This is the United States government. First of all, you never have to default because you print the money. I hate to tell you. So there’s never a default.And that second "gaffe", ladies and gentlemen, was actually NOT a gaffe at all. Why? Because it is actually TRUE, believe it or not. Even a stopped clock is right twice a day, after all.
Wait, what? You read that correctly. Modern Monetary Theory (MMT) has actually been arguing this for years now, as has Rodger Malcolm Mitchell and his own theory of Monetary Sovereignty (MS). That is, a Monetarily Sovereign government like our own federal government and many others (but unlike the euro nations or any US state or local government) has the inherent and unlimited power to create money by fiat. The only limits such a government has are those it chooses to impose on itself, such as the remaining arcane and archaic rules left over from when we actually had a gold standard before we got off of it in 1971. The world changed in that year, but our "leaders" have apparently not gotten the memo.
You might want to sit down before you read any further. Taxes do NOT actually pay for federal spending, rather, the government simply creates the money they spend ad hoc with a few clicks of a computer as they go along. Nor is there any physical need for them to borrow money, but they do so anyway by issuing Treasury securities (i.e. T-bills, T-notes, and T-bonds) whenever they create new money that is unmatched by taxes in order to match it with borrowing--all because of those arcane and archaic rules that they could remove with a stroke of a pen if they chose to. That is, IF they actually chose to.
So where do our tax dollars actually go then? Well, one could argue that those dollars are effectively taken out of the economy and needlessly destroyed. And yes, some of those dollars are ultimately destroyed in practice if not in theory. But it is worse than that, for at least at some point before destruction, they first have to make a pit stop at the privately-owned FERAL Reserve, where they do little more than further enrich the bankster oligarchs. Again, all because of those arcane and archaic rules.
And that big, scary number that we see on the National Debt Clock? Well, nowadays the national debt is literally just an accounting gimmick. What it really consists of are deposits in federal Treasury security accounts, not debt in the way that private debt is. Effectively, it is really a national savings account, and deficit spending is simply when the government puts more money into the economy (via spending) than it takes out (via taxes and fees). Thus, a deficit for the federal budget is actually a surplus for the rest of the economy, and vice-versa.
Of course, Rodger Mitchell has an even better, more fundamental idea that makes it so the government would never need to borrow a single penny ever again, and it doesn't require raising taxes OR cutting spending. Not only that, but it would guarantee that Social Security and Medicare, and any other program, would remain fully funded indefinitely as well without the use of FICA taxes (or any other tax for that matter). The solution, in his exact words:
The best way is to eliminate the federal budget deficit and debt: Ending government borrowing. The government has the unlimited ability to create and spend money without borrowing. The process will be:
1) Congress will create an account called "Money."
2) Congress will determine how much money this account contains. The process will be similar to the way Congress now determines the debt ceiling.
3) Federal agencies will write checks against this account according to budgets decided by Congress. If any federal agency needed additional funds, Congress would decide whether or not to allow this spending, in the same way that Congress votes for additional spending by the military et al.
This would eliminate concerns about "our grandchildren paying for the federal debt." There would be no federal debt.And as long as such money were created without any interest or related fees (as per Ellen Brown) such a solution would actually work. Modern Monetary Theory indeed supports such an idea. But before we can do that, of course, we must first have an independent Treasury and/or a public national bank in place of the privately-owned FERAL Reserve. (And since he mentioned the debt ceiling, that is another thing we should really get rid of as well in the meantime, since it does far more harm than good.)
Before that, there actually is a painless (albeit unconventional) method of paying off the existing debt in one fell swoop. Not just this year's deficit, but ALL of the cumulative $21 trillion of the debt. It's called the Noble Solution (named after its creator, Richard E. Noble) and does not involve any significant tax hikes or spending cuts. So what is it? It's something we never would have advocated just a few years ago: printing (electronically creating) money out of thin air to pay it off all at once. After all, FERAL Reserve has been creating money out of thin air for decades now (including that recent whopping $16 trillion secret bailout of the banks, which eventually rose to nearly $30 trillion) so we might as well put this practice to productive use. Money is really nothing more than an accounting entry nowadays, so let's make the entry and be done with it for good.
But wouldn't that lead to hyperinflation? Not if it is properly done with due diligence. Noble points out that while creating such money is undoubtedly inflationary, using it to pay off the debt (which is in Treasury bonds and is thus already part of the money supply) would be deflationary in that it would shrink the money supply by an equal amount. Thus, the two effects would cancel each other out, as paper (electronic data) would be exchanged for paper (data). Of course, we would have to bypass the FERAL Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, abolish or nationalize the FERAL Reserve entirely and return the power of money creation to its rightful owners, our elected representatives in Congress and the Department of the Treasury. America would then be free and clear for the first time in history since Thomas Jefferson. And it would cost us NOTHING.
Alternatively, Joseph M. Firestone points out that the very same effect can also be had more gradually, with Congress passing an Act (such as the very next budget or appropriations bill) that removes those arcane and archaic rules entirely, and mandates/guarantees than any new deficits as well as any outstanding Treasury securities (i.e. national debt) be funded / paid for automatically with the very same ad hoc money creation that they already do in practice, but no longer needing to match it with new borrowing or tax revenues. Thus, the federal government would no longer need to borrow even one penny (i.e. issue any new Treasury securities) unless they truly wanted to for reasons unrelated to the federal budget. And according to Rodger Mitchell, such bonds do, in fact, have other useful, unrelated functions (i.e. providing a safe haven for investors to park their money, and an effective platform for the government to control both short and long-term interest rates, and thus the demand for dollars). But the point is they would no longer HAVE to do so just to meet their current and future fiscal obligations, so the national debt would stop increasing and gradually decrease as any existing Treasury securities mature and/or are redeemed. And thus the 100% contrived political issue (and cudgel) that is the national debt / deficit would quickly become a dead issue, and we can finally focus on other, real priorities for a change.
So what are we waiting for?