George and Silent Dick's Secret Tax

We hear a great deal about taxes. Who should be taxed, and how much, are points of great controversy here in the United States (there in the United States if this is being read by persons not currently within our borders). There is a secret tax that is little noted nor long remembered and for all the Republican posturing, about how taxation stifles economic growth, the truth of the matter is never wholly acknowledged. If we accept the conservative premise that every dollar that the government removes from the private sector economy is a burden, then it follows that taxation is not the most important issue when it comes to our burdensome government. It would seem that government spending, not taxation, is the key to the government’s economically burdensome policies. When the government spends a dollar it must get that dollar from somewhere. In the simplest terms (I have neither the knowledge nor inclination to describe the many nuances that permeate this process) the government has three choices to get their dollar.

They can tax their constituents.

They can borrow money.

They can print money.

The ideology of our current administration is that the first option is bad. People work hard for their money and they should be allowed to keep it. If we take people’s money from them they will buy fewer things. If people buy fewer things then businesses will produce fewer things. If businesses produce fewer things then they lay people off or reduce wages. The cycle continues until every one is out of work and nothing is getting done. The opposite is then true by definition. Tax people less and they will spend more, so businesses must produce more, so wages go up and more people are employed.

We need to find a better way to fund our government. We can’t take the risk of sinking our economy through taxation. So let’s borrow that dollar we need for our government. The problem with borrowing money (as anyone with a credit card can attest) is the interest. The financial markets work under the same supply vs. demand laws that all other markets do. So every dollar the government borrows is a dollar a private citizen can’t borrow to buy a house or car, and a business can’t borrow to build a new factory or buy more supplies. If we take the money people want to borrow then they will buy fewer things. If people buy fewer things then businesses will produce fewer things. If businesses produce fewer things then… I’ve seen this somewhere before.

If only there was another way to fund our government that did not take money from the people who need it in order to fuel our economy. As a child I didn’t understand why the government had to borrow money. They have a printer. Print all you want to spend, and when you’re done print some more. As an adult, it’s remarkably obvious why it doesn’t work that way. Every new dollar the government prints and spends with out removing another dollar from circulation devalues the currency. Inflation! The economy, as a whole, works much like an auction the amount of money is finite and the amount of goods is finite, then the government shows up with new money and as a result prices go up. If we raise people’s prices they will buy fewer things. If people buy fewer things then businesses will produce fewer things. If businesses produce fewer things then… Hummm, back here again.

It doesn’t matter from a global economic perspective how the government gets its cash, it still has to take it from the economy. Therefore, borrowing and inflation become a secret tax. We don’t see a line item like “FICA” on our check, or “sales tax” on our bill. We don’t receive a statement describing our reduced buying power with our property tax forms. It all just happens so slowly that we don’t even notice unless we are reading a stupid blog.

This isn’t an attack focused on the current administration alone. I just couldn’t resist the title after I thought of it.