Skip to comments.Debt and Taxes and Perdition
Posted on 11/22/2017 11:28:17 PM PST by Oshkalaboomboom
Should the government borrow against the future? Should it guarantee higher taxes for your children and grandchildren in return for lower taxes for you?
If government's moral legitimacy depends on the consent of the governed, as Thomas Jefferson argued in the Declaration of Independence, can the federal government morally compel those who haven't consented to its financial profligacy -- because they are not yet born -- to pay higher taxes?
These questions are at the base of the debate -- such as it is -- in Congress these days over the so-called Republican tax reform plan. But you will not hear these questions even asked, much less answered, on Capitol Hill because the Republican leadership of the House and Senate is afraid that the answers might drive them from power. The same can be said for Democratic leaders when their party controls Congress.
In fact, with the exception of a few courageous senators, such as Rand Paul of Kentucky, and representatives, such as Justin Amash of Michigan and Thomas Massie of Kentucky, most in Congress in both parties think the only limit on the government's taxing power is what it can politically get away with at any given moment.
And it gets away with a great deal because vast majorities in both major political parties recognize no moral limits to the government's sordid pattern of tax, borrow and spend.
The numbers are chilling.
The federal government collects about $2.5 trillion in revenue and spends about $4 trillion, annually. The difference between what it collects and what it spends is made up in borrowing. But it doesn't borrow money as you or I do or any business does -- with a planned schedule to pay back the principal it owes plus interest. Rather, it goes deeper into debt to pay its debts.
Though the federal government has been in debt since day one, when it borrowed millions to pay the debts that the states had amassed in fighting the American Revolution (who knows whether the states would have formed a central government without its promise of assuming their war debts?), but from time to time, it has paid back the principal that it borrowed.
Since the presidency of Woodrow Wilson 100 years ago, however, with two then-novel revenue-generating tools -- the personal income tax to produce cash and the Federal Reserve to print cash -- the federal government has rolled over debt but has never retired it. Stated differently, the feds have always made timely interest payments, but when principal has come due, they have simply borrowed more money to pay the principal and of course thereby incurred more debt.
For example, the federal government still owes the $30 billion Wilson borrowed to finance the useless and fruitless World War I, but the lenders it owes it to are different from those from which it originally borrowed that money. It has paid more than $15 billion in interest on this rolled-over and still owed $30 billion principal in the past 100 years.
No household, no business, no bank, no government can long survive by doing this.
Since Wilson began this process, all of his successors have added to it, so that the federal government's debt has swelled in 100 years from $30 billion to $20.5 trillion. Of the $4 trillion the feds spend annually, more than $850 billion of it is interest payments to its current creditors on its debts.
The Republican House tax changes -- they cannot be called a "reform," because they reform nothing; they just redistribute wealth and add debt -- would lower taxes for some and raise taxes for many and add $1.5 trillion in debt for all.
If the feds follow their 100-year consistent pattern, this debt will never be retired, will be rolled over hundreds of times and will cause the taxes on generations of unborn Americans -- where is their consent? -- to rise without benefit to them and without popular or legislative approval.
But you won't hear any of this debated in Congress because there -- and in the White House, as well -- we have insufficient political courage to address this problem prudently.
This is now so severe and so consistently an accepted method of operation for the federal government that one can only surmise that those who can address it today must expect that they will no longer be on earth when the bubble bursts.
The bubble, soon to consist of $1 trillion in annual federal government interest payments on $25 trillion in debt, has been characterized by no less a warrior than the current secretary of defense and by his colleague the chairman of the Joint Chiefs of Staff as the greatest contemporary threat to national security America faces -- greater than Russian President Vladimir Putin, North Korea and all the terrorist crazies who wish us ill combined.
The threat is that people will stop paying taxes because nearly half of revenue will soon go to debt service and nearly half to fixed transfer payments and the productive earners will get little or nothing for their taxes. Then the government's creditors will not be paid, and the government will not be able to borrow money. Then America as we have known it will cease to exist, and individuals and groups will be on their own to protect life, liberty and property.
Call me the skunk at the garden party if you will, but we need these sober thoughts on this Thanksgiving holiday, lest the blind continue to lead us into a pit with false claims of tax reform that really are part of our government-induced march to perdition.
At some point, the bribing of the poor with welfare and the middle class with temporary tax cuts and the rich with bailouts will come crashing down -- unless we change the direction of the government before it is too late.
How about we cut spending?
