Many people are hopeful at the prospect of a 3rd party in US politics, but without a shift from current neoliberal austerity policies and outdated gold standard thinking, there can be no real change.
Following are Warren Mosler’s responses & recommendations to sections of the Green Party platform related to money, debt, and macroeconomic policy.
Greens will reduce our national debt.
MOSLER: The national debt is in fact a broad measure of the money supply in the economy. It is the dollars spent by government that have not yet been used to pay taxes. Those dollars are in the form of actual cash and bank deposits in accounts at the Federal Reserve Bank.
US Treasury bonds, notes and bills are nothing more than time deposits- savings accounts- at the Fed. The only thing the US ‘owes’ when Treasury bonds mature, for example, is to debit that securities account and credit a reserve account, all at the Fed. Think of it as shifting the dollars from savings to checking. No taxpayers or grandchildren involved.
So think of what you are proposing as eliminating the money supply and you can understand why each time the public debt has been reduced a serious depression or recession followed.
Our nation is in debt because our privatized Federal Reserve monetary system only creates and issues money as debt through loans. The government must constantly borrow more money due to the shortfall in tax revenue, thus steadily increasing the national debt.
MOSLER: First, the Fed is an agent of Congress, as per the Federal Reserve Act. All its profits go to the Treasury and all decisions are made by its political appointees who answer to Congress. Second, yes, the Treasury has to borrow but only as a matter of policy set by Congress, something left over from the gold standard days.
But since the dollars that can be used to pay taxes can come only from government through its agents, close examination of Fed monetary operations shows the government as a whole must spend first before taxes can be paid. So what happens is the Fed is always standing by to lend to the primary securities dealers to facilitate their purchase of securities from the Treasury, so the Fed is standing by as needed to spend first after which those dollars can be used to buy securities from the Treasury. That’s why there’s never been any kind of problem ‘financing the debt’ as they say.
Our national debt has grown by trillions of dollars to finance tax cuts for America’s wealthiest citizens, war, corporate welfare and bailouts of Wall Street and the automotive industry. The burden of the increasing annual interest payments on the debt falls disproportionately on working people and the small business community. It is not sustainable.
MOSLER: First, I’ve proposed a permanent zero rate policy, so there never would be any interest payments. Second, the channel for that ‘burden’ would be the tax structure, which Congress continuously modifies for ‘fairness’ regardless of the composition of the government’s spending.
Reduce our national debt
Mosler: As above, I see no reason to shrink the money supply and most likely collapse the economy.
by increasing taxes on large corporations and polluters,
Mosler: First, large corporations pass through tax increases to consumers so that is highly regressive policy hurting the lowest income earners the most.
eliminating loopholes for the super-rich
Mosler: That should be done though it doesn’t alter their spending so it doesn’t make room for others to spend.
and decreasing expenditures in some areas, especially for war, armaments
Mosler: I’d specify details on what you’d like cut.
and corporate welfare.
Mosler: Same here, best to specify a few examples. Everyone’s heard these generalities for a long time and they don’t have any credibility without details.
Pay off the national debt as it comes due when ‘Greening the Dollar’ is implemented.
Mosler: As above. This comes from a lack of understanding of monetary operations.
Monetary Reform (Greening the Dollar)
A Green Public Money Future
The crisis in our financial system makes it imperative that we restructure our monetary system. The present system of privatized money issuance and control has resulted in the misdirection of our financial resources to speculation, toxic financial instruments, and loans that create huge profits and wealth for the corporate few, but inadequate income and jobs for the common people.
Mosler: That actually comes from government regulation and supervision, and not the actual monetary operations. I have a list of proposals that directly addresses those issues. It’s not a matter of restructuring the monetary system.
It is both possible and necessary for Congress to take back its exclusive Constitutional power to create our money (Article 1 Section 8) without the creation of debt,
Mosler: That’s an oxymoron, as any money the state will accept for tax payment is accounted for as a liability of the state and therefore a ‘debt’ which is what today’s dollars are.
and assume the responsibility to spend this money directly into circulation to fund public benefits outlined in the Federal Budget.
Mosler: Close examination shows that for all practical purposes this is already the case.
Only with a Public Money System can the government direct our national wealth to the needs of the people through their local and state governments.
Mosler: It can be done and is done all the time by Congress through all kinds of grants and assistance.
A Public Money System will enable millions of good livelihoods, provide sufficient incomes,
Mosler: It already does that and policy can be put in place to do as much of that as desired.
shrink the debt burden
Mosler: As above, not a good idea…
and begin to close the wealth gap.
Mosler: My proposals do exactly that with our current monetary system.
Public money has not been issued since Greenbacks, introduced by President Lincoln in 1862, and circulating as public money until 1971.
Mosler: Our cash in circulation is the same thing.
To reverse the private control of issuing our nation’s money;
Mosler: It’s under public control via the Federal Reserve Act.
to reverse the immoral and undeserved concentration of national wealth and income resulting from that private control;
Mosler: Resulting from direct Congressional policy.
to place control over money within a more equitable public system of governmental checks and balances; and to end the regular recurrence of severe and disruptive financial crises that mark the Booms and Busts cycles of capitalism
Mosler: I have proposals to sustain full employment at all times.
The Green Party proposes the following three Public Money solutions to be enacted together:
Nationalize the 12 Federal Reserve Banks and transfer administrative functions of the Federal Reserve Board of Governors to a Bureau of the U.S. Treasury.
Mosler: They are already branches of the Fed which is already entirely a public bank.
All money created under the nationalized Federal Reserve System will be treated as publicly issued money. The private creation of money will cease and with it the reckless practices that have led to recurring economic crises.
Mosler: You are calling for an end to bank lending? My proposals dramatically narrow the scope of bank lending but don’t eliminate home mortgages, etc.
All new money will be issued as a debt-free, permanently circulating asset by the federal government.
Mosler: That describes a permanent zero rate policy which I have long proposed.
A new Public Monetary Authority will be established under the Department of Treasury to scientifically determine the amount of money that can be safely created for the national economy to avoid inflation or deflation.
Mosler: That is already being done by the CBO and Fed forecasters. There’s no other way to do it that I know of.
The Monetary Authority will be empowered with full autonomy and independence to avoid political influence.
Mosler: A fourth branch of government? Elected officials? How do you keep it from getting politicized?
Although banks will continue as financial intermediaries, lending publicly-issued money at interest, and performing traditional banking functions they will no longer be allowed to create money, ending what is known as fractional reserve banking.
Mosler: That ended when we went off the gold standard. Banking today isn’t reserve constrained as it was then.
Specific guidance for a progressive publicly-controlled Monetary Authority can be found in a bill already entered into the U.S. Congress: H.R. 2990 112th Congress: National Emergency Employment Defense Act of 2011 (NEED Act).
Mosler: Haven’t seen it.
All new money will be spent into circulation by the U.S. Government as authorized by Congress for public purpose.
Mosler: This is already the case as Congress already has as much control as it wants over bank lending.
This includes funding a 21st century infrastructure including education and health care.
Mosler: This can just as easily be done right now under current institutional arrangements.
Per capita spending guidelines for new money will assure a fair distribution across the nation, creating good livelihoods, re-invigorating local economies and funding government at all levels. Newly-created money will also be distributed directly to state and local governments.”
Mosler: Already the case and can be expanded by Congress within the current institutional structure.
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