Every time we “Pay” our Bills we go deeper in debt

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Are you all hearing this lunacy?

“The Obama administration has said it will not negotiate over the debt ceiling, arguing Congress needs to act because the issue isn’t whether to approve new spending but whether the government should pay the bills it has already racked up.”

Treasury Secretary Jack Lew told congressional leaders Tuesday night…

“If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history,”

What a crock!

They want me to believe that the US has always paid it’s bills but somehow, despite our flawless record, we’re over 16 Trillion in debt. Hmm? Call me crazy but the last time I checked paying the bills means you owe less than you did before.

The truth is we have to borrow money to give to the people we’ve borrowed from in the past. This is not “paying” in a strict sense. Payment is the cancellation of debt. We are not paying our bills. We haven’t paid a bill in years because we haven’t cancelled a debt. We’ve only shifted our ever increasing debt around.

The debt ceiling is the amount of money the US government is legally allowed to owe. At some point we will not be able to borrow any more because no one will loan us the money needed to keep those we’ve already borrowed from off our backs. Then the taxes will have to be raised or the printing presses will have to be fired up to cover maintain the charade of prosperity.

Ugh!

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31 responses to “Every time we “Pay” our Bills we go deeper in debt

  1. We baby boomers are retiring over the next 14 years. The only way to avoid passing on the $17 trillion debt to our children is by paying it off ourselves, before we retire.

    Spending does not cause debt. Only borrowing can cause debt. Therefore we must raise taxes at least twice: First to end deficit spending. Second to begin paying down the debt.

  2. It seems to me that the best way to eliminate deficit spending (borrowing) is to spend less, not raise taxes to accommodate the massive spending that persists. Taxes are theft and the revenue generated by the private sector is not a stream of income that is unaffected by having a portion of the wealth production generates confiscated. When the State takes more it necessarily alters the output because capital that would otherwise go towards productive means, is not available. All government activity hampers the market to some extent because government is not funded voluntarily, but rather, exists as a parasite on the productive market.

    “Spending does not cause debt. Only borrowing can cause debt.”

    This was exactly my point. So it is obvious that we are not “paying” our bills as the president suggests, but rather, borrowing more to cover the costs of past borrowing. Payment is the cancellation of debt. If after you’ve “paid” you owe more than you did before, you have not paid at all. You have borrowed and shifted your debt from one entity or person to another.

    This is why both the quotes I posted above are a crock. They are misleading to someone who cannot think critically about economic issues.

  3. I get your point about the two quotes. But I believe Obama was pointing out that the budgets were already passed, and if congress requires spending but fails to match that spending with taxes, then it logically must consent to borrowing.

    The fight has to be up front, in the budget. It cannot be over taxes and it cannot be over borrowing. Once you’ve authorized spending the money, it is too late to argue over taxes and borrowing, except to choose one of the other.

    I agree with Sen. Mark Warner who pointed out, “Federal spending is at an all-time high of 25 percent of our GDP, and our government revenue is about 15 percent of GDP, a 60-year low. We need to recognize that the only way to close that gap and restore fiscal stability is to attack both sides of the ledger.”

    Calling taxes “theft” and signing pledges refusing to raise revenues is not a rational approach to the problem.

  4. “When the State takes more it necessarily alters the output because capital that would otherwise go towards productive means, is not available.”

    Whoa! Government spending is just as productive as private spending. In fact, with the borrowing, one might argue it was more productive. :-)

    Some goods and services are provided by the private sector. Some goods and services are provided by the public sector. Some are even provided by both. But goods and services are still GDP no matter who provides them.

  5. “Whoa! Government spending is just as productive as private spending.”

    This cannot be the case. Who spends your money more efficiently, you or me? Well, I would hope you’d see that If I took your money by force, I’d more than likely part with it for far less than you would. Why? Because I didn’t have to work for it. I just took it. I forcefully replaced my preference for yours in determining how your property is utilized.

    Look into the law of marginal utility and the law of diminishing marginal utility.

