Excellent Article About UBI

The ever-insightful Rodger Malcolm Mitchell has a great new article about the topic of UBI from a Monetary Sovereignty perspective.  Read it and share it far and wide.  It needs to go VIRAL!

The only arguments against UBI are either ignorant, obsolete, greedy, selfish, patronizing, paternalistic, and/or sadistic, which means that there are really NO good arguments against it in any free and decent society worthy of the name.  Period.

(Mic drop)

To Refurbish Modern Monetary Theory (MMT), One Must Admit That Lockdowns Were Indeed Harmful On Balance

Modern Monetary Theory (MMT) has been taking quite a drubbing lately.  Some say it has been thoroughly discredited since it was de facto practiced (to an extent) during the pandemic, and massive inflation resulted.  But that glib commentary misses the real root cause of the inflation:  the shortages of goods, services, and labor resulting from the massive global supply chain disruptions, which in turn resulted from the lockdowns and related restrictions. 

(And it's not entirely due to ignorance, since those naysayers actually DO admit as much about the lockdowns, but yet they still speciously put most, if not all, of the blame on MMT, because reasons.)

MMT per se was never the problem.  But to refurbish it, one must admit that lockdowns and related restrictions did very real harm, something that the pseudo-left is loath to do.  Not that MMT is flawless, by any means.  But Rodger Malcolm Mitchell's related theory, Monetary Sovereignty (MS), essentially fixes those flaws, especially when he (belatedly) jettisoned the specious idea of interest rate hikes (which only deepened the stagflationary quagmire) as an inflation-fighting tool.  A good essay about the differences between the two can be found here.

In a nutshell, when you literally shut down the broader economy in most of the world for an extended period of time (which greatly disrupts and shrinks supply), AND then try to paper over it by printing unprecedented amounts of money (which stokes demand), that WILL be inflationary.  But the money printing was NOT the root cause, and remember that if the powers that be didn't do that, there would have been a full-blown depression, if not a complete collapse of civilization as we knew it, and within a couple weeks the masses would have been furiously calling for their heads with torches and pitchforks.  Or, they could have simply adopted the "flu strategy" and NOT imposed any restrictions, and perhaps implemented a more modest (but more brief and front-loaded) stimulus package, and this whole stagflationary quagmire could have been avoided.  And as the experience of Sweden and other countries has famously shown, it would not have resulted in any more excess deaths than occurred with lockdowns.  Hindsight is quite literally 2020.

It's not that lunch cannot ever be free.  It actually can be, at least to a point.  But truly lockdowns can never be a free lunch, no matter how much money gets printed to paper over the massive holes they make.

As for the specious notion that MMT (and by extension, MS) is a "luxury belief", well, we know that the real luxury beliefs are austerity and artificial scarcity.  Not to mention lockdowns as well.

A Better Than Nordic-Style Social Welfare State With Less Than ALASKA Taxes

A friendly reminder to all readers:  contrary to popular opinion, it is entirely possible to have a better than Nordic-style social welfare state with less than Florida Alaska taxes.  Why?  (You really may want to sit down before reading any further.)

Because federal taxes do NOT fund federal spending, that's why!  Not the individual income tax, not the corporate income tax, not FICA, not the various excises, duties, and tariffs, not estate or gift taxes, nor any other federal tax for that matter.  It is all a Big Lie illusion to prop up the oligarchy, especially the big banks, via artificial scarcity of dollars.  As Rodger Malcolm Mitchell famously notes, and echoed by Dr. Joseph M. Firestone, the federal government is Monetarily Sovereign, that is, being the issuer of it's own currency, it by definition has infinite money.  Any money they receive, through taxes or otherwise, is effectively like bringing coals to Newcastle, in that it disappears into infinity (thus de facto destroyed).  And whenever they spend money on anything, they create each dollar on an ad hoc basis to pay as they go.  

Switching to what Dr. Firestone calls "Overt Congressional Financing (OCF)" is LONG overdue.  On August 15, 1971, the gold standard effectively ended for good, but the method of Congressional financing remains more or less stuck in the past.

Meanwhile, the so-called "National Debt" (TM) is also an illusion, in that it consists of Treasury securities that are only spuriously linked to federal spending due to arcane and archaic rules left over from the now-defunct gold standard that ended over half a century ago.  Each T-security is effectively equivalent to a CD savings account for those who choose to invest in them.  Additionally, the idea that money can only be created with interest or other "strings" attached to it is yet another part of the Big Lie as well.

(It could literally be paid off in one fell swoop at zero cost to anyone, in fact.  And it's technically not even "borrowing" at all.  Infinite money, remember?)

Ditto for the Social Security, Medicare, and other federal "trust funds", which are literally nothing more than accounting gimmicks based on artificial scarcity.  They could fund all of that and more by simply creating the money on an ad hoc basis.

As for inflation, that is generally caused by shortages of goods and services, NOT by printing too much money.  It is ultimately a supply-side problem that requires supply-side solutions, including (counterintuitively) more federal spending targeted to incentivize more production of scarce goods and services.  Thus, rationing dollars via austerity measures and/or raising interest rates to fight inflation and/or recession is like applying leeches to cure anemia.  It is a fundamental category mistake that does far more harm than good on balance.

Of course, the oligarchs want to condition We the People to accept mere crumbs from the tables of the rich.  That way they can keep widening the yawning gap between the haves and have-nots, givng the oligarchs more power to lord it over us all.

Bottom line: all of these gimmicks are completely artificial, contrived, and designed to deceive us all.  The ONLY purposes of taxes in a Monetarily Sovereign government that issues it's own currency (like the federal government, but not (yet) state and local governments) are 1) to control and regulate the economy by encouraging or discouraging various behaviors and activities, 2) to (crudely) fight inflation, 3) to create demand for the currency, and 4) to prop up and give credence to the Big Lie.  But the supposed need to raise revenue is NOT one of them at all.

Thus, with the stroke of a pen, Congress can very easily square the circle of a better than Nordic-style social welfare state with less than Alaska taxes, complete with a national version of the Alaska Permanent Fund.  They gave the FERAL Reserve its power in 1913, and they can just as easily take it away today if they chose to.  But of course, their oligarch masters would NOT want that at all!  Most Congresscritters save for a tiny few, are of course bought and paid for by the big money interests.  Thus, we need to throw the bums out, yesterday!

