Trump made a few rather large promises last night in his acceptance speech. The first of these promises concerns our inner cities and infrastructure:
“The forgotten men and women of our country will be forgotten no longer. We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”
First off, I want to make the reality behind Trump’s words nice and sparkling clear to every, single person who voted for him, and you are just going to have to find a way to come to terms with that reality:
Monetary policy cannot accomplish this plan of action outlined by Trump whatsoever.
Trump is talking fiscal policy here. If he actually intends to keep these promises outlined above, then a redirected fiscal policy towards the public purpose and employment is the only way those promises can be kept. It means a major expansion in the federal budget deficit – there is no other way. I’ll say it again: To be clear, Trump must expand the deficit in order to keep his word. If you voted for Trump, you need to accept the following reality right now: All US Dollars are manufactured exclusively and then spent into existence by the US government and no one else anywhere.
When the federal government wants to rebuild our infrastructure and our inner cities, Congress will authorize the spending for those initiatives, Trump will sign it, and the federal government will “pay for it” all with newly created US Dollars. No federal tax dollars are involved – ever.
The US government will enter the bank accounts of contractors and individuals and credit those accounts with a bunch of numbers typed into existence via keystrokes. Those numbers become US Dollars and the infrastructure work is paid for and the repair of our inner cities is paid for. No tax dollars involved. The US government cannot run out of money. Full stop.
Harping on like an ignorant deficit hawk or deficit dove will not help you in your journey to acceptance of macroeconomic reality. Blathering on endlessly about federal taxes “paying for” Trump’s “expensive” promises down the road will only result in maintaining your delusional fantasies. The US has the real resources to easily achieve these goals. It has plenty of idle labor. It has vast raw materials. It has the engineers. It has the construction machinery. It has the technology. The US is an untapped economic powerhouse that has sat idle for many, many years. It has everything we need. It only requires the US government to issue the US Dollars to access it and it becomes a reality. If you truly want to make America great, Mr. Trump is going to have to deficit spend for employment and the public purpose in order to do it. There is no other way.
Once again: Federal taxes do not fund any federal spending. All federal tax dollars collected are destroyed by the US government. Not one thin dime of your federal tax dollars will go to fixing our inner cities, nor will they pay for rebuilding our highways, bridges, tunnels, airports, schools, and hospitals.
Fearmongering over Trump “blowing up” the non-existent national debt will not help you either. In fact, by doing so, you will be obstructing the plans of the man you voted for, and you will be signaling to all of us who actually know what we are talking about that you are living in La La Land, delusional to the core.
For the one zillionth time: There is no national debt. It is just a bunch of savings accounts held at the Federal Reserve. The only way for anyone, anywhere in the US or the world to buy US Treasury bonds is if the US government first issues the US Dollars necessary to buy them. Every single US Dollar used to buy US Treasury bonds first came from federal spending in previous years. In other words, for you to buy bonds or pay your federal taxes, the US government must first give you the US Dollars to do so. Full Stop.
If Trump keeps these promises, he will be adding a few trillion dollars to non-government savings. In other words, he will be adding to the national savings, not the national debt. By reducing unemployment, putting Americans back to work in good paying, long-term jobs, yes, he will help matters. But by ensuring perpetual full employment through a federal Job Guarantee initiative, not only would Mr. Trump end all involuntary unemployment, he would also reduce racial tensions enormously, reduce the crime rate, and address many social ills that have plagued America in the era of neoliberalism. If Mr. Trump wants to make America great, these social issues must be addressed, in large part, through appropriate macroeconomic policy that is sustained indefinitely.
Once more, in order to drive it into any thick skulls reading this article: There is no such thing as the US national debt. The so-called “debt” is composed entirely of US Dollars that the US government spent into existence. Remember the words of Trump when he said that the US government can’t default because it “prints the money”? Well, that’s true, but the US government doesn’t actually “print” the money to fund spending. It credits US Dollars into existence via keystrokes. When the US government types the number 8 in a bank account, $8 suddenly exists, where before, $8 did not exist.
