The US Dollar is a tax credit.
It is a unit of measure.
You can’t run out of inches.
You can’t run out of numbers.
The government can’t run out of dollars…
unless it purposely, politically chooses to.
Since the US Dollar is a mere tax credit and a unit of measure, it is neither precious nor permanent.
A dollar is an IOU.
When it is spent into existence a debt is born.
When it is taxed out of existence a debt is washed away.
All money is debt.
So reducing the national debt means reducing the national money supply.
Dollars are not reused.
A dollar is spent once into existence.
It circulates within the economy, then is destroyed once it is returned as a tax.
More precisely, it drains reserves at the Fed and is destroyed.
There is NO PRINTING MONEY!!!!
Congressional spending is simply marking up accounts and taxation is marking them down.
Dollars are constantly created and constantly destroyed daily. DAILY!!!!
There is no such thing as paying for programs.
The government neither has nor doesn’t have dollars.
Dollars are created every time the government seeks to provision itself and deposits are made into their account for spending… via keystrokes on a keyboard.
Dollars are deleted, destroyed, shredded when received as a tax.
So why are we always talking about the government going broke?
Why are we always talking about reducing the deficit or lowering the debt?
The National Debt is merely: wait for it…
The sum total, to the penny, of every untaxed dollar in existence since the start of the nation.
To pay off the debt is to DELETE, Destroy EVERY dollar in the economy.
What kind of knucklehead would push that?
What programs are we missing out on because people do not know this?
Why do people think that taxes fund federal programs?
Being the “richest” country in the world is not about dollars… it’s about available REAL RESOURCES.
Why do people make up stories about the end of the dollar or make up tales from the bar stool about the end of the world reserve currency? The nonsense about the Petrodollar??? Why do they do it???
The lie is so pervasive and systematically reinforced in our sitcoms, magazines, media, churches, work place, community associations, and political parties, unplugging from economic illiteracy is a herculean task but one that must be destroyed every moment of every day.
As we watch the deep freeze sweep the nation and people die from exposure… remember the people who claimed we needed to reduce the debt and deficit and who refused to advance a bold progressive agenda.
Remember them all.
The dead have no voice.
We must be their megaphone.
Double entry accounting demands an asset be tallied. So the other side of the debt is a private sector asset on the balance sheet. The debt is an IOU and the asset is a tax credit.
“If state spending is printing money, then federal taxation is unprinting money”Warren Mosler
Currency User vs. Currency Issuer
An important distinction exists between the currency issuer & currency users..
The Federal Government is the currency issuer. It has no means to live beyond. It creates money at will when Congress authorizes it.
States, counties and non sovereign zones such as the Euro adopters are revenue constrained. So pushing for state based initiatives that should be paid for Federally have a very different constraint. States and individuals cannot spend without borrowing, earning or taxing (gov).
To make this distinction, look at this snippet from a Rodger Malcolm Mitchell article on Monetary Sovereignty:
Heck, in 1946, NY Fed Chair Beardsley Ruml understood this even but the purveyors of the Mont Pelerin Society and later the Powell Memo and libertarian and right-wing think tanks made neoliberalism God. And eradicated knowledge of “the public purse” from the discourse of society.
For progressives seeking to organize and expand public purpose spending, keep these shareable images in your back pocket.
Full breakdown of the Job Guarantee
Did you know that one of the ways our government prevents massive recessions, or mitigates them is with automatic stabilizers?
Automatic Stabilizers are cash injections into the economy when certain events occur and they are cyclical and automatic. When the economy improves, the stabilizers eventually slow to appropriate levels as well.
They serve the public through services such as food stamps, Medicaid, and many other public services, but the key purpose of these automatic stabilizers is not just to help the people.
It is to ensure entire industries do not collapse and that the economy has some built in fail safes to stop the bleeding.
These Federal services are not paid for in tax dollars and that should be readily apparent. They are new money spent directly into the economy with jobs to support those services as well.
Many think we have to Institute work requirements and make life more cruel for the benefit receivers because they are seen as “getting a free lunch”, when in truth, merchants are getting business to keep the economy alive and well (or at least out of complete failure).
Because the myth of the “tax payer dollar”, many horrifically believe that their tax dollar is being wasted on “lazy people”, “bad choices” and of course they just hate government.
