Monetary Sovereignty and Gap Psychology: Why the Rich Need The Poor

Monetary Sovereignty and Gap Psychology: Why the Rich Need The Poor

  • Why does the richest nation in history repeatedly claim it cannot afford to provide adequate healthcare, retirement income, education, housing, and food for its people?
  • Why do politicians warn that Social Security and Medicare are running out of money while the federal government continues to create trillions of dollars for other purposes?
  • Why are Americans told that helping the poor requires painful sacrifices, higher taxes, and reductions in other benefits?
  • And why do these supposed financial limitations so often fall most heavily on those who have the least?

To answer those questions, we need to understand two fundamental economic concepts: Monetary Sovereignty and Gap Psychology, two pillars of economics.

Monetary Sovereignty explains the federal government’s relationship with money. Gap Psychology explains an important part of humanity’s relationship with power. One concerns what the government can do. The other helps explain why it doesn’t. Together, they explain some of the most persistent contradictions in American economic policy.

The Gap: Why Being Rich Requires Someone Else to be Poorer

Imagine that you have $1 million. Are you rich? That depends.

If everyone else has $100, you are extraordinarily rich. If everyone else has $1 million, you are average. If everyone else has $100 million, you are poor. Your $1 million has not changed. What changed was your position relative to everyone else.

Thus, rich and poor are comparative terms. They describe relationships, not merely quantities. I call that relationship the Gap. It separates people according to income, wealth, power, status, and other measures of superiority.

And Gap Psychology describes the common human desire to widen the Gap below oneself and narrow the Gap above.

Consider a man who can perform only two chin-ups. He wants to be considered strong. He could exercise until he can perform twenty chin-ups, or he could hang a 300-pound weight from everyone else’s ankles. Suddenly, his two chin-ups might make him the strongest man in the room.

He hasn’t improved himself. He has made everyone else comparatively weaker. That is Gap Psychology. You can increase your relative superiority either by raising yourself or by lowering others. And lowering others sometimes is easier.

This principle extends far beyond money.

The Gap is Everywhere

Gap Psychology operates in two directions. We look up at people with more income, wealth, status, or power than we do, and we want to narrow that Gap. But we also look down at those with less, and we resist their narrowing the Gap with us. These two impulses aren’t necessarily equal. We may enjoy gaining on the people above us, but we can feel something more visceral when the people below us gain on us.

Consider a simple inheritance. A parent leaves one child $2 million. She is delighted—until she learns that her sibling received $2,000,010. She hasn’t lost a penny. She still has the same $2 million that delighted her moments earlier. What she has lost is relative position. Ten dollars changed happiness into resentment, not because of its purchasing power but because of its effect on the Gap.

This may connect Gap Psychology to the well-established psychological phenomenon of loss aversion: losses generally affect us more strongly than equivalent gains. A raise is welcome. Try cutting someone’s salary by the same amount and observe the difference.

But Gap Psychology adds another dimension: We can experience a loss without losing anything at all. If someone below us rises toward us, our income and wealth may remain unchanged while our relative position declines.

Suppose Fred earns $60,000 and Sam earns $40,000. Fred has a $20,000 income Gap below him. Now suppose a government program improves Sam’s economic position by $20,000 while costing Fred nothing. Fred still earns $60,000. In absolute terms, he has lost nothing. But his $20,000 Gap has shrunk to $0. If relative position matters to Fred, he has experienced something that feels like a loss.

This helps explain why Gap Psychology is not merely a theory about the rich. Middle-class people, and even those with relatively low incomes, often oppose programs that benefit people poorer than themselves. Their opposition may seem irrational if we assume that everyone seeks only to maximize their own absolute financial well-being. But it becomes more understandable if relative position also has value. A benefit received by someone below me can narrow my Gap even when it costs me nothing.

Thus, the desire to preserve hierarchy can extend throughout the hierarchy. The billionaire wants distance from the millionaire. The millionaire wants distance from the upper-middle class. The upper-middle class wants distance from the middle class. The middle class wants distance from the poor. Even someone near the bottom may place considerable psychological value on knowing that someone else remains below him.

This helps explain the remarkable durability of caste and class systems. A hierarchy need not provide substantial material benefits to everyone who defends it. Each level except the bottom can receive at least one benefit from the arrangement: the status of not being at the bottom. The system can therefore recruit some of its own victims to help preserve it.

And this may explain something particularly important about political efforts to protect the income/wealth/power Gap. The rich need not persuade middle-income people that making billionaires richer will improve their lives. That can be a difficult sale. It may be far easier to persuade them that improving the lives of people below them will diminish what they have earned, reward people who do not deserve it, or unfairly elevate others to their level.

In that sense, Gap Psychology can turn the hierarchy into a self-protecting system. Those at the top have the greatest economic incentive to preserve it, but people throughout the hierarchy can also gain a psychological incentive to protect or even widen the Gap immediately below them.

We aspire to narrow the Gap above us, but we may fight even harder to prevent others from narrowing the Gap below us. And that may be one reason economic hierarchies survive even when most of the people defending them are nowhere near the top.

Consider intelligence. A child who learns to read at age four may be considered exceptionally intelligent. But if every other child learns to read at age three, that same child may be considered slow.

Consider physical ability. A man who runs 100 meters in twelve seconds is fast compared with most people, but slow compared with an Olympic sprinter.

Consider social status. A person may feel important because of a prestigious job, an exclusive club, an expensive automobile, a distinguished family, or membership in a particular organization. Satisfaction often comes not merely from possessing something desirable, but from possessing something others lack.

Exclusivity itself becomes valuable. An exclusive club loses some of its appeal when everyone can join. A luxury brand loses some of its status when everyone can afford it. A title loses some of its distinction when everyone possesses it. The Gap gives these things their comparative value.

People can also gain a sense of superiority through the groups they belong to. Sports provide an example. When the Chicago Bears won the Super Bowl following the 1985 season, their fans celebrated as though they personally had accomplished something extraordinary. I was one of them. I hadn’t blocked a defensive lineman, thrown a pass, or scored a touchdown. Nevertheless, I felt victorious.

Why? Because I identified with the winning group. Their superiority became my superiority. The same psychological mechanism can operate through nationalities, religions, political movements, professions, social classes, and other affiliations.

People seek superiority not only as individuals but also as members of groups. When their group rises, they feel elevated. When a competing group falls, they may experience a similar satisfaction. Gap Psychology helps explain why people sometimes celebrate another group’s misfortune even when that misfortune provides no material benefit to themselves.

From Gap Psychology to Caste and Class

Throughout history, societies have established systems that rank human beings according to ancestry, religion, occupation, race, wealth, and social position.

