I read today where one fellow, in defense of unfettered capitalism, said in effect : well it’s all that money that the rich spend on yachts and other high valued toys that produces the taxes that pays for teachers, roads and all the other necessities of a nation.
Besides being impossible, this isn’t anywhere near accurate. Trump, with his penchant for garish excess, is the exception among the wealthy. Most of them live quite simply because the things money can buy means a lot less to them than having the money. Trump may be the better adjusted of the extremes but is more likely simply showing an entitlement that is common with second generation wealth.
While some eighty-five percent of all productivity gains go to the top 10% (with over half of that going to the top .1%) their ability to manipulate the tax system saves them more than what the bottom half of workers make in total. If we were serious about paying for the government with taxation we would obviously get a lot more serious about taxing wealth, but we aren’t.
And so with the government desperately needing revenue for essential services, the Republicans of course turn to wanting to take it away from average citizens by trying to cut things like social security, Medicare and Medicaid.
Cutting programs has nothing to do with funding anything. Neither do taxes, and the wealthy know that. We can, obviously, spend more than collected, so it’s quite evident that taxes are not a necessary component to spending. Also, a currency-issuing government cannot increase the money supply by borrowing, as it must first create the money before it can borrow it.
Given that money created by banks is always balanced by the debt that created it, never able to be saved or used to retire that debt, it becomes difficult to explain how the government “borrowed” more than the total money supply of a few decades ago when we moved to a fiat currency. Business, banking, and the stock market all simply shuffle money around, so where did all that money come from that we supposedly “owe” like a mortgage held by China on our nation? China isn’t authorized to create US dollars.
Our Constitution holds the answer in Article 1: Section 8 where it authorizes Congress to create the currency “for the public welfare”. Our government simply creates money whenever it spends, without regard to revenue or any limitations. That is how we grew the economy because it is the only way possible. Taxes fund nothing and are deleted by the first order accounting entity of the debt as soon as they enter the government sector. (I can prove this with a very boring and detailed published peer-reviewed paper if needed)
Treasury bonds are different than any other type of bond because they were never designed to produce revenue, but to remove currency from circulation to protect a now non-existent gold reserve. A Treasury bond always contains its face value in future currency, which makes them the world’s preferred safe investment. The currency used to purchase them is changed to a different type of currency that can’t be spent until the bond matures, but pays some small amount of interest.
All the Fed does is asset swaps between currency reserves and bonds unless it has authorization from Congress and Treasury to mark up accounts for spending. Then it simply pokes some keys and money appears, completely independent of taxation or bonds. This is all very common knowledge, but very few people have the entirety of knowledge of the system, even most of our elected officials. It was made overly complex and fragmented for a purpose, and that purpose was to promote a convenient misconception people have naturally because it fits the way their own finances work.
How many times have we heard “I have to tighten my belt, so government should have to also.”? They don’t understand that it is government tightening its belt that causes them to have to tighten theirs. Any misery in this economy is a political, not economic, decision. The red ink (deficit spending) of government is the only source of black ink the economy has.
The Democrats need to keep reminding citizens that that today’s GOP cares not a wit about any American worth less than a billion.
To say that this undermining of the ability of the government to spend for the public purpose, only restrained by the “real” available resources of this rich country, not how many dollars it can “get”, is entirely a Republican conspiracy is completely false. I can show video of Obama talking about “taking out a credit card from the Bank of China in our grandchildren’s name” in reference to the national debt, obviously knowing it was malarky. If the guy that appoints the Federal Reserve Chairman doesn’t know how the government spends we are in deeper doo-doo than I thought, but I’m pretty sure it was staged for effect.
America needs a finely balanced system of capitalism and socialism, a system tailored by hard rules and regulations that allow all within the nation to prosper fairly. Yes my friends feed and guard the golden goose of capitalism well so that all may have the ability to afford a good and rewarding life.
Governments that create their own currencies and levy taxes do so primarily to drive the need for that currency in the economy. They effectively make everyone unemployed until they can earn enough currency to pay their tax obligation, and in the process assure that the government can provision itself as needed without concerns for revenue. Controlling inflation is also an important use of taxation, but it is “never” a source of revenue for the currency issuer that neither needs nor uses revenue from any source to spend.
Since the government demands the use of its currency, to the extent of making citizens unemployed, it has the responsibility to assure that employment is available to anyone who needs it, regardless of the whims of capitalism. This is why many macro-economists are advocating for a federally funded, but locally administered, guaranteed job program that offers employment serving the public welfare.
Such a program would replace the mandatory minimum wage with a “livable wage” and benefits that offer dignity, not just subsistence. It would also set the floor for private sector employment by simply being available to anyone able to show up and perform assigned tasks. The program would be countercyclical to the business cycle, eliminating many safety net programs and maintaining supply chains. Business would then only have to outbid the program when the demand for labor increased and would be rewarded with employees who have all of their job and social skills intact.
Unlike a universal basic income, a job guarantee pegs the economy to labor and the work hour. With the economy not dependent upon capitalism entirely it would be difficult to sell any lack of environmental protections and the job guarantee would have stipulations that would set standards of worker safety and treatment. It is only the concept that the government can’t do anything for the people without taking from them the cost of the benefit that prevents the proper control and regulation of capitalism. The best way to handle the wealthy is to make them. and their money, unnecessary. Then taxation can be approached from the perspective of what is best for the people, and I can guarantee that would be to heavily tax wealth.