I have proposed spending $200 billion dollars a year, or as much as $10 trillion dollars in total, over a duration of 50 years. That’s a big number no matter how you count it, even within the vast scope of the Federal budget. That naturally lends itself to the question of how I propose to pay for a vastly expanded program in space when no one has been successful before. It is a daunting challenge.
Take everything one of the richest people in the world, Jeff Bezos, owns and has earned over his entire life and career, sell it, and put it in the pot and you have the budget I am proposing covered for just one year or less (depending on the stock price of Amazon). The scale of the funding needed is massive and my thesis from the start is that it will require public funding at scale to build out an economically self-sustaining frontier in space.
In a government with a budget approaching $6.0 trillion per year by 2025 and above $7 trillion from 2027 and $9 trillion from 2032. We are talking less than 3.5% of the total. Yet, our deficits each year are running $1 trillion and are projected to increase to over $2 trillion by end of decade. Funding to develop the space frontier is going to have to compete against a long list of earthly priorities as well as the need to raise money to close the gaps we have in paying for what we already spend.1
If we have done our job right, we will have the votes to increase funding. But where will the funding come from, how do you make it sustainable over multiple generations when competing with earthly priorities that are morally compelling and deeply urgent, and in an environment where no one really likes to be taxed and the ones with the most money will fight back as much as they can?
Taxing the Rich
Most suggestions for bigger programs inevitably come back to higher taxes on the rich and so it is worth considering what that means and what is possible. The New York Times once ran an article about the kind of funding higher taxes on the richest 10%, 1%, or even .1% could bring in. The numbers are interesting and probably have not changed that much since the original article.
The top fifth of taxpayers have an average income of $321,000. The top 1% have an average income of $2.1m and those at the very top, the much vaunted .1%, have an average income of nearly $9.5m – every year. Out of 171 million taxpayers, there are just 115,000 in that very top .1%, more than 1.13m in the top 1%, and just shy of 24 million in the top 20% of all taxpayers.
If we increased the tax burden on the top 1% (1.13 million households that currently pay about a third of their income in taxes) to 40%, it would bring in $157 billion in revenue in the first year. Bump it up to 45% and the tax revenue generated would be $276 billion.
If you limit that same tax increase (to 40%) to just the top .1% (the households making on average $9.4m), then you would bring in $55 billion in additional tax revenue. Increase it to 45% and the tax revenue increases to $109 billion.
As the article points out, if you also increase taxes on those in the 95th-99th tax bracket (the 4.4m households that make on average $405k and currently pay just over 25% of their income in taxes) to 30%, you increase tax revenue by $86 billion and increase it to 35% and the revenue increases to $176 billion.
Alternatively, if you change the tax code to eliminate lower rates on capital gains and dividends, you get $134 billion per year in additional tax revenue.2
It’s clear we could tax the rich more, but it is unclear if that is a sustainable way to fund a program in space. After all the rich are like you and me in one sense – no one really likes to see their money disappear into the general fund to be spent by flunkies (politicians) and bureaucrats as if it were their own. Where the rich are less like you and me is that they can subvert the process over time to eliminate those taxes, leaving any grand vision adrift or starved for funding – a sure fire way to kill any real chance to create something sustainable and growing.
The Rich have also acculturated every trick in the book to minimize their contribution and they have accumulated every accountant and expert for hire with a novel way to hide income from the tax man. We have a culture of tax avoidance where the well to do admire each other for their ability to keep it rather than have Uncle Sam take it and spend it on things they don’t like, don’t agree with, or don’t get direct benefit out of. And let’s just be honest. If you or I were rich, we might just do the same, because we will have worked so hard for it, earned it and, therefore, we will think we deserve it, too.
Finally, what’s also true is that tapping and taxing the rich is the favored strategy for virtually every other policy proposal to expand or pay for government and will be in the future. But that doesn’t mean these will be successful. The primary campaign of 2020 tested many messages about taxing the rich and the most aggressive versions were the ones that failed the worst.
For all of these reasons, I’m less enamored of taxing the rich in a standard way without a better rationale or explanation and a more effective and sustainable mechanism. The good news is that there is a potentially good case to be made and a sustainable, potentially even attractive way to tax the rich in a mutually beneficial way.