Caste systems are particularly revealing. Their purpose is not merely to recognize differences among people. They establish differences in status, rights, opportunities, and power. They preserve those differences across generations.

A person born into a dominant caste may possess privileges unavailable to someone born into a subordinate caste, regardless of individual ability. The superiority Gap is inherited.

Religion and group identity also can become vehicles for asserting superiority. Some groups claim special virtue, divine favor, purity, or exclusive access to truth. Such claims can justify treating outsiders as inferior.

Not every religion, club, or social organization behaves this way. But the mechanism recurs: membership in a supposedly superior group provides status, while exclusion helps preserve it.

In her book “Caste: The Origins of Our Discontents”, Isabel Wilkerson examines how hierarchical social systems preserve privilege through inherited status, exclusion, stigma, and institutional power. Gap Psychology provides one possible explanation for the human attraction to such hierarchies.

If my superiority depends on your inferiority, your improvement can feel like my loss. That is the essential psychological problem. And it becomes particularly consequential when applied to economics.

Why the Rich Want to Widen the Gap

The rich possess more than money. They possess economic power. Money can buy goods and services, but wealth also can purchase ownership, influence, access, security, and control over resources.

A wealthy employer may determine whether hundreds or thousands of people have jobs. A wealthy landlord may determine the conditions under which families obtain housing. A wealthy investor may influence which businesses expand and which disappear. A wealthy donor may obtain political access unavailable to ordinary voters.

These forms of power do not depend solely on how many dollars the wealthy possess. They also depend on how economically independent everyone else is.

Imagine two societies. In the first, workers have government-guaranteed healthcare, retirement income, affordable education, and a dependable minimum income.

In the second, workers risk losing healthcare when they lose their jobs. Retirement is uncertain. Education creates debt. Unemployment threatens financial catastrophe.

In which society does an employer possess greater leverage over employees? Clearly, the second. Workers who fear losing essential benefits have fewer practical choices. They may accept lower wages, undesirable working conditions, or mistreatment because leaving their jobs carries unacceptable risks. The employer’s power grows as the worker’s alternatives diminish.

That is the connection between wealth and dependence. The Gap is not merely a difference in dollars. It is a difference in freedom. A wealthy person need not consciously think, “I want workers to remain dependent on me.” But economic incentives can operate without such explicit thoughts.

The result remains. Systems that preserve economic insecurity can preserve the advantages associated with concentrated wealth. And Gap Psychology suggests that preserving relative superiority may itself become a powerful motivation.

Monetary Sovereignty: The other pillar

Now consider an entirely different question. Where does the federal government obtain dollars?

Most Americans have been taught to think of federal finances as though the United States were an enormous household. The federal government collects taxes. It spends the money. If it spends more than it collects, it must borrow the difference. We are told that eventually, the debt grows so large that the government no longer can afford to pay its bills.

This familiar explanation overlooks a fundamental distinction. A household, business, city or state government uses dollars. The United States federal government operates the monetary system that issues dollars. It is Monetarily Sovereign.

The federal government cannot create unlimited doctors, nurses, houses, oil, food, steel, or electricity merely by issuing dollars. Those are real resources. But the monetary system can create the dollars to buy these assets without first obtaining them from taxpayers.

The U.S. Treasury does not have the same financial limitations as a household. Though the federal government can face a shortage of real resources. It never faces an inherent shortage of its own currency. That means federal programs should be evaluated primarily according to their real economic consequences, not on cost.

  • Will they require resources that are unavailable at any price?
  • Will they increase productive capacity?Will they improve people’s lives?
  • Will they cause or relieve inflationary shortages?

Those questions are more meaningful than asking whether the federal government can somehow find enough dollars.

Where the Two Pillars Meet

Now combine Monetary Sovereignty with Gap Psychology. Suppose the federal government possessed the monetary capacity to provide substantially greater economic security to ordinary Americans.

And, suppose those benefits would reduce poverty, improve health, increase educational opportunities, and make workers less dependent on wealthy employers and asset owners. Such policies could narrow the income/wealth/power Gap. That would benefit millions of Americans. But it also could reduce the relative advantages of people whose power depends partly on the economic insecurity of others.

Gap Psychology supplies a possible motive for resisting those policies. Monetary Sovereignty exposes a weakness in the argument that the government simply cannot afford them. Together, the concepts raise an uncomfortable question:

Are Americans being denied benefits because the federal government lacks the monetary capacity to provide them, or because providing them would alter existing relationships of wealth and power?

The answer may differ among particular policies and political actors. But the question deserves far more attention than it receives.

The Remarkable History of FICA

Social Security provides a revealing example. When President Franklin Roosevelt established Social Security, he insisted that the program include payroll contributions. Why?

Was it because the federal government otherwise would lack the dollars needed to pay retirement benefits? No. Roosevelt’s own explanation suggests something quite different.

In a 1941 conversation recorded by Luther Gulick, Roosevelt explained that payroll contributions were intended to give workers a legal, moral, and political claim to their benefits. He described the taxes as intended to protect Social Security against future attempts to abolish it.

Roosevelt understood something important about human psychology. People are more likely to defend benefits they believe they have earned than benefits portrayed as government charity. Payroll contributions helped transform Social Security from a welfare program into a perceived earned right.

And Roosevelt expected that perception to make the program politically secure. He did not present the payroll tax as a necessary source of dollars that the federal government otherwise lacked.

The irony is extraordinary. A tax intended to protect Social Security politically became part of the argument for limiting Social Security financially. Today, Americans repeatedly hear that Social Security benefits cannot be expanded because payroll taxes and trust-fund balances are insufficient.

The program is described as though it were a private pension fund that must accumulate dollars before distributing them. But that is a statutory financing arrangement, not a fundamental limitation on federal monetary capacity.

Congress could authorize benefits through a different financing system. The federal government would not gain any new power to create dollars. It would exercise an existing monetary capacity under different laws.

Roosevelt intended payroll contributions to protect Social Security from political destruction. He apparently did not anticipate how effectively the resulting financing structure could be used to argue against expanding benefits.

The Trust-fund Illusion

The Social Security and Medicare trust funds reinforce the same misunderstanding. The phrase trust fund suggests a protected pool of money, invested independently and held exclusively for future recipients. Private trust funds operate that way.

Federal trust funds are different. They are legal and accounting arrangements through which the government records designated receipts, expenditures, and obligations. Social Security trust funds hold special Treasury securities. Those securities are assets of the trust funds and liabilities of the Treasury. One part of the federal government holds obligations issued by another part.

The arrangements are legally real. Their balances matter under existing statutes, but they do not represent an independent source of monetary power.

