From Ellen Brown:
“As alarm bells sound over the advancing destruction of the environment, a variety of Green New Deal proposals have appeared in the US and Europe, along with some interesting academic debates about how to fund them. Monetary policy, normally relegated to obscure academic tomes and bureaucratic meetings behind closed doors, has suddenly taken center stage.
The 14 page proposal for a Green New Deal submitted to the US House of Representatives by Congresswoman Alexandria Ocasio Cortez does not actually mention Modern Monetary Theory, but that is the approach currently capturing the attention of the media—and taking most of the heat. The concept is good: abundance can be ours without worrying about taxes or debt, at least until we hit full productive capacity. But the devil is in the details….
MMT advocates say the government does not need to collect taxes before it spends. It actually creates new money in the process of spending it; and there is plenty of room in the economy for public spending before demand outstrips supply, driving up prices.”
Ellen Brown is right about one thing: the U.S. Government doesn’t have to actually collect the taxes that it’s owed before it spends money.
Back when Congress and the President actually passed budgets and appropriations bills ( when dinosaurs were still around, ha, ha, ) they would agree to what the U.S. Government would spend and how to collect the money that it spent. Then most of that money would be spent and the taxes would come in later.
If Congress and the President passed a budget, all the appropriations, and a tax bill today, the revenue to pay for that government spending that has already been spent wouldn’t actually come in until the following year, or at least not all of it. Similar to how individuals pay for things on credit: we purchase items on credit and then pay those bills to our credit card company at the end of the month. If we made those payments, we didn’t have any debt. But if we didn’t make those payments, we would now have a credit card debt.
When Congress appropriates money for the Executive to spend, that money gets spent before the taxes are actually collected. And if the Executive takes in more money than was actually spent, ( which happens about as often as the Cleveland Indians win the World Series ) then the U.S. Government has a budget surplus. But if the Executive spent more money than it collected in either taxes or tariffs or a combination of both, then it runs a deficit for that year and that deficit is added to the national debt. Which has happened every year in this country since 2002. ( That should give you an idea of how often that is )
What Ellen Brown is arguing for is that the U.S. Government could fund a Green New Deal ( as its called ) simply though monetary policy that would fund it by itself and you wouldn’t have to borrow more money or raise new taxes to pay for it. If that were true, government wouldn’t need a tax code, taxes, or an Internal Revenue Service, because it could just pay for all of its operations with Treasury printing all the money. The reason why we have a national debt of 22 trillion-dollars ( get your head all the way around that number ) is because Congress and the Executive has been borrowing money ever since the Federal Republic was created and has been running a budget deficit almost every year since the 1960s, because it almost always takes in less tax revenue than it spends. With the last four years of the Clinton Administration, the last year of the Johnson Administration, and one year during the 1950s under President Dwight Eisenhower.
“Democrats are introducing framework for what they call the Green New Deal. It addresses climate change and how the U.S. can make clean energy a priority over 10 years. Congresswoman Alexandria Ocasio-Cortez and Senator Ed Markey have championed the measure. CBS News chief congressional correspondent Nancy Cordes joins CBSN to explain.”