Is it possible for government to have a budget deficit? On the surface it would seem so; budget deficits seem obvious, not to mention persistent. A slightly deeper look into the machinations of funding government (the most public of corporations), reveals that there is no such thing as a deficit, nor is there really such a thing as a national debt. A government that oversees a productive and profitable economy, and which has legitimate costs to do its duties, must tax that productivity to pay for its expenses. To take less than what it needs from our national productivity and yet borrow from that same productivity, offering the profit of interest to the lenders, along with burdens of debt to the producing taxpayers, is a conspiracy to defraud and enslave the working class with continually increasing taxes and or continually decreasing services.
Government must pay its bills, and the money used to pay those bills can only be, and are in fact, tax dollars. There are no other dollars available to a government unless it simply creates them, which is taxation by inflation, devaluing future labor until wages and prices rise to consume those dollars. The definition of debt is, in principle, the obligation to repay borrowed labor or borrowed commodities, from one person to another, or from one group of persons to another. But no person or group of persons can be in debt to themselves. Only a moron would take money from his wallet to spend on himself, and replace it with an IOU. We are in principle supposed to be one people, indivisible. We cannot be in debt to ourselves; we cannot write ourselves an IOU. Therefore, the so-called national debt is not a debt. It is, however, misfeasance and malfeasance in the operation of government.
So how can these borrowed deficit dollars be considered taxes? Quite simply it follows from the force or persuasion principle, which is the principle by which all levels of society interact with government. We are all familiar with the power of government to force our participation in the tax system. The government also takes in tax dollars through persuasion. This is accomplished by having the elected representatives create a Government Investment Program (GIP), whose function is to take seed money from the dollars coming in by force and offer it as interest payments to anyone persuaded to invest money in the government. The Government Investment Program is competing for, and getting, surplus dollars from wealthy citizens, many private investment groups, such as insurance companies, mutual funds companies, retirement funds (401K and IRAs), large and small businesses, all manner of stocks and bonds related investment companies, foreign companies and citizens, foreign governments, etc. Since individuals own all manner of businesses by owning stock in those companies, all of these persuasion tax dollars are idle dollars held by individuals, who are directly, or through their elected corporate representatives, or through their hired investment counselors, seeking to put those dollars on loan to increase their future wealth at forced taxpayers' expense.
Even with increasing foreign investment in our national tax system, Americans still own about three-quarters of this so-called debt; but where foreigners must be paid back for their loans, US citizens will eventually just forfeit their persuasion taxes; after all, their money is spent and it will bankrupt the country just to repay the foreign investors.
Much of the idle wealth accumulated in the 1980's came as a result of tax reform, whereby taxes were reduced for everyone. However, upper income citizens reaped greater amounts of wealth to re-invest, while the federal government was running larger and larger fictitious deficits. With wealthy individuals and corporations already receiving substantial labor rewards from their workers, government services would have to be cut or government would have to raise funds another way. Borrowing idle dollars from wealth was chosen. But since our government is supposed to be a non-profit organization, every dollar coming in is spent, and since our government is also supposed to be a non-debt organization, every dollar taken in by persuasion, must eventually be repaid with a dollar taken in by force, plus interest. Persuasion taxes on idle wealth will eventually have to be converted to forced taxes on the productivity of our economy; or the debt will have to be abrogated.
Persuasion tax money is idle money, and is not needed by wealth to expand the private economy. The economy would not suffer if all taxes were forced taxes, and it would be perceived to be much stronger because there would never be an artificial deficit.
Although banks must keep a certain amount of their depositors' dollars in reserve, available to cover withdrawal demands and to pay for insurance from the government on all deposits, using the government's liquidity to cover for any mismanagement by the banks. The GIP does not retain any reserves against the spending of these persuasion dollars except the printing press to create new dollars, the power to raise additional taxes by force, and the power to sell national resources (parks, lands, minerals, forests, etc.) to the debt holders. In our current fiscal difficulties the government must keep the nine-plus trillion dollars taken in by the GIP in an idle state simply because government is still forced to continue persuading additional idle dollars to be deposited into the GIP.
What is becoming ridiculous is the cost of keeping all those spent dollars from being returned to the investors. The Government Investment Program must compete with private investment companies, national and international, to retain those trillions of dollars. Its only power to do so lies in offering higher interest returns, and the fear of the consequences to international economics if the investors fail to leave these idle dollars where they are. Since these dollars are already spent, any request for withdrawal of the principle by investors in the GIP that could not be repaid by additional borrowing from other investors would have to be raised by the confiscation of private assets. In other words, government would have to raise forced taxes drastically to pay persuasion tax refunds, so that those least able to pay would have to contribute to refunds for those most able to pay.