This is all paid for with the “public money”. The money is never a problem once we understand how our nation creates money through Congressional authorization and appropriations. Not some nebulous and nefarious scheme by private banksters.
Much of the faulty logic comes from the Ellen Brown school of thought that has never understood the nature of the Fed Reserve or the lack of regulation Congress has exerted over the banking industry, that serves the public purpose, albeit in a grotesque way due to deregulation.
This is also fueled by the upside down world of Ron Paul and the Austrian school who hate the Fed for manipulating interest rates and disturbing the “free market” (add in a perverse desire to shackle the nation to the ridiculous gold standard).
Two opposing but equally ignorant schools of thought have made the most simple and straight forward answers difficult to mobilize the people over.
The Federal Government is the monopoly issuer of the currency, sets all rules and regulations supporting its currency and can do whatever it wants should Congress make the decision to do so. The government is also the price setter as the money monopolist.
Which brings me to the last point I want to make, now that we understand a little bit about what automatic stabilizers are and the fact that it isn’t private banksters or the IMF funding our food stamp programs etc., we will look at the most efficient and powerful of all the automatic stabilizers, the Federal Job Guarantee. No need for a pilot Cory Booker.
This program provides a transitional job, locally administered and federally funded to serve the same downcycle moments food stamps and other welfare benefits kick in.
It isn’t make work, as the local communities would identify the work they want to compensate to improve the lives of the people and enhance the communities in which they reside.
A Federal Job Guarantee is a permanent program, a guaranteed job that sets the wage floor (say $15 per hour) and benefits floor (they are a government employee and entitled to such benefits).
The intention of the Job Guarantee however is to provide a transition from the wage floor/employer of last resort (or ELR), back into the private sector or a higher paying public service job.
This program provides a buffer stock of “employed” people vs “unemployed” people. Consider how seasonal workers in agriculture might require work in the off season.
But also, as shocks to the economy strike various industries or the nation as a whole, the productive capacity of the nation isn’t further diminished.
What types of work could be included you may wonder? Caregivers to surfing lessons and other social engagement such as volunteer services normally unpaid at nonprofits could be included.
What you do not want to do is provide a wage floor, bufferstock of high skill green jobs as the wage floor. This is not a progressive angle to valuing labor.
This is devaluing high skill labor that could and should be funded directly by the Federal Government at a career level opportunity.
We should not let politics alter the purpose of the Federal Job Guarantee as the important purpose of the automatic stabilizers should not also serve as a means of killing high paying career level opportunities the government is more than capable of fully funding in perpetuity.
One more final thought about the politically charged, economically invalid concept of a Universal Basic Income or UBI.
A #UBI is quite literally for everyone. No matter what. A massive infusion of money without the productivity to support the infusion is not a dollar cost crisis but a real resources crisis that directly causes inflationary concerns and represents the status quo.
The #UBI has no price anchor. There is no wage floor. There is no guaranteed services and there is nothing to prevent the worst of situations because the money is not what the poor need, it is the services.
A more literate way of addressing this concern about those unable to work would be to expand social security and raise the payments to keep up with any cost of living adjustments. This is not paid for with FICA anymore than TANF is paid for with your “hard earned tax dollars”.
They are all new money injections to the economy and until you understand that, no progressive agenda will ever come to be. It’s really that simple.
Please read Pavlina Tcherneva’s book on this subject:
The Case for a Job Guarantee
Also, please listen to our podcast with Dr. Tcherneva on Nationalizing Payroll and a Federal Job Guarantee.
Ending the Federal Reserve? Not so fast.
Pretend you understand MMT (Modern Monetary Theory) and look down at your child, knowing we have less than 12 years to substantively reduce our carbon footprint massively to stave off some of the more deleterious effects of climate change heading towards us.
You know that Congress and other sovereign currency issuing nations can simply spend what must be spent to save us all from disaster. (Same with Healthcare and education amongst a host of basic needs left unmet.)
Now… pretend that the major parties are both corrupt and 3rd parties are steeped in economic illiteracy that edges up on at worst criminal negligence and the very least incompetence.
What do you do?
Now stop pretending.
That is what we are facing today.
