Confirmation that all federal spending (in the US) is – and has always been – financed with created currency.

The idea that “taxpayer money” pays for our federal programs is economically inaccurate. The truth is that, ever since 1796, when the first dollar was created, every single dollar of spending by the US federal government is created currency. This includes the military; Social Security, Medicare, and Medicaid benefits; FBI, Congressmen, and judge salaries; interest on US Treasury securities; and so on. (That all spending by the federal government is created currency, logically extends to, “Federal taxes do not and cannot pay for any federal spending.”)

But more than being economically inaccurate, the idea of “taxpayer money” is a profoundly sinister and insidious one for our society. It further enables and promotes the neoliberal “monetarist” austerity economics that guarantees that the people will never actually get the big programs that we need to not die, suffer, or go bankrupt. “Taxpayer money” is also a racist, sexist, and classist dogwhistle.

(And if you think about it: If all of these things – Social Security, Medicare, and Medicaid – are created currency… then how can they “go broke”?)

Below is confirmation by many different economists, experts, and people in power, confirming that the above is true. Each contains a link to the original source so you can independently confirm.

(Here is a link to these same resources in Twitter form.)

‪Even when you try really really hard, taxpayer money does not and cannot fund federal programs. (Link to tweet)

The powerful: Federal Reserve Chairmen

Link to video

Ben Bernanke was the Chairman of the Federal Reserve during the Great Financial Crisis of 2008. Here is the partial transcript from an interview on CBS’ 60 Minutes in 2009, starting at the eight minute mark in this video:

  • Scott Pelley: Is that [the massive spending necessary to deal with this crisis] tax money that the Fed [the Federal Reserve] is spending?
  • Bernanke: It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. To lend to a bank, we simply use a computer to mark up the size of the the account they have at the Fed. It’s much more akin, although not exactly the same, to printing money than it is to borrowing.
  • Pelley: You’ve been printing money?
  • Bernanke: Well, effectively. And we need to do that…

In 2013, Ben Bernanke testified to Congress – meaning, under oath. According to Forbes magazine:

Congressman: “Where does the Fed get the money to buy [assets]? Do you create the reserves?”
Bernanke: “Yes.”
Congressman: “Are you printing money?”
Bernanke: “Not literally.”

(“Not literally” refers to the fact that the money is created in a computer, not by printing physical bills.)

Link to video

Alan Greenspan was the Chariman of the Federal Reserve from 1987-2006. In 2005 he testified in Congress – again, under oath – to then Republican Speaker Paul Ryan:

There is nothing to prevent the government from creating as much money as it wants.

Link to video

He continued:

It’s not a question of [economic] security, it’s a question of the structure of the financial system, which assures that the real resources are created for retirement, as distinct from the cash. The cash itself is nice to have, but it’s got to be in the context of the real resources being created at the time those benefits are paid, so that you can purchase the real resources with the benefits, which of course, are cash [in the people’s pockets].

In other words, the only actual limitation to creating money is the real resources (that is: raw materials, labor, technology, and time) that are domestically available to the government. These are the resources that can be purchased after, for example, Social Security benefits – money – are added to the bank accounts of American citizens.

Alan Greenspan on NBC’s Meet The Press in 2012:

The United States can pay any debt it has because we can always print money to do that…. There is zero probability of default.

Beardsley Ruml was the Chairman of the New York Federal Reserve from 1941-1946. In the January 1946 issue of American Affairs quarterly journal, he wrote an article called “TAXES FOR REVENUE ARE OBSOLETE.”

Economists

ABOVE: American Economist Stephanie Kelton, in the abstract of her 1998 paper, “Can Taxes and Bonds Finance Government Spending?”.

Australian economist William Mitchell

Australian economist William Mitchell wrote in 2010 on his blog:

Taxpayers do not fund anything. So when you hear commentators and politicians and the like use terms like “taxpayers’ funds are being mis-spent” etc, you can immediately conclude they do not understand how the monetary system functions.

American economist L Randall Wray

Wray wrote in a 2014 article on Naked Capitalism:

Taxes are not needed to “pay for” government spending.


Link to tweet

Economist Pavlina Tcherneva.

Experts

Warren Mosler is the “father” of Modern Monetary Theory (MMT). It is his ideas that were adopted, polished, and formalized by economists (including the above), starting in the 1990s. The above is on page nine in his book, The Seven Deadly Innocent Frauds of Economic Policy (2010).

The following quote is on page 15.

It makes no sense at all to think that the government has to get money by taxing in order to spend.

Macroeconomics expert Ellis Winningham

Macroeconomics expert Ellis Winningham, in his 2018 blog post, “On the Use of the Ubiquitous Term “Printing Money” by MMT Novices – Please Stop Using It.”

In short, you do not fund the US government, the US government funds you.



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