So what are we waiting for? PAGING DR. FIRESTONE!  NEEDED IN WASHINGTON, DC, STAT!

A "Job Guarantee", Without The Guarantee?

The TSAP has once endorsed the MMT idea of a Job Guarantee (JG), which is exactly what it sounds like.  Of course, we also supported Universal Basic Income (UBI) with NO strings attached as well for years now, but still maintained that a JG would be good in addition to that.  However, we no longer support that idea anymore.  JG, in all of its flavors, has far too many conceptual, logistical, and ontological problems to be workable at scale, as Rodger Malcolm Mitchell notes in his article, and several others.

So what do we at the TSAP support instead of JG?  Well, we clearly support UBI, hands down.  But beyond that, we support a scaled-up version of something like Job Corps, and which is basically a Job Guarantee but without the "guarantee" part.  That is, simply a jobs program, both for finding and creating jobs as needed, and one that provides only useful work rather than the Sisyphean make-work boondoggles that would inevitably occur in a true JG program.  Otherwise, it is guaranteed to fail.

A Better Than Nordic-Style Social Welfare State With Less Than Florida Taxes

A friendly reminder to all readers:  contrary to popular opinion, it is entirely possible to have a better than Nordic-style social welfare state with less than Florida taxes.  Why?  (You really may want to sit down before reading any further.)

Because federal taxes do NOT fund federal spending, that's why!  Not the individual income tax, not the corporate income tax, not FICA, not the various excises, duties, and tariffs, not estate or gift taxes, nor any other federal tax for that matter.  It is all a Big Lie illusion to prop up the oligarchy, especially the big banks, via artificial scarcity of dollars.  As Rodger Malcolm Mitchell famously notes, and echoed by Dr. Joseph M. Firestone, the federal government is Monetarily Sovereign, that is, being the issuer of it's own currency, it by definition has infinite money.  Any money they receive, through taxes or otherwise, is effectively like bringing coals to Newcastle, in that it disappears into infinity (thus de facto destroyed).  And whenever they spend money on anything, they create each dollar on an ad hoc basis to pay as they go.  

Switching to what Dr. Firestone calls "Overt Congressional Financing (OCF)" is LONG overdue.  On August 15, 1971, the gold standard effectively ended for good, but the method of Congressional financing remains more or less stuck in the past.

Meanwhile, the so-called "National Debt" (TM) is also an illusion, in that it consists of Treasury securities that are only spuriously linked to federal spending due to arcane and archaic rules left over from the now-defunct gold standard that ended over half a century ago.  Each T-security is effectively equivalent to a CD savings account for those who choose to invest in them.  Additionally, the idea that money can only be created with interest or other "strings" attached to it is yet another part of the Big Lie as well.

(It could literally be paid off in one fell swoop at zero cost to anyone, in fact.  And it's technically not even "borrowing" at all.  Infinite money, remember?)

Ditto for the Social Security, Medicare, and other federal "trust funds", which are literally nothing more than accounting gimmicks based on artificial scarcity.  They could fund all of that and more by simply creating the money on an ad hoc basis.

As for inflation, that is generally caused by shortages of goods and services, NOT by printing too much money.  It is ultimately a supply-side problem that requires supply-side solutions, including (counterintuitively) more federal spending targeted to incentivize more production of scarce goods and services.  Thus, rationing dollars via austerity measures and/or raising interest rates to fight inflation and/or recession is like applying leeches to cure anemia.  It is a fundamental category mistake that does far more harm than good on balance.

Of course, the oligarchs want to condition We the People to accept mere crumbs from the tables of the rich.  That way they can keep widening the yawning gap between the haves and have-nots, givng the oligarchs more power to lord it over us all.

Bottom line: all of these gimmicks are completely artificial, contrived, and designed to deceive us all.  The ONLY purposes of taxes in a Monetarily Sovereign government that issues it's own currency (like the federal government, but not (yet) state and local governments) are 1) to control and regulate the economy by encouraging or discouraging various behaviors and activities, 2) to (crudely) fight inflation, 3) to create demand for the currency, and 4) to prop up and give credence to the Big Lie.  But the supposed need to raise revenue is NOT one of them at all.

Thus, with the stroke of a pen, Congress can very easily square the circle of a better than Nordic-style social welfare state with less than Florida taxes.  They gave the FERAL Reserve its power in 1913, and they can just as easily take it away today if they chose to.  But of course, their oligarch masters would NOT want that at all!  Most Congresscritters save for a tiny few, are of course bought and paid for by the big money interests.  Thus we need to throw the bums out!

So what are we waiting for? PAGING DR. FIRESTONE!  NEEDED IN WASHINGTON, DC, STAT!

The Root Cause Of All Economic Woes Of The Past Half-Century: "Financialization" Of The Economy

The year was 1971, just over half a century ago.  The utterly costly (in both lives and money) and protracted Vietnam War was gradually winding down but still raging, inflation was getting out of control, and the Bretton-Woods system of an international (fool's) gold standard and fixed currency exchange rates was rapidly collapsing on itself due to rampant cheating and attrition.  On August 15, 1971, President Richard M. Nixon decided to effectively suspend the gold standard, first temporarily, though it would soon become permanent by 1973.  And by 1975, any nominal and vestigial links between gold and the dollar had been severed completely.   

Since this "Nixon Shock" of 1971, the money creation capability of the federal government and the Federal Reserve were no longer constrained by gold or anything else (except the remaining arcane and archaic rules of Congress left over from the defunct gold standard, and thus no longer make any sense).  Thus, Congress could really create as much money as they wanted from then on, and the Fed could create as much as Congress would allow them to.   The money supply had clearly exploded exponentially since then, and a fortiori after 2008 and 2020.  

So where did nearly all of those newly-created dollars go?

Wall Street, of course.  The result?  A perpetually yawning chasm between the financial sector (which grew exponentially along with the money supply) relative to the real, physical economy (which has basically stagnated and hollowed-out ever since).  That absolute and relative advantage was then weaponized against the bottom 99% of Americans, as the financial sector is dominated by the top 1% and especially the top 0.01%.  Extreme inequality and very much harm followed.  Decades of utterly remarkable progress against poverty stalled and even reversed somewhat.  And that, ladies and gentlemen, is the real root of all economic woes of the past half-century.