    Here is a quote that might shed some light on the situation…
    “Since the state is not constrained by revenue, it can effectively outbid potential competitors for whatever resources are necessary to complete the spending program. There is no need to economize dollars, because the state can borrow, tax, and simply create more in order to finance its purchases. Ultimately, this distorts the entire notion of scarcity, because government can acquire any economic good at any cost. The role of prices in aiding individuals in making their decisions when economizing means is effectively nullified, because, to the government, prices are almost irrelevant.” http://www.mises.org/daily/5123/

    “The consequences of government spending are best understood when laid against the backdrop of market activity. We live under the specter of scarcity — a corollary of human action and the fundamental scarcity of labor — and thus all economic goods, which are defined as scarce to begin with, are economized on the market through the processes mentioned above. Government spending, whether done directly or through subsidies, redistributes resources from the individuals who would have economized them and instead allots them toward less-preferred ends. Thus, even if a government program ultimately turns a profit, the opportunity cost represented by the foregone production represents a net loss to society.” http://www.mises.org/daily/5123/

    Are Government Jobs Productive?

    http://mises.org/daily/5772/

    Economics in One Lesson by Henry Hazlitt

    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDUQFjAB&url=http%3A%2F%2Fmises.org%2Fbooks%2Feconomics_in_one_lesson_hazlitt.pdf&ei=-WFQUrbSEY_I4APmz4HgBg&usg=AFQjCNEN0ON_Z7DhWPe-kk4RBFliqMwRlQ&bvm=bv.53537100,d.dmg&cad=rja

  6. Raising taxes diminished production which means there is less to tax in the future. Every king and government throughout history knows that you risk killing your cash cow (society) if you dare take too much, to quickly. They try to strike a balance so that the productive portion of society can continue to be extorted.

    This is a spending problem, a central bank and fractional reserve banking issue, a currency issue, a scope of government issue. This is not an issue that more spending, more borrowing, more inflation, more government can fix.

  7. Here’s hoping you understand the quotes as well as I believe that I do.

    First, Mises is incorrect in his assumption that we are operating under conditions of scarcity. We are not. We seem to have an abundance of goods and services at hand, and an excess of labor that private enterprise cannot keep employed. And we even have an excess of money lying around, more than can be put to good use. (Hey, I’ve got an idea, let’s pay down the $17 trillion debt!)

    Second, Mises is incorrect about the state’s willingness to print money. If you were around during the Carter administration when we had double digit inflation, you’d understand why the Fed is deliberately constraining interests rates. So, Mises may (or may not) have been correct then, but he certainly is not correct now.

    Third, Mises is incorrect about the state’s willingness to tax. Consider that nearly every Republican and even a few Democrats have signed a pact with the devil (Norquist) to not raise taxes under any circumstances. Frankly, at this point in our history, we really need to be a lot more willing to tax! But, to continue…

    Fourth, Mises is morally misleading when he says “Government spending, whether done directly or through subsidies, redistributes resources from the individuals who would have economized them and instead allots them toward less-preferred ends.” (a) Any individual with excess income may lose the motivation to economize. (b) The presumption that repairing crumbling bridges is a “less-preferred end” is pretty outrageous.

    Fifth, … oh, well that appears to be all there is here. Oh, wait. Taxes are ethically equivalent to rent. They are a condition of your living within the state’s territory. They pay for those bridges we mentioned, plus the laws that secure your rights to your life, liberty, and property, plus a great many other things. These things cost money. And, if you claim to be a citizen, then you are a party to the contract that resulted in your tax bill.

  8. Raising taxes does not diminish production. Tax revenue is spent almost immediately, which means it immediately returns back into the economy. Spending, private or public, stimulates the economy.

    And raising taxes seemed to work fine during Clinton’s administration and even resulted in an annual surplus. Cutting taxes did not work for Bush. But I don’t blame Bush for the economy. American factories followed the cheapest labor, first moving from northern to southern states, and then to Mexico, India, China, etc. Tax policy was pretty much irrelevant to the job losses.

    However, tax policy was very relevant to the annual deficits. As soon as we stopped running a surplus, we should have dropped the Bush tax cuts. As soon as we went to war in Afghanistan, we should have raised tax revenue. And when we went to war in Iraq, taxes should have gone up a third time.

    The point of taxes is very simple: to pay the bills.

  9. “First, Mises is incorrect in his assumption that we are operating under conditions of scarcity.”

