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Who Will Pay for This?

Updated: May 20, 2022

Good question. But not really answerable until we know who or what is included in the “this.” In fact, you could probably do a bias check by noting what initially came to mind when you read the question.

The “this” could be:

· the hospitals’ costs of caring for covid 19 patients

· the 50 States costs of providing services for the epidemic

· the businesses’ cost of repair from looting

· the costs of providing basic food security

· the costs of unemployment,

· the costs of losses in the stock market

· the costs of losses in public education

· the costs of shifting from a military to a civilian approach to social problems

How do you decide? We may not be having a revolution, but we are in the midst of a revelation: a revelation of a lot that needs repair and reform. The pandemic has revealed the inequality in health care, the lack of protection for essential workers, and the heroes who have risked their lives for the rest of us. And then civilian responses to the murder of Floyd George revealed that current patterns of civilian-police relations must be transformed.

So how do we decide what the “this” is? We have to decide what matters; or, what matters in such a way that caring for it will bring other matters in its wake. Black lives matter; or, to put it in another form: If black lives don’t matter, nothing matters.

So, once we know which costs matter, we can then figure out how to get the money to pay for them. For the most part, we can either take it or create it. We could take money from financial speculators, property owners, and national budgets:

· Speculators and investors who got rich from other people’s work and assets.

· Property owners who have “unearned income” from the increase of property value due to the dynamics of social systems and public policy.

· National budgets that could direct funds toward civilian security instead of national security.

As a general rule, it is better to create money rather than to take it, especially when you need it immediately. That’s what governments can do. On March 25th, Congress passed a 2 trillion-dollar stimulus package in response to the coronavirus epidemic. The House passed a 3 trillion-dollar package in April. That money was not taken. It was created.

So, how is this money created? The government sells government bonds to the large banks that belong to the Federal Reserve. The banks create the money to buy the bonds, which they then exchange for the bonds, and the government promises to repay with interest, which becomes a government debt. The government, in other words, facilitates the creation of money by borrowing it from the banks. The banks profit from the transaction by getting interest on the debt.

As you might wonder: why doesn’t the government create its own money, which would eliminate not only interest payments, but government debt? The Public Banking Institute has some proposals for moving in that direction that are worth considering. For now, it’s safe to say that if the government can create millions or trillions for preventing economic collapse, it can also create money to cover the costs for things that matter.

I know that some worry that the increase in money will cause inflation.. There may be occasions where that is worrisome, but that’s not our situation. As long as there is an abundance of goods, and some restrictions on speculation, increases in money, like increases in food stamps, make the economy more efficient in making provisions. After all, as I argued in Civilizing the Economy, that’s the economy’s purpose.

In a democracy, the people—not private banks—should control money and protect its function as a means of exchange. When money becomes an asset, it divides us into those who have it and those who do not. As a means of exchange, on the other hand, it allows all of us to get the provisions that are vital to living a good life.

So, returning to our question: “Who will pay for this?” We could. We the people (the government) could create the money necessary to cover the costs of what matters.

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