The Democrats want to reduce deficits. (At least some Justice Dems like Alexandria Ocasio-Cortez, Bernie Sanders, and Rashida Tlaib’s economic advisers get it right and understand MMT)
Both major parties want to reduce public services while blowing up the deficit on the wealthy.
The Greens want to End the Fed, Green the Dollar, create some non-elected monetary reform board and then… deal with climate change.
We are FUBAR. Get it? Still wondering what I am talking about?
Time is running out for millions during this COVID19 pandemic. From mortgages and rent to utilities and even student debt. Congress acts like this is tough. Many believe them. They think the Federal Government is budget constrained like their household and that is a huge mistake.
Congress alone can fix all of this. Can pay for it with keystrokes. Deficit spend without raising a nickel of taxes and if that seems to hard to get, then we are more screwed than anyone could’ve ever dreamed.
This article is a compilation of tweet threads – you can find them in original form here.
6 thoughts on “Back to [MMT] Basics”
Thanks Steve succinct summary of MMT and the socio-economic political implications for change.
This is a wealth of important information laid out in a simple but comprehensive manner. Bravo and thank you!
Since I’ve learned about how the economy operates and how MMT IS, I’m always puzzled as to why people don’t understand. You lay it out well, Steve. I don’t understand what’s not to get, yet millions don’t. And the ones who do get it, refuse to push and demand from Congress to do their job. If people who know MMT aren’t pushing and demanding Congress act, what’s the good of knowing MMT?
If I may, my answer is until enough people understand MMT and demand that Congress act to use its power, we will not be able to dig ourselves out of the hole we are in and adequately address the climate crisis, growing wealth inequality resulting in poverty and homelessness, repair our crumbling infrastructure, provide adequate healthcare to all Americans, fully fund education through college, childcare and more. By ignoring the issue, the hole just gets deeper and, at some point, we won’t be able to get out of it thus condemning ourselves, our children, our grandchildren and the planet to a slow and agonizing decline and death.
We don’t have a lot of time to do this so education is first, i.e. learn MMT, followed by democratic elections, followed by constant citizen involvement in the democratic process and participation in rebuilding what is broken.
Others may have a different take but that is my opinion.
Can’t educate people without getting their attention and then convincing them that you are right. I had an idea for an approach that I believe could accomplish that but I’m having a very hard time getting help in perfecting and promoting it. I initially thought that once people understand what I’m shooting for it would be a no-brained the get support but boy was I wrong!
Lift all boats Co-op:
I’m looking for help in ‘selling’ this concept to people that are serious about wanting to help the world.
I have gotten encouragement (and a sanity check) for this from two prominent MMT economists: https://en.m.wikipedia.org/wiki/John_T._Harvey
My idea is to do an end run around the powers that be by using strategy and the advantages of modern technology.
I propose creating a co-op of successful capitalist entrepreneurs that makes capitalism work for the 99%.
WE would MAKE them successful using a team of salesmen, investment managers, credit repair services, accountants, etc.
Instead of trying to wrest the wealth and power from the 1% why not create ripples of ever increasing wealth within a co-op that works by helping all others in the co-op continue the growth of wealth for themselves and each other. This relies on postponing the costs of profits and externalities (much like the wealthy do) to the point where the CURRENCY CREATOR is manipulated into covering those costs!
With just a few people investing very little to start I would like to start with green MLMs (Multi Level Marketing) using a computer program to identify which members buy and sell to whom, sales would be done FOR the members by a team of professional salesmen. (I’m not wedded to MLMs, we could use other means of circulating money amongst the members) Once the initial group proved it can be successful we could actually crowd fund others to join, making it very advantageous to become a member. This is a concept for a wealth building co-op that is meant as a tool to strategically shift small amounts of money between members at as high a velocity as possible and pooling the money in the hands of a segment of the group until that segment increases their income/creditworthiness (using their available credit for investments to eventually attain a livable passive income). Repeating this through all segments of the group ever increasing the overall ‘creditworthiness’ of everyone, which manipulates the CURRENCY CREATOR (the government – through the banking system) into providing the profits for all and covering the externalities, by kicking the can down the road enough that the growth in GDP from our co-op manipulates the federal government into covering those costs, and as the creator of the currency they are the only segment of the economy that can always afford it!
As more and more members achieved more and more financial clout just imagine what they could accomplish socially and politically!