Let’s start with the value proposition.
First, I would argue that a viable plan to promote rapid economic growth in America will greatly benefit the rich and increase the value of everything they own today from stocks to property and this is very different from the standard case for increasing public spending or vague talk of investments in our future. It is very much in the interests of the rich to promote a more prosperous future for the simple reason that they will benefit more than everyone else. There may be many ways to do so, but if we have done our job right, then we have begun to acculturate among all Americans the idea that the space frontier will create a vast opportunity for economic growth and this message should also resonate with the rich as well.
Second, if we are successful in building out the space frontier, then it will naturally drive the creation of many new industries and companies that will offer fantastically lucrative new opportunities for profitable investment and have the potential to create outsized returns. Most of these new firms will have investors, shareholders, and executives that will come from the ranks of the wealthy today and tomorrow. After all, the Digital Economy will have its run, but there are only so many unicorns possible without a new frontier.
Last, if the macro impact of the space frontier is or has the potential to be as large as I have speculated and if it could generate large positive returns to the public purse, then there is the potential that the future fiscal environment could be much more positive than today’s. Imagine if we weren’t facing an age of austerity, bitter political division, and nascent class warfare against the elites and wealthy. Imagine if our future were better, not worse in every way. Imagine if we could create public revenue off a new frontier that would provide relief to our contentious politics and allow for a grand bargain of lower taxes (on everyone, including the rich) paired with greater services, healthcare, and pensions for all. That future looks much better than the one that is emerging now in which a winner-take-all society faces an angry electorate with a confiscatory instinct and mood that is going to grow more extreme with each passing year of low economic growth and higher inequality all of which is amplified by a polarized electorate and a debt-laden recovery from a global pandemic.
Donald Trump was just the start. A major political struggle is happening in a bitterly divided country. Things could get a lot worse – and probably will.
A vastly more prosperous future of rapid economic growth, extraordinary opportunities for investing and achieving outsize returns (think Google, Facebook, and Apple x 100), and just possibly a political environment where government achieves significant revenues without resorting to taxing the rich. That is the value proposition we are talking about and it is one that is much more positive for the wealthy than the current trends and outlook suggest.
How, then, do you get there today in a way that can achieve consistent funding and realize this potential given how contentious public funding always has been and will always be? How do we tax the rich in a sustainable way to gain not only their acquiescence, but the seemingly impossible outcome of actually enlisting their support in the cause of their own taxation? I have some ideas.
Financial Repression is when governments force the financial sector (re: banks) to purchase public sector debt instead of alternative investments and hold interest rates below the rate of inflation, in effect, forcing the private sector to subsidize government. A more sustainable way to tax the rich – and one potentially more palatable to the rich as well – is a variation on this theme.
Unlike any other government activity which is always a cost, a national investment in the space frontier has the potential to pay for itself over time. Therefore, it should be possible to collect revenue directly from commercial and economic activity in space in various forms (income tax, VAT tax, corporate tax, etc.). Further, we can expect those revenues to grow over time, potentially to very large numbers. A rough sketch of what kind of revenue might be possible long-term was outlined earlier. If these cash flows are possible, it means we can treat this as an investment and change how we finance it.
One option, of course, is create bonds to finance the program. That is easy to do. There is a vast liquid market looking for safe assets like U.S. Government Treasury Bills. But that would increase the government’s debt at a time when that debt looks enormous already. That idea will face significant opposition. It’s also an old-fashioned way of funding the future and it is subject to the same contentious political process and challenges of sustainability that any other program faces.
Therefore, I don’t like it.
I’ll offer you an alternative proposal in the form of a set of principles to define a new approach to financing the space frontier for your consideration:
Principle 1: Charter a Trust. Charter a public investment vehicle separate from NASA. I see this as a public corporation charted to disburse revenue for future space-based activities. The same entity would also be chartered to collect tax revenues from all commercial activities in space under US jurisdiction, which can be expected to grow significantly over time.
Principle 2: Tax the Rich. Fund the space frontier with a dedicated tax on the top 1-5% in the form of an extra 5-10% surcharge tax to raise the targeted $200 billion/year in space frontier funding.
