Veronique de Rugy is the George Gibbs Chair in Political Economy and Senior Research Fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the US economy, the federal budget, taxation, tax competition, and cronyism. She received her MA in economics from the Paris Dauphine University and her PhD in economics from the Panthéon-Sorbonne University.

The following article came from the April 4, 2025, The Week Magazine

Veronique de Rugy National Review

“Washington’s so-called debate over deficit spending is a complete joke,” said Veronique de Rugy.

As the U.S. faces the consequences of runaway pandemic spending and deficits that could add $25 trillion to our existing $36 trillion national debt over the next decade, “neither party is serious” about tackling the problem.

Presumably, Ms. de Rugy believes “the problem” is federal debt and deficits, which as you learned in previous posts is no problem at all.

Debt and deficits may be problems for monetarily non-sovereign individuals, state and local governments, and businesses, but they do not burden the Monetarily Sovereign federal government.

It seems that Ms. de Rugy is ignorant of Monetary Sovereignty or wants you to be ignorant.

We all are monetarily non-sovereign. We cannot create dollars at will. However, the U.S. government is monetarily sovereign and can create dollars with the touch of a computer key.

It would be amazing if Ms. de Rugy didn’t know this, yet here we are.

Democrats refuse to acknowledge” the crisis even exists, instead pretending “the fix for every economic problem is more government spending paid for by rich people.”

No, the fix really is “more government spending,” not “paid for by rich people.” Federal spending- ALL federal spending- is paid for by money creation, that touch of a computer key.

As we said, you can’t do it, I can’t do it, and even Elon Musk can’t. But the federal government can, and in fact, it does it every day with every payment of every financial obligation.

Meanwhile, they label any suggestion on taming Social Security and Medicare as “devastating and, hence, unacceptable,” even though those programs will account for half of all non-interest federal spending by 2035.

If by “taming” she means cutting benefits, then she is spouting misinformation that the rich love. Cutting Social Security and Medicare benefits pleases the rich by widening the income/wealth/power Gap between the rich and the rest.

No agency of the federal government can become insolvent unless Congress and the President want it to. So the only debt crisis is the crisis of misinformation (or disinformation, the intentional form of misinformation).

The claims that the Social Security and Medicare trust fund will run short of money are- let me be clear here- dirty, stinking, rotten lies. This can happen only if Congress and the President want it to happen.

If Congress weren’t beholden to the rich, it would vote to add a trillion dollars (or $100 trillion, for that matter) to the trust funds or simply pay for Social Security and Medicare directly without the useless trust funds.

But that is the last thing Congress’s wealthy donors want, so they bleat sadly about the “debt crisis” and their inability to “find the money” to keep these programs solvent.

Republicans, for their part, “try to convince voters they care about the deficit” but feed the delusion that they can balance the budget through discretionary spending cuts that leave Social Security and Medicare untouched.

The delusion is that balancing the federal budget, i.e., eliminating the deficit, would benefit anyone. It wouldn’t. It would be a financial disaster.

Gross Domestic Product (GDP) is a measure of the economy. The formula for GDP is:

GDP = Federal Spending + Nonfederal Spending + Net Exports

Even the most basic understanding of algebra tells you that reduced federal spending reduces GDP, i.e. cuts the economy, while increases in Federal Spending grow the economy. And with even the tiniest inflation, a balanced budget instantly would reduce GDP.

A party that really did “care about fiscal responsibility” also wouldn’t claim that President Trump’s 2017 tax cuts can be extended with no budget cost, or have pushed through the recent continuing resolution that authorized 1.7 trillion in spending – 47 percent more than President Barack Obana’s last budget.

A writer who really ” cared about fiscal responsibility” would take the trouble to learn about Monetary Sovereignty and what it means for federal finances rather than assuming the federal government has the same financial limits we do.

With Washinton in a state of bipartisn denial, “the debt crisis will only get worse.”

Yes, the “debt crisis” is worsening, but it’s not a crisis about federal agency insolvency. It’s a crisis of ignorance, intentional or otherwise, about federal government finances.

THE FEDERAL GOVERNMENT CANNOT RUN SHORT OF U.S. DOLLARS. PERIOD. Someone, please, please inform economics PhD Veronique de Rugy.

And oh yes, if she says, “What about inflation?” Tell her to read, “At long last, let’s put this inflation question to bed.”

Rodger Malcolm Mitchell Monetary Sovereignty

Twitter: @rodgermitchell

Search #monetarysovereignty

Facebook: Rodger Malcolm Mitchell;

MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell;

https://www.academia.edu/

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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.