    I reject this notion. All man must forgo certain goals in favor of the most pressing need. This is due to the scarcity of time. Resources are also scarce in the since that there is never enough raw resources to achieve every possible end which would requires their use. How resources get allocated can only be considered productive in a system of voluntary exchange where owners dictate how property is utilized or not and what actions are believed to achieve the ends which are believed to be most advantageous.

    I’m not going to comment on the rest since the rest of your comments stem around the denial of scarcity.

  10. “Raising taxes does not diminish production. Tax revenue is spent almost immediately, which means it immediately returns back into the economy. Spending, private or public, stimulates the economy.”

    This is false. Spending matters little without production. Production is the foundation of the economy. This is why if everyone received 1 million dollars tomorrow, no one would be any richer. The increase in dollars would still be chasing a limited amount of goods. You want an increase in the welfare of humanity, it must start with an increase in production. Not just any production but production of the things that consumers want and need. There is no method to better determine what consumers want and need other than the free market. Every interference by government into the relationship between the producer and the consumer distorts market signals which otherwise would dictate how scarce resources are implemented to meet he most urgent needs of the consumer.

    If I take your property and give it to someone else or utilize it for my own ends, it goes without saying that there is a net loss to you. Theft is not productive. Redistribution of wealth denies private property rights and misallocated resources in the same way that me stealing your property will always result in your property being used towards ends that only you rightfully have the authority to determine.

    You will always utilize your property in a manor which you believe best satisfies your needs and wants for the least expense to you. I on the other hand would gladly take all your assets and trade them for a big gumball. Government distorts the pricing mechanism that is engrained in individual preference. Why do you think that the cost of things goes up when government starts throwing other peoples money at it? It’s because a thief will always be willing to trade someone elses property away for less than the owner would.

  11. The “scarcity of time”? But that is disproved automatically by the abundance of everything else. Obviously there has been sufficient time, because the goods and services are all over the place. Got a cell phone? And a tablet? And a car: gas, hybrid, electric?

    There can be no logical claim of a scarcity of time when there is an excess of labor sitting on its hands.

    “How resources get allocated can only be considered productive in a system of voluntary exchange where owners dictate how property is utilized or not and what actions are believed to achieve the ends which are believed to be most advantageous.”

    And I repeat: got a cell phone? etc.

    One more point. Government is also a voluntary exchange. Taxpayers (customers) elect representatives (buying agents) to purchase for themselves desirable goods and services (roads, law enforcement, several economic safety nets, a national defense, homeland security, etc).

    It is false to clump everything bad with government and everything good with private enterprise. It is false to pretend the economic effects of government are non-productive.

    Something to think about. How does one acquire and sustain a collection of false beliefs outside of a church?

  12. Got the gist of the article. I’d favor any means to mitigate the bad effects of CO2, especially to get the beneficial effects. After all, its what plants breath in. But a few greenhouses may be insufficient to compensate for the vast acres of rainforest being cut down daily to build houses and clear the land for raising crops and cows (methane).

  13. “Production is the foundation of the economy. This is why if everyone received 1 million dollars tomorrow, no one would be any richer.”

    Amen! Money is worthless except to spur the exchange of goods and services.

    “No just any production but product of the things that consumers want and need. There is no method to better determine what consumers want and need other than the free market.”

    The market reflects the things the consumer wants from private institutions. The government reflects the things that consumers want through public institutions. BOTH provide goods and services. BOTH are means of consumer spending to attain their wants and needs.

    “Every interference by government into the relationship between the producer and the consumer distorted market signals which otherwise would dictate how scarce resources are implemented to meet he most urgent needs of the consumer.”

    Generally speaking, the government does not interfere with the relationship of the producer and consumer except to provide regulations necessary to protect individual rights. The FDA for example prohibited the sale of Thalidomide in the U.S. and saved us from hundreds of deformed babies that were the result in other parts of the world. Laws prohibit the use of child workers in factories and provide a minimum wage. So, different kinds of regulations may be seen as beneficial or harmful and we want the minimum regulation necessary to protect the rights of the people involved (competitors, workers, customers, etc).