The on-going tug-of-war between idle wealth and the producing class makes our social existence very precarious. Those who hold the paper of government debt should be advised that when the producing class is no longer able or willing to service that debt, the government will be obligated to raise the taxes of those most able to pay, in order to pay off these notes. It would be the easiest way to abrogate a debt that is not a debt and should never have occurred in the first place. So if government fails to take in the first place, what it spends in the first place, then those who have been persuaded to invest in government will come to realize that they have also been taken. Such is the reality of the taxation authority that resides in the people.
The federal government and the common people are two different entities now. Since the common people have already paid their taxes, the federal government will have to turn to its controllers to abrogate this debt. Keep in mind that the interest expense on the national debt is paid to keep the nine-plus trillion dollar principal from coming due. When those who invest in these pieces of paper determine that our eroded job base does not have enough taxable income to support our own needs, as well as the interest expense on their bond-paper, they will cash in those bonds as they mature, adding additional hundreds of billions of dollars to our tax burdens yearly. And you can be assured that not only will your taxes go up, but also the cost of Medicare, Medicaid, Food Stamps, Social Security, Head Start. Many other programs will be cut or abolished to help pay back those bonds. The choices for the future are to pay the bills and suffer social chaos while maintaining economic stability; or do not pay the bills and suffer economic chaos, while trying to maintain social stability. Or inflate the currency, pay the bills with worthless dollars, and bring on both economic and social chaos.
Many believe our country can operate with an unbalanced budget, when in fact we have always had a balanced budget. We just use unbalanced taxation to achieve it, borrowing from idle wealth directly and through its myriad investment resources, to cover our government's obligations to ourselves. A balanced budget amendment is a farcical thing, since every budget is always balanced (forced taxes and persuasion taxes equal money spent). A new amendment should be called "the equitable and forced taxation from all" amendment.
Does the middle class really believe that their pension funds, mutual funds, and life insurance money can be invested in government bonds to provide future income for themselves, without requiring that they tax themselves into poverty to pay those bonds when they are due; or requiring that their money inflate to worthless paper? Labor barters for labor and consumption privileges today. The future can only be likewise. If you expect to receive a pension when you retire, and your pension fund is investing in government bonds, then you should prepare yourself to continue working until death retires you. You will have to pay your share of the increasing taxes that will come due to pay all of the bonds that we the government owe to our wealthier citizens.
The argument by some politicians and some economists that we need not force the up-front collections of all money to be spent by government through forced taxation is ludicrous. A trillion dollars paid out in interest money in President Reagan's years to expand and maintenance this pool of idle dollars is morally and economically criminal. Another trillion dollars in interest was paid out in the first President Bush's term. And even more in President Clinton's term; and still more in the terms of Bush-2. If we cannot pay our bills in relative good times, we shall not survive as a nation in the worst of times.
Yet the political buffoons will increase Social Security taxes every year, (which is not only paid by each laborer but is matched dollar for dollar by the employer), spending a significant portion of these dollars off-budget to help finance government. All the while telling us that they are investing the surplus Social Security taxes for our future. How could dollars spent for today's consumption be considered an investment that can be refunded to pay for future consumption? That money is gone forever. This process is just another worthless IOU from us to us.
Government can never be a good investment in a capitalist economy. The whole principle of democracy and its relationship to an economy is that the government would tax, spend, and regulate both personal and corporate productivity to provide for our common needs, to promote our continued prosperity, and to always maintain a net asset wealth of infrastructure owned by all and free of debt. Government takes what we need; it cannot ethically borrow in the sense of mortgaging our future. Workers are paid weekly, BI-weekly, or monthly, and corporations calculate their profits monthly and quarterly. So there is no reason why government cannot establish monthly tax payments from labor and business to pay its monthly bills. If necessary, the government could establish different fiscal years for different workers and corporations to smooth over seasonal and other income aberrations. There is no reason why government should not have 100 to 200 billion dollars available to cover for any natural disasters until taxes can be adjusted to pay any new expenses. But there should never be a deficit or national debt or interest due on any taxes collected by government.
