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A People’s Economy that will ensure a Democratic Sweep in 2024. [1]

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Date: 2023-03-07

Professor Stephanie Kelton, in her recent book, “The Deficit Myth” explains “Modern Monetary Theory” [MMT] A bedrock principle to understanding how MMT works is to understand the difference between a currency issuer, and a currency user. The Federal Government is the only entity in the United States with the legal authority to issue currency, ie: U.S. Dollars. Therefore, it is the only currency issuer in the United States. State and local governments, the private sector, and the taxpayers cannot issue currency, and are all currency users. MMT recognizes that it is the Federal Government, not the taxpayer, that finances all government expenditures. Taxpayers do not pay for what the government spends.

The danger of a growing government deficit is a myth. The Federal Government, as the only currency issuer, has a virtually unlimited access to dollars, and can payoff the entire government deficit any time it has the political will to do so. Congress merely has to pass legislation eliminating the “debt ceiling,” and mandate that the Treasury, and the Fed pay for any government expenditures approved by Congress, and enacted into law. Thus, the current Budget Deficit will disappear, not by magic, but because, it never really existed in the first place.

Unfortunately, that scary sounding 31 trillion dollar national debt will remain, safely denominated in our Treasury [Bonds, Notes, etc] market where it will remain as an important investment option for our economy. I do not believe we would want to pay off this national debt, and completely eliminate the Treasury Market as an investment vehicle for millions of investors. However, if the 31 trillion dollar frightens us we could gradually begin to reduce it by retiring a portion of Treasuries when the mature, and only issuing a reduced amount of Treasuries to replace them [maybe 2-5% per year]. Thus, the Treasury could begin to reduce the total debt yearly, and when we reached an amount of debt deemed sustainable, simply replace the total amount of Treasuries retired, by selling an equal amount of Treasuries to the investmnt community. We would not longer have to terrorize our citizens by telling us each and every citizens share of the national debt is more than $90,000 dollars, which our children and grandchildren will have to pay off. That is just nonsense, you will not have to sell your house to pay off the national debt.

However, in the current political climate, with House Republicans refusing to raise the debt ceiling unless President Biden and the Democrats agree to substantial cuts in spending, it appears unlikely that any legislation eliminating the debt ceiling will be passed in the House of Representatives’ But if it did pass the House, the Republicans in the Senate would certainly filibuster any attempt to repeal the debt ceiling. This puts President Biden in a bind, what should he do if the Congress doesn’t suspend or raise the debt ceiling in the next few months. Default is out of the question. However, all is not lost. President Biden need only ignore the debt ceiling and direct the Treasury to pay all of the nations debts as they come due even if it exceeds the debt ceiling.

The Constitution requires the President to make sure the laws be faithfully executed, which would mean that the President is obligated to fulfill the terms of any budget enacted by Congress. Moreover, Section 4 of the 14th Amendment states, in its relevant part, that “(t)he validity of the public debt of the United States, authorized by law, . . ., shall not be questioned.” The Duke Law Journal (2013), and the Columbia Law Review (2012) argued that the !4th Amendments “debt clause” applies in any situation where the government threatens to act in a way suggesting that it will not meet its financial obligation to pay its debts. Thus, it is argued that the debt ceiling law passed by Congress is unconstitutional if it threatens to prevent the Federal Government from paying its lawful debts, and defaulting.

If the Republicans are unhappy with this, they can institute a Federal lawsuit arguing the President exceeded his lawful authority in ignoring the debt ceiling legislation, and paying the nations debts. Such a lawsuit would take months, if not years, to get to the Supreme Court. By then the 2024 elections would be over and President Biden would have been reelected, and the Democrats would have gained control of both the House and the Senate, if they adopt the economic programs recommended below. Additionally, I seriously doubt that even the current Supreme Court would hold the Biden acted unlawfully in ordering that the nations debts be paid, and not letting the United States default for the first time in its history.