When the federal government redeems a trust fund’s Treasury securities, it makes dollar payments through the same monetary system that makes all other federal dollar payments possible. Congress can change the laws governing trust-fund financing. But it cannot change the fact that the federal government issues the currency in which benefits are paid.

Yet the public repeatedly and falsely is told that trust-fund depletion means Social Security is running out of money. The statement confuses two different propositions. The trust fund may exhaust its authority to support scheduled benefits under existing law. But the federal government always can create new dollars.

The distinction matters because the proposed responses often involve benefit reductions, higher payroll taxes, later retirement ages, or combinations of those measures. Those policies have serious consequences.

Reducing benefits increases recipients’ financial insecurity. Increasing payroll taxes reduces workers’ take-home pay. Raising retirement ages can impose particular burdens on people whose health or occupations make continued employment difficult. And because businesses pay 50% of FICA, this not only reduces economic profits but discourages hiring.

Each policy deserves examination according to its actual effects. But no one should justify these policies by pretending the federal government is financially equivalent to a private pension fund.

Healthcare and the Power of Dependence

Consider employer-sponsored healthcare insurance. Millions of Americans receive health coverage through their employers. That arrangement has advantages, including access to group insurance and employer contributions toward premiums. But it also creates dependence.

An employee contemplating a job change must consider not merely salary and working conditions but also the availability, cost, and quality of health coverage. Economists call this phenomenon “job lock.”

Research has found that employer-linked health insurance can discourage workers from changing jobs or asking for higher wages or improved working conditions.

The Affordable Care Act reduced key problems involving preexisting conditions, but concerns remain about provider networks, coverage differences, premiums, and family benefits. The economic implications extend beyond healthcare.

A worker who can leave an employer without risking medical coverage possesses greater bargaining freedom. A worker whose family depends on the employer’s insurance may feel compelled to remain.

Now imagine Medicare For All.

Healthcare coverage would no longer depend on employment. Workers could change jobs, start businesses, retire, or negotiate without the same fear of losing insurance. The federal government could pay for the program in dollars.

Of course, paying medical bills is not the same as producing medical care. A successful expansion would require adequate doctors, nurses, hospitals, clinics, equipment, medications, and other real resources.

Federal spending to expand those resources would be essential. But the monetary question and the production question are separate. The federal government need not run short of dollars. The healthcare system can run short of healthcare.

That is a real problem requiring a real solution. Declaring Medicare for All unaffordable because the government lacks dollars does not solve it. And the dependence created by employer-sponsored insurance has consequences for the Gap.

Universal Medicare coverage could reduce one important source of employer leverage over workers. That makes healthcare policy a question of economic power as well as medical care.

Social Security For All, Education, and Poverty

The same reasoning extends to other public benefits.

Consider Social Security for All: a federal income floor sufficient to prevent destitution. Such a program would not make everyone wealthy, but it could reduce the desperation that forces people to accept almost any available wage or working condition.

Consider free public college and vocational education, which could provide skills, knowledge, and opportunities. When access depends heavily on family wealth or the willingness to take on debt, existing economic advantages can reproduce across generations. A student from a wealthy family may start adulthood with an education and no debt. A student from a poorer family may have similar abilities but face substantial financial obligations.

The Gap can widen before either student earns a paycheck.

Consider food assistance. A person who lacks adequate food has less freedom to make long-term decisions about education, employment, health, and family life. Reducing hunger can improve both individual well-being and productive capacity.

These programs have different costs, resource requirements, and economic effects. They should not be treated as interchangeable, but they share an important characteristic. They can reduce the degree to which survival and opportunity depend on private wealth. That is why Gap Psychology is so important.

The Tax Code: Another Window Into the Gap

The federal tax code further illustrates how financial policies maintain these hierarchies. While labor income is typically taxed at the highest marginal rates as it is earned, capital gains often enjoy preferential tax treatment and the ability to defer taxation indefinitely. Through deductions, exclusions, and loopholes, the tax system often consolidates wealth at the top, reinforcing the economic divide that Gap Psychology seeks to preserve.

These rules are not distributed equally across economic circumstances. People whose income comes primarily from wages face a different tax environment from people whose wealth comes largely from appreciating assets.

Raising the top ordinary income-tax rate therefore does not necessarily reach all the mechanisms through which enormous fortunes accumulate, nor does it automatically eliminate the political and economic advantages associated with concentrated ownership.

In short, the tax code does more than collect revenue. It influences who accumulates wealth, who retains it, and widens the income/wealth/power Gap. Further, people with substantial wealth have more resources to influence the laws that govern it.

That creates a reinforcing cycle. Wealth provides influence, which helps preserve favorable economic arrangements. Those arrangements preserve or increase wealth, which provides still more influence.

The Question of Motive.

If the federal government possesses the monetary capacity to provide greater benefits, why does the claim that it cannot afford them remain so influential? There are several possible explanations. Some people sincerely misunderstand how the federal government manages money. They apply household financial rules to the federal government because those rules are familiar.

Others understand that federal finance differs from household finance but believe that taxes, borrowing restrictions, and spending limits provide useful safeguards against inflation or excessive political spending.

Still others may find that claims of financial scarcity support policies favorable to their economic interests.

These explanations can coexist. But Gap Psychology preserves relative superiority. People may not acknowledge that motivation, even to themselves. They may describe their preferences in terms of fiscal responsibility, self-reliance, efficiency, fairness, or opposition to government dependency.

Some of those concerns may be sincere; some may be rationalizations, and some may conceal deliberate efforts to preserve economic advantages. But the distributional consequences of policies can be examined by:

    • Who gains or loses?
    • Whose economic independence increases or decreases?
    • Whose relative power grows or shrinks?

Those questions reveal dimensions of economic policy that conventional discussions of deficits and debt often overlook the difference between wanting more and wanting relatively more. Conventional economics often assumes people seek to increase their material well-being, but Gap Psychology adds another consideration. People also seek to improve their position relative to others.

Imagine a wealthy person choosing between two outcomes. Under the first, his wealth increases by 20%, while everyone else’s wealth increases by 40%. Under the second, his wealth increases by 10%, while everyone else’s wealth stays the same.

The first outcome makes him absolutely richer. The second may make him relatively richer. If he values absolute wealth most, he may prefer the first, but if he values relative superiority most, he may prefer the second. That distinction matters enormously.

It suggests that opposition to broadly beneficial policies often stems not from fear that the wealthy will become poorer, but from the realization that such policies would accelerate everyone else’s advancement. Consequently, a policy can increase national prosperity while simultaneously narrowing the social and economic gap—an outcome many find unacceptable because it diminishes their relative standing.

