Progressives want a lot done. Some things, like accountability for torture and violations of constitutional rights, and for criminal activity undermining the financial system, won’t cost much to accomplish. But other things, like full employment job programs, Medicare for All, reconstruction of the educational system, modernization of infrastructure, transformation of the energy foundations of the economy, environmental sustainability, halting climate change, the creation of new industries, will all require Government spending. And in each area, deficit terrorists and many well-meaning people who believe in prudence and not living beyond one’s means will meet progressive legislative proposals with the statement, “that’s all very well but . . . , followed by the question “How Are We Going To Pay For It?”

If progressives expect to get done the things that they need to get done for America’s future they need to be able to answer this question. Currently the conventional answer to it has been either to tax or to borrow to “fund” or “finance” Government spending. But this doesn’t work very well because the taxing answer is now met with claims that taxes, even those on the very wealthy, should not be raised during a recession because of their deflationary impact. And borrowing is met with the claims of the deficit terrorists that progressive proposals are fiscally irresponsible and would place the nation on an unsustainable fiscal course and that interest payments would claim an increasingly and unsustainably high proportion of GDP.

So, since increasing taxes isn’t a popular alternative, and further borrowing is also to be avoided, progressives get into arguments with others about which Government expenditures ought to be cut, to achieve fiscal sustainability. They allow the best alternative legislative proposals to be taken off the table because "they cost too much," and they work awfully hard to pass legislation that is deficit neutral, whether or not its impact on society actually produces less well-being than other alternatives that fail the test of deficit neutrality, but produce much better outcomes for public purposes.

The shame of all of this is that it’s completely needless because the question “How Are We Going to Pay For It?” has a very easy answer. That answer is that “We,” acting collectively as the United States Government will pay for it just as we pay for things now, through the Government using its authority to credit the checking accounts of non-Government Sector organizations and people in return for goods and services. The Government has that authority under its constitutional right to issue currency. It exercises that right every time it spends money on a day-to-day basis. Its expenditures, of course are rarely in paper currency any longer. Nowadays the Government mainly just marks up spreadsheets, i.e. credits non-Government sector accounts. The currency it issues is electronic, and not printed on paper, but it is legal tender nonetheless.

But, you may ask, doesn’t the Government have to get the dollars it uses to credit our checking accounts by either borrowing them from others who have and want to lend dollars, like the Chinese or Japanese, or taxing dollars away from the rest of us? The short answer is: “no, it doesn’t.” Neither borrowing, nor taxing are part of the actual process the Government uses to pay for goods and services it buys from the private sector. Taxing and borrowing by the Government are separate activities of the Government. They have important effects on the private economy, but they don’t provide the funding for Government spending.

In fact, Government doesn’t fund its spending at all. in a fiat currency system like the kind we have in the United States, it spends without “funding” itself first. It is able to spend this way because it acts as the “scorekeeper” in the US monetary system whose function it is to mark up or mark down the monetary resources of all those who use its monopoly currency. My friend Warren Mosler likes to say that as the scorekeeper, the Government neither has nor doesn’t have any money, and that is surely right. But like any scorekeeper who neither has nor doesn’t have any points, the Government in a fiat money system sovereign in its own currency, can always make points (e,g. Dollars, yen, UK pounds, etc.) and in the same operation allocate them to non-Government sector organizations and people.

So, how are we going to pay for it? By spending the money. And how are going to fund the money so we can do the spending? We don’t have to fund it, because unlike the users of a fiat currency, the monopoly issuers of it have the authority to make/spend as much of it as is legislatively appropriated – so no funding is necessary thank you very much.

Well, one might ask, is that all there is to it? Can the Government really just spend freely without taxing or borrowing without consequences? Well no, but I didn’t say that it could. I only said that it can pay for anything we legislatively approve by simply spending without funding first either through taxation or borrowing. So, that means that the important question we have to face in relation to any legislative proposal is not “How Are Going To Pay For It,” but instead, if we pass it and spend that money, what will be the effects of that spending? What will be its effects if we accompany that spending with new taxes of a certain kind? What will be its effects, if we accompany it by issuing new debt instruments in some specified ratio to the Dollars spent? What will be its effects if we neither tax nor issue debt instruments to accompany the spending? What will be its effects under high unemployment or full employment? What will be its effects, if we’re still fighting wars in Iraq and Afghanistan?

All of the above and more are legitimate questions to ask when considering legislation that will cost a lot a lot of money. But “How Are We Going To Pay For It” is not a legitimate question, when the “We” in question is the scorekeeper in a fiat money system with the authority to make however many “points” are needed to pay for available or potentially available goods and services.

So, in short, I don’t want to hear “How Are We Going To Pay For It,” anymore. That question is nonsense for the United States. And discussions of it are pure distractions from the real issues. Let’s debate, instead what the consequences are likely to be of paying for “it,” whatever “it” is. And let’s compare those consequences with the likely consequences of not paying for it, or paying for something else, or paying for yet other alternatives. And then let’s decide what the best thing to do is. But let’s not, like the President, pretend that we don’t have the money to pay for it; for a bigger lie has never been told than that one.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).



Joseph M. Firestone, Ph.D. is Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director and co-Instructor of KMCI’s CKIM Certificate program, as well as Director of KMCI’s synchronous, real-time Distance Learning Program. He is also CKO of Executive Information Systems, Inc. a Knowledge and Information Management Consultancy.

Joe is author or co-author of more than 150 articles, white papers, and reports, as well as the following book-length publications: Knowledge Management and Risk Management; A Business Fable, UK: Ark Group, 2008, Risk Intelligence Metrics: An Adaptive Metrics Center Industry Report, Wilmington, DE: KMCI Online Press, 2006, “Has Knowledge management been Done,” Special Issue of The Learning Organization: An International Journal, 12, no. 2, April, 2005, Enterprise Information Portals and Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003; Key Issues in The New Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003, and Excerpt # 1 from The Open Enterprise, Wilmington, DE: KMCI Online Press, 2003.

Joe is also developer of the web sites,,, and the blog “All Life is Problem Solving” at, and He has taught Political Science at the Graduate and Undergraduate Levels, and has a BA from Cornell University in Government, and MA and Ph.D. degrees in Comparative Politics and International Relations from Michigan State University.