If Trump were really, really smart, he would demand that the federal government order the Fed to maintain a zero interest rate policy and stop issuing treasury bonds altogether. Stop giving banks and Wall Street heavy doses of corporate welfare and a basic income guarantee. It is time that the “sink or swim” philosophy be properly applied to Wall Street and not the American people. But that is a different discussion.
Start coming to terms with deficit expansion because that is the only way possible for Trump to keep his promise to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals.
And speaking of hospitals, universal healthcare comes to mind. As I said yesterday, Obamacare must be ripped out by the roots and burned on the funeral pyre of neoliberalism. It must be replaced by universal healthcare. I do recall during the campaign that Trump said he’d enact a universal healthcare scheme. Of course, later, he discussed a private scheme which will not and cannot work. If Mr. Trump actually wants to make America great, he has no choice but universal healthcare. It is a priority.
“We will also finally take care of our great veterans who have been so loyal, and I’ve gotten to know so many over this 18-month journey. The time I’ve spent with them during this campaign has been among my greatest honors. Our veterans are incredible people.”
Again, if Trump intends to keep this promise, then I congratulate him. It is long overdue and both establishment Republicans and establishment Democrats are 100% to blame for ignoring our veterans while they busied themselves looking after the needs of Wall Street and corporate America. And again, to keep this promise too, Trump will have to rely on fiscal policy. He will have to direct deficit expansion towards securing the well-being of each and every veteran, disabled or healthy. There is no other way. Trump will have to ask Congress to create more US Dollars out of thin air to pay for it. Get over it. It’s not your money that will be going to veterans. Leave them alone and let the federal government do its job of taking care of our veterans. They’ve gone through enough as it is, they deserve just compensation for their service, and they do not need your petty, nonsensical, fantasy, bullshit whining about “blowing up the deficit”. If you are one of these “blow up the deficit” screaming Republicans or establishment Democrats, you have no idea what you are talking about when it comes to federal spending, taxes, deficits and public debt. You are part of the problem. Do our veterans a favor, and all of us too for that matter: Sit down and keep your damn mouth shut.
“We will embark upon a project of national growth and renewal. I will harness the creative talents of our people, and we will call upon the best and brightest to leverage their tremendous talent for the benefit of all. It is going to happen.”
That talent is not Paul Krugman, Greg Mankiw, Larry Summers, nor any orthodox economist. Mr. Trump should make it clear to all that religious practitioners of orthodoxy no longer have any place in creating economic policy, and are to be ousted from every corner of the federal government, consigned to oblivion. If Trump means what he says here, then as far as economics goes, he should include Stephanie Kelton, L. Randall Wray, Scott Fullweiler, Pavlina Tcherneva, and especially Fadhel Kaboub within that group of talent that he calls upon. If Trump wants to “make America great again”, he should give that list of people a call, invite them to the White House, listen very carefully to every, single word that comes out of their mouths, and then do what they advise.
“At the same time, we will get along with all other nations willing to get along with us. We will be. We will have great relationships. We expect to have great, great relationships.”
If Mr. Trump means what he says here, and if he intends to see it through come hell or high water, then establishment politicians within the Republican Party along with several members of the US intelligence community are in for a spine-jarring, extremely bumpy ride. This promise means no more meddling in the affairs of Venezuela. No more ego posturing with Russia. No more support for Israel at the expense of Israel’s neighbors. It is a desirable policy, but a “wait and see” approach is prudent here because it is one of those “too good to be true” subjects. If Mr. Trump does keep this promise though, and that’s a very big “if”, then he will most certainly draw the ire of various establishment Republicans and “New Democrats”. At that point, I’d recommend to all Americans, both Trump voters and Progressives (liberals can go cry and complain in a corner somewhere), that they make a list of every Republican and Democrat that opposes Mr. Trump’s “Great Relationships” promise, then turn out for the mid-term election in droves as they did in this election and vote those establishment Republicans and Democrats out of office. Clean house.
