By J.D. Alt
Viewed through the ideology of money-scarcity, the major challenges facing society appear to represent “costs” that people must be penalized to pay by taking dollars out of their personal pockets. At one level, politics is the endless and bitter argument of one party proposing to do X, Y, or Z in order to accomplish some collective benefit, and the other party saying: Yes, but how are you going to pay for it?—which is the “gotcha” question because everyone certainly “knows” that in order to actually do X, Y, or Z, the federal government will have to increase taxes or borrow dollars from the Private Sector pot. Understanding modern fiat money (and how to manage it as a collective tool) creates, as we now understand, a remarkably different and more useful perspective. With this new perspective, as we’re about to see, many of the biggest challenges we face as a collective society can be viewed not as a “cost”—a penalty to be paid—but instead as an enormous opportunity to make our lives, both collectively and individually, more effective and prosperous. Confronting these challenges, in other words, will not take dollars out of our personal pockets, it will—in addition to hopefully overcoming the challenge addressed—put dollars into our pockets. This, in essence, is the uniquely empowering perspective that modern fiat money makes possible.
To see the power of this perspective in concrete terms, let’s explore four of the major dilemmas the Millennials will surely be facing as they come into power:
- Establishing a free lifetime education system
- Re-engineering our built environment for a warmer climate and higher sea-levels
- Creating “work” in an economy of super-automation
- Building a sustainable urban infrastructure that everyone can afford to live in
I don’t propose to prescribe here definitive answers to these challenges. That is something to be worked out in a long-term political dialog that, hopefully, will soon begin to unfold. My goal in exploring these topics—and suggesting possible ways to address them—is primarily to show and emphasize how the change in perspective that modern fiat money provides can alter, dramatically, the parameters and possibilities of the debate.
Before we begin, since we’re about to explore what very high levels of sovereign spending can achieve, let’s quickly review the basic realities of the modern fiat money we’re about to employ:
- What limits our potential collective accomplishment is not the number of dollars that exist, but the actual, real resources—materials, labor, technologies, expertise—which are available to be put to work accomplishing the task. If the real resources are available—that is to say, if they are not already being deployed to accomplish something else we deem more important—there is nothing (except the ideology of money scarcity) to prevent our sovereign government from issuing the dollars necessary to employ those resources.
- Sovereign spending, at the levels we are about to suggest, will result in the federal government spending a great many dollars more than it collects in taxes. We realize now, however, that because the federal government is the issuer of the fiat currency, it is incorrect to view this as creating a federal “deficit” in the sense that it is a hole that has to somehow be refilled, or a loan that has to someday be repaid. What the ideology of money scarcity calls a federal “deficit”, in fact, represents the net dollars the American people will have been paid to build the collective goods and services we are going to propose. This is what we referred to earlier as our “national spending achievement”—with the emphasis always needing to be placed on the achievement side of the equation.
- If people who have been paid to build or provide collective goods and services end up with excess dollars—dollars which they decide to set aside for future spending—they can choose to trade those dollars for Treasury bonds, which will pay them interest. Treasury bonds, then, are the people’s savings accounts—they are not a “debt” which the U.S. government has to repay at some point in the future. Encouraging people to buy Treasury bonds is a powerful way to drain spending dollars out of the Private Sector pot, helping to control inflation, and thereby enabling the federal government to pay for more collective goods and services.
- In sum, the concepts of “deficit” and “debt” are not applicable to the federal issuer of a sovereign fiat currency—they are only applicable to the users of that currency: the individuals, families, businesses, corporations, local and state governments who comprise the citizenry of the nation, and who, as currency users, have to balance their income and expenses.
With these basic realities of modern fiat money reconfirmed in our thinking, we can now begin to imagine how the Millennials might go about accomplishing some miraculous and astonishing things during their tenure as a governing generation.
Establishing a free lifetime education system
It seems appropriate to begin with a topic that is foremost today in the personal experience of the Millennials themselves: Education. They are, as a generation, just exiting—or are in the middle of—what has, on many levels, devolved into a profoundly dysfunctional experience. As we’ll see, the primary reason for the dysfunction is the ideology of money scarcity.