MONETARY SOVEREIGNTY

Donald Trump has offered five reasons to raise tariffs:

1. He claims that tariffs will force foreign manufacturers’ prices up, which will help American manufacturers compete.

2. He claims many countries, notably China, manipulate currencies and dump products at below-market prices. Tariffs supposedly force these countries to raise their prices.

3. He claims that tariffs can help reduce the U.S. trade deficit and encourage the domestic consumption of American-made products.

4. He claims the tariffs will make us less reliant on foreign suppliers of critical sectors like steel and aluminum.

5. He claims the federal income from tariffs will provide money for tax cuts to offset inflationary price increases.

The problem is that these are not only mutually incompatible but individually false.

MUTUALLY INCOMPATIBLE

Consider #1 and #4. Suppose our tariffs successfully force foreign manufacturers to raise prices, making them less able to compete with American manufacturers (#1).

In that case, our government will have less tariff income thought to offset inflation with tax cuts (#5).

The more successful is #1, the less successful will be #5.

Further, because all U.S. tariff money comes not from foreign exporters but from U.S. citizens, the reduction in the trade deficit would be funded by Americans, not by foreigners.

Since the lower 80% of Americans purchase most foreign goods, the proposed tax cut would benefit the rich, not the average American.

All tariffs are transfers of money from the poor and middle to the rich—a right-wing, reverse Robin Hood approach.

The whole point of tariffs is to force prices up. By design, tariffs are inflationary. Inflation will require domestic manufacturers to pay more for supplies.

Workers, paying more for goods and services, will demand higher wages, thus forcing American manufacturers to pay more for labor.

INDIVIDUALLY FALSE

Trump’s claim that tariffs will increase foreign manufacturers’ prices is incorrect. Tariffs will add a sales tax to the foreign manufacturers’ prices. Like all sales taxes, the sales tax will be paid by the buyers, in this case, Americans.

The so-called “trade deficit” is not a real deficit. It is an even exchange. America pays with dollars; they pay with goods and services.

The U.S. creates money effortlessly by pressing computer keys, while others produce goods and services through physical labor and resources.

In that exchange, we receive the better of the bargain.

Tariffs only can make us “less reliant” on foreign suppliers of critical sectors like steel and aluminum by increasing the prices of steel and aluminum.

Paying a higher price for steel and aluminum does not benefit America.

Finally, the biggest lie of all: Trump’s claim that the federal income from tariffs will provide money for tax cuts. The federal government already has infinite money to provide tax cuts.

In fact, if the federal government collected zero taxes, it still could continue to deficit spend endlessly.

Being Monetarily Sovereign, the government never can run short of dollars.

THE BETTER SOLUTION

Strangely, when faced with a problem where the solution involves reward or punishment, Trump always chooses punishment (except for himself). If the problem is how to protect American industry and the American economy in competition with foreigners, the solution is not to punish the foreigners but to reward America.

If foreign companies price their products too low for American industry to compete, the solution is for the U.S. federal government to reward American industry via tax credits and direct payments.

That is what we have already done for many industries:

The U.S. agriculture sector is one of the most heavily subsidized in the U.S. Government support here includes direct payments, crop insurance, and various subsidies aimed at stabilizing farm income and ensuring food security. Rather than increasing consumer prices, as tariffs do, these support lower consumer prices.

Oil, natural gas, and coal industries have historically benefited from tax breaks, deductions, and other financial incentives that lower production costs and encourage domestic energy production.

Renewable energy sectors, such as solar and wind energy, have received substantial federal and state support through tax credits, grants, and loan guarantees to help drive the adoption of cleaner energy sources.

Elon Musk should appreciate this: The U.S. government has offered incentives and funding for developing and manufacturing electric vehicles and related technologies.

Substantial government support is provided to the aerospace and defense industries, including direct contracts for research, development, and procurement, which are essential for maintaining technological leadership and national security.

The semiconductor industry has seen increased government support (such as through the CHIPS Act) via grants and tax incentives. These measures aim to reduce reliance on foreign suppliers, enhance domestic manufacturing capabilities, and secure critical technology supply chains.

SUMMARY

The federal government has the infinite ability to create dollars. Rather than trying to punish other nations with tariffs, which in reality punish Americans and cause inflation, the federal government should reward Americans and simultaneously fight inflation by addressing the shortages that cause it.

Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/

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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.

