How to Reform Welfare and Taxes to Provide Every American Citizen with a Basic Income
Scott Santens
56153

Mr. Santens,

A modern solution for endemic economic deprivation ought not rely on abandoned gold standard rubrics. While I support the overdue need for Basic Income Policies I take issue with your reliance on false and obsolete premises to fund such programs. My views are best expressed in the following article, written by Professor Bill MItchell.

He writes, “At times some document from the past is discovered that no-one much has read or paid any attention to but which offers fundamental insights into the options facing governments operating a monetary system based on a fiat currency. We have available now one such document which I will discuss in some detail. The essential insight can be summarised by the title of the 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. At that point, it is advisable to ignore what they have to say — given it is likely to be erroneous as a result of the initial FALSE PREMISE.

The problem is that the public policy debate is largely based on false premises; revenue must be raised, deficits must be constrained, and borrowing burdens future generations. As a result, the policy positions that emerge are typically inferior and in many cases extremely damaging to the fortunes of the disadvantaged. When there is no currency convertibility and exchange rates are flexible, then the central bank has total liberty to create financial assets (money) and the federal government is totally free from any financing constraints.

Federal taxes can be made to serve four principal purposes of a social and economic character. These purposes are:

1. As an instrument of fiscal policy to help stabilize the purchasing power of the dollar;

2. To express public policy in the distribution of wealth and of income, as in the case of the progressive income and estate taxes;

3. To express public policy in subsidizing or in penalizing various industries and economic groups;

4. To isolate and assess directly the costs of certain national benefits, such as highways and social security.”

Our sovereign government is the monopoly issuer of the currency and is never revenue-constrained. So it never has to “obey” the constraints that the private sector always has to obey. Proposing a flat tax to fund BI flies in the face of modern monetary operations and does not advance the general proposition that America must continue on in this new century with a significantly different mind set concerning funding for public purposes. Every time the Federal government pays a bill it creates new dollars in our economy. When it deficit spends that spending is equal to the penny to net savings in the non-public sector. When it taxes it destroys dollars. Those receipts never reenter the money supply. A flat tax or any other type of tax reduces economic growth potential while failing to fund policy objectives.

We must tell Americans that there is no real cost for a Basic Income Program. The government simply marks up checking accounts when it spends and marks them down when it taxes.

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