country.
We have arrived at the point where we can have it all:
- Free healthcare for every man, woman, and child
- The end of poverty and the narrowing of the gap between rich and poor.
- As much free education as each individual wants.
- Government funding of research and development for new beneficial products and services
- Fairer allocation of power and wealth
The only, ONLY thing standing in our way is ignorance about a few facts:
- The purpose of government and the economy is to improve and protect the lives of the people, and not the other way around
- Our Monetarily Sovereign government is not financially constrained. It can pay for anything, and do it without using tax dollars.
- Federal debts and deficits are not burdens on the federal government, on taxpayers, or on the economy.
- Inflations are caused by shortages of goods and services. To prevent/cure inflations, prevent/cure shortages with federal spending.
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 