Now instead of wasting its time worrying about illusionary budget deficits, President Biden and Congress can now devote their time and energy building an economy that benefits all of the people, not just those at the top.

These programs include: Medicare for All, Tuition Free College Education at all State run Universities, and Community Colleges, a federal guarantee that Social Security will be funded indefinitely, and benefits never reduced, a Green Revolution, and most importantly, a guarantee of a well paid job, with adequate benefits for anyone who wants to work.

YES! President Biden and the Democrats can guarantee all of this to the American voter.

However, Congress will have to closely monitor inflation in order to insure the new growing economy does not overheat, and cause hyper-inflation.

Moreover, there is a limit on how much an economy can grow, and this is expressed in the economies real access to productive assets, an adequate supply of educated workers who are willing and able to work, and use their skills to build an economy that produces the goods necessary to provide society with the products required to sustain a decent standard of living for the entire population, not just the 1% at the top.

Of course, physical assets are also necessary. This includes natural resources [oil, gas, minerals, lumber], and physical resources [infrastructure, roads, bridges, factories, hospitals, schools, etc.]. The proposed Federal Jobs Guarantee can help supply the workforce necessary to rebuild the infrastructure, and construct, and install solar panels, and wind farms necessary to reduce our carbon footprint, and lead to a greener environment for everyone.

JOBS! JOBS! JOBS! Problem solved. Congress need only pass legislation guaranteeing a good job for every citizen who wants to work. The Federal Government will set the basic wage, and benefits. However; the state, local governments, and local communities will determine the kinds of jobs offered, in accordance with state and local needs. In the current economic climate created by COVID-19, a Federal jobs guarantee would dramatically reduce unemployment, and create a major economic stimulus helping the overall economy to recover:

If there are millions of people looking for paid work and our economy has the capacity to produce more goods and services without raising prices, then we have the fiscal space to bring those resources into productive employment. [Kelton, at pg.235]

Also when the economy begins to improve private employers will start to hire workers away from their government funded jobs; thus, these workers will no longer be on the public payroll, automatically helping to curb any rising inflation.

Medicare for all is affordable. Congress need only enact legislation mandating that the Treasury pay for the health care expenses authorized by Medicare. Medicare should be authorized to establish the amount it will pay health care providers for the services they provide. This should include monetary limits for prescription drugs. Of course, the limits imposed by Medicare should be sufficient to provide quality health care for the entire population, and a reasonable profit for the health care providers . The private sector would no longer br required to provide health insurance as an employee benefit. This means private employers would retain more of their profits, some of which could be used to raise the wages of their workers.

Free college education at public universities, and community colleges is also affordable under MMT. Once again all that is necessary is that Congress enact such a program into law. The Department of Education or other administrative agency would set limits on the amount of tuition they will pay to the educational institutions for each student enrolled. Of course, this amount must be sufficient to pay the reasonable costs of a quality education. With a virtual guarantee of students and adequate financial resources, public colleges, and universities would be in a position to upgrade their institution by hiring the most qualified professors, and establishing quality research departments.

The Green Revolution could also be funded by Congress authorizing funds for research and development of alternate sources of energy, like solar panels, wind farms. This would provide jobs for thousands of workers in development, installation and maintenance our new green infrastructure.

The programs described above would constitute a winning economic argument to present to the voters, and it would virtually ensure that President Biden is reelected, and the Democrats retain control of the Senate, and regain control of the House in 2024.

If you would like additional information, I recommend “Modern Money Theory,” 2nd Ed, by L. Randall Wray, Publisher, Palgrave Macmillan, 2015, and “Modern Monetary Theory and its Critics,” edited by Edward Fullbrook & Jamie Morgan, Publisher, World Economics Assoc., 2019/2220.

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[1] Url: https://www.dailykos.com/stories/2023/3/7/2150786/-A-People-s-Economy-that-will-ensure-Democratic-Sweep-in-2024

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