For people who value relative superiority, that narrowing itself may feel threatening. The desire to widen the Gap therefore can conflict with the desire to maximize total prosperity. When those who benefit from a wide Gap have disproportionate political influence, that conflict can prevent affordable programs that benefit the poor.

What About Inflation?

Inflation is the widespread increase in prices. If there is a shortage of bananas, the cost of bananas will rise, but that is not inflation. If food is scarce, the cost of food will rise, and that could be inflation. If there is a shortage of food and oil, the cost of everything will rise, and that absolutely is inflation.

Many people believe, and many economics texts teach, that federal spending increases demand, and that increase causes inflation. The evidence does not support this. See: The inflation myths debunked. It’s never “money-printing.” It’s always shortages.

The article lists historical inflations and their causes. It shows that no major historical inflations have been caused primarily by a government spending “too much.”  Further, the article shows that recessions are caused by a government spending too little.

To prevent and cure inflations, it is not necessary to instigate recessions. Instead, the government should prevent and cure shortages of critical goods and services, most often oil, food and labor. Rather than trying to  prevent inflation via a blanket restriction of federal deficit spending, a Monetarily Sovereign government should:

    • Identify the shortages
    • Increase the supply of scarce goods and services.
    • Invest in productive capacity.
    • Remove unnecessary barriers to production.Train additional workers.
    • Develop technology.
    • Expand infrastructure.

The conventional response to inflation often emphasizes reducing demand by raising interest rates, increasing taxes, or cutting spending. Those policies can reduce inflationary pressure by making purchases more expensive (ironically) and reducing people’s ability to buy. They do not eliminate the underlying shortages.

The current “plan” (if one can call it a plan) is to reduce demand for scarce medical care rather than to produce more medical care. Forcing the sick to go untreated is not a viable anti-inflation program.

There is a difference between making housing unaffordable and building more housing. Making energy unaffordable for some is different from increasing the amount of energy available.

If the problem is a shortage, the lasting solution is to relieve the shortage. Federal spending can reduce inflationary pressure by increasing the supply of what is scarce.

Therefore, the question should not be merely how much the government spends. It should be what the spending accomplishes.

The Purpose of Government

The purpose of government is to protect and improve the lives of the governed.

We do not suggest punishing wealthy people for being wealthy, nor must everyone have the same income, property, or status. People differ in ability, ambition, preferences, circumstances, and accomplishments. Differences in income and wealth will exist.

The question is whether those differences should determine access to the necessities of life and the degree of freedom people possess. Should a person be forced to remain in an undesirable job because leaving would endanger the family’s healthcare? Should an elderly person face poverty because a federal accounting arrangement has reached a statutory limit? Should a capable student be denied education because the family lacks money? Should children go hungry in a nation with the productive capacity to feed them?

Monetary Sovereignty tells us that the availability of federal dollars should not be an obstacle. Gap Psychology suggests why reducing those hardships may encounter resistance from people and institutions whose relative advantages depend partly on their continuation.

The two theories therefore illuminate different sides of the same problem. One explains the monetary possibilities. The other examines the human incentives that can prevent those possibilities from being realized.

The Ultimate Gap

The most important Gap is not the difference between two bank accounts. It is the difference between two people’s freedom. One person can leave an unpleasant job without worrying about food, housing, or medical care. Another cannot.

One can pursue education without incurring unaffordable debt. Another cannot. One can survive a financial emergency without losing a home. Another cannot. One can influence public policy through wealth and connections. Another struggles merely to be heard.

These differences are economic, but they also are differences in power. And power can perpetuate itself. People with power can influence the rules under which others acquire power. People without power may lack the resources to change those rules. The Gap therefore can become self-reinforcing.

That is why reducing poverty is not enough. A society can become wealthier while its economic hierarchy becomes more extreme. The poor can gain dollars while losing relative influence. The middle class can earn higher salaries while becoming more dependent on employers, lenders, insurers, and asset owners.

Prosperity and Economic Independence are Not Identical.

A society should be judged not merely by how much wealth it produces but also by how that wealth affects people’s lives and freedoms. Monetary Sovereignty and Gap Psychology approach economics from opposite directions. Monetary Sovereignty begins with the nature of money. Gap Psychology begins with the nature of human comparisons.

Monetary Sovereignty asks what a currency-issuing government can accomplish. Gap Psychology asks how the desire for relative superiority influences people’s decisions.

Together, they help explain why policies that could improve millions of lives may face determined resistance. The familiar claim is that America cannot afford to provide greater economic security to its people. But the more revealing question may be, Who benefits when:

  • Americans believe that claim?
  • retirement remains uncertain?
  • healthcare depends on employment?
  • education requires debt?
  • workers fear unemployment more than employers fear losing workers?
  • people accept economic insecurity as unavoidable?

And who loses power when those insecurities disappear?

These questions don’t require us to assume every wealthy person is selfish, every politician dishonest, or every economist ignorant. They require us to recognize that economic policies influence relative power—and that relative power can influence economic policies.

For too long, Americans have been trapped in a manufactured debate over whether the federal government can “afford” to improve their lives. This framing ignores the reality of our Monetary Sovereignty and obscures the incentives driven by Gap Psychology.

The federal government possesses extraordinary monetary capacity, and our nation holds vast productive potential. Neither guarantees perfect policy, but together they make it essential to ask why so many Americans remain economically insecure.

The answer is not found in national affordability, but in the incentives of powerful interests to maintain the status quo. Monetary Sovereignty shows that federal financial scarcity is a choice, not a constraint; Gap Psychology explains why prosperity’s benefits are intentionally kept unequally distributed.

Together, these concepts lead us to a fundamental question: If our government has the inherent capacity to free its citizens from economic dependence, why do we continue to accept false narratives of financial limitation as a justification for preserving that very dependence?

The greatest obstacle to narrowing the Gap is not a shortage of dollars, but rather the value some people place on keeping the Gap wide.

Rodger Malcolm Mitchell

Does education benefit America? You might think the answer is obvious.

In 1647, the Massachusetts “Old Deluder Satan Act” required towns in colonial New England to hire teachers. The schools were funded by local taxes to promote literacy, so people could read the Bible.

This is widely regarded as the first law that mandated publicly funded education in what would later become the United States. By the early 1800s, this idea had spread, with other New England states adopting similar town-funded schools, although southern states did not follow suit.

In the 1830s to 1850s, modern free public schooling took shape. In Massachusetts in 1837, Horace Mann championed free, universal education funded by taxes and implemented by professional teachers.

By around 1850, most Northern states had established free public elementary schools funded by property taxes. These schools were accessible to most white children, as racial equality was achieved much later.

