Why We Can’t Afford a Bus-Ride

By J.D. Alt

Today I cut out of the Wall Street Journal an article and photo that, in combination, illustrate the absurd plight we have placed ourselves in as a society by insisting that we are too poor to create the things we really need. The article is about the Pittsburgh metro area and how it is drastically reducing its public transit routes (as well as increasing fares) in order to cope with a $64 million deficit in its operating funds. The accompanying photo was of a young, bright-looking mother of two day-care aged children (the article explained) sitting at a bus stop that will soon be removed, waiting not for a ride to her job, but for a ride to a job placement agency where she spends four hours a day looking for work. When her bus route is eliminated, she won’t even be able to get to the placement agency. And this is America, the great achievement of modern civilization. I hang my head in shame.

The word “deficit,” of course, explains it all.  The article tells a familiar story: The public sector has mismanaged its finances. The union wages the metro area is required to pay its bus drivers are excessively generous. (Ralph Cramden, apparently, now lives in a mansion and drives a Mercedes).  Bus driver health care costs are unsustainable, and their retirement benefits are a shameless demand on the “backs of the tax-payers.”  There’s no way people are going to pay more taxes to build new transit lines, or buy modern buses and light rail cars. The governor of Pennsylvania refuses any help whatsoever until the metro area gets its fiscal house in order (presumably, by cutting transit routes even further or, perhaps, busting the union and reneging on retirement and health benefits.) But then, what could the governor do anyway? He can’t spend what he doesn’t have, and states are still struggling, partly due to the fact that people are finding it harder and harder to get to work in the morning (if they have a job) and so are paying the state fewer and fewer taxes. The jobless young mother in the photo presumably pays no state income tax.

There is mention, of course, of a possible federal role in this situation. There is something called a “Transportation Bill” that is currently stuck in Congress.  But even if it gets unstuck, it seems it won’t make any difference, because the bill is actually proposing to reduce the federal funds targeting public transportation. This is necessary, we’re told, because the federal government is the most broke of all. Its deficit is around a trillion dollars, and Congress can’t even think about anything except how to get out the big financial hole it believes it’s in.

What is so shameful about all of this is that the solution is both simple and painless: All that’s required is that we remove the Neanderthal glasses we’re collectively wearing so that we can begin to see and understand that the U.S. dollar is no longer convertible to gold. It has become a modern fiat currency, which can be created and tallied like points on an electronic scoreboard. What looks like a “deficit” through our Neanderthal glasses is really just a spreadsheet entry that shows how many “points” our currency-issuing government has added to the scoreboard by purchasing goods and services from (mostly) American workers and businesses. To even call it a “deficit” is to misunderstand the fundamental dynamic of modern fiat monetary systems.

How would this revelation affect the Pittsburgh metro area? For starters it means the federal government could (without any fear of going broke) immediately declare that it stands ready to pay for the modernization of the public transit systems not just in Pittsburgh, but in every city in the country, including the overhaul and refinancing of union pension and health care programs. It can do this very simply because it is the sovereign currency-issuing entity in our society.  It can use the power of the purse to pay for the goods and services that its citizens are willing and able to provide in exchange for the currency.

It’s as simple as that. And if we could stop thinking like Neanderthals when it comes to how our currency-issuing government really works, the young mother in the photo would not only get to keep her bus-route, but the next time she goes to the job placement center, she might actually find employment.

21 Responses to Why We Can’t Afford a Bus-Ride

  1. I purpose that The Great Moderation be renamed The Great Regression

    • Nah, it’s depression 2.0.

      • I think Regression makes sense. It speaks to the ways in which progressive/new deal achievements have been, and are still, being rolled back. We are regressing.

  2. There are many stories like this — stories involving ignorance of Monetary Sovereignty, and how if our leaders actually understood the realities of economics, we would not be in a recession. But, beginning with the President, and working all the way down to the popular media and the “man-in-the-street,” the belief that our Monetarily Sovereign government is “broke” (as John Boehner famously declaired), or “can’t afford” this or that has completely stifled our ability to recover.

