By J. D. Alt
*A work of fiction
The President appeared surprisingly upbeat and confident: He grasped the sides of the lectern—not as he often had in the recent past, as if to support and steady himself in moments of national turmoil—but rather as if he were about to lift it up and toss it aside. Adjusting his papers, he quickly made eye-contact with each reporter in the front rows, usually with a quick nod of greeting, but sometimes with a stern hesitation.
“I would like to announce today,” he began, then paused just a beat—“a paradigm shift.”
The press-corps itself shifted, just slightly, then assumed various poses of attentiveness.
“You know,” the President continued, a casual sweep of his hand suggesting his topic was going to be familiar and easy to grasp, “it’s one of those things we’ve all been looking at with our own eyes for hundreds, even thousands of years, and we always agreed on what it was we were seeing. Then someone comes along and says that really isn’t what we’re seeing at all—what we think we’re seeing is actually THIS instead. And, of course, we then give that person a sideways look—or, maybe, we throw them in a dungeon or (I’m afraid it’s happened) we burn them at the stake….” (A grim expression crossed his face, as if he were recalling bad times.)
“The evolution of human civilization has not always been pretty. But IF it turned out that person happened to be correct, eventually we all began to see the thing in question as THIS instead of THAT for the simple reason it turned out to be true.
“Paradigm shifts don’t happen often. Actually, there have been only three big ones in modern human history—including the one I am announcing today. The good news is when they do happen they provide enormous benefits, equally, for all of us. For example, the first big paradigm shift in modern civilization was to see and understand that even though for countless generations it had appeared that the Earth was flat, in fact it is a sphere! This gave us the huge benefit of being able to sail our ships far out to sea without the catastrophic possibility of falling off the edge! A real confidence booster, to say the least.
“The next big paradigm shift was to see and understand that the Earth was not the center of the Heavens—with the Sun orbiting around it—but that, instead, the Earth is orbiting around the Sun, along with a few other planets. This was a most difficult thing to accept, not just because it conflicted with our theological models, but because—well, you can plainly see with your own eyes, every day, that the sun comes up over here, orbits across the sky, and disappears over there…” here the President used some body language to indicate the sun’s movement, “only to come up over HERE again the next morning! It’s just common-sense obvious what’s going on, right? So they gave Copernicus and Galileo a really hard time about that one. But, eventually, we all began seeing it their way and, yes, if you concentrated real hard watching the sun rise, or watching the sun set, you could actually feel, wow, that IS what’s happening! And, of course, we all benefit from the fact that because the Earth orbits the Sun rather than the other way around, and because it’s tilted in doing so, we get to have our four seasons, not to mention the fact that it means gravity is actually working properly and we don’t have to fill our pockets with rocks to keep from floating out into space.”
He gave the room a quick look around to make sure that last point had sunk in.
“So now we come to the third great paradigm shift of modern civilization, which I am going to announce today. Right now, in fact. Here it is: Sovereign governments do NOT have to collect tax dollars in order to have dollars to spend. In fact, exactly the opposite of what we have believed for so many generations actually is the case: In order for people to have dollars with which to pay taxes, the sovereign government has to SPEND dollars first.
“Now, I know many people are going to resist seeing it this way. It seems like it is just common sense that a sovereign government, by the people and for the people, collects taxes FROM the people to pay for things they all agree they need together. Everyone contributes some fair share, and the collected money is pooled and used to pay for the public goods that everyone will benefit from. That’s what taxes are all about, that’s how we get our highways and bridges, how we pay for our army and navy and air-force; it is how we build our weather and GPS satellites, how we pay our federal judges and law-enforcement officers.
“But what we THINK we have been seeing is not actually what has been happening. The money we use here in the United States does not come into existence independent of us—it does not magically appear in bank vaults, all stacked up and ready to be used—and then we borrow some of it, and work to earn some more of it so we can pay back what we borrowed—and then we pay some of what we’ve earned to the federal government in taxes so the federal government itself has some of it to spend on the army and the highways. Nope. That’s not the way it works. And if you think about it, you’ll realize it really could NOT work that way either. There’s only one way it actually COULD work, which is, as it turns out, the way it DOES work:
“Our money—the U.S. Dollar—is created by us together as a sovereign act. We create it, literally out of thin air, by the simple but profound declaration that we exist as a sovereign nation and have agreed that we are going to create a sovereign currency which we are going to call the U.S. Dollar. When we declare that we exist as a sovereign nation, what we mean is that we have all agreed to live together under a certain set of laws—and one of those laws is that each citizen, on a regular basis (and on pain of imprisonment), shall pay TAXES to the sovereign government which we have formed to manage our nation.
