The trouble with even the biggest and most beautiful bill is that eventually you have to pay your bills, and the beauty of what you bought may have dimmed a bit by then. We realize we’re committing a slight “fallacy of equivocation” by using a word meant in one sense in a different sense, but in this case it works. We think.
The thing is, there are signs popping up that, in addition to the problems inherent in trying to make a single piece of legislation cover everything including the kitchen sink, supporters of the Big Beautiful Bill completely ignored warnings about the debt increase that is projected to accompany its bigness and beautifulness. As noted in the referenced article in Politico,
In passing the One Big Beautiful Bill Act last week, GOP leaders blew past a host of warnings to potentially add several trillion dollars of additional borrowing — brushing off concerns that they were missing a late opportunity to put the nation on a more sustainable fiscal trajectory in favor of piling on expensive new tax cuts. The whole episode was a stark display of how short-term rewards and Trump’s demands outweighed any anxieties about long-term calamity — even from a constituency as powerful as Wall Street, whose major players are reliable financiers for politicians of both parties.
It's even worse than the Politico article lets on. Once you understand money, you realize just how bad the BBBA truly is. You see, every dollar the government spends . . . okay, that anyone spends or even exists, means a dollar that the original issuer of the dollar owes to the holder of the dollar when finally presented for payment.
Contrary to the delusion prevalent among Keynesians and adherents of several other schools of economics, money is not a non-repayable debt the nation owes itself. No, even in the current surreal understanding of money, credit, banking, and finance, the issuer — usually the government — eventually has to make good on the debt, that is, the promise the issuer made to the first person who accepted the money and to all subsequent holders of the money.
A non-repayable debt is a contradiction in terms; it’s nonsense because a debt is defined as money owed by one party to another, arising from a loan or other form of credit. It represents an obligation to repay a sum of money, often with interest, and often within a specified timeframe. When the government creates money, it is eventually going to have to make good on that money. It’s not free, whatever people may have gotten into their heads with the coming of Keynes and his adherence to “the State Theory of Money” or “Chartalism” developed by the German socialist Georg Friedrich Knapp.
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| Georg Friedrich Knapp |
According to Knapp, the whole of the money supply should consist of government-emitted bills of credit, what are also called “anticipation notes” because they are backed by anticipated future tax collections . . . which might never materialize. The government should create all the money it needs and spend it into circulation. If more money is needed, the government should spend more. If there is too much money in circulation, the government taxes it away and cancels it. That’s the theory, anyway.
The flaws in Chartalism are immediately apparent. First, of course, the legal tender currency is not the only form of money, nor until the last fifty or so years, even the most common form of money. Money is anything that can be accepted in settlement of a debt; “all things transferred in commerce,” as Black’s Law Dictionary has it.
The legal tender currency was never intended to be the sole form of money nor even the most common form of money. It is simply the official unit of measure for value in the economy in which it circulates. As Louis Kelso noted, “Money is . . . a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges.” (Louis O. Kelso and Patricia Hetter, Two-Factor Theory: The Economics of Reality. New York: Random House, 1967, 54.) Consequently, the idea that government can control every single transaction in an economy is ludicrous — but that is the idea behind Chartalism and thus of Keynesian monetary theory.
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| Louis O. Kelso |
Then there is the idea that taxation is for the purpose of social control and not for raising revenue. Traditionally, the only way free citizens had of controlling their own government short of armed revolt was to keep control over the purse strings. One of the biggest problems with feudalism was not that the government was in the hands of aristocrats, but that it was in the hands of rich aristocrats.
People, especially these days (when they should know better) are enamored of rulers who are rich and therefore serve without pay . . . and collect their cut through graft and corruption. Even if the rich are not out to get more money, they can function without accountability to the taxpayer. This is also the delusion that afflicts people who say government should abolish taxes and just print the money it needs. Even if that were financially feasible, it would be political insanity, because the government would not be accountable to the citizens.
Finally, there is the idea in Chartalism that the money the government taxes away from the citizens will be cancelled. Like that’s going to happen. No politician and few statesmen ever gave up the chance to spend someone else’s money, and all a bureaucrat does is try and figure out ways to get more money.
So, the Big Beautiful Question that people are starting to ask about the Big Beautiful Bill is where are all the Big Beautiful Bucks coming from to pay for it? Frankly, we don’t think anyone in power right now has the answer or even an answer. We do but implementing it would take a rather drastic shift in people’s thinking, although it would do far more to increase human happiness and wellbeing than even a Bigger and More Beautiful Bill ever could.
We refer, of course, to the Economic Democracy Act, which would empower ordinary people instead of putting more power in the hands of the private sector wealthy elite or government. It’s about time to give it serious consideration.
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