Principle 3: Give them a Stake. Design the taxes received to be a form of modified hybrid equity by which I mean it should have some of the properties of a tax-free municipal bond and some of the properties of an equity investment. In effect, a Tax/Equity Hybrid is a coerced (taxed) investment that may pay sub-par returns over time compared to other alternatives, but whose intent is to return the investment principle with a modest rate of return to those taxed at some point in the distant future, likely 50 years out. Therefore, it is not a ‘tax’ in the traditional sense. It is a tax in that it is coerced and legislated. But it has aspects of a loan that has the potential to be repaid. And it has aspects of an equity that can lose all of its face value if the investment fails. As a tax, it does not add to the nation’s debt, unlike a bond issuance.
Principle 4: Sunset the Tax. Create rules to phase out the collection of taxes at the point that space-based revenue collection exceeds program funding requirements. In other words, at the point that the space frontier becomes self-sustaining from a public funding point, then the tax phases out. If we manage the development of the space frontier to drive costs down and revenue up, we might reach this point much faster than planned, but the expectation is that this tax will take 40-50 years to phase out.
Principle 5: Design payback. Make payback subject to very stringent conditions. I would design a payback regime to provide a modest rate of return on the Tax/Equity accrued and contingent on the public getting a bigger share first. Thus the rich are not going to make substantial gains just off this funding mechanism. For that, they will have to invest, innovate, and create industries, companies, and products in space. But they will get paid back. Payback would begin to occur as revenue takes off and exceeds program funding requirements. I would design a mechanism that designates a specific and limited share of positive net revenue (say 20% of the total) for pay back. So the public purse gains the other 80% to help make things better for everyone, but as the space economy grows over time, the 20% is used to cash out the coerced tax/investment and close out people’s shares. We may also sweeten the pot by making the repayment tax advantaged in some form to increase the effective return.
Principle 6: Penalize failure. If the effort to win the space frontier fails and does not achieve positive net revenue or is abandoned, then the investment is declared bankrupt and everything previously collected in taxes from the rich is treated as taxation without any obligation for payback. This is the same risk that any equity investor faces if their favored stock or company should go bust. The investment disappears without a public debt or obligation if the effort is eventually abandoned for any reason. If we fail, the equity is gone and this was effectively a tax.
Principle 7: Make it tradable. If this is an asset, then allow it to be traded via a mechanism like a blockchain so that people have some control or choice over their asset and whether to sell it or hold it. Not everyone rich today will be rich 20 years from now or even next year. Some will need to cash in the chips they have much sooner. The ‘Rich’ are not a monolithic block that is the same year over year. Some rise, some fall – at least on the margins. Creating a way to trade the ‘asset’ even if at a steep discount early on allows people that have some of these ‘shares’ a set of options on whether to sell or hold these bets on America’s future. It provides other investors a chance to accrue them.
These seven principles set up a potentially unique dynamic. No one likes to have money taken from them and everyone would prefer to invest their money themselves and gain the highest possible return. But if this program collects taxes and converts them into a hybrid equity share that will eventually pay off, then it’s basically a forced savings plan for the rich that achieves a significant public good and a number of positive outcomes for all, including the rich.
Our strategy should be to coerce, seduce, and then enlist the rich in support of the space frontier and future government investments needed to make it sustainable. The coerce part is easy to understand from the above. We tax them. They don’t get to opt out. They won’t like this at the start. No one does.
But then we seduce them. We treat them like shareholders. We flatter them, thank them, and kill them with kindness. We give them annual reports and an economic report card app that shows progress in reaching sustainability, how much they have contributed and will get paid back based on various assumptions, and a forecast of when the tax will phase out. This progress becomes an annual report card, a newsworthy event. It is something that shows progress, and if progress is rapid, it is a tool that helps build and maintain support, gives the country (and the rich) something to root for that is tangible and specific. In the process, we make them patriots instead of villains. We thank them profusely, flatter their sense of importance, and make them part of an elite club. It’s fine if they know we are doing it to them and why. They’re used to it. Let’s play the game.
