We Can Afford to Save the Planet
by John M Repp
We live on a beautiful blue and green planet full of life. The last 12,000 years has been an especially abundant and fruitful period for our planet and our species as the planet warmed and got wetter after the end of the last glacial period. But now we face a crisis, a crisis of our own making, human induced climate change.
We must be clear, “to save the planet” is a metaphor. The planet will be here even if there is catastrophic climate change gravely effecting human civilization.
We know many of the things we need to do to save ourselves: get off fossil fuels, change how we farm, build affordable green housing, make our current buildings more efficient, change how we transport ourselves and our goods, plant trees instead of cutting so many, farm seaweed, and more. A real difficulty seems to be how do we pay for this? Isn’t the government hopelessly in debt and almost broke?
Consider the clause of Article 1, Section 8 of the United States Constitution on the Powers of Congress: “To coin Money, regulate the Value thereof,… ” Our Federal Government was given the power to create money by our Founders. The monarchies of Europe had this power as did the Roman Republic, so why should not this republic in the new world have the same power? The Continental Congress issued paper currency to pay for the Revolutionary War. This ended badly despite the success of many of the colonies, especially Pennsylvania, with paper money. The British anchored a ship just off the American coast with printing presses that flooded the colonies with counterfeit Continentals to sabotage the Revolution. The new republic did not have a supply of the metals usually used to coin money. Nevertheless, the original intent of the framers of the U.S. Constitution was to give the Federal Government the power to create the money supply. “Coin” in Article 1, Section 8 means “create”.
Thomas Jefferson wrote the following to John Wayles Eppes on September 11, 1813: “ Bank-paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs,…” Bank paper was the form money took for large transactions in the 19th century. Throughout the nineteenth century, money, who issued it, and how much was issued, was a hot political topic, but the nation never completely restored its right to issue money. An exception was Lincoln’s issuing of paper money to pay for the civil war. He first went to New York bankers to ask for a loan and they wanted to charge 20 percent interest. Lincoln then decided to issue “Greenbacks” to finance the war. The Confederates also issued paper money.
More recently, during the 2008-2009 financial crisis, the Federal Reserve, using the modern method of creating new money, gave out very low interest loans to many banks all over the world to the tune of 13 trillion dollars, to bail out the financial system. So clearly, when there is an emergency, the leaders of our nation have throughout our history used the power vested in Article 1, Section 8. But when will they understand what the scientific community understands, that we are now facing an emergency? There is a time lag of about 50 years between the increased amount of greenhouse gases in the atmosphere and the buildup of heat as well as a time lag of about 50 years between completing mitigation measures and their positive effect on our planet and our society.
There is new enlightened thinking about money from several respected economists. They call their new thinking Modern Monetary Theory or MMT and they are educating the public about of how our monetary system works after we went off the gold standard in 1971. When the United States no longer backed its currency with gold, the amount of paper money in circulation was no longer limited by the amount of the gold the government held at Fort Knox. Except for coins and paper money, all new money is created on a computer keyboard, increasing the amount in an account of a local bank or of the central bank. The main fallacy of mainstream economic and political thinking is to assume that our Federal Government is like a household or business, that it needs income from taxes or borrowing before it can spend. Just like the amount of money is no longer limited by the amount of the gold hoard, MMT asserts the amount of money is no longer limited by the amount of taxes the Federal Government collects. If you could create money would you worry about debt?
A sovereign government establishes a currency by spending that currency into the economy and by requiring that citizens pay taxes in that currency. MMT says the Federal Government can create and spend new money into the economy without causing inflation when there are there are unemployed, underemployed, those who have given up looking for work. It is very difficult to find the number of such workers, but a conservative estimate is 20 million. Actual full employment at a living wage is possible without inflation. This is a break from the orthodoxy currently dominating policy making. Until government policy broke from the orthodoxy of the time – no deficit spending even during a downturn – and embraced John Maynard Keynes’s ideas, the U.S. could not get out of the Great Depression that started in 1929.
One of the profound implications of MMT is that we can afford to save our blue green planet and ourselves. Our government can create the new revenue to deal with this emergency without either borrowing or taxing. Congress can spend the money into the economy. Currently, if Congress spends more than the government takes in by taxation we call it “deficit spending”. However, if the new thinking of MMT were to become the norm, the words “deficit spending” and “national debt” would disappear from political discourse. The idea that we are leaving our children with “a massive debt” would also disappear. Taxation would be used to pull money out of the economy, if after full employment and full use of productive capacity, inflation starts to appear.
Currently, we use the word “investment” to name two very distinct actions which have very different effects on ordinary people’s lives. Productive investment creates new factories, farms, and jobs while speculative investment with borrowed money creates new money for the wealthy. Speculative investment with borrowed money, using insider information to boot, is the providence of hedge funds where the real action on Wall Street is taking place today. If we follow MMT we will no longer use the words “debt and deficit” and start using more the words “productive and speculative” until “speculative” practice is regulated and disappears and with it the word itself.
If MMT can get their message out and enough people understand the emergency we face, the people can eventually defeat the powerful interests who oppose action. We can expect those interests will continue to use old scare tactics about hyperinflation or their arguments about small government to try and preserve their power. MMT should hold sway as far as the inflation scare goes. And if as Congress spends the new money through revenue sharing with the states, cities, and counties, the power of the small government argument can be blunted. We need a political revolution and candidates who will stand up to the big banks and fossil fuel companies. A hopeful sign comes from the fact that economic advisors to the Bernie Sander’s presidential campaign were from the MMT group.
How does public banking fit in? MMT concerns the power of the Federal Government. State, city, and county governments cannot issue money and must tax or borrow to be able to spend, the exception being funds obtained from the Federal Government. However, a state could charter a public bank, and that public bank with its loan portfolio could insure the new money is used locally and productively, rather than globally and speculatively, which is unfortunately the case now. A public bank would return to the state government the interest on the loan, reducing the cost of new infrastructure by almost half. But a few, even a few large state public banks, cannot deal with the global crisis. However public banks at all local jurisdictions would strengthen local governments vis-a-vis the Federal Government.
The progressive left continues to think with the old concepts when they advocate cutting the military budget and taxing the wealthy “to cut the deficit and balance the budget”. We need to cut the military budget but we need to do so to make the world safer. There would be less U.S. military interventions to provoke terrorism. When we tax, we should tax the wealthy at a higher rate because that decreases the wealth gap which creates many positive social results like better health, less incarceration, and more trust between members of society.
In summation, we can afford to “save the planet” and create full employment with green jobs. We no longer need to listen to the naysayers when they say “we don’t have the money”.