    We pay dearly for our ignorance — not just ignorance, but absolute refusal to learn. Tell your friends that the federal government never can run short of money and they will respond with the “W” word (Weimar Republic) or the “Z” word (Zimbabwe), not realizing that those hyperinflations were caused by circumstances unrelated to government spending, and never existing in America.

    We could eliminate poverty, greatly reduce the gap between rich and poor, and create the greatest, most productive economy the world ever has known. The power is in our hands, and has been since August 15, 1971, when we became Monetarily Sovereign — were it not for our ignorance.

    What a waste we are.

    • Matt Franko

      Rodger,
      Is our “Monetary Sovereigntyism” going to provide a job, or otherwise a robust means of subsistence, for this young woman and her two children? Rsp,

      • When a nation uses the single most valuable asset it owns, namely its Monetary Sovereignty, it does many things that add jobs and create a “robust means of subsistence” for its residents. For instance, this is what I have suggested at: http://rodgermmitchell.wordpress.com/?s=%22click+here%22

        1. Eliminate FICA
        2. Medicare — parts A, B & D — for everyone
        3. Send every American citizen an annual check for $5,000 or give every state $5,000 per capita (Click here)
        4. Long-term nursing care for everyone
        5. Free education (including post-grad) for everyone
        6. Salary for attending school
        7. Eliminate corporate taxes
        8. Increase the standard income tax deduction annually
        9. Increase federal spending on the myriad initiatives that benefit America

        Each step would help “create jobs and create a robust means of subsistence.”

        Rodger Malcolm Mitchell

        • I’ll buy most of that and add the JG.

        • Matt Franko

          Rodger,

          “send every American citizen an annual check for $5,000″ and “Salary for attending school”

          Sounds good! Rsp

        • the problem with this helicopter-drop money is that it will all be quickly raked out of the economy by the rent-seekers — in real estate, energy, and healthcare. Plus our national trade deficits.

          Taxing rents 50% would also give us funding to implement that list of benefits, too, no massive money printing required.

  3. Dan Kervick

    Nice J.D. The mystification of money gets in the way of everything. All that matters is the existence of real resources – natural, human, capital – and out determination to put them to use. A country rich in real resources should never allow itself to get stuck in the mud because it has convinced itself it is “out of” money. Money is a mere tool, and its the easiest and cheapest tool to manufacture.

    • Michael Boudreau

      I’ll 2nd that Dan. How to we push people beyond “out of money”. Canadians and Americans are so rich in real resources, it is almost embarrassing to watch how we behave.

      I also think the establishment is really good at using mico/personal examples to push against macro/aggregation. Joe/Jane did it by….. whats wring with Jim/Janet. As an aside, I was using the dogs/bones analogy today and it occurred to me that unemployed as dogs is probably not the best connotation. I’m not saying it is something that DanK or JD have used – I’ve just seen it around. I’m changing to kids and easter eggs for now, but I am open to suggestions.

  4. JD. All true. Too bad no one who counts believes any of it.

  5. Who do the Pittsburgh gov’t think they are, the IMF? Oops, sorry, we aren’t in the un-g177. Pretty much looks like the same result that the IMF have wreaked in other countries. Could be that the Banana Republic moniker some have been giving to the U.S. economy for a few years now is finally beginning to show its colors.

    Question: for how long is our “public” (privatized) government going to be able to keep hydrocarbons cheap enough for us to keep driving our cars like we have been?

  6. We have bought, hook- line-and-sinker, into the mentality of scarcity instead of abundance. Let’s don’t produce … let’s cut costs. People don’t need an education … we’ll teach them only what they need to know to serve our needs. Don’t create jobs here … create jobs elsewhere. We’ll create a situation of no jobs, fire you, then blame you for not having a job. Being put out of work is good for you. We will move our production to a foreign, third world hell hole, we will pay no taxes and will not contribute to our country, then when the sh*t hits the fan we will demand that you spill your blood to protect our interests in that hell hole. Sound familiar?