Tough questions indeed. Austerity programs are needed. It’s a matter of survival for our children and grandchildren.
But some 40 million Americans get their incomes from the various levels of bloated government now. The only way to get the President elected was to drop hints that he would keep the big spending going. You saw the reaction in so many voters of both political parties to the idea of nominating Scott Walker.
No one’s going to give with spending cuts or higher taxes for wealthier constituents. Needed spending cuts would cause the markets to fall some (unemployment, even less consumer spending, etc.), while investors are nervous. On the other hand, great cuts in spending might save us from a near-future bond collapse. The corporate rate had to be adjusted radically downward to compete with other nations on exports.
So now what? Are defaults and repudiations still going to be the final answer in the very near future? How many of you see that world oil demand will continue to go higher and cause inventories to fall toward a panic?
Do you folks in the West know that regular gasoline is around $2.199 a gallon and lower in some places in the U.S.? Do you know why?
We’re living in an economy that is more managed than ever before. It’s on the verge and has been for a long time. That’s why it’s so weird. That’s why formerly extremely risky commodities and land have been so popular.
Oil production is running on debt and has been largely taken over by bankers (indirectly or directly, whatever). We’re running on debt.
One way or another, it’s probably likely that many very wealthy and influential people will lose some very large fortunes. That’s been known, with their influence suddenly absent (diplomacy to keep markets stable), to release the onset of some mighty scary international conflicts and other problems.
Nations’ leaders have been biting at the bight (the bit) to fight over natural resources. The more controlling, authoritarian communist/fascist governments tend to take extreme measures to keep their populations pleased with hints and movements toward conquest against other nations. So that’s another probability in the mix.
First off: I agree with your thoughts.
Apparently you do not have to pay back anything if you are the government.
You just print more money and away you go.
I would have thought the debt would have been so overwhelming we would crash but no....we print more digital money. We are not borrowing it we just make it. Foreign investors such as China and Japan only hold about 1/3 of our debt. The government and the people hold a whole dang bunch. Thats that printing money thing: just iou’s.
I do not believe you can cut enough spending to make a difference. Not saying we shouldn’t try but where do you do it: military? Domestic spending? Every year? The numbers seem miniscule compared to the massive debt we incur.
We want to strive for a merely balanced budget but you do not do that if you are paying 850b per year in interest.
In the end, you just print more money and everyone winks that its wealth.
Everyone does it. The Germans, the Chinese, the Japanese. So long as you piously make payments on the “debt” everyone goes along. When you miss them, SHTF as in Greece and Venezuela. Now Greece is “restructured” and properly penitent and they still go on.
So I do not know what the answers are. We still think that the govt. is run like our homes: you incur debt, you pay off the debt. You live within your means. But they have not done that for a century now. They pay lip service to the idea but they just make more money out of nothing.
When I hold that twenty in my hand, thats real money. But its not: Its just a piece of paper with some rag threads in it. Its only backed by my belief that its real and your belief that is real when I give it to you as payment. As long as we believe that fairy tale, we go on, none the wiser.
I’ve found the popular prediction that we’ll follow the Zimbabwean dollar model to be interesting. We have no choice but to share the declining wealth with some 40 million employees of the various levels of government instead of cutting spending and raising taxes or paying our dues for a bond collapse.
We will continue to be mesmerized and allowing nominations of the equivalents of Hillary, until the last of the opioid-addicted child descendants of tradesmen are clutching the latest smartphone while attempting to dig further into landfills for food and finally starving to death. Looks like the part about nominations is out the window for now.
Meanwhile, in the forming narrative, the fittest of socially adept, technically retarded, uncoordinated former government employees shall come out of their luxury bunkers full of gold and weapons in triumph, proving themselves to be Darwin’s fittest after all.
It’s quite a show indeed, as shown in media, entertainment and politics.
But it’s time now, to go out and finish a repair before cleaning up and giving thanks at dinner. ;-)
...and then maybe later, to check on some of the latest crop of highly pedigreed, philanthropic interns, as they continue to talk about starting a robotic, SHTF dream farm for the more equal folks.
Getting Trump elected was quite the slick but civil effort to begin to do things the right way. Hopefully, rudeness won’t be required to reverse the trend into hard socialism through incremental violations of the law of our land. Folks can take men out of machine shops in a country, but they can’t take the ingenuity out of men and women descended from northwestern Europe after Anatolia after Assyria after...
Yeah, there are puzzles here. Let those who’ve studied much history sort them out.
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