Opinion | Stephanie Kelton: Just Use ‘the Computer’ to Give People More Money

Still, an often muddled (even politically hidden) truth is that, when called upon, the same computer that works for large banks is there for Main Street as well. But the Federal Reserve needs specific instructions before typing up dollars for the rest of us.

Those instructions come in the form of legislation: When a bill becomes a law, the government is, in essence, telling the Fed how many dollars it is ordering up to cover health care expenses, child care costs or replace lost wages, and so on. And — this is crucial — all spending, whether or not it is offset by tax increases, is covered by the Federal Reserve.

The most fiscally responsible way for Congress to support the economy now is with higher deficit spending until it is no longer needed. Why? Because private demand could be weak for the next 18 months or more. In such a case, it’s crucial to prevent premature attempts to make deficits smaller. As the economy recovers and consumers and businesses get back in the game, Congress can safely withdraw support, handing the reins back to the private sector.

The degree to which Congress’ relief efforts actually reach working families depends upon how effectively lawmakers of good will can fend off the various industry interest groups that will attempt to eat up as much of the allotments as they can. Congress shouldn’t just settle for short-term band-aids to patch holes in our health care infrastructure and our social safety nets. It can and should use this opportunity to make ambitious, lasting improvements.

The large deficits in the likely oncoming recession — and they will be large whether the result of government action or inaction — should be calmly accepted. There is no risk of a Greek-style debt crisis because, unlike the Greece, whose currency is the euro, the U.S. government maintains control of a sovereign currency, the most powerful one on earth. We are not going to “run out of money,” as President Obama once declared during the Great Recession.

This is as good a moment as any for the American people to learn where money comes from and why the federal government, and only the federal government, has the means to step up and save the economy. Congress has all the firepower it needs. It just needs to send instructions to the Fed — and the money will go out.

Stephanie Kelton is a professor of economics and public policy at Stony Brook University and the author of the forthcoming book “The Deficit Myth.”

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