    Theft is not productive, of course. But taxes are spent producing goods and services. If Mises or anyone else denies that, they are clearly wrong. (Consider tanks, drones, etc in the military, the roads and bridges, salaries for judges, etc etd etc)

    “Why do you think that the cost of things goes up when government starts throwing other peoples money at it?”

    Well, isn’t it up to us to make sure that government does not waste our money?

  14. “Well, isn’t it up to us to make sure that government does not waste our money?”

    I suppose this argument begs the question, how anyone can spend someone elses money and not waste it. If a thief comes into my house and steals my money, does it matter to me that he uses it to do something he thinks will benefit me. No. My property is mine to do with as I see fit – within the realm of possibilities that do not directly harm others without there consent. It does not matter how someone else uses my property – for them to take it by force and use it at all constitutes theft and is a violation of property rights.

    When government takes my money and uses it to do things that it tells me are for my benefit, there is no difference between them and the thief. There is no means to determine how many roads or bridges consumers need or want because government work in not voluntary – it is forced on us. What individuals decide to to with their money and resources is the only mechanism for determining what is valued and what production is truly meeting the needs of society.

    Maybe government allocates too much money and resources in roads or bridges. Perhaps there are people who are homeless and hungry right now because government decided to confiscate capital from those who generated it by providing a service or good that people voluntarily exchanged their money for – that could have been put toward any number of things (creating more job opportunities) – but instead was forceably extracted by government to build a billion dollar bridge. You see when your revenue is acquired by force there is no mechanism to determine that what you are doing – the services you provide, or the utilities you build – are truly desired or if the time and energy and resources that go into any endeavor is truly a productive pursuit.

  15. Taxes are not voluntary.

    http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=9&ved=0CGUQFjAI&url=http%3A%2F%2Fwww.irs.gov%2Fpub%2Firs-utl%2Ffriv_tax.pdf&ei=gsdQUs3kI5Wj4AONmoDgAQ&usg=AFQjCNHVVsxGNBkibZHzHplgkG8dZREfaA&cad=rja

    When someone takes money from you under the threat of penalty if you do not comply – that is theft. There is no basis for any argument in favor of government spending on the grounds that consumers demand certain services from government.

  16. Market demand for cows and crops dictates the clearing of land but at some point that demand will be satisfied. There is no need to starve people or deny them meat and vegetables under the assumption that they will cut all the trees down. In fact the very best way to ensure that the demand for cows crops remains high is to have a government step in an create artificial shortages by demanding that producers limit their production in the face of demand. The shortage that will result will increase profit margins on these goods and in turn generate more incentive for producers to clear the land.

  17. “Market demand for cows and crops dictates the clearing of land but at some point that demand will be satisfied”

    The demand will never be satisfied so long as population continues to grow. There is a common, but mistaken belief among Libertarians that markets are “self-regulating”. There may be some truth there, but it is too often contradicted in reality to be sustained by facts.

    I think you are operating under a false economic model. The earlier quotes from Mises seem to confirm that.

  18. A free market is self regulating. We do not have a free market. The signs that you see that lead you to believe that regulation is necessary are precisely the evidence that lead me to believe to much intervention and regulation has brought us to this point.

  19. A free market is rooted in individual liberty. I propose that when society can maximize liberty prosperity will follow. Sadly too many have been indoctrinated with the idea that freedom is dangerous and that chaos is thwarted by government control of everything. This is not the case as I see it. People seek to control others by the force of government. This Imo is an obsticle to prosperity and partially to blame for the need we witness in our country and around the world. I want no government for everyones benefit. You and many others see government as a source of prosperity. We couldn’t be further apart in this regard.

  20. “how anyone can spend someone elses money and not waste it.”

    By using it to produce valuable goods and services, obviously.

    “My property is mine to do with as I see fit – within the realm of possibilities that do not directly harm others without there consent. ”

    I suppose the question “Whose face is on the coin?” is less relevant today with credit cards, But keeping the value of a “dollar” consistent is a service performed by the Fed. They’ve been protecting the value of the dollar against inflation for many years now. Back in the Carter administration inflation averaged 12.5% ! (Wikipedia).

    Taxes are ethically equivalent to rent. If you enjoy the benefits of living within the territory of the United States, then you are legally required to contribute to the cost of its maintenance.

