Don’t worry about the deficit—Part 1
Rarely am I so motivated to put fingers to keyboard and respond to those who would have us worry about the country owing money and the mindless refrain of, “Who’s going to pay for it?”
I addressed this one with the healthcare, I know, but it keeps coming up, like an ecoli laden burger, choking YouTube, the mainstream media and whatever else is being used for economic propaganda these days.
The evil tale goes something like this: Your country is just like your household. You need to balance your budget, right? You can take on a little debt but pay it off soon otherwise you’ll be deluged with interest, right? Sure we put in a few nice things for you like unemployment insurance and social security but look at the debt we owe, how can we keep this up, right?
At this point the speaker will start eyeing social security (possible UI, too) and start making arguments about how we just can’t afford it anymore, right? But, hey, maybe we could save it and privatize it? You get the picture.
This story is appealing to a lot of people because they understand it from their own life. Debt will hurt a household if you let it accumulate but the same is not true of a country. There are some important differences such as, you cannot tax the people in your household and you cannot print money.
You cannot print money
If you could then the question of, “Who is paying for Lamborghini?” is moot, my friends. Print up the pile of money, visit the dealership and miracle of miracles, they take your “money” and you drive off the lot doing 80 in second gear.
Ah, but you say, if the country could do that then why do we collect taxes? Well, there are few views on that, taxes are there to lower consumption or it creates demand for the currency.
As far as that first one goes, is there some reason why we would want to lower the consumption of a populace that is barely making ends meet with their real wages frozen for several decades? Nope. Although I do think that the Trump tax cut did a pretty good job of doing just that.
The second explanation makes more sense than the first. You absolutely need our beautiful dollars to pay your taxes but taxes are not used to pay for your government in any kind of balance-the-books kind of way.
You cannot tax your household
You could try, of course; if you had six kids and each one of them had six kids and you throw on a modestly progressive tax rate of say, 30%, that would start to add up nicely and you wouldn’t have to worry about the secret service knocking on the door. Sadly for you, the kids can just refuse and not show up at thanksgiving.
End of Part 1
