Hi Gary. I agree that our deficit problem is fundamentally one of government spending. The reason it is relevant to look at deficits as separate from all government expenditures is that it can tell us more about government's effects on interest rates and to consider the interest cost burden the government is imposing (which is spending without government service provision). There's also the lack of appropriate trade-off calculations when current government spending is financed by borrowing versus taxation that is immensely relevant. You might appreciate this post on fiscal illusion to get at the core of how borrowing impacts the overall size of the government. Lastly, if government had to finance all its spending with current taxation, it would inevitably run into a natural limit; government can extend its spending capacity by borrowing -- especially given that the government is viewed to have a much longer-term (some would argue infinite) time horizon.
I didn't hear back from you. I imagine you are busy.
Most people have a poor understanding of Public Finance, and tend to make bad deductions and conclusions. A bad premise draws minds to illusory issues and obscures the real and immense problems of government waste and Taxation's deterrent effect.
None has refuted my arguments on public debt and I can't see that anyone ever shall.
My entire argument centers on the idea of the deficit. If the deficit is as claimed by others, the borrowed portion of public expenditures, I am clearly wrong. If the deficit is as I claim - the whole of public expenditures, then economics and the world is about to undergo a transformation as broad as it is profound. One simple declaration changes everything.
God didn't put us on this earth to have the worst of Man rule the best.
I think you've wasted enough of your time chasing illusions.
When government taxes funds, savings fall. When government borrows funds, savings fall. The effect on interest rates is the same regardless of whether government taxes or borrows from resident citizens.
Government does not pay taxes nor lend funds, therefore the cost or burden of interest is not borne by government. It is borne by the resident citizens, and it is their finances that must be analyzed in order to decide on detriment or benefit.
The natural limit of taxation or heavy taxation is misery. Taxes are fines or penalties placed upon productive economic activity. The higher the tax rates, the less the amount of productive activity that occurs.
And yes, borrowing in conjunction with taxation gives government a freedom to spend that funding solely by taxation does not.
So what is the problem here? Is it that government doesn't tax enough? Or is it that government spends or rather commandeers too much of the resources of a community?
I think the latter. And your answer is to restrict government expenditures to funds garnered through punishing taxation, and, in doing so, crush the economy? This solution, incidentally, also takes care of the first problem of government not taxing enough.
So we know that taxation exclusively doesn't encourage a growing economy, and we know also that taxation in conjunction with borrowing permits elevated government expansion.
Is there a third option that would enable a growing economy and sharply limit government participation?
Let us say that government wastes 80% of what it spends. In the US, this amounts to about $7.2 Trillion of ~$9 Trillion spent. And let us say the deterrent of Taxation is about 40% meaning that an economy producing 100 units would grow to one producing 140 units if all taxation were abolished, that is an economy of $25 trillion growing to $35 trillion. We are talking about the possibility of adding approximately adding $17 trillion in wealth to the US economy each year.
The problem is finding a means to get us to this enriching scenario. And the answer is the abolition of all taxation and the institution of full public borrowing. As government must go cap in hand daily to its public bankers, corruption and waste shall decline to ~nil and the economy shall grow without a taxation constraint.
Hello Romina,
I don't think the 'deficit' is the problem you claim it is. There is a faulty premise at work that we all know, but refuse to act on.
All government spending is deficit financed, government having no money, or rather resources of its own. You may read all about it here ...
https://economart.substack.com/p/the-great-blunder-in-public-finance
Hi Gary. I agree that our deficit problem is fundamentally one of government spending. The reason it is relevant to look at deficits as separate from all government expenditures is that it can tell us more about government's effects on interest rates and to consider the interest cost burden the government is imposing (which is spending without government service provision). There's also the lack of appropriate trade-off calculations when current government spending is financed by borrowing versus taxation that is immensely relevant. You might appreciate this post on fiscal illusion to get at the core of how borrowing impacts the overall size of the government. Lastly, if government had to finance all its spending with current taxation, it would inevitably run into a natural limit; government can extend its spending capacity by borrowing -- especially given that the government is viewed to have a much longer-term (some would argue infinite) time horizon.
https://debtdispatch.substack.com/p/fiscal-illusion-and-deficit-spending
Hello Romina,
I didn't hear back from you. I imagine you are busy.
Most people have a poor understanding of Public Finance, and tend to make bad deductions and conclusions. A bad premise draws minds to illusory issues and obscures the real and immense problems of government waste and Taxation's deterrent effect.
None has refuted my arguments on public debt and I can't see that anyone ever shall.
My entire argument centers on the idea of the deficit. If the deficit is as claimed by others, the borrowed portion of public expenditures, I am clearly wrong. If the deficit is as I claim - the whole of public expenditures, then economics and the world is about to undergo a transformation as broad as it is profound. One simple declaration changes everything.
God didn't put us on this earth to have the worst of Man rule the best.
I think you've wasted enough of your time chasing illusions.
Here is a link to a short article explaining all this.
https://www.zerohedge.com/markets/case-government-borrower-limit-tyranny
Regards,
Gary Marshall
Hello Romina,
Thanks for taking the time to respond. So few do.
When government taxes funds, savings fall. When government borrows funds, savings fall. The effect on interest rates is the same regardless of whether government taxes or borrows from resident citizens.
Government does not pay taxes nor lend funds, therefore the cost or burden of interest is not borne by government. It is borne by the resident citizens, and it is their finances that must be analyzed in order to decide on detriment or benefit.
The natural limit of taxation or heavy taxation is misery. Taxes are fines or penalties placed upon productive economic activity. The higher the tax rates, the less the amount of productive activity that occurs.
And yes, borrowing in conjunction with taxation gives government a freedom to spend that funding solely by taxation does not.
So what is the problem here? Is it that government doesn't tax enough? Or is it that government spends or rather commandeers too much of the resources of a community?
I think the latter. And your answer is to restrict government expenditures to funds garnered through punishing taxation, and, in doing so, crush the economy? This solution, incidentally, also takes care of the first problem of government not taxing enough.
So we know that taxation exclusively doesn't encourage a growing economy, and we know also that taxation in conjunction with borrowing permits elevated government expansion.
Is there a third option that would enable a growing economy and sharply limit government participation?
Let us say that government wastes 80% of what it spends. In the US, this amounts to about $7.2 Trillion of ~$9 Trillion spent. And let us say the deterrent of Taxation is about 40% meaning that an economy producing 100 units would grow to one producing 140 units if all taxation were abolished, that is an economy of $25 trillion growing to $35 trillion. We are talking about the possibility of adding approximately adding $17 trillion in wealth to the US economy each year.
The problem is finding a means to get us to this enriching scenario. And the answer is the abolition of all taxation and the institution of full public borrowing. As government must go cap in hand daily to its public bankers, corruption and waste shall decline to ~nil and the economy shall grow without a taxation constraint.
Regards,
Gary Marshall