Chapter 2
Chapter 1 began with this:
MS$=∞ is one of the most important equations in economics. When the information sources acknowledge it and the public understands it, we could have, in America:
- The end of federal taxes collected ostensibly for funding (Collect federal taxes only to control the economy and to assure demand for the U.S. dollar.)
- The end of poverty by instituting a more generous Social Security for everyone in America, regardless of age.
- Free, no-deductible healthcare for every man, woman, and child regardless of prior health.
- Free K-16+ education, including professional (medical, legal, etc.) for all who want it.
- Free and generous retirement income
- Modern and maintained infrastructure — free roads, utilities, buildings, and mass transit.
- Responsive and helpful government services.
- The prevention/cure for recessions, depressions, and inflation.
- The research and development of AI and other inventions to protect and improve the lives of the people.
- The end of the state and local governments’ need for taxes to fund spending
The equation means: A monetarily sovereign has unlimited access to its own currency.
We now will continue with:
VI. Modern and maintained infrastructure — free roads, utilities, buildings, and mass transit.
The U.S. infrastructure costs are layered into federal, state, local, and household budgets. Each layer funds different types of assets with different lifespans and different replacement cycles. Our Monetarily Sovereign federal government could fund the entire system, simplifying national infrastructure management.
Infrastructure includes roads & highways, bridges, mass transit, airports, ports, water systems, sewage & stormwater, electric grid, broadband, public buildings, schools & universities, and housing infrastructure.
Each category has its own cost structure and funding.
Total U.S. infrastructure spending (all levels combined)
Across all categories, the U.S. spends about $1.5–2.0 trillion per year. This includes federal, state, local, and private household utility payments. That is the cost of maintaining and expanding the national physical infrastructure.
The federal government spends about $350–450 billion per year to fund interstate highways, FAA & airports, Amtrak, the Army Corps of Engineers, water projects, broadband grants, energy grid modernization grants, federal buildings, national parks, disaster rebuilding, and transit capital grants.
State governments spend about $500–600 billion per year to fund state highways, state universities, state water systems, state transit agencies, state buildings, state parks, and state energy programs.
While the federal government merely creates the dollars it spends, ad hoc, states rely on gas taxes, vehicle registration fees, sales taxes, bonds plus usage fees, all of which come from the public.
Local governments spend about $500–600 billion per year to fund local roads, local water & sewer, local transit operations, school buildings, police/fire stations, libraries, local airports, local parks, and zoning & planning infrastructure.
Local governments rely on property taxes, local sales taxes, municipal bonds, utility fees plus usage fees. These too come from the pockets of the public.
Households & individuals spend about $300–400 billion per year. (These are the usage fees). Households pay water bills, sewer bills, electricity, natural gas, broadband, trash collection, stormwater fees, tolls, transit fares, vehicle registration, gasoline taxes, and HOA infrastructure fees.
This is infrastructure paid directly by individuals, not governments.
In summary, the total cost of the national infrastructure system is about $ 1.6- 2.0 trillion, of which the federal government pays $350–450 billion- dollars that it creates and that do not come from the public.* The state and local government, and households pay a total of $ 1.3- 1.6 trillion, all of which comes from the pockets of the public.
*Note. In our Monetarily Sovereign government system, the purpose of federal taxes is not to provide spending funds to the government. The government creates, ad hoc, all the dollars it needs and uses. The purposes of taxes are:
1. To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward, and
2. To assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
Our Monetarily Sovereign federal government could fund all $1.6–2.0 trillion a year without financial constraint. State/local taxes could be eliminated or drastically reduced. Household utility bills could be eliminated or subsidized. Infrastructure would become free at the point of use (like roads already are).
This would eliminate deferred maintenance, infrastructure debt costs, local budget crises, regressive utility burdens, tolls and fares, and infrastructure inequality between rich and poor regions.
And it would not increase real resource use beyond the existing $1.6–2.0T envelope — it would simply remove the financial burden from the public and add to net growth dollars coming in to the public.
IN SUMMARY
America’s total infrastructure cost is about $1.6–2.0 trillion per year, of which $1.3-1.6 trillion comes from the pockets of the public. Our Monetarily Sovereign federal government could fund all of it at no cost to anyone.
Control: There are several formulas by which the dollars could be allocated, allowing local governments to retain control.
- On a state overall per-capita basis (and the states would allocate to counties and cities)
- Directly to municipalities on a per-capita basis
- By specific infrastructure according to usage.
- Additionally, by specific proposal and need.
Whatever system is used, the public would save money, and more infrastructure would be upgraded, without funding hesitations.
VII. Responsive and helpful government services. Unlike households and businesses, and even state and local governments, the federal government does not need to save money. The biggest problem facing the federal government is not waste, but lack.
That is, for our Monetarily Sovereign federal government, cost is not the concern. The government creates all the dollars it needs, simply by pressing computer keys.
The concern is whether a job is done well and timely.
This is alien thinking for most of us who are accustomed to visualizing our own households and businesses, where costs are a major concern. But as many Federal Reserve Chairmen have said:
Alan Greenspan, Former Federal Reserve Chairman: “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.”
Despite Elon Musk’s claims and his infamous chainsaw, he did not save the American taxpayer one cent. In fact, he cost us billions in lost services that the government should have provided but couldn’t.
If ever you need to contact a government agency for the help they are supposed to provide, and the phone rings forever or you stand in line forever, you can thank the obsolete, harmful think of Elon Musk and his failed claims.
In a strictly financial sense, federal wasted spending is more beneficial to taxpayers than no spending, because at least federal “wasted” spending enters the economy as growth dollars. The federal government is not “too big.” This is a big country, with big needs, and it needs a big government to provide help for those needs.
