Yes; through bond sales just like they do right now. This requires some explanation.
“Legal tender for all debts public and private” is what gives money its value. People must use dollars if they want the legal system to enforce contracts and rights, and will continue to do so as long as there is benefit to that.
But what about inflation?
In simple terms, price inflation is when demand for goods and services grows faster than supply. Most dollars are not in that demand pool, as they all start out in the investment pool. The nature of investment is that efficiency gains must match the cost, or the investment loses. So an efficient economy balances both sides with investments which increase supply, and payments to workers, which increases demand. In this scenario, monetary inflation can be used to supply investment dollars up to the point where that balance is achieved. (Obviously not all verticals are affected the same way.) Government can be seen as the public goods investor, which is supposed to increase productivity economy-wide more than their own spending. So if that’s true, and all dollars are created under that constraint, inflation is impossible. Big if, of course. Even if not, there should be a very wide berth for ‘unproductive’ investment to inflate demand equal to the over-efficient gains in supply.
What about the environment?
Good point. Productivity has externality cost, some more than others. Firstly, we should be maximizing investment efficiency because financial waste correlates well with environmental waste. Secondly, there could be a strong case made for selling externality rights, and this alone could probably replace all tax revenues in the budget. I don’t know how that would work legislatively. If you ask me, this is what killed Al Gore’s campaign. He suggested that we make corporations pay for their waste, instead of people pay for their work.
