In 2020, we must begin to spend serious money fighting climate change: switching over to renewable energy and electric cars, weatherizing buildings, planting trees. It’s not too late if we will get started.
I think it would help if people understood how government finances really work, especially that the federal government will not be spending “taxpayer money” on these crucial planet-saving projects.
When the federal government spends, it creates every dollar on the spot by directing the Federal Reserve to increase the bank accounts of its intended recipients. A sovereign government with its own currency doesn’t need to first obtain money through taxes in order to spend. It automatically creates money as it spends. These are key insights of Modern Monetary Theory.
Then why do we have federal taxes? Primarily to reduce private spending in the economy to make room for government spending approved by Congress and thereby avoid inflation. If government spending – on fighting climate change or anything else – were simply added to all the spending desired by the private sector, there would be more demand than the economy could handle. We’d see bidding wars that would lead to serious inflation. To avoid this, the government imposes taxes.