“And what is it that we’ve agreed the sovereign government will accept as a tax payment? Can we pay our taxes with colored rocks or seashells? No, we cannot, because we’ve agreed that we cannot. Can we pay our taxes with gold or silver? No, we cannot even do that—even though gold and silver obviously are valuable—because we’ve agreed we cannot. What we’ve agreed to is that the ONLY thing we can pay our taxes with is the U.S. Dollar. So if, when tax time comes, we happen to only have seashells, or some chunks of gold and silver, in order to pay the tax we’ve agreed to pay, we have to first trade our seashells or chunks of gold to someone else for U.S. Dollars. Then, and only then, can we extinguish our tax liability with the sovereign government.”
The President stopped here and adjusted the papers on the lectern. Then he grasped its edges once more and leaned forward meaningfully.
“Now the important thing to SEE here,” he quickly surveyed the front rows of reporters, then searched briefly the back rows of the room to make sure there were no dawdlers, “…the important thing to see is that someone has to CREATE those U.S. Dollars in order for them to exist. They have to come from somewhere, right? So who is it that creates those dollars? Is it Goldman and Sachs? Is it Bank of America? Is China going to create them and loan them to us? Can you go down in your basement and create them yourself? Nope, you cannot. There’s only ONE entity who can legally create U.S. Dollars—and that’s the sovereign government that we’ve put together to implement the laws we’ve agreed to live under.
“So the sovereign government creates the U.S. Dollars that we’re going to need to get in order to pay our taxes. Is everyone with me here?” (Another quick survey of the press corps.) “Now HOW do you imagine that we, the people, GET those U.S. Dollars the sovereign government creates, so we can have them to pay our taxes with? The sovereign government has created the dollars. They’re all stacked up there in the sovereign money room. How do we—the-people-who-need-to-pay-taxes—GET them? Anybody have a suggestion?”
The President looked at each of the front row reporters in turn, as if he were asking each if they had an answer. Each, in turn, squirmed a little; two or three pretended to be taking notes.
“The answer,” the President continued, “is very simple. The sovereign government SPENDS the dollars. It BUYS things. It buys goods and services—highways and bridges and aircraft carriers—medical and air-traffic control services—things like that. And who does it buy these things from? Who does it PAY those dollars to for those goods and services? It pays those dollars to the businesses and contractors and civil employees who provide the goods and services—and who then use the dollars they’re paid to buy goods and services from other people, who in turn use them to buy goods and services from somebody else, etcetera, etcetera. Do you see how it works? Pretty soon, everybody—each one of us—has some dollars that we can use to pay our taxes with, so we don’t end up in jail for tax evasion.
“So that’s how it works. That’s the paradigm shift: Sovereign governments don’t need to COLLECT taxes in order to have dollars to spend, they need to SPEND dollars so the citizens can have the dollars they need to pay their taxes.”
The President paused and focused on one reporter in the center of the second row who seemed to be writing this down, as if to give the reporter proper time to finish the transcription.
“Now then,” the President continued, “I’m going to dispense—just for today—with our tradition of you asking me questions, and me trying to answer them. Instead, I’m going to conclude here with ME asking YOU some questions. Three questions, to be exact. And I’d appreciate it very much if you’d write these questions down, think about them, and then I’d appreciate it even more if you’d write articles and editorials and go on TV and radio talk shows, and explain to your viewers and readers and listeners the answers you come up with to the three questions. Here they are:
“If what we are calling our federal “deficit or surplus” is the difference between the number of dollars the sovereign government SPENDS and the number of dollars it collects back in taxes:
“(1) Do we want the sovereign government to collect back MORE in taxes than it spends?—in which case the government would have a ‘surplus.’ Or—
“(2) Do we want the sovereign government to collect back exactly the SAME number of dollars in taxes as it spends?—in which case the government’s budget would be ‘balanced.’ Or—
“(3) Do we want the sovereign government to collect back FEWER dollars than it spends?—in which case it would have that thing we pronounce today with such terrifying dread: a ‘DEFICIT.’”
“Thanks for coming this morning for what, I think you’ll agree, has been an important announcement. As I said at the outset, paradigm shifts take a little time for everyone to wrap their thinking around. But the benefits can be enormous—as I think you’ll see when you begin pondering the three questions I’ve posed.”
The President gathered up his papers from the lectern and left the room with a stride that definitely had some bounce to it.