From the perspective of a society based on consumer economics—people working to produce goods and services which other people (and they, themselves) then purchase, it should be obvious that if there was ever a collective benefit that everyone profits by, it is that everyone becomes as well educated as possible—beginning, most importantly, in the formative years of pre-school childhood. Simply put, people who are well educated have better jobs, and people with better jobs buy more goods and services, which means there are then more things that need to be built and provided which, in turn, means there are more people with money to buy the things produced. This is the virtuous cycle that a consumer based economy depends upon.
Given this dynamic, it is remarkably irrational, from a collective point of view, to run a national education system based on the idea that the organized instruction of Americans is seriously constrained and limited by a lack of dollars—that each generation, in effect, must borrow dollars from its future earnings to buy the training they’ll need to obtain those future earnings in order to become effective consumers. But this is precisely how the ideology of money-scarcity tells us the system must work.
The messaging begins with the orthodoxy that early, pre-school education is something that families must “earn”—that pre-school care and instruction is a commodity produced and consumed in a market-place, like everything else we buy and sell. The logic of the market is irrefutable: those who can’t earn enough dollars to buy their formative-years instruction, either individually through their families—or collectively through local school taxes—don’t get to have that instruction, or receive an inferior substitute for it.
The ideology continues with the federal government acknowledging, grudgingly, that some federal spending is necessary to “help” local school systems pay their teachers and build their facilities—but then severely limits what can be spent to some calculated slice of a perceived sovereign budget “deficit.” This parsimonious perspective insinuates itself further by demanding that local schools “prove” they are putting their federal assistance to good use by producing children’s test scores that meet a predefined measure—as if the students had to “earn” the federal assistance with their performance.
The final culmination of collective irrationality—which truly boggles the mind, when you fully consider it—can best be described as a system of debt slavery for young adults: the forcible requirement that in order to obtain the specialized or higher-level training they need for a specific career in the consumer society, they must directly borrow dollars against their future earnings.
Here are a few statistics illustrating the astonishing dimensions of this conundrum:
The average annual cost of pre-school day care in the U.S. now exceeds the average annual cost of a college education—and exceeds, as well, what the average young family spends for housing. Meanwhile, the average U.S. college student, in 2014, graduated from college with a debt of $33,000—an encumbrance which will require them to pay, over the next fifteen years, $82,000 in principal and interest. If they happen to marry someone in the same boat, the new family now has a combined future encumbrance on their earnings of $164,000—and they haven’t even bought anything yet! Which they’re not likely to do, either, because they must immediately begin saving to pay for the pre-school day care of their future toddlers—(why else did they get married?) But the problem is, if you’re paying for four years of toddlerhood, and pre-school day care costs more than college tuition, it’s unlikely you’ll even come close to saving enough for the day care—especially if you’re having to work full time to make payments on your own college loans. In fact, since it takes the average family eighteen years to save enough for a child’s college tuition, that same child who the parents are saving for, by mathematical logic, needs to begin saving for his or her own children’s day care beginning at the age of eight. If this sounds like the insane makings of an overly stressful young-family life—in which marriages are likely fall apart, leaving children under-cared for in their most formative years—welcome to the U.S. free-enterprise education system the BGXers have cobbled together.
But what is the alternative? From the perspective of money-scarcity, there is none.
President Obama, in his 2015 State of the Union address, grandly (and rationally, it seemed) proposed that it was time for America to have a program of universal pre-school instructional care which would be available to every family for free. This was going to “cost”, he later told us, $10 billion dollars a year. He’d make the American people “pay” that cost, he decided, by requiring them pay an extra dollar or so each time they bought a pack of cigarettes.
This is exactly the kind of convoluted logic that the ideology of money-scarcity forces upon even people with the highest of intellects: To the extent that we succeed in discouraging people from smoking cigarettes (which presumably would be both the goal and the result of the increased tobacco tax) we ultimately diminish what we can spend to begin the early education of our nation’s children. But President Obama’s proposal, of course, was a meaningless convolution of logic since the idea of making people pay dollars out of their pockets so someone else can put their pre-school kids in a safe early learning environment was not something the BGX politicians, listening to Obama’s speech, could even begin to compute. Result: We are completely stuck—incapable of collectively climbing out of a hole we don’t even understand how we got into.