MONETARY SOVEREIGNTY

Monetary Sovereignty posits two fundamental laws:

1. A Monetarily Sovereign government can infinitely write and modify the laws that create its sovereign currency. Thus, it never unintentionally can run short of its sovereign currency.
2. Inflation, the general increase in prices, is caused by shortages of crucial goods and services.

These laws are not well understood because they do not apply to the monetarily nonsovereign private sector, where dollars are scarce and individual prices can be determined in various ways, not just by shortages.

For more detailed explanation of the two laws see: Monetary Sovereignty, the key to understanding economics and Stimulating economic growth without inflation.

We’ve begun seeing more articles about a “sovereign wealth fund,” most recently in the following article: “The case for a U.S. sovereign wealth fund”, by Stephen Prince.

Professor Prince was a professor of cinema studies at Virginia Tech. He was renowned for his groundbreaking scholarship in film history, aesthetics, and technology, publishing 16 books during his career.

His works explored topics like film violence, digital cinema, and auteur studies, including books on Akira Kurosawa and Sam Peckinpah. Prince was also celebrated for his insightful audio commentaries on classic films and his dedication to teaching and mentoring students.

Based on his history, perhaps he can be forgiven for not understanding economics, federal finances, inflation, or Monetary Sovereignty.

Here are some excerpts from his article, together with my comments:

Sovereign wealth funds are usually the strategic resources of petrostates with budget surpluses, not diverse, debt-heavy economies like the United States.

His use of the terms “budget surpluses” and “debt-heavy” immediately tells us he falsely believes a Monetarily Sovereign government’s finances should be like yours and mine, where long-term solvency requires income to exceed spending.

He does not realize that:

• Federal deficit spending adds growth dollars to our economy.
• The federal government never can run short of dollars
• Taxpayers do not fund federal spending, which is instead funded by federal money creation.

Even if the federal government collected zero taxes and issued zero T-securities, it still could continue spending, forever.

That should change. Instead of managing our nation’s balance sheet with a spendthrift’s short-term outlook, the U.S. should think like an investorand put its assets to work deliberately.

No, the Monetarily Sovereign U.S. should not think like a monetarily nonsovereign investor. Quite the opposite.

President Donald Trump’s directive to establish a sovereign wealth fund could add immense firepower to our economic arsenal, converting national wealth into strategic and financial advantages for all Americans. And right now, we don’t have the luxury of holding our fire.

It’s not clear what “immense firepower” he thinks we could add nor what “fire” we can’t hold. Again, it seems the professor doesn’t understand the differences between federal finance and personal finance.

America is at risk of losing the technological  race—and going broke in the process. In quantum computing, China outspends us four to one. Japan has emerged as a global leader in robotics.

It is impossible for our Monetarily Sovereign government to unintentionally run short of dollars. It cannot “go broke.”

(Statement from the St. Louis Federal Reserve: “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.” From their publication titled “Why Health Care Matters and the Current Debt Does Not” from October 2011.)

Germany is now ground-zero for advanced manufacturing. And as our competitive edgeerodes, our debt mounts.

The U.S. paid $882 billion in net interest in FY 2024—more than we spent to fund the entire Department of Defense. The real risk isn’t creating a sovereign wealth fund—it’s pretending we don’t need one.

No, the real risk is pretending the federal government’s finances are like a state or local government’s finances.

Capitalism has long been America’s greatest asset. It’s time to wield it patriotically.

Now, it’s “patriotism” to not understand economics?

A U.S. sovereign wealth fund’s success would come down to four crucial questions: Where does the money  come from? How is it invested? Where do the returns go? How is it managed? Critics say we can’t have a sovereign wealth fund without a budget surplus.

Why would “critics” say that? We rarely have a budget surplus.

The last time we did (under President Clinton), it caused a recession, and every depression in U.S. history has followed a federal budget surplus.

The reason: A federal budget surplus removes dollars from the economy.

But America already owns substantial assets: land, mineral rights, spectrum licenses, and intellectual property.

We just don’t normally monetize our ownership in them for the direct benefit of our citizens. Instead, we treat our assets and their revenues as disposable income, while countries like Norway prudently invest their oil wealth.

Norway does not act like a Monetarily Sovereign entity. It artificially limits its spending to oil revenues. This is not prudence. It is a misunderstanding of Monetary Sovereignty.

The oil royalties charged by the Department of the Interior are at below-market rates. By charging what Texas charges for the same activities, we could generate an incremental $8.5 billion. Add expanded renewable energy leasing, and we could boost that to $10.1 billion.