Prior to 1971, the financial sector moved largely in lockstep with the rest of the economy.  And not coincidentally, prior to 1973, wages grew largely in lockstep with labor productivity as well.  But ever since then, both have seen an ever-widening divergence, to the detriment of the greater working class.  While the oligarchs literally laughed all the way to the bank.  And that was clearly no accident, but rather by design.

Imagine if even a fraction of all that newly created-out-of-thin-air money since 1971 was rained down upon We the People directly instead of Wall Street and the big banks.  How different would America, and indeed the world, be today?  If that doesn't make you feel RIPPED OFF, check your pulse 'cause you might be dead!

The cure for this disease is indeed very, very simple.  All it takes is a simple Act of Congress to 1) scrap the remaining arcane and archaic rules that prevent Overt Congressional Financing, 2) implement Overt Congressional Financing, and then 3) use it to benefit We the People instead of the oligarchy.  UBI, Medicare For All, expanded Social Security, free college, debt cancellation, Green New Deal, oh my! Basically, the entire progressive economic agenda and more can be paid by the federal government for without any borrowing or taxes unless Congress wants to.  

That is the real logical conclusion of Monetary Sovereignty:  when a government issues it's own currency, by definition it has infinite money, which is constrained only by the laws that the government passes.  Time to end the Big Lie and act like it for once.

(And no, going back on the gold standard now would be a dumb idea, as that would only lead to artificial scarcity of money.)

As for inflation, that can be cured by 1) raising interest rates (in the short term), and 2) counterintuitive as it sounds, increased federal spending to cure shortages by incentivizing increased production of goods and services that are experiencing shortages (food, energy, labor, computer chips, etc.) in the longer-term.  Problem solved.  Next.

(And of course, stop creating shortages via supply chain problems due to lockdowns!)

So what are we waiting for?

UPDATE:  We would be remiss if we did not also enumerate the more proximal causes in addition the more distal root cause of financialization.  Those include:  

• Legalization of usury (lifting of federal 12% usury cap on interest rates) (1978)
• Union-busting re-legitimized by Reagan against the PATCO strike, which made an example of them for the private sector going forward (1981)
• Legalization of stock buybacks (1982)
• General deregulation and tax cuts for the ultra-rich and corporations (1980s)
• General deregulation of big banks and Wall Street (1980s)
• Shrinking the social safety net by stealth, letting it lag behind inflation (1970s through 1990s))
• NAFTA (1994)
• Shrinking the social safety net again via welfare deform (1996)
• Repeal of Glass-Steagall Act, the firewall between commercial banks and investment banks (1999)
• China joining the WTO as a "most favored nation" (2001)
• More tax cuts for the rich (2001-2003)
• NOT learning the lessons of 2008, particularly the moral hazard created by the Wall Street bailouts (2008-2009)
• Offshoring/outsourcing of manufacturing jobs (ongoing)
• Pandemic relief money disproportionately going to, and benefitting, Wall Street much more than Main Street (2020-2021)
• And of course, the lockdowns which, when combined with the above, constituted the largest wealth transfer in history, from the poor and middle class to the ultra-rich and Wall Street, both nationally and globally (2020-2021)

To Both Parties: Stop Playing "Chicken" With The Economy!

The elephant and jackass corporate duopoly in Congress are at it again.  They are, for the gazillionth time, playing a dangerous game of "chicken" with the "debt ceiling" and therefore with the economy.  Even merely hinting that the US government might default on its obligations is enough to cause real and broad economic damage.  And to add insult to injury, they also risk a government shutdown at the same time.  And to them we say, KNOCK IT OFF!  Yesterday!

We are officially being "governed" by overgrown children now, it seems.  In both parties, no less.

Not only is it a stupid and dangerous game to play, but it is 100% unnecessary.  The USA is the only country on Earth that has a separate vote for the debt ceiling and the budget, and one of only two countries that even has a formal "debt ceiling" at all.  And being Monetarily Sovereign, the USA would only default on the debt if it wanted to, since they could literally just print (or keystroke) the money.  Really.  (Just like that "gaffe" that Trump made back in 2016.)  And even the "debt" itself isn't really debt like occurs in the private sector or households--it is literally nothing more than deposits in Treasury security accounts, which are functionally equivalent to glorified savings accounts for investors.  That's it.  Otherwise, they simply keystroke money into existence every time they pay a bill, all while pretending otherwise of course.

And only due to arcane and archaic rules left over from the now-defunct gold standard (that functionally ended on August 15, 1971), which no longer make sense, is there any reason for this sort of utterly pointless dog and pony show, which means there really are only political reasons for it.  Which thus means there are no good reasons for it.  All they have to do is add the following text to any budget appropriations bill, per Dr. Joseph M. Firestone:

Paging Dr. Firestone indeed!  That would render "teh debt" a non-problem overnight.  And if Congress won't do that, the White House can always simply direct the US Treasury to #MintTheCoin.  Due to a little-known loophole in the law, the US Mint is allowed to mint platinum coins in literally ANY denomination as legal tender.  That means they can mint a trillion-dollar coin, or even a $100 trillion coin for that matter, and use such seigniorage as revenue to pay any bills.  The current White House, however, does not seem to be even the least bit interested in doing so, alas.

The US Constitution makes it crystal clear that the government must never call the public debt into question.  So what are we waiting for?

UPDATE:  The predictable howling about how the platinum coin loophole doesn't really exist (and that using the face value of such a coin as revenue is somehow technically illegal) is back again, and it is neither true nor necessarily in good faith.  This particular criticism appears to hinge entirely on the technical legal definition of "bullion coin" and the relative lack of precedent, but that doesn't mean it is necessary illegal.  Simply call it a "proof coin", and the face value is valid regardless of the value of the metal used to make it.  And the Federal Reserve would have no choice but to accept it as legal tender when deposited at the New York Fed, and thus fill the Treasury's own spending account there with the equivalent amount of paper/electronic dollars of revenue for spending.  Problem solved.  Next.

By the way, if the loophole doesn't really exist, then why did Republican Senator Mike Lee introduce a bill explicitly to close that very same loophole?

Even failing that, other things the President can do is invoke the 14th Amendment to nullify the debt ceiling, issue a new and special kind of bond to make an end-run around the debt ceiling, or even simply issue more debt in the short-term interim as the "least illegal" option under the Constitution, as the Constitution clearly prohibits defaulting on the debt.

In other words, President Biden can end this madness all by himself if he wanted.  So what is he waiting for?

