CBO: Federal Debt and the Risk of a Fiscal Crisis

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Now that we have established, that a Sovereign government does not need to tax to fund its expenditures. Then, the automatic question arises -- What purpose then does taxation serve? Once that question is answered, then one should ask the question -- in light of the above discussion, what really has been the truly corrupt act of the last 30 years.

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Your attempting to muddy the water; we are not debating the success or failure of political systems.

Aw shucks, I was doing my darndest not to muddy the waters. I listed "credit-based or other capitalist, communist, fascist, or socialist system" as examples of economic systems. You were asking for an example of an (economic, I presume?) system that followed my heresies and was successful. I could not think of a credit-based system (money is lent into existence) of any kind that was successful for a prolonged period of time either way. So it seemed to me your "success" criteria eliminated all contenders.

When I emphasize, as did Tymoigne in his article, financial limits, I mean that there are limits, just not financial. The point is not to print money willy nilly and drop it from helicopters, but rather the point is that price levels and the rate of economic activity drive the desired money supply, not the other way around.

If inflation heats up too much, as in the fine examples of hyperinflation posted above, then the fix is not to tighten the money supply. Simlarly, the fix for a bleeding open wound is neither to remove blood from the patient nor to bath the patient in blood! Rather provide money as needed so sustain economic life while addressing the underlying problem, such as crushing debt, a collapse of the productive economy or a supply shock of some critical commodity (food or oil, typically.)

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

what really has been the truly corrupt act of the last 30 years.

Gosh Rajiv, that's a tough question. So many contenders.

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Gosh Rajiv, that's a tough question. So many contenders.

I should probably change that to the last 50 years -- then the clock begins sooner, and I won't have people baying for my blood!

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Thank you for your example Rajiv. As quoted, the government appears to have been operating under constraints and conditions that were not outlined in Tymoigne's article.

Tymoigne's article certainly recognizes limits. His point in rebutting the CBO report was that the partcular limits the CBO was fussing over, such as "you can't tax or borrow that much!", are not limits that apply to a sovereign nation with its own currency.

The CBO figures the U.S. supply of Dollars is subject to exogenous constraints. External forces or institutions decide how much money should be pumped into the monetary system or limit how much can be pumped in.

Tymoigne figures the U.S. supply of Dollars is subject to endogenous constraints. Factors within the monetary system, such as price levels and transaction rates, determine how much money is needed.

Your body's blood supply is endogenous. Factors within your body, such as your weight and activity levels, determine how much blood you need. Except for a traumatic leakage or organ failure, you don't inject blood. Except to save up blood for such catastrophes, you don't draw blood. Even when you do inject blood, it doesn't fix the problem, just as food stamps, welfare and unemployment checks don't fix the problem. Such measures are temporary substitutes. If you don't like how much blood you have to keep injecting to stay alive, then stitch up the rupture in your femoral artery or get a bone marrow transplant.

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

I should probably change that to the last 50 years

Good grief, that just makes it harder. Even more choices!

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

The problem is alway the enforcement of said constraints and conditions.

Yes. Any sufficiently corrupt central authority can screw up any political, economic or monetary structure.

Taking it as a given that we have just such a "sufficiently corrupt central authority", it makes me wonder why I even bother trying to figure out how to make the system work better.

I guess I'm like a small mammal in a field of hungry dinosaurs. I study dinosaur biology not to make them healthier, heaven forbid. Rather I hope to learn better how to stay out from under their feet or inside their gut.

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

What purpose then does taxation serve?

It helps regulate the money supply, tyrannize the people serfs, and extort more money from the poor to give to the rich.

A sufficiently complex tax code (which the U.S. tax code certainly qualifies as) insures that everyone is a law breaker. That way, if someone "needs" a little time in jail, an excuse (some tax violation charges) can be found. Moreover, for every person who "gets caught", a hundred more teach themselves how better to bend over and take it in the wallet.