A Monetarily Sovereign government neither needs nor uses income. All federal spending is funded by the ad hoc creation of new dollars.

All income, including the taxes you pay, are destroyed upon receipt by the Treasury.

But the key isn’t spending that extra money—it’s borrowing against it. With congressional approval, current AAA municipal bond rates of 2.9% and $10.1 billion in annual revenue would allow the U.S. to support up to $225 billion in initial funding.

But, why borrow dollars when we can create dollars and never run short?

Bondholders get paid from resource revenues, not investment returns. By separating funding risk from investment risk, the fund could make bold bets on America’s future, without risking its present.

The implied belief is that the U.S. federal government can run short of its own currency.

The government is excellent at identifying strategic threats.

For example, the National Security Commission on AI has spelled out how our adversaries might overtake us within a decade. But these reports end up unread with the same toothless conclusions like, “Congress needs to appropriate billions.”

While we wait for our government to act, other governments, like Saudi Arabia and Qatar, are deploying trillions into the technologies and markets our future depends on.

A U.S. fund would let us turn government threat assessments into investment theses, allowing us to shape these critical technologies to our national advantage.

Why would the wealth fund managers be depended upon to do what Congress and the President refuse to do?

The success of this fund should be shared with its citizen shareholders through investment accounts for every newborn American.

Giving money to Americans is a great idea. We often have discussed Social Security for All and Medicare for All. We could do it tomorrow without the intermediary of a wealth fund. We have something far better than a wealth fund. It’s called Monetary Sovereignty.

Finally, a U.S. sovereign wealth fund, like the Federal Reserve, can operate independently with a clear mandate: maximize returns while advancing strategic interests.

Professor Prince seems to believe this management would have better knowledge and understanding of our strategic interests than Congress and the President.

The following can only be summarized as the innocence of a person who has spent too much time in the film industry.

We could start by creating a board of America’s best talent. Think: Mitt Romney and Bill Gurley working alongside Condoleezza Rice and Eric Schmidt.

Meanwhile, the fund’s day-to-day operations would be managed by world-class investment professionals who are paid competitive salaries and evaluated against clear benchmarks.

Critics will argue the government can’t or shouldn’t manage capital, that markets do this better and don’t violate free-market principles.

These are fair concerns—but they are also outdated. A sovereign wealth fund is not a step toward socialism; it is a step toward sovereignty.

It would put America’s markets to work, creating common wealth for the common good. It would help us stay technologically competitive with our rivals without raising taxes.

And instead of passing debt to future generations, we’d be giving them assets. That way, they’ll have a real stake in America’s success.

No, actually, you’d be growing the federal debt. But rather than the current debt being backed by the full faith and credit of the United States, it would be backed by depreciating assets, unavailable to future generations.

In 1776, just months after Adam Smith published The Wealth of Nations, Thomas Jefferson wrote the Declaration of Independence.

These twin revolutions—American democracy and modern capitalism—were born together. Now it’s time to reunite them.

Huh? This unites democracy and capitalism?? How?

Our rivals are wielding their wealth to shape tomorrow without American leadership. We can no longer watch from the sidelines. Let’s build a sovereign wealth fund—and build it so we can win.

Thankfully, as the prose became ever more purple, the article ends.

Curious, I asked ChatGPT, “What do you think of a sovereign wealth fund?” I was pleased to find that it understood the concept of a sovereign wealth fund and Monetary Sovereignty.

GPT:A sovereign wealth fund (SWF) can be a useful tool for nations with excess financial resources, but its relevance and effectiveness depend on the country’s monetary system.

From a Monetary Sovereignty perspective, a sovereign wealth fund is somewhat redundant for monetarily sovereign nations like the U.S., U.K., Canada, Japan, or Australia.

These nations do not need to “save” money in a fund to finance future spending because they issue their own sovereign currency without financial constraints.

Unlike resource-rich nations that rely on SWFs to manage surplus revenues (e.g., Norway or Saudi Arabia), a monetarily sovereign government can always spend as needed to achieve economic and public policy goals without relying on investment returns from an SWF.

If a monetarily sovereign nation sets up an SWF, pretending it needs to “save” money for the future, it  reinforces the false idea that government spending is financially constrained.

Norway uses its SWF because its government does not issue its own currency freely—it pegs spending to its oil revenues. That might makes sense under their self-imposed rules, but for a country like the U.S., an SWF is unnecessary.

The U.S. government doesn’t need an investment fund to finance spending—it can just spend directly to meet public needs.