We Need To Do Both

If you are confused about how to save America, you are NOT alone.  To fix this country we need to get out of this nasty rut we are stuck in ASAP.  And to do this, we need to not only reopen the country by ending the lockdowns and restrictions OR only firehose the economy with federal money, we need to do BOTH.  

Yesterday.  In fact, yesterday is not soon enough!

If we keep these restrictions for any longer while hoping to just paper over the massive holes in our economy and society with newly printed money, that will not work in the long run, as we will just keep on damaging the economy and society.  Likewise, if we attempt to reopen with a bang without injecting federal dollars into the economy, it will be a big disappointment since the damage is done and has not been repaired.  Either way, it is like pushing on a string--or like pushing an elephant up the stairs.

As we have already noted in a previous article, we can effectively end the pandemic in ONE WEEK tops without lockdowns, masks, or vaccines, full stop.  Simply send everyone an Indian-style $2 Ziverdo kit (Zinc, Ivermectin, and Doxycycline), and as Karl Denninger notes, the Doxycycline is optional and can be substituted with Vitamins C and D (and if we had our way, also add Niacin, Thiamine, and Quercetin as well).  And for the few severe or critical cases that still occur despite this, there is always the MATH+ Protocol (and even cheap steroid inhalers) to fall back on.  In fact, early use of steroid inhalers seems to reduce the number of severe cases by 90%!  Problem solved.

(In India, adding Vitamin D to the Ziverdo Triple Therapy mix is also known as Quadruple Therapy.)

Oh and by the way, did you know that we are basically at the holy grail of herd immunity in the USA (if not also globally on average) already?  Why else would virus cases be plummeting starting weeks before fully vaccinating a significant chunk of the population, in the middle of winter, even in states and countries with little to no restrictions?  Even with those supposedly scary new mutant strains allegedly running rampant for weeks, no less.  If it can't be due to seasonality, vaccines, or restrictions, then it MUST be due to naturally acquired herd immunity.   Too bad we had to climb a mountain of corpses to get there thanks to the incompetence and malfeasance of our "leaders" who suppressed the treatments and prophylaxis that actually work while throwing the wisdom of the ages out the window like so much garbage.  And that's to say nothing of all the collateral damage deaths caused by the lockdowns and panic.

(NOTE:  The sharp decrease in cases predates the reduction in the PCR test cycle threshold in many places, and was in fact followed by decreases in hospitalizations and deaths, so it can't be entirely due to sleight of hand unless one concedes that all of the data were nearly 100% false from the very start.  Either way, the case for restrictions crumbles.)

Thus, no reason not to end all restrictions and open up right away, full stop.  That is, no more restrictions than we had a year ago in February 2020, other than those that individuals and businesses voluntarily choose to put on themselves.  But again, the damage is already done at this point, even if we don't do any further damage going forward.  We must then do the Herculean task of healing the existing damage done.  Fortunately, the federal government has just the technology to do that--the printing press, or its more modern equivalent, a computer with a keyboard.  Money is simply an accounting entry these days, so make the entry and be done with it.  Yesterday. 

(And before anyone predictably cries "inflation!", the truth is that deflation is actually a much, much bigger risk nowadays in the age of secular stagnation.)

The recent paltry stimulus is just barely scratching the surface of what is needed.  We will need an ongoing Universal Basic Income for all (at least $2000/month per adult and $1000/month per child for the first three months, followed by at least half those amounts per month thereafter). We will need single-payer Medicare For All. We will need to expand Social Security.  We will need to increase funding for schools.  We will need free higher education as well.  We will need a Green New Deal to create millions of good jobs while saving the Earth at the same time.  And we will ultimately need some sort of debt jubilee as well.  Seriously, now is NOT the time to be pikers!

So what are we waiting for?

UPDATE:  As the ever-insightful Bill Sardi notes, we can now add the amino acid lysine to the rapidly accumulating list of treatments and prophylaxis for COVID-19.   It may be the biggest game-changer of all.

Paging Dr. Firestone (Part Deux)

(For the longer version, see the previous post.)

There has been trouble brewing lately in a little-understood corner of the financial markets, known as the repurchase agreements (or "repo") market.  Since mid-September of this year, when overnight borrowing rates spiked due to a shortage of liquidity (i.e. cash money), the FERAL Reserve has been injecting more new cash into the repo market (a sort of stealth QE) in the hopes of shoring it up.  Though this is really supposed to be a temporary measure.

And the shortage of cash in the repo market was most likely due to too many T-securities (i.e. US Treasury bills, notes, and bonds) on the market at one time, which in turn is a result of this year's high federal "deficit" spending.  (The previously record-high deficits a decade ago during the Great Recession coincided with QE which prevented any liquidity shortage then.)  If not resolved, this could indeed spell trouble far beyond just the repo market as well.

(Note that the repo market, which provides a type of short-term lending, is directly linked to money market funds, and is also directly or indirectly linked to the "plumbing" of the entire financial system as well.)

Of course, even an extreme excess of Treasuries on the market, in and of itself, would be insufficient to cause such a "plumbing blockage" in the repo market.  Also required to cause such a problem is the new rules put in place after the 2008 financial crisis to prevent another Lehman-style meltdown.  Such rules require banks to retain a certain amount of liquidity at all times, and for good reason (as we learned the hard way in 2008).  But when the FERAL Reserve leads banks to prioritize holding cash over holding Treasuries, as opposed to giving equal weight to both (which would have made it a non-problem), then banks will end up hoarding way too much cash, causing a shortage of liquidity in the repo market.   To wit, it is the combination of 1) new liquidity rules, 2) excess number of Treasuries on the market, and 3) lack of QE all creating the perfect storm here.

(Throw in Wall Street greed, and then we really see the picture in much clearer focus, to say nothing of the half-quadrillion+ dollar derivatives bubble too.)

But literally the only reason this would ever even be an issue at all is due to the arcane and archaic rules that require federal "deficits" (i.e. spending not matched by tax revenues) to be matched by "borrowing" in the form of T-securities.  And literally all Congress needs to do is repeal those outdated rules and decouple spending, taxes, and "borrowing", as the TSAP has repeatedly noted.  Yes, really.

(You can also add another rule to the mix of arcane and archaic rules that need to be repealed:  the one which prohibits the Fed from purchasing T-securities directly from US Treasury Department, something that was not always the case in the USA.)

