When will these male Harridans realize that there screeds about taxpayer money are false and empty since the Federal government (FG) does not recycle tax receipts. The Federal government must spend before it can tax and when it taxes it does not do do to further its spending. Tax policy in America manages inflation, income distribution, market incentives and disincentives and as a means to measure federal program objectives. The sovereign government issues U.S. Dollars and then spends those Dollars, in accordance with Congressional appropriations, through it’s own SPENDING spigot into the Private Sector pot! Entrepreneurs in the Private Sector (PS) then use the Dollars the FG has issued and spent—leveraging them with bank loans and creative financing—to launch business ventures that generate private sector jobs and wages. Can this possibly be the way it actually is? Let’s see. As the FG spends, the number of Dollars in the PS pot grows. If the number of goods and services available for people to buy in the PS pot does not grow by an equivalent amount, the additional Dollars flowing in will cause prices to go up—perhaps dramatically. This is the “inflation” that Congressmen and economists are constantly warning against. To prevent this from happening—or to prevent the rate of inflation from getting disruptively high—there has to be some means for draining Dollars out of the PS pot. This drain is Federal Taxes. Drained out and DESTROYED, Dollars paid in Federal taxes ARE NO LONGER AVAILABLE FOR Private Sector spending—and, therefore, can no longer contribute to price-inflation. Why would the Sovereign Government destroy the tax Dollars it collects? Doesn’t it need those tax Dollars to pay for its spending? Shouldn’t the “drain” really be a sump-pump that lifts the tax Dollars back up and dumps them into the FG pot? It would be a mistake, though, to add the “sump-pump.” The reason is the underlying reality of what a U.S. Dollar actually is: It is simply a promise, by the U.S. sovereign government, that it will accept the Dollar as payment for a Dollar’s worth of taxes. That’s it. A Dollar—whether it’s a paper Dollar or an “electronic” Dollar—is nothing more than that promise. The sovereign government doesn’t promise to exchange a Dollar for gold or silver, or for anything else of intrinsic value. It promises only to accept the Dollar in exchange for the cancellation of a Dollar’s worth of taxes due. In other words, a Dollar is the I.O.U. of the sovereign government. The Dollar says: “I owe you one Dollar’s worth of tax credit.” This I.O.U. means a lot more to all of us in the Private Sector (households and businesses) because we also use this I.O.U. Dollar for our MONEY—we use it to buy goods and services from each other, to invest in business ventures, and to save for future spending in our retirement. But at its most official heart, the U.S. Dollar is simply the I.O.U. promise of our sovereign Federal Government. This underlying reality of what a Dollar actually is has a lot of importance. First, it tells us why we (all of us citizens working in the Private Sector) are willing to accept Dollars in exchange for our very real goods and efforts: Because we need those Dollars in order to pay the taxes we owe the Federal Government! We can’t pay our taxes with apples or Pesos. We can only pay our U.S. Taxes with U.S. Dollars. So that’s why the FG SPENDING spigot works in the first place—because all the citizens and businesses in the Private Sector are willing to provide goods and services to the Federal Government in exchange for the Dollars they need to pay their Federal Tax bill. The second thing the underlying reality explains is why the Dollar is “DESTROYED” when it is used to pay U.S. Taxes. You give the Federal Government back its I.O.U., the FG declares your taxes paid, and the I.O.U. is cancelled. That I.O.U. is of no further use to the Federal Government. It is illogical for the FG to “keep” an I.O.U. that says it owes something to itself. It could recycle the I.O.U. and use it to buy new goods and services from the Private Sector. But even that is illogical, because it is far easier and more efficient, when the Sovereign Government needs to spend again, for it to simply issue a new I.O.U. This is especially true since the vast majority of Dollars issued and spent are electronic—simple keystrokes on a computer screen. So the “TAX DRAIN” really is the correct RESULT! Federal taxes drain Dollars out of the Private Sector pot and—POOF!—they’re gone. For a complete proof of the above please see J. D. Alt: neweconomicperspectives.org/2014/01/diagrams-dollars-modern-money-illustrated-part-1.html
Posted on: Sat, 23 Aug 2014 22:55:10 +0000
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