There are plenty of "public works" projects that could be "paid for" by the Fed. gov. to increase employment.. IF there is a will and IF "we" can see the light.. and remove our "ideology" from the problem....
Again it is OK to "fund" battle groups" not OK to "fund" infrastructure repairs..
THIS IS NOT an economic constraint but a philosophical/ideological one.
I'm actually worried about the day the "sheeple" realize it...
you just have to figure out who the real enemy is..
(maybe not for you but many should look in the mirror)
Ignoring the "fed can afford what it wants to afford" reality for a moment:
The answer to what’s holding back U.S. infrastructure investment lies not so much with President Obama and Congress as with county commissioners and state legislatures.
Most of the money spent on building schools, highways and waste disposal facilities comes from state and local governments, not from the federal government. As of April 2014, more than 90 percent of the $267 billion spent by the public sector (at a seasonally adjusted annual rate) was at the state and local levels, according to the latest Census Bureau report on construction spending.
That is soooooooooooo WRONG . States can't afford large infrastructure projects. They are NOT monetary soviergn. They need to pay bills w/ "real" dollars gathered from somewhere..
The BIG LIE goes deep......
Same w/ Medicaid. States can't afford Medicaid, the Fed can.......
Raising the federal gas tax is a non-starter, and Congress can’t agree on whether to make up the shortfall, as it has in recent years. Without that funding, and with state debt levels still high, we won’t see very many new bridges any time soon.
Idiots everywhere..for the past 10 years I've wondered what it will take to start asking the REAL question.. What should "we" (fed) buy?
I honestly now know what it feels like to know the earth goes around the sun while "everyone else" says the sun goes around the earth..
Congressman Ron Paul:
"Strictly speaking, it probably is not necessary for the federal government to tax anyone directly; it could simply print the money it needs.
US hasn't lost it's greatness, just its intelligence...........
See the "cut taxes" people are correct.
The "buy stuff" (i.e entitlements) are correct.
The "cut taxes AND spending" are incorrect.
The "raise taxes AND spend" are incorrect..
The last 2 are a bit of a zero sum game..
Esp. at this juncture in our country..(broad generalization btw. there are caveats)
So you have 2 parties that are right AND wrong at the same time and wonder why people are confused..
If you extend that logic a little further, you might ask, “Well, don’t we pay taxes and buy bonds so that the government can spend?” Well, you first have to ask yourself the question, “Where do you get the money to pay taxes and buy bonds?” And the answer is that we can’t get our hands on the currency until the national government spends it. Spending is the prior act in a fiat monetary system; taxing and borrowing are following acts. In effect, the government is only taxing what it has already spent, and it’s only borrowing back money that it has already spent. Once you start pursuing this logic, you realize that most of the propositions that are occupying the current debate around the world are based upon false premises.
If you look back through history and examine discussions in various government documents, what you pick up is a solid indication that governments have combined institutional arrangements such as issuing debt with certain accounting practices to make it look as though the debts were actually funding government spending. These institutional arrangements were strengthened in the late 1970s and the 1980s because the mainstream economics profession knew that those arrangements would place constraints on the freedom of governments to spend. The mainstream believes that taxation distorts individual incentives, that government borrowing pushes interest rates up and thereby undermines private sector investment, and that ultimately the danger of government spending is hyperinflation.
In sum, we’re quite categorical that we believe that budget deficits can be excessive and can be deficient as well. Deficits can be too large, just as they can be too small, and the aim of government is to make sure that they’re just right to employ all available productive capacity.
How does this differ from the dominant New Keynesian paradigm?
Well, the New Keynesian paradigm is built upon a series of false premises that affect policy prescriptions. False premise number 1: government has to borrow to fund spending. False premise number 2: there’s a fixed supply of savings available at any point in time. False premise number 3: the government, by borrowing from that fixed supply of savings, denies private sector borrowers those funds, and competition for those funds drives up interest rates.