It's often politically easier to grant some rich and powerful constituent (and generous donator of political contributions) a tax loop hole than it is to grant them some benefit from the Treasury.

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Hint: I have provided my answer in another thread in the last few hours. You can then interpolate to the last thirty years

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

It helps regulate the money supply, tyrannize the people serfs, and extort more money from the poor to give to the rich.

Close - but no cigar! Look at the history of the income tax rates, and then look at when the biggest transfers of wealth from the bottom to the top took place. You will find that you are mistaken in your conclusions.

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Cow! Have you lost your tinfoil hat? The IMF is behind this.

Ooh ah - good catch!

Yes, I had noticed. Fear not however. My tinfoil hat is in good repair.

Here's my take on this. For some time now I've observed that some of the best work on understanding our economic and monetary systems has been coming from analysts at the IMF. I figure we're being set up with a good cop, bad cop routine. The Fed, Treasury, SEC, and Goldman Sachs are playing the bad cop team (*). The IMF and BIS are playing the good cop. When the time comes (not yet, we need some more "motivation" - economic pain and suffering - first) the IMF will ride in on its white horse to rescue the failed U.S. monetary system. This might happen as part of some world-wide monetary and debt reset and restructuring. It might actually "work" for a few decades, as did Bretton Woods after World War II. With any luck, I'll be dead and long buried before this too blows up catastrophically. It might also fail more quickly, as the monetary and reparation arrangements of the Treaty of Versailles failed rather too soon after World War I.

Have I redeemed myself?

(*) and doing a dang fine job of it too, I must admit.

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Close - but no cigar! Look at the history of the income tax rates, and then look at when the biggest transfers of wealth from the bottom to the top took place. You will find that you are mistaken in your conclusions.

I'm confused. Apparently from your comments on another thread, you consider the tax cuts to be the most corrupt act(s) of the last 30 or 50 years. I gave three purposes for taxes, the third being to take money from the poor and give it (at least indirectly, as I explained) to the rich. Is that not just what you found so objectionable about those tax cuts, that they helped the rich get richer and the poor get poorer?

I must be missing something here.

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

I gave three purposes for taxes, the third being to take money from the poor and give it (at least indirectly, as I explained) to the rich. Is that not just what you found so objectionable about those tax cuts, that they helped the rich get richer and the poor get poorer?

I must be missing something here.

Tax Cuts -- absence of taxes
Taxes - destruction of the money supply aka making the rich not so rich.

Rich -- People with a large portion of the money supply
Poor -- people not as well endowed as the "Rich"

[ThePythonicCow]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Taxes - destruction of the money supply aka making the rich not so rich.

Ah - my subtlety was not adequately conveyed. Perhaps if I use the phrase "tax code" rather than the word "taxes" it will be clearer.

My take is that the tax code has become a fertile ground for granting breaks to a few while soaking the many. That is, one of the purposes of taxes (of the tax code) is to arrange to take from most people, except the rich.

I'd go a step further in this. Once you pay your taxes (even while grumbling about it) you accept that that money is now the governments to spend. This is an essential step in obtaining the buy-in of the ordinary citizen to government spending projects that (sometimes not so obviously) benefit mostly the rich. So taxes (the tax code) impoverishes the poor and obtains their (begrudging) consent for projects that benefit mostly (albeit non-transparently) the rich.

[Rajiv]

Re: CBO: Federal Debt and the Risk of a Fiscal Crisis

Taxes - destruction of the money supply aka making the rich not so rich.

I am trying to drive home a few points, that are extremely important.

If we look at the top income tax bracket post WWII, till 1964 was ~91%.

As we have discussed above, the government does not need tax revenues to fund expenditure. So why was the top bracket so high? And if it was as high as 91%, why was it not 100%? What would happen if it was 100%?

Go back also to my reply to Dummass - re Ellen Brown -- and consider what was happening in Pennsylvania.