Let them argue over every other tax line item in the federal budget, but make sure they can see direct cause and effect of where their money is going when it comes to the space frontier and how soon they will get paid back. Do that and you create a unique and new dynamic with this particular type of funding: The rich potentially self-enlist in the cause.
Here’s how and why: Over time, the longer this tax regime is in place, the bigger the accrual of paid-in taxes by the rich, then the more important and significant the asset becomes for the rich to support. As the potential repayment gets bigger AND if the rich want to get their money back, then they have to help make the space frontier a success. This dynamic is unique. My position is that after the first decade or two – the point where opposition traditionally becomes overwhelmingly stronger – the opposite will actually happen. The sustainability element begins to be driven by those paying the taxes. They begin to put their political weight behind the program in order to get their money back – even if it means continuing to pay taxes or lobbying for additional funding and taxes. Nor can they afford to cut off the funding for fear of losing their investment. No one wants to write off an investment when they can get their money back.
Not only that, but it achieves large scale private sector buy-in. If the rich are all in on the public investment and they know it and not only expect the frontier to succeed, but are determined to back it until it does, then they are also likely to begin backing private sector firms that have the potential to capitalize on the space frontier and its economic potential. We need those firms and their breakthrough products to innovate and bring down the cost curve. The rich will back them because of the scale and certainty of the public investment – and this, once again, will amplify their support for the public program and their own taxation.
The simple truth is that there are many, many more great companies, many more future Apples, Googles, and Facebooks that will come if we are able to achieve an economically sustainable breakout onto the space frontier. You have only to think about the fabled East India Company to realize what is possible. That is how the rich will make true fortunes with returns vastly in excess of anything we consider today. To invest in those firms, however, investors need a sense of certainty about the future direction. That is why getting the Rich to support the public investment is so fundamental. And the Rich, I would speculate, will get this fact faster than anyone.
That is how I would pay for this program. Make the rich shareholders and treat them like VIP owners. Thank them, flatter them (shamelessly), and make them partners in the biggest story the human race will ever fund. Market to them as heroes rather than villains in the political process. And give them a stake in the venture and a compelling reason (payback and the breeding of unicorns) to support it for the long-term.
There is another public funding mechanism to consider.
Monetary Policy: From Helicopter Drops to Rocket Launches
If you follow the global economy, you’ll know we are not in a great place. Just a short time ago, the advanced economies were in the doldrums, growth was slow, and wages were stagnating. Then came the global pandemic, the swing to expansionary fiscal and monetary policies, and a resulting crisis of inflation. Economic damage has resulted. Like it or not, we are going to be living with the fallout and debt from this public health and global economic crisis for a generation even as we struggle with the backdrop of a low growth future, high inflation, and economic volatility.
Prior to 2022, Monetary policy, the tool chest that central banks use to stimulate the economy was close to empty with all but the most extreme options already spent. We were hovering near the zero boundary on interest rates and some countries were already experimenting with negative interest rates, a concept that would have been considered radical and extreme a decade ago. No one had a decent plan or path forward and the next tool in the chest was printing money and ‘dropping it from helicopters’ (metaphorically speaking) in the form of giveaways to stimulate spending.
The incoming Biden Administration launched several rounds of stimulus during their first year in office and the result on top of pandemic induced supply chain challenges was increasing inflation. Then, in early 2022, Russia invaded Ukraine and precipitated a global economic crisis in energy and supply chains in addition to upending the global security framework.
Today, we are in a grim place to contemplate the future. We are exceedingly vulnerable to the next crisis, recession is on the horizon as the U.S. Federal Reserve ramps up interest rates to halt inflationary pressures, and once the downturn comes, we are then still hostage to a future of less prosperity and secular stagnation.
But there is another outcome of our current predicament: Ideas once considered extreme a decade ago are effectively now on the table and the door is wide open to consider additional tools. While all eyes are on the inflation crisis, we still have a growth problem and we need to solve it or the West as we know it will decline from the levels of prosperity that we have grown used to. The money, as one author has opined, will eventually run out.
