It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

(Maybe) Mark Twain (but probably not)

As regular readers know, I spend most of my time writing about Trumpism, politics in general, Bigger Home Bases, and Universal Basic Income. But just as important to my overall project proposal, if not more so, is Modern Money Theory, or at least my interpretation of it. As I have admitted before, I am certainly no economist or armchair economic expert, so my take on MMT is less technical, and more ideological than the professionals in the field. In reading MMT material, I have had several AHA moments, where a bunch of other ideas kind of click into place, ideas that I cover extensively in other posts: the morality of money, the future of labor, the role of government spending in the overall society, and the subject of today’s piece, federal taxes. The misunderstanding and/or purposeful obfuscation of taxation at the national level is one of the main drivers of our current dilemma: the plutocratic capture of government that is creating economic, political, ecological, and psychological wreckage all around us.

Let’s start with a basic refresher point of MMT: the federal government, in countries like the US that create their own currency (fiat currency), is NOTHING like a household, when it comes to income, budgeting, and spending. The government is the issuer of the currency, not a user. Individuals, households, businesses, local and state governments — these entities are all currency USERS, subject to basic budgeting constraints. Currency users cannot spend money forever without having or bringing in roughly equivalent amounts of income (although the larger the user entity, the more able it is to run ongoing debt for extended periods). But the federal government doesn’t need to bring in money first in order to spend. As the currency creator, it can spend money into existence at will, without first having to raise income.

There are, of course, other considerations, macroeconomic ones like inflation, employment targets, and global reserve conditions, that determine how much the federal government should spend. But running out of money, or “going broke,” is not a limitation at the federal level. Any existing limit on federal spending, like the debt ceiling, is an artificial constraint that politicians put on the government budget, mostly for ideological reasons. But that has nothing to do with the reality of federal finance mechanics. And in fact, ALL the talk that endlessly cycles through our congressional discourse — things like, “we gotta tighten our belts,” or “we have to live within our means and get our house in order” — is composed either of completely bad-faith lies from smart pols (people who know better) or ignorant ramblings of dumb pols who are just going with the flow.

We’ll repeat it again: the federal government is NOT a currency user. It is the issuer of the currency, and can thus spend whatever it wants with no constraints set by income.

[Before we move onto taxes, just a quick note on WHY the myth of the federal budget being just like a household persists. As mentioned in other posts, the purpose of this is to perpetuate the lie that money is scarce, a precious commodity that can only be magically conjured by hard work, special talent, and moral uprightness. This is, as should be obvious to everyone by now, a fairy tale created by the plutocracy, for whom money is absolutely NOT scarce, and whose money has absolutely NOT been earned just by hard work, talent, and ethical behavior. Is Jeff Bezos 40 million times smarter and hardworking than a teacher or a firefighter? Is Elon Musk 100 million times more talented than a farmer or electrician? Of course not. So maximum effort is expended by the plutocratic support staff talking heads to convince people that money is scarce and elusive, so we can’t afford to do all the crazy giveaways to lazy people that libs want (even though there always seems to be sufficient cash for planes, bombs, bank bailouts, tax incentives, etc.).]

f course not. So maximum effort is expended by plutocratic support staff talking head to convince people that money is scarce and elusive, so we can’t afford to do all the crazy giveaways to lazy people that libs want (even though there always seems to be sufficient cash for planes, bombs, bank bailouts, tax incentives, etc.).

Back to our main thread. So the federal government can spend whatever it wants, without income constraints. Trillions can be keystroked into existence instantaneously at the Fed, as we discovered during the 2008 GFC and the pandemic. The important question is not how much you are spending, but WHAT you’re spending it on. Currently, we use federal money to prop up plutocratic dominance of our economy and society, while allocating the bare minimum for social programs, just enough to (usually) keep people out of the streets with torches, pitchforks, and guillotines (but unfortunately not enough to keep them out of the soup kitchens and morgues).

Now, onto taxes. First, let’s remember that taxes of some kind are absolutely necessary at the local, municipal, and state levels. These entities cannot create their own money, so if they want stuff, like schools, paved roads, and police, they have to tax their residents and businesses to pay for those things. Certainly, there are gross disparities in what some areas can afford vs. other areas, but that is beyond the scope of this piece. Suffice it to say, MMT would allow for much more robust federal support for local and state projects and infrastructure. We can cover that in future posts.

For now, let’s just get to the main point: if we want to fix our broken system, our polycrisis that seems to be more overwhelming by the day, we don’t need to, and shouldn’t, go about it by taxing the rich. Now don’t get me wrong. I love Bernie and his heirs, and the righteous rhetoric that calls out the truly disgusting disparities between plutocrats and regular citizens is as compelling as anything out there right now. And as a card-carrying liberal, I certainly empathize with the urge to attack economic injustice wherever it is found.

