Rufus wrote:
This won't fly here. The intent of the Constitution was to begin a country that honored God and a country that would write its laws using God's laws as the example. I won't adress your entire comment because it doesn't deserve it. But if libs are so intent on protecting our children then why has Obama already spent our grand children's inheritance?
The purpose of a nations economy is to maximize the nations wealth by the full employment of its resources. When a nations private industry does not fully employ the nations resources, it is the duty of a rational government to employ the nations idle resources to help those in need and to build as much infrastructure as possible by spending almost enough money to cause harmful inflation.
Our nations economy depends only upon its resources. Whatever is technically feasible is financially possible. The myth that federal spending is limited by tax revenue vanishes in every crisis, rests upon false logic, corrupts political dialogue, promotes austere budgets, and destroys our infrastructure. The federal government, as a currency issuer, is not bound by business or household logic. Its maximization rule is: (Idle Resources) x (Time) = (Wasted Opportunity)!!
Government spending does not depend upon tax revenue. Only the reverse is true.
Think about it. Where did the first American taxpayer, a Pilgrim, get the currency to make his first tax payment? On landing at Plymouth Rock, the Massachusetts Colony had no currency.
During the first month, out of thin air, the governor printed fiat money and used it to pay for the goods and services supplied by the colonists as they built the colonys infrastructure. Of course, the colonists used the printed money in commerce with each other. The money was the only legal tender for tax payments.
Government spending did not depend upon tax revenue! Only the reverse was true.
For the first years budget, the governor simply estimated the labor man-hours that were available to the colony during the first year, chose a convenient hourly wage, and multiplied the two numbers to arrive at the annual budget. He printed and spent just that amount during the first year.
For the second year, the governor planned a new budget but, instead of printing the entire budget amount, he imposed a tax that repossessed most of the first years spending. Money not retaken as taxes became savings for the colonists. Annual budget deficits = annual private sector savings! And sufficient annual deficits/savings are an essential need for a thriving economy!
For the second years budget and for every subsequent budget, the governor used the previous years tax revenue plus additional printed money as needed. If, instead of taxing the first years income, he had simply printed all the money needed for the next year, market prices would have almost doubled. Without an annual income tax, the colony would eventually suffer hyper-inflation.
With fiat money, the purpose of taxation is NOT to finance spending but to prevent inflation. Ideally, to avoid wasted opportunity and maximize wealth, government must balance two goals: wisely spend almost enough to cause harmful inflation and tax barely enough to avoid harmful inflation.
It still works that way, but not very well. While crafting a budget, Congress NEVER EVER asks the Treasury if it has enough money. Congress spends the amount of the budget and taxes most of it back to avoid inflation. If we have both unemployment and low inflation, it is only because Congress is not spending enough to help those in need and to hire idle resources to build necessary infrastructure.
But, as the nation grew larger, it became difficult to estimate the spending and taxation that would avoid harmful inflation. To stabilize the dollars value, it was pegged at a fixed gold price. The government stored gold and promised to redeem dollars with gold at that price. It worked, more or less.
But due to frequent budget deficits, the nations money supply grew faster than the governments gold supply as wealthy savers redeemed gold with their excess paper currency. To prevent depletion of the gold supply, the Treasury recaptured the annual budget deficit by auctioning US bonds for that amount. The annual debt interest expense became part of the annual federal budget and of the national debt.
But there was another problem. Due to frequent annual trade deficits, foreign exporters with excess US dollars redeemed enough gold to threaten the US gold supply. Eventually, In 1971, Nixon had to end the gold standard. So, ever since, we live with fiat currency and it works, more or less.
But without the need to protect a gold supply, there is no longer a rational reason to auction US bonds to recapture the deficit. The Treasury could simply auction enough bonds to serve our governments purposes: interest rates, liquidity, etc. The minimized borrowing would stop Wall Streets fake debt crisis scam, crafted to privatize Social Security and gain a fortune in stock brokers commissions.
The federal governments financial assets are infinite. Our only problems are unemployment and inflation. High unemployment existing with low inflation is due only to insufficient deficit spending.
If you could legally print dollars in your attic, why would you balance your household budget? You would only have to balance your desires against your familys well-being. The federal government does not have to balance its annual budget. It only has to balance unemployment against harmful inflation.
An intelligent, rational, informed US citizen would vote against the deficit hawks in Congress. You? ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
This essay is based on works by: (e-books cost about $10 at Amazon)
Frank N. Newman, former Deputy Secretary of the US Treasury, author of Freedom from National Debt (Two Harbors Press);
Francis X. Cavanaugh, US Treasury economist for over 30 years, author of: The Truth about the National Debt: Five Myths and One Reality (Harvard Business School Press);
Warren Mosler, economist, author of Seven Deadly Frauds of Economic Policy (Oxford U. Press);
Dr. Stephanie Kelton, Chair of the UMKC Economics Department, at NewEconomicPerspectives.org.
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© 2014 Marvin Sussman All Rights Reserved. Permission granted only to copy entirely.
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