But now let’s shift perspectives.
Now we are going to use the tool of modern fiat money to tackle the dilemma President Obama was trying to address. The fundamental difference, of course, is that the question to be answered is no longer “where are the dollars going to come from?” It is clear, now, in everyone’s mind (right?) that the dollars necessary to pay the American people to create the goods and services comprising a national pre-school program will simply be “issued” by the central bank and deposited in the Treasury’s spending account. That spending is not going to “cost” the American people a penny—instead, it is going to pay dollars into the pockets of the pre-school care-givers and instructors.
There are, however, important questions to be debated and addressed. One has to do with the BGX push-back concerning big government, specifically big government programs that not only waste money, but fail miserably to accomplish what they were created to do. This fear was aptly expressed by House Speaker John Boehner in his comments regarding Obama’s State of the Union proposal: Getting the federal government involved in early childhood education, he said, is “a good way to screw it up.”
So how could the federal government spend $10 billion a year in newly issued fiat dollars to create and implement a universal pre-school care system without “screwing it up”—and without creating a massive government program with a massive supporting bureaucracy?
One approach (which I’ll subsequently be applying to each of the challenges were going to discuss) is for the federal government to not try to achieve the goal directly. Instead, the federal government will build a structure or platform enabling local, cooperative groups to achieve the goal themselves—and pays them to do it. In creating a national pre-school care program, for example, the federal government might create a model co-op business application (including financial management software) which incorporates a set of minimum cost-service parameters—what the government would pay per child in exchange for what services. The federal government would then call for local communities—cities, boroughs, even street neighborhoods—to submit proposals for creating and staffing their own early childhood care facilities using the co-op business application (which would be provided, free, to any interested group.)
After determining that each proposal is neither fraudulent nor inflated, the federal government will issue new fiat dollars as required to meet the costs of each proposal—and deposit those dollars in an account to be managed by the local group. The local group will then use those dollars to rent or build their facility and pay the staffers who will care for and instruct the children, using the software platform created by the federal government to manage and track their program.
It’s possible, of course, there will be a certain amount of fraud. There will be some people who succeed in getting paid to build child care centers that never get built; there will be some who succeed in charging to care for children who don’t really exist; there will be some who charge to provide supervised reading experiences, but never actually provide the service. These kinds of possibilities are certainly to be expected. There are, however, three responses to this “selfish-gene” behavior which can reasonably be made:
First, an overpowering investigative “police force” would exist to uncover and bring to light fraudulent day care programs and behaviors: the parents. Because the “books” of each participating co-op are open and accessible on the government’s software platform—invoices submitted to the Treasury, payments made by the Treasury—the parents would be able to measure the quality of the services they are getting against what the pre-school facility is claiming.
Second, each pre-school care facility would be operated as non-profit co-op, which is collectively and/or democratically managed by its members. It is difficult (though not impossible) for such a group, because of peer pressures and relationships, to engage in fraud.
Third, assuming that some amount of fraud is unavoidable—say even as much as 5% of total spending—that fraud neither harms the benefits which are created in the larger system, nor does it “cost” dollars out of anyone’s pocket: Even dollars that get paid to fraudulent operators for services that are never really provided—even those dollars ultimately get spent into the consumer economy, buying the goods and services created in the Private Sector pot.
What are the outcomes of our new perspective?
- We have 1.6 million early childhood instructors and care-givers (assuming a ratio of 1 care-giver for 6 children) who were previously under-employed, or unemployed, now earning a living wage.
- We have hired and paid hundreds of thousands of contractors to build, or renovate and furnish pre-school care and learning facilities.
- We have some eleven million pre-school American children who are now in a safe and healthful learning environment while their parents are working.
- We have an entire generation of young working parents who are relieved of the everyday stress and worry of scrambling and scrimping to find a place, during working hours, to put their pre-school children.
- And, perhaps most important, we have a new, upcoming generation of Americans who are learning the basics of reading and reasoning during their most formative years.
These are not “costs.” They are opportunities—proactively seized and embraced—to strengthen and prosper our collective society. And the seizing and embracing—the actual creative work—will have been accomplished not by a massive federal bureaucracy, but by local people, building a collective benefit they, themselves, have defined and envisioned.