US Federal debt
federal debt of the US
What does this logical progression tell you?
*A large economy needs a larger supply of money than does a small economy.
*Therefore, a growing economy needs a growing supply of money.
*All money is a form of debt.
*Therefore, a growing economy requires a growing supply of debt.
*U. S. Federal Debt is the safest, most controllable form of debt, because the federal government, alone among borrowers, never will default.
*Thus, there is no federal debt or deficit problem, and a balanced federal budget guarantees recession, and depression.

US Federal debt

Why Do You Pay Taxes? Wrong! Taxes are Not a Solution to the US Federal debt
or to the US Federal deficit.

"They (tax cuts) should not be presented as a way to prevent an economic slowdown . . . Reducing the US federal debt should remain a priority, because it cuts debt service and leaves the nation in better shape to deal with future unexpected economic challenges. . . The last thing President Bush should do is jerk the nation back into the dreary era of federal budgets scripted in red." Editorial, Chicago Tribune, January 22, 2001. (Shortly after the Bush tax cuts, the nation began to recover from the recession caused by the Clinton surpluses.)  
            You are about to learn something not one person in a thousand understands. You will find it counterintuitive. You are about to learn the most important effect of taxation.
            Why does the federal government levy taxes? What would happen if the government did not levy taxes?
            If you ask most people why the government levies taxes, they will tell you, "To pay for goods, services, entitlements and as a solution to the US federal debt and US federal deficits." If you ask most people what would happen if the federal government did not levy taxes, they would answer, "The federal deficit and federal debt would grow and the government would go bankrupt." Are those your answers?

Click the cover to see excerpts from the book

Why Your Taxes Do Nothing for the Federal Government Budget

            The belief that federal taxes pay for goods, services, entitlements and government solvency, is behind the powerful "eliminate-the-national-debt" attitude, both in Congress and in the populace. This belief, though widespread, is false. Any belief that is both widespread and false, represents a grave danger.
            Federal taxation does not pay for goods, services or entitlements. Federal taxation does not solve a Federal Government Budget "problem" (although as you will see, taxes can solve state and local governments' budget problems.)
            Federal taxation has no benefits for our economy, for our government or for us -- no beneficial purpose at all. This pervasive, intrusive, much-hated, easily-abolished activity is worthless. Worse than worthless, it is harmful.
            In year 2001, the government will spend $8.72 billion on the IRS. This does not include the many billions that business and individuals spend on preparing and filing tax records. The wasted government spending benefits the economy, but the wasted business hours are a loss.
            The federal government creates money when it sells Treasury bonds, notes and bills, and prints currency. Corporations create money when they sell bonds to creditors. You create money when you take out a mortgage and when you deposit money into bank and money market accounts.  How is money destroyed? Who does it?

The US Federal debt is Federal Money.  The Effect of Taxation Is to Destroy Money

            When the federal government borrows, this increases the US 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 US 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.

           The sole effect of federal taxes is to destroy US federal debt (money), and/or to prevent the creation of debt (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.

Click the cover to see excerpts from the book

What Kinds of Taxes Hurt Our Economy?

            Some may argue that adding federal debt to our economy causes inflation. Historically, that is untrue. There is no historical relationship between the amount of U.S. national debt and inflation.

Because all taxes destroy money, all taxes hurt business and our economy.

            Taxes do not, cannot and will not ever help our economy. All federal taxes always hurt our economy by destroying US federal debt. Always.
            Every federal tax levied on business takes money from business and from our economy, which diminishes the ability of business to pay salaries, to conduct research, to produce goods and services and to market them.
            Every tax levied on individuals takes money from these individuals and reduces their ability to purchase, which then takes money from business and from our economy.
            Politicians try to impose taxes that will encounter a minimum of public outcry. Yet all taxes, whether so-called "harmless" taxes on cigarettes or "heartless" taxes on medicine and baby food, have three identical economic effects:
                        1)         All taxes destroy money.

                        2)         All taxes hurt business.

                        3)         All taxes hurt our economy.

            Even the import duties business often begs for, take money from the private sector and pass it to the government, which weakens business.

            News Flash: For Every Debit There Is a Credit

            For every debit there is a credit. For every debtor there is a creditor. For every deficit there is a surplus.
            When the federal government runs a federal budget deficit (creates money), our economy runs a surplus (receives money). When the government runs a surplus, our economy runs a deficit.

A federal government deficit = an economic surplus;

A federal government surplus = an economic deficit.

            Paying federal taxes does not help the federal goverment manage its budget. Money is not scarce to the government, which year after year, continues to prove it can print all the debt/money it needs, without limit.
            During the Reagan years, the amount of U.S. federal debt  rose rapidly, and our economy grew. Many people called this "false prosperity," because it relied on growing debt.
            Growing U.S. federal  debt is not false prosperity. It is prosperity.

 

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What does this logical progression tell you?
*A large economy needs a larger supply of money than does a small economy.
*Therefore, a growing economy needs a growing supply of money.
*All money is a form of debt.
*Therefore, a growing economy requires a growing supply of debt.
*U. S. Federal Debt is the safest, most controllable form of debt, because the federal government, alone among borrowers, never will default.
*Thus, there is no federal debt or deficit problem, and a balanced federal budget guarantees recession, and depression.


The Interest Rate Fallacy | Social Security Solutions | Medicare Solutions | Economic Solutions | Recession | Federal Debt of the U.S. | Federal Budget Deficit | Stagflation | National Debt Letters | Federal Deficit Solution | Balanced Federal Budget | Federal Deficit Problem | Federal Government Budget | US National Debt | National Debt Solution | A Child In Arms | Glossary of Economic Terms Debt, Money, Deficit, Spend, Owe | US National Debt Clock | Inflation and Stagflation | Pseudoeconomics   | Money supply and the weather | The Relationship Between Gold and Money | Social Security Reform | Does Federal Debt Cause Inflation? | The 5 Myths That Damage Our Economy | 10 Reasons to Eliminate FICA | Rodger M. Mitchell -- Ideas |