HOW U.S. BUDGET WORKS
by John M Repp
The Federal government, according to the Constitution, creates the money we use in our nation’s economy. Since we no longer have to back the money with a limited supply of gold, the government can print as much as it needs. If it prints too much, we get inflation. If we have inflation, we can tax people and companies, pulling money out of the economy and thus lowering prices. However, if there are just a few companies in each economic sector, which is the case now, they can keep the prices high. They cooperate against us rather than compete with each other. Part of the recent inflation was just so.
We need a Federal Job Guarantee at a living wage. The Federal Government can be the employer of last resort. If the wage level of the guaranteed job were set at a real living wage, that would force all the private employers to match that rate or go above in order to find workers. There is plenty of work that needs to be done as we face the effects of climate change. We must do that work or there will be billions of displaced people and billions of deaths.
We should also increase retired and disabled people’s incomes so they can have a decent standard of living. Over half the people in the United States now have high levels of anxiety because of their low income and high level of debt. We are the wealthiest nation in the world but the wealth is too concentrated at the top 1%.
So, how can we afford these simple demands? We are told our government is broke and massively in debt. It is just not true!
What is not understood is that the budget of the Federal government is a very different from that of a household or a company/corporation. A household or a company/corporation needs income before they can spend. And most people think the Federal government needs taxes or must sell bonds in order to spend. However the Federal government as we said can create money as they spend because they are the issuer of our money. The government itself accepts only payment in dollars and that establishes dollars as the money we use.
The current administration does not understand any of this. They think they need to run the government like a private business. They are trying to make it more “efficient”, they say. But the purpose of the Federal government is to “form a more perfect Union, establish Justice, provide for the common defense, promote the general welfare, and secure the Blessings of Liberty to ourselves and to our Posterity.” (The Preamble to the U.S. Constitution)
Efficiency in the function of the Federal government would increase justice and the common good, and make us more free. Increasing the tax cut for the billionaire class will not increase the common good. It will damage the relative size and dignity of the middle class, something that has been happening since the presidency of Ronald Reagan.
We need to tax the billionaires to lessen the wealth gap and to pull money out of the economy if inflation continues. We must restart the enforcing of anti-trust legislation that Reagan stopped.
But above all else, we need to understand that the Federal government is not broke. We can afford to make the changes to mitigate climate change and give everyone in our country a dignified standard of living.
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