Unlike state and local governments, which do use tax dollars, the federal government needs no tax dollars, and its spending costs you nothing. That is how, as alien as it may seem, our Monetarily Sovereign government operates.
VIII. The prevention/cure for recessions, depressions, and inflation. This is discussed in more detail at: The inflation myths debunked. It’s never “money-printing.” It’s always shortages.
When things become scarce, prices go up. When things become more plentiful, prices go down. That is a fundamental truth in economics. Inflation is not a situation where one or two or even several prices have gone up. Inflation is a general increase in prices.
While spending by the federal government can cause certain specific prices to go up because certain specific products become scarce, federal spending cannot, and never has, caused all prices of all things to go up.
However, some products and product categories are so essential that their scarcity can cause prices to rise. Oil, for instance, is used by all industries. Oil prices rise and fall with scarcity, and those changes are reflected in inflation.
Similarly, food is consumed by everyone, and food scarcity depends on weather, disease, and labor availability, so the cost of food affects inflation.
While federal spending alone doesn’t cause inflation, using it to address shortages can help prevent or fix it.
For example, oil-related inflation could be tackled by funding efforts to produce and distribute more oil or alternative energy, and food-related inflation could be eased by supporting farmers or importing food.
Cutting federal spending to fight inflation usually backfires, leading to recessions that don’t solve the underlying shortages, as “stagflation” has shown. The Federal Reserve’s approach of raising interest rates is also flawed—it doesn’t create more oil or grow more food, and shrinking the economy is like trying to cure anemia with leeches.
Instead of relying on Congress, which moves slowly, or the Fed, which lacks the right tools, we should have a dedicated Department of Inflation Control. This agency could boost or scale back oil and food production through direct payments, tapping reserves, or imports. It would monitor critical goods and services to act quickly against looming shortages.
In III. Free, no-deductible healthcare for every man, woman, and child regardless of prior health. We advocated for a healthcare program that would exacerbate current shortages of healthcare workers and pharmaceuticals, resulting in high, unaffordable costs to the public.
While the federal government has the power to provide free, comprehensive Medicare to everyone, thus eliminating the cost problem, shortages of services and drugs still are unacceptable.
The healthcare industry provides assets and services that have various lifespans and various replacement times;
Long‑lived assets (slow replacement): Doctors (training pipeline ≈ 10–12 years; career ≈ 35–40 years), Hospitals (lifespan ≈ 40–60 years), Universities (effectively perpetual). These assets cannot expand quickly. Their supply curve is inelastic in the short run.
Medium‑lived assets: CT scanners (lifespan ≈ 7–10 years), MRI machines (≈ 10 years), Ambulances (≈ 5–10 years), Medical office buildings (≈ 20–30 years). These can expand moderately fast.
Short‑lived assets: Crutches (≈ 2 months), Bandages, syringes, consumables (days–weeks), Food (days–months), Clothing (months–years). These can expand very fast. Scarcity risk is highest when demand hits long‑lived assets.
When you inject additional billions of dollars into Medicare for All, demand will rise across all categories. We will see a time‑dependent scarcity curve.
In years 1–5, shortage risk will be highest because demand suddenly exceeds supply for doctors, nurses, hospitals, medical equipment, and medical education. These cannot scale instantly.
By years 5–15, scarcity will decrease as more doctors graduate, hospitals are built, equipment is manufactured, and universities expand capacity. Supply begins catching up.
By years 15–40, scarcity will be minimal as longer-lived assets have expanded to meet the new demand baseline. Supply will stabilize as real productive capacity has caught up to nominal demand.
Thus, the sooner we recognize that shortages cause prices to rise and prepare for them, the sooner we will prevent or at least minimize those shortages and the resulting cost increases.
Inflation is not a monetary phenomenon. It is a capacity ramp phenomenon. Money is instantaneous. Capacity is slow. A lack of planning for supply disruptions causes prices to rise.
X. The end of the state and local governments’ need for taxes to fund spending. We discussed this at VII. Responsive and helpful government services.
State and local governments are monetarily NON-sovereign. Financially, they resemble households and businesses. They require income in the form of taxes, fees, and borrowing. By contrast, the Monetarily Sovereign federal government does not need to tax or borrow for spending.
A 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.”
Therefore, the federal government can save taxpayers billions of dollars by funding many of the functions now funded by state and local government taxpayers.
This does not require these governments to give up control. While Social Security and Medicare provide dollars, doctors and hospitals determine the vast majority of what they fund.
And just as Social Security and Medicare provide financial assistance to people, the federal government can provide financial assistance to state and local governments, thereby easing the burden on taxpayers.
This could be handled by a “Medicare-like” Department of State Aid; just as Medicare pays for healthcare financial obligations, the Department of State Aid could pay for state financial obligations.
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REGARDING SLOTH
The federal government has the means to close the income, wealth, and power Gap between the rich and the poor. As a monetarily sovereign nation, it can improve and safeguard the lives of all Americans without costing anyone a dime.
Unfortunately, some oppose this idea, clinging to the false belief that giving benefits to the poor will make them lazy and unwilling to take on the tough, undesirable jobs. This view is not just wrong but cruel.
From what I’ve seen, the poor are among the hardest-working people in the country, held back not by a lack of effort but by a lack of opportunity.
The fix for poverty is money—something the federal government has in unlimited supply—and the fix for filling jobs is fair pay.
If the worry is “Who will scrub the floors and toilets?” the answer is simple: pay enough to make people want to do those jobs or automate them. The government could set higher minimum wages and help employers cover the cost if needed.
Forcing people to choose between starvation and the hardest, most unpleasant work is wrong, especially when the solution costs nothing. Building national prosperity on the backs of the poor is unjust when it’s so easily avoidable.
Rodger Malcolm Mitchell
#Monetary Sovereignty - Mitchell 