Put simply, the entire problem is artificial, both politically and psychologically.  And even that can be solved via what Dr. Joseph M. Firestone calls Overt Congressional Financing (OCF).  As for the specious argument that economic growth must outpace bond yields, that is also just another version of the Big Lie debunked above, as OCF would essentially render it irrelevant and meaningless.

To quote Dr. Firestone:

The national debt exists today because when the nation went off the gold standard in 1971 and adopted its fiat currency system, Congress did not explicitly repeal its mandate (very appropriate when our currency was convertible to gold on demand, at least in theory) requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments when the Government deficit spends caused the national debt to persist until 1996. Congress, then, unintentionally, removed the mandate, leaving in its place the perceived compulsion of an old die-hard financial practice supported by the false ideology of neoliberalism, and a real, but unrecognized, option to abandon the practice by using platinum coin seigniorage. 

Had Congress repealed the practice when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and both our national debt and our debt-to-GDP ratio would be at 0% today.

The following "magic words" can be added by Congress to any appropriations bill to implement OCF:

“Upon passage of this appropriations bill, the Federal Reserve is directed to fill the Treasury’s spending account at the New York Federal Reserve with the addition to its Reserve Balance necessary to spend the appropriation.

“In addition, the Federal Reserve is directed to fill the Treasury spending account with the additions to the Treasury Reserve balances necessary to repay all outstanding debt instruments including principal and interest as they fall due for the fiscal year of this appropriation.”

It would probably also be useful to add that there is a federal statute on the books that codifies the aforementioned arcane and archaic rules left over from when we actually had the gold standard.  That statute is codifed as 2 USC Ch. 20, most notably Section 902.   Simply repeal the text that contains those rules, and insert the aforementioned text in blue above, replacing the word "this" with "any".  The same goes for 31 USC section 3101, which is the statute that imposes that other outmoded contrivance, the so-called "debt ceiling" as well.  Repeal both of these obsolete laws, and set it and forget it.  Problem solved.

Or, to quote Rodger Malcolm Mitchell:

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 while the value of T-securities at any given time will mostly never fall all the way to zero, once they are decoupled from federal "deficit" spending, they will never again be any more than what the market wants, and likely a LOT lower than today, thus no surprise shortages of liquidity in the repo market or any other market that trades such securities.

It's long past time to end the Big Lie already, period.  The very best time to do so was in 1971 when we functionally got off the gold standard and/or 1975-1976 when all remaining nominal ties between gold and the dollar were formally severed for good.  The second best time is NOW.  And with the recent artificially contrived troubles in the repo market, it is more timely than ever now.

Paging Dr. Firestone (Or, The Other Meaning of "Repo")

There has been trouble brewing lately in a little-understood corner of the financial markets, known as the repurchase agreements (or "repo") market.  Since mid-September of this year, when overnight borrowing rates spiked due to a shortage of liquidity (i.e. cash money), the FERAL Reserve has been injecting more new cash into the repo market (a sort of stealth QE) in the hopes of shoring it up.  Though this is really supposed to be a temporary measure.

And the shortage of cash in the repo market was most likely due to too many T-securities (i.e. US Treasury bills, notes, and bonds) on the market at one time, which in turn is a result of this year's high federal "deficit" spending.  (The previously record-high deficits a decade ago during the Great Recession coincided with QE which prevented any liquidity shortage then.)  If not resolved, this could indeed spell trouble far beyond just the repo market as well.

(Note that the repo market, which provides a type of short-term lending, is directly linked to money market funds, and is also directly or indirectly linked to the "plumbing" of the entire financial system as well.)

But literally the only reason this would even be an issue at all is due to the arcane and archaic rules that require federal "deficits" (i.e. spending not matched by tax revenues) to be matched by "borrowing" in the form of T-securities.  And literally all Congress needs to do is repeal those outdated rules and decouple spending, taxes, and "borrowing".  Wait, what?

Earlier this year and last year, we at the TSAP have exposed the Big Lie of Economics, a lie so massive and specious that even WE partially fell for prior to 2018.  The Big Lie consists of the following statement and its corollaries:

• Federal taxes pay for federal spending, and any shortfall in revenues (i.e. "deficit spending") must be made up by the federal government borrowing money to cover the deficit.
• It must be this way, because otherwise the federal government will run short of dollars, which are finite.
• The federal government is literally bankrupt and can no longer afford to keep paying for Social Security, Medicare, and Medicaid, let alone anything more ambitious and progressive.
• Things like Universal Basic Income (UBI), tuition-free public college for all, state-of-the-art infrastructure, a Green New Deal, and single-payer Medicare For All sound like good ideas on paper, but we literally can't get the numbers to add up.  Sorry.  Oh well.
• If the national debt as a percentage of GDP rises above some arbitrarily high level, the federal government will have no choice but to default.
• Thus, we will have no choice but to accept an austerity "menu of pain" at this point, with both large tax hikes and/or deep spending cuts. (Austerity for the bottom 99%, that is.)

Do you still believe these statements? Well, guess what?  Each and every one of those specious statements is absolutely FALSE.  Period.  Not even a kernel of truth in there, except for the completely contrived self-fulfilling prophecy that believing such lies leads to, starting with the very first statement on that list, and it goes downhill from there. Federal taxes DO NOT pay for federal spending, because our federal government is Monetarily Sovereign and creates all the dollars they need to spend into existence on an ad hoc basis.  Tax dollars merely disappear into infinity, and the so-called "National Debt" is literally nothing more than a National Savings Account consisting of deposits in Treasury securities.  Yes, really.   And the only reason why we must currently match spending with taxes and/or "borrowing" is due to the arcane and archaic rules left over from when we actually had the gold standard.

As for inflation, there is essentially zero correlation between deficit spending and inflation, and history bears that out.  And even if there were inflation that resulted, that could be easily cured by raising interest rates as needed.  And due to the velocity of money, federal taxation of any kind, at even a relatively low rate, can to an extent automatically "claw back" any excesses in the money supply that may result, which can prevent inflation before it occurs.

So having established that, we must now note that sustaining the Big Lie, a lie that really only benefits the oligarchs and their sycophantic lackeys of both corporate duopoly parties in government, is now physically and metaphysically untenable.  Especially given the many converging real and contrived crises now facing our nation and world.  Make no mistake, we absolutely must end this Big Lie YESTERDAY or else face extremely painful austerity, recession, depression, or worse in the very near future.

