The U.S. Federal debt is Federal Money.
The Effect of Taxation Is to Destroy Money
When the federal government borrows, this increases the U.S. federal debt. The federal debt is money.
Money is created and added to our economy. What happens when you pay taxes?
Assume your tax bill is $1 thousand. You send $1 thousand to the government. You become $1 thousand poorer, since you receive nothing in return.
The government uses your money to pay the interest and principal on $1 thousand worth of U.S. federal debt, destroying the debt. When you pay $1 thousand in taxes, the amount of money in our economy is reduced by $1 thousand.
Taxation has two monetary effects: to destroy money or to prevent the creation of money.
(It also has a social purpose. Taxes on liquor and cigarettes are attempts to limit their use. The social purpose is irrelevant to this discussion, though the taxes themselves do hurt our economy.)
When taxes pay for goods and services, the taxes substitute for the creation of the money that otherwise would have been needed to pay for those same goods and services.
Click the cover to see excerpts from "FREE MONEY."
What do these data tell you?
U. S. Federal Debt reduced 29%. Depression began 1819.
U. S. Federal Debt reduced 99%. Depression began 1837.
U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
U. S. Federal Debt reduced 57%. Depression began 1893.
U. S. Federal Debt reduced 36%. Depression began 1929.
1998-2001: U. S. Federal Debt reduced 9%. Recession began 2001
The sole effect of federal taxes is to destroy U.S. federal debt (money), and/or to prevent the creation of debt (money). A growing economy requires a growing supply of money.
In general, does a large business need more money than a small business? The answer is obvious. General Motors must have more money to operate than does the corner tavern.
Does a large economy require more money than a small economy? Again the answer is clear. The economy of the United States of America must have much more money to operate than does the economy of California, which in turn, must have more money than the economy of Peoria.
In short, business is healthier in a growing economy, which requires the real supply of money (federal debt) to grow.
Some may argue that while a growing economy requires the real supply of money to grow, this doesn't prove that a growing real supply of money causes the economy to grow.
Increasing federal debt won't always cause immediate growth. Depending on circumstances, a money infusion only may inhibit a decline or collapse. For that situation, a greater infusion of federal debt is needed.
To learn more about the U.S. Federal debt, read FREE MONEY by Rodger Mitchell.