I did not vote for Trump like some of my friends who are Bernie Sanders supporters did. I can understand their vote to some degree as an act of revenge against the establishment Democratic Party regime and Hillary Clinton. I have no faith in Trump until I see action backing up his words. So, like I said, it’s an “if”, but if Trump is sincere and demonstrates that sincerity through action, then I am not too “proud” to support any action which advances the public purpose. I am not as shallow as liberals who will oppose good policy simply because a Republican is advocating it. I’m a progressive, or what people on the right would call a “leftist”. For instance, considering an unrelated economic note, Mr. Trump has an opportunity with TPP here. He can bring both the left and some conservatives who oppose TPP together on this issue, leaving liberals and their neoliberal-induced dreams of decimating the American worker to twist in the wind. Mr. Trump would be wise not to drop the ball here. The same applies with foreign policy. Mr. Trump can reach the left with his “Great Relationships” initiative if he is genuinely sincere. Actions speak louder than words. If he acts and keeps this promise, I am certain that the red letter “R” before Trump’s name wouldn’t make much difference for quite a few on the left – that is, if some of us on the left are actually sincere about peaceful coexistence with other nations.
“No dream is too big, no challenge is too great. Nothing we want for our future is beyond our reach. America will no longer settle for anything less than the best. We must reclaim our country’s destiny and dream big and bold and daring. We have to do that. We’re going to dream of things for our country, and beautiful things and successful things once again.”
One last time, in order to achieve that, it will require an expansion in the federal deficit. There is no other way. It is time that Americans forget everything that they think they know about federal spending and economics. It’s time for Americans to ask questions and learn, rather than injecting “opinions” into the national debate as though the reality of the monetary system is a political free-for-all. The monetary system is free-floating, non-convertible fiat. It only works one way. It is not something that can be twisted and bent to agree with your fiscally conservative “feelings”, nor your “feelings” concerning the role of the federal government in the economy. In other words, how the monetary system works is not subject to opinion:
1.) All US Dollars come from the US government.
2.) The supply of US Dollars available to the US government is always equal to infinity. The federal government cannot run out of money.
3.) Federal taxes are destroyed. They do not fund any federal spending of any kind.
4.) Treasury bonds do not fund any federal spending of any kind. US Treasury bonds conduct monetary policy and are nothing more than a bunch of savings accounts held at the Federal Reserve that pay interest.
5.) There is no such thing as the US national debt. It is not an actual debt. It is the national savings.
6.) Banks do not lend out reserves. They issue their own IOU that’s denominated in the US government’s unit of account.
7.) If the US has a current account deficit, then the US government must run deficits at all times.
8.) The US government is the constitutionally authorized regulatory authority.
9.) The US government is the price setter.
The above items are not subject to opinion.
I tell you plainly, if Mr. Trump cannot grasp these simple, basic concepts, and derive appropriate macro policy from them, then he cannot make America great again no matter how sincere he is, nor how hard he tries.
For a brief moment in time, the American economy might rebound. America might seem as though it is doing fantastic. But it will be short lived. Eventually, it will come crashing down again when errant gold standard thinking makes its way into policy, or the moment establishment Democrats regain their grasp on power. Regardless of Mr. Trump’s victory, we progressives must begin an immediate campaign to rid the Democratic Party of “New Democrats”, or more precisely, neoliberals, or build a third party powerful enough to overcome the Democratic Party establishment in elections. But that’s another subject entirely.
For prosperity to be sustained and to ensure a standard of living that is second to none, requires knowledge of these simple concepts, and policy derived from them, such as a Job Guarantee with a basic income guarantee, universal healthcare, free education and other ongoing public purpose initiatives. It is time for Americans to stop regurgitating economic nonsense peddled by politicians, the media, and mainstream economists in the past. It is time for Americans to start asking questions; to start learning; to listen more and speak less until they have the fundamental knowledge of how our monetary system works.
“I want to tell the world community that while we will always put America’s interests first, we will deal fairly with everyone, with everyone. All people and all other nations. We will seek common ground, not hostility; partnership, not conflict.”
We shall see about that. There is no avoiding a Trump presidency. Let us hope that Mr. Trump keeps his word to “make America great again”. He can start down that road by telling the American people the truth: The US government cannot run out of money.
There is no other way.