I am referring to FICA taxes which ‘fund’ Medicare and social security. Of course, this is a misnomer as taxes do not actually ‘fund’ anything even if they flow through the TGA. The purpose of taxes are:

  1. To give fiat currency its value and
  2. Curtail inflation

The federal gov can afford anything it wants, and in fact the private sector relies on a federal deficit in order to have net financial savings. This is especially true in countries like the US that have a negative current account (trade) balance. This is clear through the accounting identities of sectoral balances between the government, private sector, and foreign sector which must all sum to zero.

A federal job guarantee does not ‘crowd out’ private business. The federal job guarantee would set an effective minimum wage (say $10) and prime the unemployed and underemployed for private sector employment. As Trump used to rightly note before he was president, the ‘real’ unemployment rate is much higher than the official stats. Long term unemployment not only has incredible economic and social costs, but also makes those individuals unemployable. It’s also worth noting that the unemployed are already on the ‘public dole’ via unemployment benefits and other government programs. The FJG creates productive labor, fills demand gaps during contractions, and reduces employment drag. A version of it has been tried in Argentina to great success.

Your implied notion that taxation is theft is also flawed. Fiat money is an IOU of the federal government that can be redeemed for tax credit. Money must be spent by the federal government into the economy in order for the private sector to have net financial savings. In other words, the public debt is private savings. All money endogenous to the private sector are demand deposits created by loans (almost exclusively by banks) which net to zero once all loans are repaid. We could have a reasonable discussion about what sort of taxes encourage optimal economic behavior, but the idea that taxes constitute ‘theft’ is misguided as fiat money itself is a government issued IOU.

This is all not to say the federal gov SHOULD go about spending without limit. Spending beyond full productive capacity would be inflationary as more dollars would be chasing the same amount of real assets. But we are far from that point. The reality is that, as the sovereign issuer of money, the government must play an active role in the economy in order to achieve full employment and acceptable inflation. Projects for the public (and global) good such as the GND are also within its purview.

Corporate accountant and former auditor with degrees in philosophy and accounting.

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