    Calling taxes “theft” is like calling your landlord a “thief” for requiring you to pay the rent. The landlord is ethically and legally entitled to the rent.

    The money is truthfully his and not yours to spend as you please.

    The same is true for the state and nation you voluntarily chose to live in. You have an ethical and legal obligation to pay taxes.

    If you are not a citizen, then what the government does with the money is none of your business.
    If you are a citizen, then you may tell your elected representative to spend it here and not spend it there. But you are not the only citizen. There’s all the rest of us. And we may have our own ideas.

    How is this conflict resolved? The legislature democratically votes to decide what programs to finance.

    Most of us have the good manners to respect the authority of the decision even if we disagree with it. If we believe we are in the right, then we’ll try harder next time.

    But we won’t go around calling each other “thieves”, because we have previously agreed how to resolve these matters peacefully, and the majority won legitimately.

    Here’s the thing. It’s not just that you got this wrong. But whoever you have been reading, and whoever you have been listening to, has also got this wrong.

  21. “There is no basis for any argument in favor of government spending on the grounds that consumers demand certain services from government.”

    Then why is it that I feel I am getting my money’s worth by insuring that everyone has access to health insurance? It is clearly working for me. That is a service that I believe government should provide by laws mandating insurance coverage.

    Should I go down the list of other services? Do you want to consult opinion polls about things like Social Security and Medicare? How about public schools?

    Clearly there is no basis for you saying I have no basis.

  22. “There is nothing government can give that it did not first take from someone else.”

    Not quite clear about the sense of your meaning. Let’s try this:
    There is nothing the market can give that it did not first take from someone else.

    To me, the two statements are identically true or identically false.

  23. Marvin your missing the simple point. You have a gun to your head and someone is demanding that you hand over a portion of the fruits of your labor or else face the consequences. But rather than see this for what it is, you are convinced that its for your benifit. I cant get on board that ship.

  24. The unregulated market exploits child labor, fires the injured worker without compensation, operates hazardous factories with insufficient exits and safety precautions, defrauds customers, endangers customer health and safety, etc.

  25. In a free market all exchanges are voluntary. The government literally takes your money. If you refuse they put you in a cage. If you resist they will kill you. You have no other option but to comply. The market punishes people who do these sort of things. Because it is immoral.

  26. “A free market is rooted in individual liberty.”

    But who will look out for the rights of the workers, the customers, the competitors, and the public in general?

    “I propose that when society can maximize liberty prosperity will follow.”

    Bernie Madoff was doing pretty well while his liberty was maximized, but only Bernie was prosperous.

    Hey, everybody is in favor of Liberty. But we are also concerned about it’s abuses.

    “People seek to control others by the force of government.”

    No. People seek to maximize their liberty without doing unnecessary harm to other people and their rights. That is why we formed the state in the first place. Have you read the Preamble to the Constitution?

    And it is impossible to restrict one person’s freedom by law without equally restricting oneself. So it is not in our self-interest to “seek to control others by the force of government.”

    “I want no government for everyones benefit”

    Then you’ll need to prove you have a better mouse-trap. It makes no sense to eliminate an existing system without understanding it well enough to replace it. Every problem that the current system addresses must also be addressed by your system. And I don’t have the impression that you actually understand the current system well enough to replace it with anything.

  27. But you are on that ship. And the captain has come to ask for your ticket. And if you board the ship without the intent to pay, then he is not the thief, you are.

  28. “In a free market all exchanges are voluntary.”

    You mean like when you board a ship, you have to buy a ticket. Like you say, all exchanges are voluntary, including the exchange of your taxes for permission to enjoy a ride on the ship of state.

    “The government literally takes your money. If you refuse they put you in a cage. If you resist they will kill you.”

    At each point of conflict, it was you that initiated aggression. First you refuse to pay your taxes, a bill that you ethically and legally owe. In response, the court sends a policeman to arrest you. He asks you to come along with him, but instead you pull out a gun and tell him to get lost. To defend his life he shoots you.

    I don’t know who told you that taxes were theft, but they lied to you. Any author of any book you’ve read who told you that taxes are theft has lied to you. Any pundit on television or radio who told you that taxes are theft has lied to you.

    So why should you believe me.

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