It may seem contradictory at first but its actually quite obvious after further analysis. Progressives are constantly going on about how we need to increase taxes on the 1% in order to fund Govt spending on policies that support the middle and working classes. This hurts our cause in two very important ways:
1) It perpetuates the lie that the Govt's budget is like your personal budget. In that the Govt must first obtain its own IOUs from the public before it can issue them.
2) It inflates the egos and social importance of the wealthy even more than they already are.
First of all, as a purely technical matter, its logistically impossible for taxes to fund Govt spending. The Govt spends using its own IOUs (liabilities), and as the issuer of something, you cant ever receive it before you issue it. This is totally obvious when we look at any entity other than the Govt.
Where do Google shares of stock come from? Or Google bonds? Well, they come from the only place on earth they can, Google.
Where do the tickets that are being sold in Denver for the Denver-Colts NFL playoff game this weekend come from? The Denver Broncos.
Nobody would ever make the mistake that NFL tickets come from the ticket holders when they arrive at the stadium. Or that Google must first get its shares of stock from stockholders before it can issue them. But such is the nature of ideology that so much confusion has been spread about this matter when it comes to US Currency. However, the Constitution is extremely clear on this matter.
Article 1 Section 8:
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
http://www.usconstitution.net/...
Only Congress has the authority to create the laws that govern our national currency, and thats exactly as it should be. The public shouldnt be beholden to some non-representative authority when it comes to our national currency, otherwise we'd end up like the Eurozone. For example, Greece has forfeited its sovereign authority over the Drachma, and replaced its use with a foreign currency controlled by the Troika (the ECB, the EU commission, and the IMF). Which is why Greece is subservient to the bond markets, whereas the USA is not.
Or to put it another way. The Govt spends by issuing its own IOUs, and when you pay taxes, all that happens is the total number of outstanding Govt IOUs are reduced. Its meaningless to say that the Govt has this many or that many IOUs, as US Currency is nothing but promises recorded in an electronic journal at our national bank, the Fed. How many promises does the US Govt have? If you return promises to the Govt, do they now have more promises? Obviously not. Its only when we name these promises "dollars" or "money" does the confusion and ideology set in. These IOUs or promises can either take the form of reserves (can also be in cash form) or T-securities, either way they are Govt liabilities. What is accomplished by calling T-securities "debt" and reserves "money"? Deception, thats the only thing the conventional framing of Govt IOUs accomplishes. And the wealthy have spent many millions of dollars and decades of time making sure that the public is as confused as possible about Govt finances in a pure fiat monetary system. Which is a point well made many years ago by Paul Samuelson:
The wealthy worry about inflation and especially about full employment because it tips the scale of power into the direction of workers. As Michael Kalecki put it in his ingenious article from 1943 Political Aspects of Full Employment:
The reasons for the opposition of the 'industrial leaders' to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment.
As Samuelson mentioned, the myth of balanced budgets and Govt as a household comparisons are used in similar ways as old time religion, to keep the masses in line. But just as we dont need bronze age religions to guide our social morality any longer, we dont need bronze age economic religion to guide our economic morality.
This explains #1 above. By refusing to acknowledge the nature of the USA's monetary sovereignty, progressives shoot ourselves in the foot. every. time.
As for #2, every time I read an article by Dean Baker or Robert Reich that calls on increasing taxes on the 1% in order to spend more to stimulate the economy, I cringe. The wealthy already have all the power, so why are we giving them even more by tying productive Govt programs that help tens of millions of Americans to tax policies that the 1% are going to fight tooth and nail against? How many rich assholes feel even more important when the President of the freaking country is constantly telling us that we need their money? That nothing can be done unless we get the rich to acquiesce to letting us use their money. "Thank you sir, may I have another", Its insulting!!! We dont need their money, we have an unlimited supply of our own through our democratic institution aka Congress. In fact, the rich need our consumer dollars way more than we need their tax dollars. Even if republicans reduced taxes on the wealthy to zero, this would not change by even one dollar the ability of our Govt to issue its own IOUs for the rest of us to use and hold as financial wealth.
Tax the wealthy because extreme income inequality is a gross social ill that needs to be remedied, just like smoking or pollution. Not because we are a desperate nation that is paralyzed without first confiscating the funds of the wealthy. All the conventional stories do is further cement the power and authority of the 1% over our national policy making. Lets turn the narrative upside down and finally start to heal our broken nation by recognizing what should be obvious:
The US Dollar comes from the US Govt, via the authority that We The People have given ourselves; established in Our Constitution. It doesnt come from rich people or from China.