Thus, we should all write letters to our Congresscritters based on the following sample letter written by the ever-insightful Dr. Joseph M. Firestone and disseminated by the ever-insightful Rodger Malcolm Mitchell:

Dear __________________

At one time or another you and nearly every one of your fellow Representatives (or Senators) have expressed great concern, even alarm, at the size of the national debt and the often increasing debt-to-GDP ratio.

Many of you have pointed out that if the national debt were broken down into how much each American owed that would add more than $50,000 to our individual debts, even though the national debt is not an obligation of each American citizen, but of our government.

You and your political allies have also pointed out that in view of the size of the national debt it is important for the Government to either reduce spending, raise taxes or both.

You have said doing this is necessary to be “fiscally responsible”, and, at least, to reduce the annual deficit, and the debt-to-GDP ratio.

You have voted for and supported legislation in order to be “fiscally responsible” in this way, and in doing so you have cut many programs of long standing that were delivering great benefits to people, harming them and their families.

Some of you have expressed regret and sorrow about this, while insisting on the need for sacrifice in order to be fiscally responsible.

I, your constituent, have heard this fiscal responsibility story from you for many years now, including your sentiments about how much you hate “the national debt,” what an evil it is, and how much we have to lighten its burden on our grandchildren.

In view of all this from you, it surprised me greatly to learn recently, that the very existence of the national debt is Congress’s fault, including your own and your colleagues. I say this for a very simple reason.

That reason is that you and your colleagues can, in an afternoon, make it standard legislative practice to include the following clause, or an alternative formulation meaning the same thing, in every appropriations bill or continuing resolution for Federal Spending. The clause is:

Now here comes the key part:

“Upon passage of this appropriations bill, the Federal Reserve is directed to fill the Treasury’s spending account at the New York Federal Reserve with the addition to its Reserve Balance necessary to spend the appropriation.

“In addition, the Federal Reserve is directed to fill the Treasury spending account with the additions to the Treasury Reserve balances necessary to repay all outstanding debt instruments including principal and interest as they fall due for the fiscal year of this appropriation.”

In short, the Federal Reserve would pay off T-securities, making the so-called “debt” disappear.

The Fed simply would create U.S. dollars from thin air, just as it always has been authorized to do, and just as it does when it buys federal bonds with its Quantitative Easing (QE) programs.

The first sentence provides the reserves necessary for the Treasury to spend its mandate from Congress without issuing new debt.

And the second provides the reserves necessary for the Treasury to pay down the existing outstanding Treasury debt instruments as they fall due within the time period of the appropriation or continuing resolution bill.

If this or similar language were included in every such bill it would mean that (1) deficit spending by Congress would no longer involve issuing new debt instruments, so the debt would no longer grow and (2) that all outstanding debt instruments would be paid off as they fall due as long as Congress continues to include the new language in all its appropriations bills and continuing resolutions.

So, it seems to me that the sole reason why the national debt exists at all in 2017 is that when President Nixon took the United States off the gold standard in 1971, the Congress did not adjust to the new reality of fiat monetary sovereignty by funding Federal spending using language like the above.

I believe that Congress made a grievous mistake in not changing its funding language immediately after the change to a fiat currency in 1971, and mandating the Federal Reserve to fill Treasury’s spending account with the reserves needed to spend its appropriations.

That mistake has led to the whole situation of debt terrorism we see around us now, and to all the damaging propaganda and horrible legislative outcomes we have suffered at the hands of Republicans and Democrats alike.

You have all been very wrong about the need to sacrifice. There was no need to sacrifice!

You have been all wrong about all of that for 40 years now, and you should all wear sackcloth and ashes and hang your heads for the damage you have done to America.

Since the Administration of President Carter we have been treated to these meaningless harangues about a faux financial problem that is purely one of politics and messaging and not one of public financing at all.

And this faux problem, solely of Congress’s own making has led to much suffering among most of the American people, including decades of less than full employment, the denial of universal health care coverage, deteriorating public spaces and infrastructure, refusal to deal with a life-threatening climate change problem, increasing economic inequality, a declining educational system, decreasing life expectancy, and a host of other problems too numerous to mention.

Well, I have had enough of all this, and especially of the pretense that the Federal Government doesn’t have enough money to buy any goods or services for sale using US currency.

I know that using the words above or words very like them, you and a majority of your colleagues in Congress can appropriate funds for anything you want to spend on.

So, never let me hear from you ever again that we can’t afford this good program or that good program or any other program that will benefit a majority of the people of the United States.

I now know that is a lie. And I insist that you never tell that lie again in public, and that from now on you advocate for and insist on legislative language similar to the above, being included in all appropriation bills and continuing resolutions passed by Congress.

I demand, that as my representative, you vote against any bill that lacks that language.

And I tell you now that if you fail to comply with this demand of mine, I will do all I can to defeat you in the next election and will work for and vote to elect any opponent of yours who is willing to promise that she or he will include such language in all appropriations bills or continuing resolutions.

In closing, I hope I have made myself abundantly clear. I insist that the lies and propaganda advancing faux fiscal responsibility stop immediately.

I insist that the issue of the national debt be taken off the table by including the language suggested above or a similar formulation, followed by gradual pay-off of all outstanding Treasury debt instruments. And I insist that you represent me in this way going forward and for as long as you serve.

I want Job 1 for you to be seeing to it to the best of your ability that this language is in all appropriation bills or continuing resolutions coming out of Congress. I will want other things from you too.

But, as I say, this is Job 1, and if you want my vote in the future you will see to it that it is well done, so that the various lies and fables surrounding Federal spending are at last ended, and so our nation may move forward to true fiscal responsibility, which is Government spending for public purpose.

Sincerely Yours, Your Constituent,

Granted, this letter is probably TL;DR and should perhaps be more concise, but the part in blue is really the heart and soul of the letter.  As Rodger Mitchell further explains:

The above letter is way too long to send as is. Further, I disagree with two of the points it makes: 

1. I disagree that all “debt” (i.e. T-securities) should be allowed to expire...and not [be] replaced. T-securities serve useful purposes. They help the Fed control interest rates and they provide a safe place to hold large amounts of money.
2. I disagree that “. . . Treasury Reserve balances (are)necessary to repay all outstanding debt.” Maturing Treasuries are repaid by transferring existing dollars from the T-security accounts back to the checking accounts of the T-security holders.  [Only the interest needs to be created anew.]