In all of this, I am intrigued by the recent history of the Federal Reserve in expanding the monetary supply through Quantitative Easing in an attempt to stabilize the economy after the Great Recession, which could have easily been the Great Depression 2. The Fed’s response to the Global Pandemic does, itself, not appear to have resulted in the inflation plaguing all if the Western economies. This was likely caused by massive fiscal stimulus in a disrupted, structurally tight economy.
Quantitative Easing (QE) is a monetary policy in which central banks, such as the Federal Reserve, buy financial assets (e.g. Mortgages, Loans, Bonds, etc.) from banks, which increases the price of those assets (through increased demand), lowers the yield (interest rate), and increases the overall money supply in the economy. As a strategy, it is meant to expand the economy and is usually done when standard monetary policy tools such as buying short-term government bonds to lower interest rates don’t work because interest rates are at or nearly at zero already. The risk is that increasing the money supply may also result in higher inflation.3
Paul Krugman, a Nobel Prize winning economist and columnist, offers a critique of this program that is worth considering. Krugman argues that greatly expanding the Fed’s holdings (printing money) by adding financial assets to the banks has helped make credit easier, but has largely increased bank’s balance sheets without necessarily putting that money to work in the form of loans and increased economic activity in the ‘real’ economy. In other words, not enough money that is created is then loaned out to businesses to increase jobs and economic growth outside of the financial sector. This makes sense when you consider that a lot of economic analysis prior to the pandemic suggested that we have a demand problem – not enough consumers able and willing to spend – and that was limiting the willingness of companies to invest or take out those loans from the banks to drive more economic activity. We were caught in a trap of circular stagnation: Consumers weren’t driving demand so businesses weren’t investing and creating jobs, therefore consumers didn’t have more jobs and higher income to support spending money and buying more goods and services.
In this context, Krugman suggested a better strategy would have been to buy ‘stuff’.
However, the purchase of ‘stuff’ is what fiscal policy (federal budgeting) is intended to do and that is driven by Congress. During the Great Recession, a Republican-led Congress followed a contractionary fiscal policy in an attempt to achieve a balanced budget (classical economics would consider this unwise at a time of economic recession). Fiscal policy was contractionary while the Fed was expansive. Had the two worked in greater concert, there is a possibility we could have emerged faster and more vigorously from our Great Recession of 2008-2009.
Then, during the Covid Pandemic, Congress did the opposite, funding a bold economic rescue package that put money directly into people’s hands but at a great cost. Congress did what it took to keep the economy going during an election year. Then, as noted above, it went further and continued stimulating the economy with nearly $4 trillion in additional spending. A massive wave of fiscal stimulus paired with monetary stimulus and global supply chain and energy market disruptions all combined to unleash inflation.
The debate over what caused inflation will go on for years after inflation is tamed (assuming it is managed successfully). But the key issue is the concept of purchasing more ‘stuff’ at scale on the space frontier and finding a mechanism for inflating a space-based economy that will likely operate at a higher cost basis compared to the American terrestrial economy.
Is there a role for expanding the monetary supply to inflate and grow that future space-based economy and, if so, how will that grow in the future? Can we do so in concert with the tax/equity repression approach suggested previously and can the combination work to dramatically increase growth of both a profitable space-based economy as well as our own domestic economy on Earth – without unleashing the inflation monster again?
I think this is possible and here is why.
Let’s replay the context again. Inflation is top of mind now, but the cure for inflation is likely a recession. We will then return to the underlying issue of prolonged stagnation that has been haunting most of the advanced economies for the last few decades. After all of the stimulus and all of the debt, when the dust settles, we are still going to be stuck with a low growth economy with limited productivity gains and structural challenges to future growth even while balancing on the edge of a recession in demand. The Global Pandemic and Russia’s invasion of Ukraine have caused economic turmoil, but they did not fundamentally change the underlying economic dynamic.
We need a viable pathway to future economic growth and dynamism. We need a structural solution to a lack of demand, innovation, and dynamism. A future economy in Near Earth Space may offer the best structural bet to inspire that growth and dynamism at large scale. We need a frontier.
