Government is like a household?
Politics is becoming unpredictable, yet we are told, political interviews follow an identical script. The party leader or minister in question announces their policy: lowering student fees, say, or building social housing. Immediately the interviewer barks back: ‘And how are you going to pay for that?’
This line of questioning sounds so much like straightforward common sense that we are scarcely aware of the stealthy alchemy of consensus-formation that has produced it. The Government has repeated its austerity mantra with admirable message discipline. The nation has maxed out its credit card, the story goes; we need to pay down our debts, balance the books and live within our means. After years, these myths masquerading as reality checks have become thoroughly internalised by politicians, the media, and the public.
For economic reasons a sovereign government certainly does not need a ‘fully-funded’ budget, as long as it has strong measure to control inflation via TAXATION.
As stated in the USA (as shown in the video), it is critical government generate demand – as it doesn’t cost anyone anything; the taxpayer doesn’t have to finance any of this spending (the government issues the currency); a money issuing government cannot go bankrupt.
A number of similar myths, listed below, have been debunked by Warren Mosler.
1. The government must raise funds through taxation or borrowing in order to spend. In other words, government spending is limited by its ability to tax or borrow.
2. With government deficits, we are leaving our debt burden to our children.
3. Government budget deficits take away savings.
4. Social Security is broken.
5. The trade deficit is an unsustainable imbalance that takes away jobs and output.
6. We need savings to provide the funds for investment.
7. It’s a bad thing that higher deficits today mean higher taxes tomorrow.