That said, the fundamental idea of having the Fed buy enough T-securities to reduce the outstanding “debt” would change the dialog, and ease the drive to cut social benefit spending.

And there you have it.  A bit more nuanced, but the same basic idea.  It would probably also be useful to add that there is a federal statute on the books that codifies the aforementioned arcane and archaic rules left over from when we actually had the gold standard.  That statute is codifed as 2 USC Ch. 20, most notably Section 902. Once one gets through the legalese mumbo-jumbo, one can plainly see that this requirement for "sequestration" upon "falling short" of federal budgetary dollars to pay bills is an outmoded contrivance that no longer serves any useful purpose at all.  Amending or repealing this obsolete section, or even the entire Chapter 20, is not just a good idea, but a matter of grave necessity to save our country at this point.  The same goes for 31 USC section 3101, which is the statute that imposes that other outmoded contrivance, the so-called "debt ceiling" as well.  Repealing both of these obsolete laws will permanently make it so the text in blue in the aforementioned letter will no longer need to be every spending bill as a formality to work around such laws each time going forward after the first one--especially if that text in blue were to be inserted in whatever remains of the repealed/amended 2 USC Ch. 20.

And instead of so-called "debt ceiling", which almost no other nation in the world has, we could simply have a spending limit that would be deemed automatically raised each time a new budget, continuing resolution, or appropriations bill is passed and signed into law, NOT by a separate vote. And that limit will only apply to spending on any new obligations taken on going forward, not on outstanding obligations.  The only functional reason for this at all would be as a "safety valve" or "circuit breaker" that would stop feeding the beast of inflation in the (unlikely) event of truly excessive inflation.

Or, to quote Rodger Malcolm Mitchell:

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.

In the meantime, if Congress refuses to act, the executive branch does still have one powerful "ace in the hole":  the trillion-dollar coin.  While a pure "Treasury Warrant" idea is of very questionable legality and would likely be struck down by SCOTUS, under current law the Department of the Treasury has the explicit legal authority to mint platinum coins in literally any denomination.  Thus, they can easily mint one or two (or twenty!) trillion-dollar coins, or even a $100 trillion coin, as an effective workaround for the time being and use the resulting seigniorage to pay any bills and preclude default even if Congress plays "chicken" with the debt ceiling as a cudgel to force a default if they don't get their way.

TL;DR version:  Put simply, the entire problem is artificial, both politically and psychologically.  And even that can be solved via Overt Congressional Financing (OCF).  As for the argument that economic growth must outpace bond yields, that is also just another version of the Big Lie debunked above, as OCF would essentially render it meaningless.

Again, to quote Dr. Firestone:

The national debt exists today because when the nation went off the gold standard in 1971 and adopted its fiat currency system, Congress did not explicitly repeal its mandate (very appropriate when our currency was convertible to gold on demand, at least in theory) requiring that the Government back all its deficit spending with already existing borrowed dollars whose convertibility was covered by our holdings of Gold. This Congressional mandate to borrow funds by issuing debt instruments when the Government deficit spends caused the national debt to persist until 1996. Congress, then, unintentionally, removed the mandate, leaving in its place the perceived compulsion of an old die-hard financial practice supported by the false ideology of neoliberalism, and a real, but unrecognized, option to abandon the practice by using platinum coin seigniorage. 

Had Congress repealed the practice when President Nixon took the country off the Gold Standard, and had we ceased to issue debt at that time, then the Government would have re-paid all of our 1971 debts as they came due, and both our national debt and our debt-to-GDP ratio would be at 0% today.

And while the value of T-securities at any given time will mostly never fall all the way to zero, once they are decoupled from federal "deficit" spending, they will never again be any more than what the market wants, and likely a LOT lower than today, thus no surprise shortages of liquidity in the repo market or any other market that trades such securities.

It's long past time to end the Big Lie already, period.  The very best time to do so was in 1971 when we functionally got off the gold standard and/or 1975-1976 when all remaining nominal ties between gold and the dollar were formally severed for good.  The second best time is NOW.  And with the recent artificially contrived troubles in the repo market, it is more timely than ever now.

The Right Way To Do Medicare For All

With the debate about single-payer Medicare For All increasing in recent months, it is important to know a crucial detail about it.  While the main thrust of the debate lately has been how to "pay for" it all, and exactly which taxpayers will bear the brunt of it, the truth remains that our Monetarily Sovereign federal government by definition has infinite money, and thus does NOT actually need any taxes to pay for it (or anything else, for that matter), since federal taxes do NOT actually pay for federal spending at all.  That is in fact a Big Lie, and has been false ever since we got off the gold standard in 1971, yet for some reason most Americans seem to not have gotten the memo yet.

Notice how nobody seems too worried about how we are going to "pay for" the military with its truly massive price tag, after all.  That is in itself a kind of tacit admission that the Big Lie is in fact a lie, and that the emperor isn't wearing any clothes.  So no reason for all of this silly handwringing and harrumphing about how to "pay for" Medicare For All.

Yes, Virginia, we actually can have free and comprehensive health care for all Americans, period, with no deductibles, copays, cost-sharing, premiums, or taxes.  In fact, being the richest country in the world, we can aim even that much higher still than all of the other countries that currently have single-payer healthcare.  All we have to do is stop believing the Big Lie that federal taxes pay for federal spending.

So what are we waiting for?

Setting The Record Straight: Austerity Is NOT Good For The Economy

The evidence is overwhelming now.  Austerity is NOT good for the economy, for the same reason that applying leeches to cure anemia is not a good idea.  Money is the lifeblood of any economy, and cutting "deficit" spending (via tax hikes, spending cuts, or both) effectively shrinks the money supply.  And for a Monetarily Sovereign government like our own federal government, there is literally no good reason to do so at all, in good economic times or bad.

Never was, and never will be.  At least not in the post-gold standard world since August 15, 1971.

The infamous Reinhart and Rogoff (2010) outlier study that suggested that a debt/GDP ratio reaching some arbitrary level was inherently bad for the economy was roundly debunked in 2013 by a 28 year old grad student who discovered that the results were due to a coding error in the spreadsheet.  And even when Reinhart and Rogoff claimed that there still was a correlation (albeit much weaker), that was most likely due to reverse causation (i.e. due to countercylical policy responses to recessions) and residual or unmeasured confounding.