But here’s the thing about taxing the rich. It won’t work, and it doesn’t address the underlying issues with our system as a whole. And here is the kicker: viewed through the MMT lens, taxing the wealthy is just not necessary to accomplish other goals, so it is potentially a huge waste of energy and political capital to follow that route.

Let’s take these points one at a time. Firstly, it won’t work. If somehow, despite the odds, Dems were to get a liberal firebrand elected president, with a hefty cadre of like-minded congressional leaders behind her/him, you might conceivably get some kind of huge tax-the-rich plan through… once. I would say that the chances of this are vanishingly small, but let’s just say it happens. What would you actually tax? Do you jack up the top income tax rate back up to 1970s levels? Do you raise the corporate tax rate? Do you attack the Estate Tax to prevent intergenerational wealth accumulation? Any combination of these would likely result in capital flight, inflation, mass layoffs, expatriation at scale, and most importantly, concerted backlash from the plutocrats, who, by the way, would still kind of own everything.

In other words, you might get some one-time windfall of cash from the wealthy, maybe even for one or two election cycles. But unless there are massive corresponding changes to campaign finance (Citizens United would need to be overturned), corporate personhood, international money sheltering, lobbying access, dark money, etc., then those temporary gains would not last in the long run. The plutocrats will just chip away at any achievements, repeal the gains, and replace liberal reps across the following few election cycles. Unless the entire machinery of money’s access to government is completely dismantled, which is doubtful, then these tax-the-rich schemes will just not stick.

Secondly, heavy taxation of the wealthy really doesn’t get at the underlying problem. Yes, the gross inequality of income and wealth is the main issue (not the only one, of course, but the most immediate, vis-a-vis politics). But attacking that problem through taxation is a tactic of redistribution, which will always generate maximum resentment, even among many who would benefit from the scheme. Now, believe me, I’m obviously no fan of the wealth-as-proof-of-moral-worth thing (see above), but there is also a legitimate sense that large-scale, perpetual redistribution just doesn’t feel right. And it likely would create some kind of warped revere-morality to issues of wealth and labor. In other words, redistribution on a massive scale would KEEP morality at the center of our economic debates, when really what we need is to complete DE-MORALIZE money, labor, and federal spending. And this could be best done via PRE-DISTRIBUTION via UBI, and not redistribution via taxation.

By its nature as a universal payment (yes, it would even go to Bezon and Musk), this UBI pre-distribution would remove the social stigma of direct government aid, and would instead transform it, as Andrew Yan styled it, into a dividend for living in, and contributing to, an advanced, wealthy society. It would be a virtuous signal that we are a country that is proud to take care of our citizens, instead of punishing them by dropping them mercilessly into an landscape that has no overwhelming economic need for their labor or skill. Work, talent, and skill will always be valuable for people themselves and their communities, but not always in an economic sense, since labor-saving technologies and the evolution of business logistics really do eliminate the economic need for human input. But that should not mean that, “Hey, tough shit! Nobody wants to pay you enough money to live? I guess you die!” UBI is a direct renunciation of that kind of cruelty.

So pre-distribution through UBI, not redistribution through taxation of the rich. That’s the way to get on the path to decoupling life from work, and morality from money.

Finally, and most importantly, when we look at the tax-the-rich scheme through the lens of MMT, there is just no need to “get the money” from the wealthy before we can spend it on things we really need like UBI, Medicare-for-All, logistics support for a transition to BHBs, and more robust support for state and local projects and infrastructure. The “national debt” and the federal deficit (really, both misnomers) are essentially non-issues, as they are just artificial and inaccurate relics of erroneously viewing the federal government as a big household.

Indeed, MMT thinkers view federal “debt” and “deficits” in an almost completely opposite manner than our current understanding. They see them as investments in the private sphere, necessary capital that seeds the private entities that gladly and perpetually hold our treasury securities as solid investment vehicles. And all federal spending, by definition, ends up in the private sphere as a positive. Accounting identities show that every federal dollar goes somewhere into the private economy circulating around the national and global economies to strengthen the USD and to link societies together, domestically and internationally.

The problem, as we said earlier, is that we aren’t using enough of that unlimited federal spending power to directly help regular people, which would be a much more efficient and just way to use those fiat dollars.

What we’re really talking about here is attacking the plutocracy from below, instead of from above via taxation. Let the sociopathic billionaires and soon-to-be trillionaires have their pipe dreams about Mars, the Singularity, AI abindance, and crypto-funded escape islands beyond the reach of any country’s jurisdiction. We shouldn’t go after their money, because we likely won’t get much of it in the long run, and because we really don’t need it anyway.

Pre-distribution via UBI, ideally catalyzed through a new household format (BHBs), can dry up the plutocracy from below, by creating economic security and self-sufficiency for the masses. And it would all be buttressed by a federal government that spends its fiat dollars to directly help people, and not to subsidize unsustainable economic growth and runaway ecological destruction.

Don’t eat the rich. Just starve them.