High schools came in 1821. The Boston English High School became the first free public high school in the U.S.

Wealthy men throw books into a bonfire, while impoverished children watch.
If we give them a college education, they won’t work in our factories.

By the late 1800s to early 1900s, free public high schools became widespread. Compulsory attendance laws began in 1880–1918, and segregation ended (legally): 1954, Brown v. Board of Education. Truly universal access began in the mid-20th century.

Why was free schooling mandated in the past, while free advanced education is often discouraged today? The answer, as usual, involves Monetary Sovereignty and Gap Psychology, 

Our Monetarily Sovereign federal government has an unlimited ability to create dollars with just a keystroke. It never can go bankrupt or run out of money. However, it often chooses to fund tax breaks for the wealthy rather than allocate resources to education for those who are less fortunate.

Gap Psychology describes a common, almost universal desire to distance oneself from those lower on the income, wealth, and power scale while trying to associate more with those above. This mindset is the primary way the wealthy maintain and increase their wealth. It also ensures that people continue to work even after they receive higher pay.

NEWS BRIEFING Borrowers in default on student loans may see wages garnished

WASHINGTON — The Trump administration said Tuesday that it will begin garnishing the wages of student loan borrowers who are in default early next year.

The department said it will send notices to about 1,000 borrowers the week of Jan. 7, with more notices to come at an increasing scale each month.

Millions of borrowers are considered in default, meaning they are 270 days past due on their payments. The department must give borrowers 30 days’ notice before garnishing their wages.

The department said it will begin collection activities, “only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans.”

In May, the Trump administration ended the pandemic-era pause on student loan payments and began collecting on defaulted debt by withholding tax refunds and other federal payments from borrowers.

The move ended a period of leniency for student loan borrowers. Payments resumed in October 2023, but the Biden administration extended a one-year grace period. Since March 2020, no federal student loans had been referred for collection, including those in default, until the Trump administration’s changes earlier this year.

The Biden administration tried multiple times to offer broad student loan forgiveness, but those efforts were eventually halted by courts.

Persis Yu, deputy executive director of the Student Borrower Protection Center, criticized the decision to begin wage garnishment and said the department had failed to sufficiently help borrowers find affordable payment options.

Given that:
  1. Educated young people are vital for America’s advancement and security.
  2. The federal government does not need or even use any form of income.
  3. The federal government has the infinite ability to create dollars and fund anything it wishes.

Why does the government fund free elementary and high school — in fact, make attendance compulsory — but garnish the wages of our single most valuable future resource, college students?

Free basic schooling still reinforces the social hierarchy. It still supports the Gap. Early public education has been sold as moral and obedience training, workforce preparation, and national cohesion.

It teaches punctuality, deference to authority, and literacy sufficient for labor, not power.

Even in our early days, basic schooling did not threaten the Gap. Elites benefit because it make for more productive workers, fewer unruly poor, and cultural conformity

But college education for the poor is exactly what the rich do not want.

  1. It reduces the fear of losing one’s job, thus:
  2. It increases labor’s bargaining power (which is why the rich hate unions), and
  3. It puts “the rabble” on a par with the rich and weakens employers’ control.

Free college would narrow the Gap.

In this context, a federally sponsored, comprehensive, no-deductible Medicare program that covers every man, woman, and child in America would help close the healthcare Gap.

In contrast, business-sponsored healthcare insurance for workers tends to reinforce this Gap. Millions of workers fear leaving their jobs or making demands of their employers because they worry about losing their healthcare coverage.

The federal government easily could afford to provide healthcare insurance to everyone. However, instead of doing this, it offers businesses tax incentives to provide less comprehensive coverage—just enough to keep employees dependent on their jobs for healthcare.

Finally, the same would hold for federally sponsored, living-wage Social Security for everyone, of all ages. The rich make three false excuses:

  1. It would require tax increases (aka “Who would pay for it”?)
  2. It would cause inflation by adding growth dollars to the economy (Federal spending isn’t inflationary.)
  3. If given a bare minimum stipend, no one would work because the poor have no ambition. (aka, “Keep ’em poor so they have to accept low-pay jobs and bad working conditions.:”)

And things will have to get much worse before the populace begins to understand how Monetary Sovereignty and Gap Psychology are used against them.

 

Only a nation of fools would give a tax break to religion but not to science and education.

Rodger Malcolm Mitchell

Monetary Sovereignty

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

MONETARY SOVEREIGNTY

Common debt myths in economics and why they exist

Economics is filled with myths that might make one think it is taught at Hogwarts School of Witchcraft and Wizardry. A discipline that loves to use statistics often seems to disregard them in favor of intuition and confused semantics.

The majority of economics revolves around two key concepts: Monetary Sovereignty and Gap Psychology.

Monetary Sovereignty is the historical truth that the federal government created the first dollars from thin air through legislation. The government retains the unlimited authority to continue passing laws and those laws can produce as many dollars as the government desires for any purpose it chooses.

Gap Psychology suggests that the terms “rich” and “poor” are relative. To become richer, one must widen the gap in income, wealth, and power below, while narrowing the gap above. This can be achieved either by increasing one’s own earnings or by reducing others’ earnings.

Currently, the federal government creates dollars by this process:

  1. Congress votes to fund something.
  2. The President approves
  3. Computer keys are pressed
  4. The money is credited to the appropriate accounts.

This means the federal government, being Monetarily Sovereign:

  1. Cannot run short of dollars.
  2. Cannot become insolvent or go bankrupt
  3. Does not need to, and indeed does not, borrow dollars.
  4. Neither needs nor uses tax dollars to pay its obligations

Due to the monetary non-sovereignty of state and city governments, businesses, and individuals, there are many misunderstandings and myths about federal finances.

Federal “debt.” It isn’t what most people know as “debt.” The federal government is not “in debt.” It does not borrow. It does not owe. It merely accepts deposits into U.S. Treasury savings accounts.

Those deposits are owned by the depositor, not by the government. To pay off the “debt,” the government returns the deposits plus interest. Federal taxes and taxpayers are not involved in any way.

The purpose of those accounts is not to provide the government with funds for spending. Instead, those accounts:

  • Assist the Federal Reserve in managing interest rates by establishing a “base” rate.
  • Provide a secure location for unused dollars to stabilize and enhance their value.

Here are the most common myths about T-securities deposits (aka “debt”).

1. “The debt is a burden on future generations.” Future generations are not responsible for repaying past federal debt. When Treasury securities are bought, the purchaser deposits dollars into their T-security account. Upon maturity of those securities, the buyer is paid with the dollars in that account. Future tax dollars are not involved in this process.

Future generations will benefit from the government’s interest payments.