As for the Canadian experience that suggests that their austerity in the 1990s and early 2000s was somehow good for the economy has also been debunked.  The inherently harmful effects of austerity were masked by 1) an increase in the money supply, 2) a massive devaluation of the Canadian dollar, 3) a sharp cut in interest rates, 4) lag effects of previously massive deficit spending, and 5) secular global trends during that time period.  And of course, there was also the Alberta oil boom as well that continues to this day.  And they still experienced adverse effects in spite of their economic growth, particularly from the ruthless cuts to their otherwise legendary and stellar healthcare system that led to a "brain drain" and the notoriously longer "wait times" that opponents of single-payer Medicare For All disingenuously luuurve to scare ignorant Americans about.

As for Iceland in the wake of their 2008 financial crisis, they actually did more austerity than any country not named Greece.  But their austerity cuts did not begin in earnest until 2010, and the effects were essentially masked by a sharp devaluation in their currency as well as lag effects from previous deficit spending.  Thus, their massive recovery still occured in spite of budget cuts and tax hikes.

And how about the biggy:  the postwar surpluses in the late 1940 and early 1950s in the USA?  That was a deficit spending cut of a whopping 35% of GDP, yet the economy still grew like gangbusters.  But again, that growth was in spite of, not because of, their massive deficit reduction.  It was masked by massive increases in private-sector debt, lag effects of the previously massive deficits of WWII, and of course the relatively short-lived unique competitive advantage the USA had as the only major developed economy that was not devastated by the war.  And there were some fairly deep deflationary recessions during that time in 1948-1949 and 1954-1955, and before long, the federal government saw the need to run deficits once again to keep the secular economic boom going (which it did).

Thus, these exceptions really only prove the rule.  Not only is the conventional "wisdom" about austerity inaccurate, but it is in fact 100% wrong at least as far as federal finances go.  If anything, so called "deficit" spending is needed to ensure robust economic growth in the long run.  All the more reason to put an end to the Big Lie and finally decouple federal spending from taxes and Treasury securities yesterday.

In fact, since a growing economy requires a growing supply of money, and the fact that GDP = Federal Spending + Nonfederal Spending + Net Exports, one can therefore argue that a deficit/GDP ratio of at least 3% on average is needed to maintain robust economic growth of 3% per year or higher.  And to cure recessions, depressions, or secular stagnation, an even higher ratio is needed, perhaps as high as 7% or 8% even.  No wonder the EU has been persistently in the doldrums:  they actually set a 3% ceiling on their members' deficit/GDP ratios, they all have painfully high and regressive taxes such as VAT, and worse still, those nations who use the Euro are monetarily non-sovereign and cannot create their own money.

And for any country who is still contemplating fiscal austerity in spite of all this: at the very least, the growth of the money supply needs to be maintained by other means, namely the loosening of monetary policy.  Failure to do so will risk a recession or even a depression.  Note that GDP growth (or lack thereof) tends to lag the growth (or lack thereof) of the money supply by four quarters (one year) on average, sometimes even longer if there is a lot of momentum, so any apparent lack of immediate adverse effects should really not lull one into complacency.

Please note that until about 2014, the TSAP once did support austerity as well as a return to the gold standard.  We no longer do, and deeply regret ever giving any sort of credence to these outmoded ideas based on fundamental ignorance of economics.

Just Print The Money

What seemingly intractable problems can be solved with just four simple words?  And which current presidential candidate once actually said those four exact words, "just print the money", or at least the last three of those four magic words?

A)  Bernie Sanders
B)  Elizabeth Warren
C)  Kamala Harris
D)  Joe Biden
E)  Donald Trump

Give up?  Scroll down to find the answer:

The answer, believe it or not, is E, Donald Trump.  Yes, THAT Donald Trump.  Meanwhile all of the other 2020 candidates (sorry Bernie, but even you don't get a pass on this one) are apparently too cowardly to utter those words when asked how they will "pay for" the various high-ticket items on their wish list.

Back in 2016, then presidential candidate Donald Trump said a lot of outrageous and controversial things and too many gaffes to count.  But one in particular stands out in light of recent posts and current events, namely, the one in which he implied he would default on the national debt if he couldn't negotiate a better deal.  Now that is clearly not something for a politician or candidate to even joke about, let alone actually do.  But it was what he said after he was criticized for it and he backpedaled on it which was actually much more noteworthy:

This is the United States government. First of all, you never have to default because you [just] 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 so-called "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 attached to its creation (as per Ellen Brown), such a solution would actually work.  Modern Monetary Theory indeed supports such an idea.  Congress can already spend money into existence rather than lend it into existence, all they would have to do now is officially decouple such spending from taxes and Treasury securities.  (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?  In a word, NO.  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).   Besides, inflation and hyperinflation is NOT caused by money creation, but rather by shortages of food and/or energy, leading to reverse causation.  Of course, we would have to bypass the FERAL Reserve to avoid creating more debt in the process, such as #MintTheCoin. Or better yet, 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.

Not like it really matters, since as we already noted, the "debt" is not even really debt at all, but simply deposits in Treasury securities.  And as Mitchell notes, since the federal government has infinite money, it does not actually touch those deposits at all, but simply returns the existing money in those accounts to the account holders by transferring it, while adding newly-created interest dollars to whatever amount is there.  Thus, to "pay off" / extinguish the debt completely, the only new money that needs to be created is the interest, and that new money will stimulate the economy.  You read that right.

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.

You know, things like Universal Basic Income, Medicare For All, free college, improvements to education, rebuilding our crumbling infrastructure, and stuff like that.  All of which can be readily "paid for" with the stroke of a pen and the click of a computer key.   No taxes or borrowing required.  And if the "inflation dragon" ever does happen rear its ugly head again, simply raising interest rates will quash it, as will the practice of draining excess bank reserves and "sterilizing" cash inflows at the FERAL Reserve (which again, really should be nationalized to to become truly FEDERAL) when the newly-created dollars pass through many hands and then the banks and make an inevitable pit stop there.  Problem solved.  And any inflation that is driven by food and energy shortages can be resolved by simply redirecting federal spending to incentivize the producers of such to produce more, by buying such products at a premium and selling (or giving them away) at a loss.  Hey, it's infinite money, remember?

So what are we waiting for?