    • Eventually those third-world hell holes (China) may start to look a lot better … at least they seem to be concerned about keeping their people working.

      I posted this another blod, but I really like it:

      Something from the Guardian:

      China’s economic stimulus offers Europe a lesson
      Chinese state action from the onset of the global crisis countered any investment decline. In the EU, it’s a case of too little, too late

      http://www.guardian.co.uk/commentisfree/2012/may/30/europe-china-economic-stimulus

      Here is the kicker for MMT’ers. A comment from one of the Guardian readers:

      frontalcortexes
      30 May 2012 2:21PM
      Oh Dear ! The Chinese appear to be using Modern Monetary Theory. That will never do for our know-nothing Neo-Liberal dogmatists who prefer to cling to their dogma than find out what the theory is really all about. Usually they start screaming hyper-inflation like frightened children at the first mention of MMT not even aware that this is caused by an abrupt reduction of goods and services but the same amount of money in an economy still chasing those items. Reparation demands Weimar Republic. Inadequate black management of confiscated white owned farms Zimbabwe. How remarkable that the Chinese government tightened under-writing standards at the first sign of their property market over-heating. Here the Neo-Liberal simpletons would be calling for more de-regulation of the financial and real-estate sectors!

  7. Broken windows. In economics there are two stories about broken windows. One is about how repairing broken windows can improve a neighbourhood. The following is about the second story, how breaking a window and thereby forcing the avoidable expense of replacing the window does not increase the economic wellbeing of society. The shopkeeper could buy a new coat instead of replacing his broken window. The US spends about one trillion dollars per year on the second type of broken windows in the form of security and defence. This will make some generals, fighter pilots, defence contractors, bureaucrats and politicians very happy, but it presents a heavy burden on the general economy. Consider reducing this broken-window spending by 500 billion dollars or more per year. The broken-window manpower and funds could be redirected to transportation systems, education, medical insurance, new-energy development and more. Just consider.

  8. John M. Giannone

    Look, I do not want to sound heartless, but how do we come too presume that reproduction is just a woman’s business?
    Obviously . . . according to the article, given the facts there, it is not JUST her business. In an ethical society not only would the bus be running, but the assumption that in reproduction woman are detached from society–it is simply their business and no one else’s–would be subject to scrutiny if not challenge. There is responsibility here too—responsibility to oneself and to others.

  9. Although most money is not actually “fiat” in the proper use of the term, the article correctly points out that money is just a system of keeping accounts. It is a means of acCOUNTING. There can be shortages of raw materials, or physical capital, or labour, but there should never be a shortage of money. Most money is created by private commercial banks when they make loans, purchase assets or pay expenses and dividends to their shareholders. Most money is created as debt. Money should be a means of accounting for the activities of production and consumption, and production and consumption should determine the amount of money being created and destroyed. Unfortunately, in the world we live in today, money and finance determine the amount of production and consumption. The tail is wagging the dog.

    Demon est deus inversus — “the devil is God upside down.”

    People need to educate themselves on the mechanics of money creation with fractional reserve banking. There is a route out of this madness, and it was discovered by a British Engineer over a century ago – his name was Clifford Hugh Douglas, and he demonstrated that an accounting flaw, which resulted from technological advances replacing labour in prodution, led to prices increasing faster than incomes. The result of this accounting flaw led countries and their citizens into ever increasing debt and periods of booms and busts. And the only way out of this dillema was to increase people’s purchasing power in such a way that said purchasing power is not costed in industry. This would be accomplished by a national dividend given to all and a price rebate created through new monies without the resulting debt of money created through the fractional reserve process.

    http://en.wikipedia.org/wiki/Social_Credit