In an outline of the legislative agenda House Democrats plan to pursue should they win the majority this election, Minority Leader Nancy Pelosi has promised to bring back the “pay-go” mandate. This rule basically means that Congress can authorize new government payments only if it “finds the money” from the private sector or cuts some other government program. In other words, it prohibits our nation from deploying our sovereign currency — the U.S. dollar — in the service of the country.
By tying her party to this misguided ordinance, Pelosi has committed a major act of self-sabotage.
To start, the “pay-go” rules established by Congress serve no public purpose. In a scathing article in The Intercept, David Dayen outlines the economic and political folly of this kind of policy. There is nothing fiscally responsible about tying public investments to tax receipts. The belief that the issuer of a currency should operate under the same rules as households and businesses is fundamentally misguided. Businesses and households alike borrow money for investing and spending, respectively. But our federal government is not like a household or a business — it makes the money it invests.
Let me be very clear: Congress has the power to create dollars. It never needs to receive back a dollar it previously created before it can create another one. It has a limitless capacity to deploy the nation’s currency in the service of public needs. Every time Congress authorizes a payment, the Department of the Treasury will make that payment via its account at the Federal Reserve. There will never be a payment that Congress authorizes that won’t be paid fully and without default, as the only way it could default is by choice.
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Our nation can never run out of dollars because we create them at will. This powerful tool should not be locked in a straitjacket when there are so many needs to be met and opportunities to seize.
Now, of course we need to use the instrument of public policy responsibly. How Congress taxes is as important in shaping our economy and society as how it invests. We need to hold Congress responsible to use the nation’s monetary power to invest in the development of the nation and the well-being of its citizens.
Creating money to give away to wealthy donors, like last year’s Republican tax bill, is exactly the kind of misuse of our monetary system that should result in members of Congress losing their seats in the next election. What it should not result in is restricting the power of Congress to deploy currency in ways that will do good.
The last thing our nation needs is to replace a greedy Congress with an impotent one. Our country has enormous unmet potential. We have significant needs in areas of health care, education, community safety, urban and rural development and public infrastructure. We have a dynamic economy that can absorb and respond to injections of money from government investments without unhealthy levels of inflation, as evidenced by how our system responds to the huge cycles of private credit booms and busts.
Ultimately, Democratic leadership needs to retool its economic paradigm and stop playing political games with the American people when there is such a dire need for national investment. Yes, criticize the egregious tax cuts, but don’t hamstring the next Congress by putting our currency in a box.
Now is the time for bold leadership and a hopeful vision of what our nation can become. The public currency is our weapon of change. Use it well.
Geoff Coventry is a member of the 501(c)(4) nonprofit Patriotic Millionaires and a founder and principal of Tradewind Energy, Inc.