A non-traditional program to inject liquidity into a future space-based economy would be the ‘pull’ to complement the ‘push’ of the fiscally driven tax/equity repression mechanism offered earlier. The Fed has the tools and the means to support the rapid build-out of a space-based economy if it simultaneously fosters a more dynamic economy at home as well, which is their mandate.
Is there a hybrid mechanism for creating a quantitative easing-like program that creates credit and expands the money supply in space and allows for innovation and economic growth? Can we use monetary policy to expand a space-based economy at the same time we are using fiscal policy (tax, spend) to build out an infrastructure in space and pay for imports from Earth? Can we do this in combination without creating an inflationary burst at home, once again?
Here’s one possibility. As we begin to build out a space frontier, we will create cities and industries in space. To do so, we must fund them. We can charter space-based entities that are public (municipal/colony governments) and/or private (banks or investment funds based on the frontier and investing entirely in frontier ventures) entities that issue long-term bonds which the Fed can then purchase. (Effectively, this is space-based quantitative easing, what I think of as Quantum Easing.) These funds can be used to support and amplify economic activity in space by injecting funds that will be used to drive both municipal colony construction as well as business formation and innovation.
Once we have built up the capability to construct a space colony, you start by chartering a municipal government that will run that colony. You issue it a loan from a space-based entity (a bank or public trust). The loan will be big. The municipal authority uses the loan to build the colony. Once built, it leases out space for commercial activity and it owns, for a long time, all of the residential property from which it collects rent. These cash flows from commercial and residential activity go back to paying the original loan. This process is pretty standard. The only thing new is the location.
If we get to the point of building out large habitats in space, we are effectively positioning a smart, innovative, and entrepreneurial work force in space and presenting them with a huge number of opportunities to create new products and services. If we have also created a market-based economy for goods and services in which wages and prices find their natural balance point, then we can inject liquidity in the form of further loans that give people a chance to create those businesses and innovate within this market-based economy. We are talking Silicon Valley on steroids, a dramatically turbocharged space-based economy. Public funding and fiscal policy will get us the stuff. In space, there will be no shortage of opportunities for innovation and growth for many generations if we can create mechanisms to fund innovative private sector entrepreneurialism and we operate an economy that is market-based instead of centrally planned.
This is a rough idea at best, but some variant is almost certainly possible – because it has already been proven possible on Earth. If we have a fiscally driven program to spend $200 billion a year on the space frontier AND we have a monetary policy to inject $200-$300 billion in liquidity into that same space-based economy on an annual basis during build-out, then in effect, we have the means to dramatically increase the level of economic activity in space and this has important implications for our economy at home as well. It will drive high productivity economic growth that cascades throughout our economy.
At the end of the day, the Federal Reserve’s goals are to support a strong US economy. We need to strongly encourage the Fed to begin thinking creatively now about the best tools for growing the economy of a space frontier that has the potential to grow exponentially for a long period of time thereby deriving benefits for the American people and our domestic economy as well.
Private Sector Investment
Throughout this section on funding, the topic has been mobilizing public sector investment at scale through fiscal and monetary policy. But there is a third leg of funding that will also come into play if and when there is a level of certainty and belief that the public sector investment is sustainable and will be maintained for long enough to build a truly self-supporting economy in space: Private sector investment.
No other data point illustrates this point more than the example of a current aerospace company that shall remain nameless that returned $25 billion in cash to shareholders during a single 5-year period from 2010, but has not, to my knowledge, invested its own money in a reusable rocket such as the ones that SpaceX has been building for much less. Nor is SpaceX alone. Blue Origin is doing the same.
I would argue that companies like this are simply not yet seeing a crucial market signal. Elon Musk and Jeff Bezos are trying to create a market in space. They are the exceptions.
Most every other normal company in our economy looks for a market that exists in order to invest into it. They do not take on risk or make big bets on products and strategies that require markets that are beyond their control. There is no stampede to invest in products that companies and their leaders do not believe there is a current market for and for which incremental revenue can’t be quickly obtained.
If, however, we have a massive public sector investment being implemented with enough certainty that it will be sustained for a long period of time and that is used to create a market-based economy in space with prospects for rapid growth for centuries, I believe that will drive investment decisions throughout our economy like dominoes. Once a fiscal and monetary policy are articulated and put into place, the private sector will mobilize vast sums to build the future instead of just making YouTube videos about it.
