Posted by: James Atticus Bowden | May 22, 2012

3 Bad Ways the Feds Get Money

US Treasury Secretart kowtows to Chinese because he must.

The 3 main ways the Federal Government gets money are bad.  The 3 ways are taking money in taxes, borrowing money in bonds, or printing money on paper.

Taking money in taxes kills jobs.  Because capital creates jobs.  Let’s say one quarter equals one job.  Every quarter taken out of the economy kills a job.  The money (averages about $50k) circulating in the economy would create and sustain one job.  So, every dollar taken out of the economy kills 3 to 4 jobs.  If it is spent by the Federal government as a stimulus to create jobs, the whole dollar only produces about a quarter’s worth of work.  3 to 4 jobs are killed to create one job – that only lasts as long as the taxes keep getting taken and spent.

Borrowing money in bonds crowds out other capital.   If the capital is spent buying government bonds it is not spent elsewhere.  Like corporate stocks and bonds.  So businesses which produce capital with the capital invested in them have less capital.  A dollar in the economy, over time, produces many more dollars.  So the dollar kept in the economy – starts by paying for 4 jobs.  Over time it creates 12 jobs or more. 

Borrowing money creates debt.  If your family income is $50k and you have a $55k credit card bill and a $300k mortgage, a $40k car loan and $30k school loans – what is your financial situation?  Should you borrow more money?  If you die and your children inherit your debt, how much of their pay check must be spent to pay off your debt?  What will happen to their standard of living?

Printing money on paper is called Quantitative Easing these days.  If you just printed money it would be called ‘counterfeiting’ and you would go to jail.  When the Federal Government does it, its called by its acronyms: QE I, QE II, QE III.   The multiple efforts indicate how many times it has failed in its current form. 

Printing money creates inflation.  This inflation may temporarily prop up the stock markets because the extra money has to go somewhere.   2 dollars are circulating in an economy where 1 dollar was being used to pay for goods and services.  The dollars are phony money.  They aren’t real capital.  They are the source of inflation.

Inflation punishes the poor and persons, especially seniors, on fixed incomes.  It robs anyone who has saved any money.  A dollar saved through hard work loses its value – and becomes worth 90 cents, then 75 cents, etc.   Creating inflation should be a criminal offense.  It is a crime against The People. 

Those 3 bad ways the Feds get money indicate why the smaller the Federal Government, the better.  Some money must be taxed for the limited powers the Federal Government is supposed to perform (see the 1787 U.S. Constitution as amended). 

The fees, import duties and gifts the U.S. Government gets are not bad ways for Feds to get money.  They are much smaller sources of revenue than the bad ways. 

If $1 trillion in real capital is kept in the economy by taxing and spending less in one year, then about 2 million jobs will be created.  And, over time, about 6 million jobs will be created.   This is what President Romney MUST do from day one in January 2013.

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Responses

  1. Reblogged this on Citizen Tom and commented:
    Here is simple post, just a little basic economics. I would just like to add a couple of notes of clarification. When you read about the three bad ways the Feds get money, remember two things: (1) with the exception of inflation, we have the same problem with state and local governments, and (2) government does not produce wealth. Because government does not produce wealth, it must take it from us. If government actually produced wealth, government would not need to tax us.


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