2. “The federal government could become insolvent.” Many people believe federal finances resemble a family budget. This comparison is intuitively appealing and for some, politically advantageous.

A monetarily sovereign government creates all the currency it owes. It cannot run out of dollars any more than a scorekeeper runs out of points. It can generate the dollars required to fulfill any obligation.

3. “China ‘owns’ us and can demand repayment.” China holds U.S. Treasuries because it seeks a secure way to save in dollars. It does not have the power to make demands regarding these securities. Repayment occurs only at maturity and involves an electronic transfer from China’s T-security account at the Federal Reserve to other Chinese accounts at the same

4. “Interest will crowd out federal programs.” Paying interest simply credits bank accounts. It doesn’t deplete federal funds; the government creates the funds it pays out. Additionally, paying interest generates dollars for economic growth. Even if the government paid trillions of dollars in interest, it would not affect the government’s ability to fund its programs — not by one penny.

5. “High debt causes inflation.” Federal debt differs from personal debt. It is created when dollars are accepted into Treasury accounts, which are settled at maturity simply by returning those dollars. Inflation is related to resource shortages, not to federal debt.

There is no relationship between federal debt (red) and inflation (green). The peaks and valleys of the two lines differ substantially.

6. “High debt raises interest rates.” The Federal Reserve sets interest rates arbitrarily. Since the federal government does not have a financial need to accept T-security deposits, the demand for these investments does not influence interest rates.

The peaks and valleys of interest rate changes (gold) do not match those of federal debt, indicating that interest rate changes are not associated with changes in federal debt. One even could argue that increases in federal debt lead to lower interest rates.

7. “Our grandchildren will be saddled with the debt.” Every dollar of debt corresponds to a dollar of someone’s savings. Future generations will own both the Treasuries and the interest dollars used to service them. There is no intergenerational burden. The “debt” is not a taxpayer liability.

8. “The level of debt is too high compared to the GDP.” Japan is at 260% and has had almost no inflation and near-zero interest rates for decades. The Debt/GDP ratio tells nothing about the government’s credit or ability to pay its obligations. It is an often quoted, but useless ratio.

Here are the lowest and highest ratios. By analyzing these ratios, could you determine which nations you would prefer to lend to? Which nations are strongest financially? Which nations are least likely to default?

You can’t, because the Debt/GDP ratio is meaningless.

There is no relationship between the Debt/GDP ratio and financial strength.

9. “Large debt hurts economic growth.” Higher government debt correlates with stronger GDP growth because federal deficits and interest payments add growth dollars to the economy.

The following graph illustrates the parallel paths of Gross Domestic Product and Federal Debt. This parallelism is not coincidental. The most crucial equation in economics is GDP = Federal Spending + Nonfederal Spending + Net Exports. Federal spending adds dollars to the private sector and is necessary for economic growth.

Federal expenditures and GDP move essentially in parallel.

10. “We must reduce debt so interest payments don’t explode.” Interest payments act as a fiscal stimulus by adding growth funds to the private sector. When interest payments increase, private income also rises.

Our government, as a monetarily sovereign entity, easily manages any level of interest payments.

Interest rates (yellow, dashed line) and GDP (blue) rise and fall together.

11. “It’s irresponsible to let debt grow forever.” The federal debt is the difference between federal spending and revenue. Thus, debt adds growth capital to the economy, allowing for continuous economic growth, which is beneficial.

The federal debt has grown for 85 years, belying the repeated false claims that it is a “ticking time bomb.” 

12. “Eventually, no one will buy our debt.” The Federal Reserve and primary dealers are obligated to purchase Treasury securities; however, the federal government has no financial need for anyone to buy its debt.

The purpose of federal debt is not to provide spending funds to the government. T-securities provide dollar users with a safe place to store unused dollars. The dollar-using world wants the insurance that T-securities provide.

13. “High deficits mean higher taxes later.” Federal taxes do not pay for the federal debt. Instead, the Treasury creates new dollars to cover the interest, and each debt account is settled at maturity by returning the dollars in that account.

Tax rates: The Highest bracket (green dashed line) and the lowest bracket (blue dashed line) are compared with annual changes in federal deficit spending (red). Tax rates have fallen as deficit spending has increased.

14. “We should have a balanced budget.” This means the federal government would not provide additional funds to the economy, which would result in a depression.

Even President Barack Obama, who should have known better, said in 2011, “We have to reduce our deficit, and we have to get back on a path that will allow us to pay down our debt.” 

Paying down the debt requires running surpluses, which historically have led to depressions. Throughout U.S. history, every depression has been preceded by federal surpluses.

1804-1812: U. S. Federal Debt reduced 48%. Depression began in 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began in 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began in 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began in 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began in 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began in 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began in 1929.
1997-2001: U. S. Federal Debt reduced 15%. The recession began in 2001.

When federal deficit spending decreases, recessions tend to occur, which are resolved by increasing federal deficit spending. See the following graph:

Every recession (vertical gray bars) followed a decline in federal deficit spending, and all were cured by an increase in deficit spending.

15. “The federal debt is not sustainable.” This is a non-specific false claim encompassing all of the other false claims about federal debt. The term “sustainable” frequently is used by individuals opposed to debt and leaning toward Libertarian views.

However, they seldom clarify why a Monetarily Sovereign nation cannot “sustain” any level of debt, especially when the situation in question isn’t even a debt. (It’s deposits.)

And all the false claims boil down to the one underlying false claim:

16. The government and taxpayers cannot afford Medicare for All, Social Security for all, housing assistance, food assistance, or any other benefits for the middle class and the poor. The federal government, being Monetarily Sovereign, can afford anything without needing taxpayer funds.

Despite the fact that tax loopholes for the wealthy cost the government money, Congress and the President rarely oppose them. The reason: wealthy people are major campaign contributors.

Given this situation, why is Washington hesitant to provide those benefits? Why do we have “debt ceilings” and government shutdown battles over spending?

The answer: Gap Psychology.

The very wealthy still want to become wealthier. It is human nature. To become wealthier, one must widen the income/wealth/power Gap below and narrow it above.

To do that, one must increase one’s own income or decrease the income of others. The rich do both by bribing the most important information sources:

  1. They bribe politicians via campaign contributions and lucrative jobs in “think tanks.”
  2. They bribe economists via university endowments and promises of lucrative jobs and assignments
  3. They bribe the media via advertising dollars and outright ownership

All are expected to promulgate the myths about federal debt so as to reduce or eliminate entirely spending for social services.

That is why it is said that the Social Security and Medicare trust funds are running out of money, when in reality, there are no actual trust funds, and the necessary funds would be available if Congress simply voted for them.