Nine trillion dollars invested by private citizens and foreigners, in government spending needs, show where the trickle-down economies got sidetracked. When President Reagan lowered taxes to promote investment in business and entrepreneurship, he should also have lowered interest rates that the government would pay for private money, to ensure that the reduced taxes on the wealthy would cause them to invest their surplus into expanding the private economy. Instead, government had to raise interest rates, to compete with private enterprise, to borrow the money needed to fund government, since spending was increased after taxes were reduced. For many years government has been a safe and profitable investment for the very dollars it should have taken to pay for government spending. It is impossible for government to be a wealth-producing investment, unless it is also a poverty-producing indenture. We are one people; therefore, if some can increase their wealth by mortgaging our common needs, then many others must increase their poverty to pay that mortgage.
The portion of these deposits in the government that is owned by retirement funds, insurance companies, states and municipalities, demonstrates a collective belief that you can give yourself an IOU. If government takes or accepts money contributed by these above named groups, giving them the IOU promise, then government will be obligated at some point in the future to persuade if not coerce these groups to contribute those moneys a second time. The interest paid to these groups to keep them in the scam is approaching the character of a Ponzi scheme, (using new investment money to pay previous investors dividends, to attract more investment until the operator of the scheme takes as much as he can and disappears before it all collapses). When government runs out of legitimate investors, it will begin using the electronic printing press to pay the profits expected by earlier depositors, because it cannot just disappear like an ordinary con-artist. And finally, the portion of these deposits invested by foreign individuals and foreign governments demonstrates some gross errors in commerce, when the most powerful, most productive, and largest economy in the world, cannot conduct international trade for a net surplus of dollars. It is instead forced or persuaded to conduct trade in such a manner that the profits made by foreign companies and governments come back as investments in our domestic spending requirements; either for want of a more lucrative investment or for political power to maintain the unfortunate circumstances which have created and which sustain these exported profits. The amount of money loaned to our government annually, by foreigners, is roughly equal to the interest that is paid on this so-called debt annually. If the persuasion taxes had been taken as forced taxes there would be no interest due and no foreign investment in our internal affairs.
We are failing as a community to deal fairly with each other. Those who store their wealth in pieces of paper, issued by governments, should know that labor is bartered for labor, and those who harvest a bumper crop today cannot set it aside for the future in pieces of paper. People will not always be property and laborers will not always submit to being enslaved; those who wish to own the future will find that their paper wealth will be abrogated. If we are going to continue to tax the lower class with lack of opportunity, the middle class by force, and the upper class by persuasion, giving the persuaded first feeding at the communal trough, then we are a short way from self destruction. Bad taxation policies should not make good investments for surplus dollars. Posterity has the right of self-determination and cannot be sold into slavery for today's folly. Since it is doubtful that our children will accept this debt as theirs, and also doubtful that the debt will be forgiven, we have only social strife and the threat of revolution to dog us, until we are captives of its violent processes.
Eventually, foreigners investing in our economy and our government debt will need their money to support their own economies. We will either destroy our currency if we print those dollars for them, or we will destroy our economy if we are forced to tax ourselves to raise the capital necessary to repay such bonds; or we will sell our resources to them and become economically dominated like South America and Africa.
The Earth is free, when honored; sufficient, when shared; abundant, when sacrificed for. Let those who fence off the Earth's resources, and control the opportunities for labor, be aware, the laborers who are being farmed for profit by the world's capitalist aristocracy, and saddled with unnecessary public debt in virtually all countries, will not be morally or legally obligated to pay this bondage.
Government cannot be in debt, nor can it have deficits in the budget process. We are one people, and we pay our bills with tax dollars collected by ourselves. Whether we choose to tax and spend or borrow and spend, we are paying those bills with dollars collected by the Treasury Department, and if the Treasury wants to switch the country from forced taxation to one of persuasion taxation, so be it. Wealth and political power are often inseparable, and this marriage is just as often unavoidable. I call upon the persons of wealth and influence to bring their considerable powers to bear upon the federal government to either reduce expenditures to the level of tax income immediately, or to bring their considerable powers to bear upon their wealth, and force the government to take from them, without obligation to refund, those moneys which were idly invested in treasury notes, to balance the federal budget. If you do not help the nation voluntarily to the benefit and preservation of all, the working class (and unemployed working class) will help themselves later, to your specific detriment. You are fiscally irresponsible to disregard the consequences, in your pursuit of personal gain, just as the lower classes are irresponsible in demanding expenditures of borrowed funds, without regard to those same consequences. Let's not be GIP'ed out of our future.
© March 2009
Craig D. Hanks
This article is taken from a chapter of my book SOCIAL BENCHMARKS. Other excerpts can be viewed at http://beyondfarenough.blogspot.com/
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