The third story is what happens when the government runs a budget deficit. What happens in the money market is as follows: the US government buys something from the private sector. They pay the manufacturer, who then pays the workers. A whole range of transactions follows from that initial government purchase. All of those transactions work their way through the system and find their way to the reserves of the banks each day. Typically—though not at the present because we are in an extraordinary situation where the central bank is paying interest on reserves—those reserves would just sit there and earn zero interest for the banks. And so typically, as I’ve explained before, banks try to get rid of those reserves, driving down the interest rate in the interbank market in the process. What you can understand from that is that budget deficits, independent of any monetary operations, drive interest rates down, not up. This is the complete opposite of what orthodox economists claim is the case, and it’s confirmed by the present combination of record low interest rates and very large budget deficits.
The "powers that be" want you ignorant of reality..
The role of government bonds, then, is to provide the central bank with the capacity to ensure that there is no competitive pressure on the target interest rate. So you can see that the function of government bonds is something quite other than to lend the government money.
For quite a while now I’ve been pretty unsatisfied with mainstream as well as Austrian economics-based takes on the global economic situation, in particular phenomena such as record low to negative interest rates in countries with record debts (such as Japan), massive excess reserves, and QE 1 through infinity without much consumer price inflation, etc. No economic school I had learned about offered fully coherent answers regarding those.
To summarize, the most important things I took away from this exercise are:
In a free floating irredeemable fiat currency system the government cannot be forced to default on its debts (it could of course choose to suspend interest and/or principal payments, but that would be a policy choice, not one of financial necessity)
In such a fiat money system the government creates money by spending and destroys it by taxing
Taxes drive money
Government bonds are basically just like savings accounts at the central bank
Private banks lend first, then obtain reserves
Fractional reserve lending is naturally constrained by the creditworthiness of borrowers
In my opinion MMT helps us explain and understand the current fiat money system much better than conventional or Austrian economics. This is coming from an Anarcho-Capitalist who has read books like Mises’ Human Action, Theory of Money and Credit, Socialism, and many others, so don’t think I say this lightly!
Even if we find moral or economic flaws in a system, it is better for us to understand how it actually “works” right now in order to make policy recommendations down the road. I believe MMT offers a lot of insight on that front and I will provide some contemporary and relevant examples in subsequent posts.
But why should the government need to take from the private sector the money (currency and/or
bank reserves) that it alone is capable of creating? It seems reasonable to suggest that it is not
money but bridges, armies, satellites, etc. that the government wants and that it acquires them by
encouraging the population to provide them in exchange for government money. That is, it
cannot be the government but the public/citizens who need the money in order to settle their tax
liabilities to the state.
Indeed, the entire process of taxing and spending must, as a matter of logic, have begun
with the government first creating (and spending) new government money. How, after all, could
a population settle its tax liabilities using the government’s money (I-PM) before the government
had made its money available? In other words, the government’s purchase of goods and services
using newly-created money must first have supplied the citizens with the means with which to pay
taxes. Thus, taxes can be conceived as the means by which the government directs real resources
from private to public domain. If this theory is accepted, taxes are used to create a demand for
the government’s money, not to “finance” the government’s spending.
The destruction of these promises is no different from the private destruction of a promise once it has been fulfilled. In other words, when an individual takes out a loan, she issues a
promise to a bank. Once she ‘makes good’ on that promise (i.e. repays the loan), she may
‘destroy’ that loan debt (liability) by eliminating it from her balance sheet. Likewise, the State,
once it fulfills its promise to accept its own money (HPM) at State pay-offices, can eliminate an
equivalent number of these liabilities from its balance sheet.
Thus, while bank money (Ml) is destroyed when demand deposits are used to pay taxes,
the government’s money, HPM, is destroyed as the funds are placed into the Treasury’s account
at the Fed. Viewed this way, it can be convincingly argued that the money collected from taxation
and bond sales cannot possibly finance the government’s spending. This is because in order to
‘get its hands on’ the proceeds from taxation and bond sales, the government must destroy the
money it has collected. Clearly, government spending cannot be financed by money that is
destroyed when received in payment to the State!
See what happens when one ass-u-me.