It is why Congress forces the states to fund social programs, knowing that the states are monetarily non-sovereign and often unable to fund programs properly.

SUMMARY

The federal “debt” is not real debt in the traditional sense. It refers to deposits that are essentially repaid by returning them. This process does not impact taxpayers.

The federal government, as a monetarily sovereign entity, does not borrow dollars. Instead, the purpose of this so-called debt (or deposits) is to help the Federal Reserve manage interest rates and provide a safe option for unused dollars, thereby protecting dollar users.

In summary, the federal debt does not threaten the federal government’s solvency nor hinder economic growth. In fact, it serves the opposite purpose.

 

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

Are you for or against Universal Basic Income. Do you understand Monetary Sovereignty?

I’ve researched the question, “What are the reasons against Universal Basic Income (UBI).” I call it “Social Security for All.”

Here is a summary of the anti-UBI claims:

1. Cost and Feasibility: One of the primary concerns is the high cost of UBI. For example, in the United States, a UBI of $12,000 per year for every adult would cost over $3 trillion annually/

2. Inflation: UBI could lead to inflation. If everyone has more money to spend, demand for goods and services might increase, driving up prices and potentially negating the benefits of the additional income.

3. Work Incentive: UBI might reduce the incentive to work. If people receive a guaranteed income regardless of employment, some may choose not to work, potentially leading to a decrease in the labor force and economic productivity.

4. Misuse of Funds: Recipients might misuse the funds, spending them on non-essential items rather than necessities. This could undermine the goal of reducing poverty and improving living standards.

5. Impact on Existing Welfare Programs: Implementing UBI might require cutting or restructuring existing welfare programs. This could harm those who rely on targeted support for specific needs, such as healthcare or housing.

6. Political and Social Challenges: Gaining political and public support for UBI can be difficult. Many people are skeptical of unconditional transfer programs and prefer welfare systems tied to employment or specific conditions.

Before I address #s 1 through 6, I’ll give you the real one:

7. It would narrow the income/wealth/power Gap between the rich and the rest. The Gap is what makes the rich rich. Without the Gap no one would be rich; we all would be the same.

The wider the Gap, the richer are the rich. The easiest way for the rich to remain rich is to make sure the Gap doesn’t narrow, so using their political and informational power, the rich invent and promulgate false reasons why UBI won’t work.

Now, let us address each of the reasons given for objecting to UBI.

1. Cost and Feasibility:

We already have a form of UBI, except it isn’t “U” (Universal). We call it “Social Security,” and it covers old and/or disabled people. All the ideas opposing UBI were put forth in the 1930s when Social Security first was proposed.

Contrary to popular myth, Social Security (as well as Medicare, the military, SCOTUS salaries, White House salaries, Congress’s salaries, and every other federal expenditure) are not funded by FICA or any other federal taxes.

These programs all are funded the same way: through federal money creation.

It is as simple as A, B, C.

A. When any federal government agency approves an invoice for payment, it sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account. The instructions are in the form of a check or a wire.

B. When the bank does as instructed ( by pressing a few computer keys), dollars are created by being added to the creditor’s checking account and to the money supply measure known as “M2.”

C. The bank then balances its books by clearing the payment through the Federal Reserve, which has the infinite power to approve all federal checks and wires.

So long as the federal government has the infinite power to pass laws and to issue instructions, it has the infinite power to pay any invoices it receives. The U.S. federal government, being the original creator of dollars from thin air, never unintentionally can run short of dollars.

You often have been told that Medicare, Social Security and/or their trust funds are running out of money. It is a false claim. Unlike state/local governments, the U.S. government is Monetarily Sovereign. With the infinite ability to create dollars, it could create the above-mentioned $3 trillion at the touch of a computer key.

The sole purpose of federal taxes (unlike state/local taxes) is not to provide the government with spending money. The dual purposes are 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
    • Assure demand for the dollar by requiring taxes to be paid in dollars.

Even if the federal government didn’t collect a single dollar in taxes, it could continue spending, forever.

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.”

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.”

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.”

Mario Draghi, President of the Monetarily Sovereign European Central Bank: “We cannot run out of money.”

Further, UBI would grow the economy. It’s a mathematical certainty because the size of the economy is determined by this formula:

Gross Domestic Product (GDP) = Federal Spending + Nonfederal Spending + Net Exports.

By simple algebra, UBI would grow the economy because it would increase Federal Spending and, as a result, increase Nonfederal Spending, too.

When faced with the undeniable facts that UBI is affordable for the federal government and would grow the economy, those influenced by wealthy propaganda resort to excuse #2.;

 2. Inflation: The common yet erroneous belief is that “excessive” fedeal spending causes inflation. This belief is wrong on several fronts. 

First, no one knows what “excessive” means. The rich always claim federal spending is excessive (see: Historical claims the Federal Debt is a “ticking time bomb.” From Sept. 26, 1940, to July 22, 2024) because most federal spending goes to the poor. It narrows the Gap, a situation the rich despise.

By contrast, the rich favor tax deductions for the wealthy, which are not part of “spending” but widen the Gap just as federal spending does.

Economics is a pseudoscience loaded with hypotheses and flush with data — and ne’er the twain shall meet.

Some economists make this arguement based on intuition, but not on fact: They claim that people earn income by selling their labor on the labor market as a contribution to the production of goods and services for the economy. Income increases that aren’t directly related to correlating increases in production tend to result in higher prices.

It’s nonsense.

Which of these can claim their income is “directly related to correlating increases in production?” Taxi driver? School teacher? Musician? Flight attendant? Doctor? How about Elon Musk? If he made “just $100 million instead of a few billion, would that “directly relate to a correlating decrease in production”?

Pay has little to do with production and more with labor scarcity, politics, heredity, and other social factors. Queen Elizabeth’s pay had little to do with her output. I am retired, and my income has nothing to do with my production. Raising hotel workers’ skimpy pay or decreasing mortgage brokers’ high pay would not “directly relate to their production.”

The hypothesis is something that only an economics professor in a well-endowed think tank could dream up.

Inflation is not caused by federal spending. Inflation is caused by scarcities, most often scarcities of oil and food:

The peaks and valleys of inflation(red) do not match up with the peaks and valleys of federal spending (blue).

 

The peaks and valleys of inflation do match up with the peaks and valleys of oil prices, which are dictated by oil supply and demand.

Today, the federal government is spending more than ever, yet inflation is drifting down. The most recent inflation was COVID-related, not spending-related. It was caused by shortages of oil, food, computer chips, metal, lumber, shipping, and labor.

Raising everyone’s income by giving them money would not cause inflation. Scarcities of crucial items cause inflation.