This turn to investment will have profound implications for domestic economic growth.
An active large-scale presence in space represents a platform for innovation and the creation of wealth. It represents an historic opportunity to invest in the future. Once we have an active frontier in space, we can complement public funding with private-led venture funding and corporate investment. The sums are potentially in the hundreds of billions per year.
Economic Conjugation – A Bonus for Humanity
I’ve suggested previously that it might be possible to ‘conjugate’ our domestic economy by creating a clone in space that operates at a higher level of prices and wages, a plural tense of our domestic economy, if you will. I think of it as an Economic Conjugate. Mobilizing public and private investment in the range of many hundreds of billions of dollars per year creates that conjugate and it has potentially huge implications for our Earth-based civilization.
Conceptually, I think of the space-based economy as operating at wage and price levels that are 10-20x those of our own domestic economy. A minimum wage in the most progressive cities and states today is or will soon be $15. In space, an equivalent minimum wage might be closer to $250 an hour. The interplay between these two economic tenses will need to be studied and understood better. The implications, however, are far reaching.
What if another 5-10% of our population could earn as much as all of the rest combined and these people don’t come from the ranks of the wealthy, but from the ranks of the middle class? What if they are rotated every 5 years? That means a much larger percentage of the Middle Class would have access to a period of very high earnings. What if their taxes could mostly be used to help pay our Earthly bills (and potentially without argument and political divisiveness)?
Printing money should be inflationary, even hyper-inflationary, but our experience with Quantitative Easing prior to the pandemic was that it barely kept us out of a deflationary spiral. Core inflation only started growing when we unleashed a combination of monetary and fiscal stimulus with multiple global economic and energy shocks.
If we build a space-based economy, we are going to have to expand the money supply for that economy to operate. We are going to print money to ‘inflate’ a future space-based economy. Much of that money supply will stay within the space-based economy, but some of it will flow back in the form of taxes and savings. We will need to understand how that impacts our domestic money supply and whether it has an inflationary impact or has other side effects such as mispricing assets at home.
To some it will seem obvious that it must do so, but I believe the impact will be modest. What if the expectation is that costs are going to decrease over time, driven by innovation and scale, and that our space-based economy is going to grow exponentially over the decades? If that multi-thousand-dollar cup of coffee is going to decrease over time to ‘just’ $200 and perhaps less and the circulation of currency allows the space-based economy to operate effectively, then a conjugated economy without dramatic inflation might be possible.
Likewise, if the flow of revenue back to the domestic economy is in the form of public tax revenue and corporate and individual income, will it have an inflationary impact or can the negative outcomes be mitigated and controlled? Can we safely inflate a space-based economy using the US Dollar or do we need to create a separate currency?
For America, the positive outcomes of solving these problems and creating a conjugate are huge. Can we create a bonus in tax revenue that can help us address many of our Earthly problems? Want to finance a living wage for all? What if the answer is ‘No problem?’ Want to pay for the transition to a zero-emission economy without passing on any additional costs to business? Check. Want to reduce taxes on the wealthy? Done. Want to build out universal healthcare, early childhood education for all, and rebuild our crumbling infrastructure. Check, check, and check again. What if our politicians could make political promises and actually keep them? What if we can unlock a significant source of cash flow for our future in the back half of this century?
An economic conjugate of our own economy operating in space at higher levels of wages and prices has the potential to pay a sizable bonus back to our public coffers at home and to change our future on Earth if done at scale.
On the political front, what if the Left and Right could each achieve core objectives (more spending, less taxes) in an economically sustainable way? Would they just push further to the extreme or could they actually compromise and get along? Wouldn’t it be interesting to find out?
Here’s another possibility. If every economy on Earth is able to conjugate as well, if we can help them build their own economic clones in space, then we are talking about a self-sustaining financial jackpot that can help us resolve some of our largest problems on Earth. Want to finance a massive build-out of public infrastructure in developing countries? Check. Want to eliminate extreme poverty with a social safety net for all? Check. Want to get high quality healthcare for all of humanity fielded, deployed, and operating in every corner of the world. Done.