Federal spending to cure scarcities cures inflation. The “federal spending causes inflation” meme is a fever dream promulgated by the rich to maintain the income/wealth/power Gap.

The common meme that inflation is “too much money chasing too few goods” is half right. Inflation is caused by too few goods (and services).

3. Work Incentive: Critics argue that UBI might reduce the incentive to work, decreasing the labor force and economic productivity. This is a favorite of the rich, who love to portray lower-income people as lazy slugs who, if given money, will simply loll about doing nothing. 

The truth is that poor labor is harder than rich labor unless one considers costly vacations, country clubs, and having servants do one’s work to be “labor.” Virtually everyone wants a better life, and that includes the poor. Given a stipend by the government, they will work to increase their standard of living, just as the rich do.

Similarly, the vast majority of the rich want to be richer. Almost no one is satisfied, and it is certainly not a low-income family that receives Social Security.

I trust this isn’t just a projection on my part, but I began collecting Social Security at age 65. I continued to work for a living until I was 73, not because I loved  work, but because I wanted more money to feel secure. I had what some may consider a lot, but I still wanted more.

That said, what is wrong with a decrease in the labor force? What is wrong with a four-day work week or a five-hour day? Work usually is not a purpose unto itself. The primary purpose of most work is to improve one’s life, however one defines “improve.”

For households in every quintile of the income distribution, the share of income required to pay for their 2019 consumption decreased, on average, because income grew faster than prices did over that four-year period.

Households in the top income quintile had the largest decline, on average, in the share of income required to pay for their 2019 consumption.

Translation: The rich kept earning more spending money than the rest of us did. Even though they had plenty of money, they wanted more, and worked for it. Why would the average and below-average income people be less motivated? They wouldn’t, but that is what the rich claim.

Artificial intelligence (AI) and automation are making it more possible to do less and accomplish more. A solution to the possible unemployment caused by AI may be UBI.

4. Misuse of Funds: Some argue that recipients might misuse the funds, spending them on non-essential items rather than necessities. This is another one the rich love — the notion that the poor are ignorant money managers and that if you give them money they’ll waste it on drugs and lottery tickets.

The reality is quite the opposite. By necessity, the poor have learned to be good money managers. In any event, it is none of the government’s business whether or not someone “misuses” their income. The idea the the government knows better is repulsive and bigoted.

5. Impact on Existing Welfare Programs: Implementing UBI might require cutting or restructuring existing welfare programs. Critics worry that this could harm those who rely on targeted support for specific needs, such as healthcare or housing.

This is easily prevented. Just don’t do it. Don’t include UBI income as part of any welfare criterion.

The current system — requiring someone to be poor to receive financial aid — is self-defeating. It encourages the very thing the rich claim to fear: people not working. It also leads to dishonesty and to gaming the system by mischaracterizing income.

6. Political and Social Challenges: Gaining political and public support for UBI can be difficult. Many people are skeptical of unconditional transfer programs and prefer welfare systems tied to employment or specific conditions.

This is the old “If I had to work for my money, why should he get money for doing nothing?” The solution would be to give every man, woman and child in America the same amounts regardless of their other income or wealth.

The money would mean little to the rich and much to the poor, but it would overcome the resistance of those who hate to see others receive something.

7. It would narrow the Gap between the rich and the rest. The Gap is what makes the rich rich. Without the Gap no one would be rich; we all would be the same.

The wider the Gap, the richer are the rich. The easiest way for the rich to remain rich is to make sure the Gap doesn’t narrow, so using their political and informational power, the rich invent and promulgate false reasons why UBI won’t work.

This is the single biggest hurdle to cross. The first six objections easily are overcome and/or are based on incomplete information. This one is based on the intense emotions of America’s most influential people.

A rich man might be generous about charity for the poor, but he doesn’t want poverty to be eliminated altogether. He needs the poor. Having a mansion is not as attractive if everyone else has a mansion. It’s the Gap that makes him rich, and narrowing the Gap makes him less rich, an unappealing prospect.

If a neighbor wins the lottery or even gets a more lucrative job, how does the rest of the neighborhood feel? What does Mark Zuckerberg think about Elon Musk having more money?

The majority of us suffers from Gap Psychology, the desire to distance ourselves from those below us on the income/wealth/power scale and to come closer to those above us. The conflict arises because those above us don’t want us closer and those below us want us closer.

SUMMARY

There are no good reasons not to begin a UBI program and plenty of reasons to start.

I suggest the following monthly payments:

  • $1,000 to every adult (18+)
  • $500 to every child
  • Include undocumented adults and children.

Assume:

  • 258 million adult (citizens) + 31 million adult (non-citizens) = 289 million total adults; Annual Cost: $289 billion * 12 = $3.468 trillion
  •  73 million children (citizens) + 14 million children(non-citizens) = 87 million children; Annual Cost: $43.5 billion * 12 = $522 billion
  • Combined Annual Cost: $3.468 trillion (adults) + $522 billion (children) = $3.99 trillion per year

This compares to the most recent (2023) federal expenditure of about $6.3 trillion.

Poverty generally is worse in the states that tend to vote Republican, the party that wrongly opposes social benefits, saying they are “unaffordable” and “socialism” — which they are not.

(Socialism is government control of industry, not just government funding. All governments fund things, but relatively few of those things can be called “socialism.”)

Government spending has a multiplier effect on GDP. The multiplier effect measures how much economic activity is generated by an initial amount of the expenditure. Estimates for the fiscal multiplier vary, but a typical range is between 0.5 and 2.0.

With a conservative multiplier of 1.5, GDP would grow about $6 trillion on top of the most recent 28.65 trillion for a new value of $34.65 trillion.

Consider this: The expanded Child Tax Credit (CTC) in 2021 provided up to $3,600 per child under 6 and $3,000 per child aged 6 to 17. The total cost of this expansion was approximately $105 billion for the year. It lifted about 3.7 million children out of poverty during its implementation.

Today, about 37.9 million people live below the poverty line.  The UBI described above would:

  1. Eliminate poverty in America
  2. Vastly increase economic growth
  3. Stimulate scientific progress
  4. Increase all areas of production.
  5. Improve the quality and availability of education
  6. Improve the infrastructure and help cut global warming
  7. And improve the entire American nation’s quality of life by using the brainpower now hampered by a lack of funding
  8. Do all this at no cost to anyone.

Think of it. The United States of America has the power to be the first large nation on earth to eliminate poverty. Millions of men, women, and children could begin to contribute to America’s success.

Too good to be true? No, too good only for those who don’t understand the power of human thought and desire, when funded by Monetary Sovereignty.

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/

……………………………………………………………………..

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

MONETARY SOVEREIGNTY