There are going to be challenges to work through. How do you couple the conjugate with the original without creating inflationary spirals? We’ll need to figure it out. Is there a limit to inflating a conjugate in space with public finances before we create distortions in the domestic economy on Earth? I don’t know. Let’s put our best economists on the case to study it and figure out the guardrails and safety mechanisms.
The bigger point is that if America can pilot a full-fledged economic conjugate in space and figure out how to manage the linkages, then it is possible to conceive of deploying this model for all of humanity by the back half of the century. Where others see doom and gloom, I see the possibility of creating a fountain of prosperity from a space-based economy – precisely because the cost of living and working there will be much more expensive than in the abundance of Earth. Humanity can achieve a major bonus in prosperity if we seize the possibilities of the space frontier and harvest some of the benefits.
Want to jump the wall of Fermi’s Paradox? This may be how you do it. You start by figuring how to finance the expansion onto the space frontier in a sustainable way that produces a significant return to our Earth-based economies.
For nearly two generations, our space program has been starved for funding and we have not returned to the moon nor gone further than Low Earth Orbit as a result.
Even if we see a return of astronauts into space in the mid-2020s, funding is the Catch-22 to the opening of a frontier in space. Until we have scale, costs are extraordinarily high and only a few national governments and the extremely wealthy can afford the trip. Only when we have scale and certainty on funding, will we be able to open up the space frontier and create a full-fledged economy in space.
I have proposed two strategies for public sector funding: Fiscal and monetary. A tax/equity hybrid vehicle could generate $200 billion per year in funding. And a variant on Quantitative Easing (Quantum Easing) by the Federal Reserve that could be used to inject liquidity and inflate an economy in space, potentially at similar levels of funding. We can argue about whether these strategies make sense and what the numbers look like.
But here’s something to consider. Today, NASA has a funding level of $25 billion and we are a society that has consistently been unwilling to pay more for a program focused on space exploration. By contrast, a space program focused on a New Frontier Future and the creation of an economically self-sustaining presence in Near Earth Space that creates high-paying jobs and high-single digit economic growth at home has a viable pathway to sustained funding, both fiscal and monetary, in the range of $500 billion per year.
My proposed funding is 20-25x greater than NASA’s current budget and is potentially more sustainable than current funding for space exploration precisely because it draws a direct connection, a direct strategic line, to a more prosperous economy with high-paying jobs and robust economic growth that will benefit all Americans and that are the top Earthly priorities for most Americans today.
Not only that, but my program has a shot at being supported by a majority of American voters in a way that space exploration does not. If the initial survey that I have run is any indication, we already have a majority of Americans that support the principal of a space-based economy that returns a profit to Earth and we have a near majority of voters (40-45%) that are supportive when specific numbers (even very large numbers) are put next to that question. If those numbers represent the baseline of public will before we have even articulated a true strategy for the space frontier, then we are starting from a very strong position.
The level of investment I am proposing – $500 billion annually when including monetary policies – may sound scary or big to many people that read this, but I would argue they are viable politically because they can drive significant and prolonged economic growth that results in good jobs and higher wages for a vast number of Americans. To move the needle of growth on an economy as large as the one we have today, simply requires thinking more boldly and at a greater scale than has been previously considered. Going big has big benefits and is potentially more politically and economically sustainable as a result.
Not only that, if we can truly create an economic clone of our domestic economy, one that operates at a much higher level of wages and prices, then we have the potential to finance many of our more politically divisive challenges here on Earth. We can do that not only for America, but if we can pilot the model and make it work, we can expand it for all of humanity. We can create a bonus for all of humankind if we dare to try.
- ___, “The Budget and Economic Outlook: 2022 to 2032“, Congressional Budget Office, May, 2022. https://www.cbo.gov/publication/58147#_idTextAnchor105
- Cohen, Patricia, “What Could Raising Taxes on the 1% do? Surprising Amounts,” October 16, 2015, New York Times, http://www.nytimes.com/2015/10/17/business/putting-numbers-to-a-tax-increase-for-the-rich.html?_r=0
- ____, https://en.wikipedia.org/wiki/Quantitative_easing