Taxation and spending are two different things though related.
TX Kevin
11

Taxation and spending are two different things though related. To reduce debt spending will have to be decreased or taxation will have to increase.

This is technically inarguable, except that we have completely different perceptions of “debt”. If you replaced debt with “private sector reserves” in your statement you’d be saying the same thing, but you might wonder why you said it. The word debt has such negative connotation that it is always ripe for political misrepresentation. Spending by congress (fiscal policy) creates currency and taxation “cancels” currency. That is the extent of their relationship, period. In fact, if you pay your taxes in cash it is most likely that your cash will be destroyed soon after you leave. Accounting for currency that is technically no longer currency presents Treasury with more expense than simply debiting or crediting the required accounts necessary with keystrokes, so it isn’t practiced.

Taxation is never a revenue source that enables spending. The monopoly issuer of currency doesn’t need your currency to spend currency. It is also technically impossible for it to “borrow” its own currency as a means of increasing the currency supply. When congress appropriates spending the Treasury issues corresponding debt instruments for sale to fund the spending, but this removes an equal amount of currency from the private sector as payment for the instruments, just like taxation except not permanent. It creates no currency at that point, but the price of the instruments serve to set bond prices and give an interest rate floor to banks and investors. The currency creation doesn’t take place until the instrument matures and is retired with “new” currency. This can be tracked by looking at the line item labeled “debt service” in any appropriations bill. The life of Treasury instruments to maturity is normally ten years and the interest accrued is almost always less than the inflation rate.

Too bad Obama paid that Trillion dollars in Stimulus money on …non stimulus / non infrastructure payoffs to political supporters.

Nothing I’m saying has a left or right. It is just how things actually work. If you think you can bait me into some knee jerk defense of Obama you’d be wrong, again. Obama either had no more clue, or was just as dishonest, as any President before him concerning how the government functions, which is the sad part of our current situation. Not many of the politicians we hire to manage the “economy” could describe the process of spending at the federal level and how it impacts the economy.

If you listen to any of them you come away with the impression that the private sector doesn’t exist and their job is to manage the “budget”, which is only half of the spread sheet that must be considered. If they spend a dollar and then tax back ninety cents they treat it as if a dime had been “lost” in the process. However, that dime went somewhere and stayed there, and that is the private sector. It was the only portion of the currency created that wasn’t “canceled” by taxation. It is our accumulated savings, or wealth, but is labeled as “debt” on the public side of the balance sheet so it gets treated like the red headed step child and beaten regularly. The only political statement I might interject here is that the left approaches the debt from the perspective of taxation of wealth, which is primarily what the debt represents. I have no confidence that they recognize this though.

Are you making a claim that capital investment by the private sector is at a low point? I am pretty confident that is not true.

Not at all. My claim is that capital investment is currently not creating jobs as promised by Reagan and his present day disciples. The most productive use of taxation is in directing investment in a carrot/stick relationship to investors that penalizes profit taking from paper shuffling while rewarding productive investment with lower rates. While profit is a primary goal of investing, risk avoidance comes in a close second. When Reagan took away the stick of taxation of paper profits, he left all of the carrots in place and congress has made a cottage industry out of selling more carrots in exchange for donations. The result has been a growth of the financial sector as a percentage of GDP from seven percent in ’83 to over twenty percent in 2016. This has given us much more inflation than the deficit spending has via bidding up of commodities and real estate to the detriment of the general economy that is currency poor already from a fiscal policy that ignores it completely in deference to a meaningless number on one half of a balance sheet that doesn’t even represent what it says.

Uh Reagan lowered capital gains tax which encourages investment which led to the roaring 80’s which was a period of marked prosperity overall.

Can you point to where I suggested increasing taxation? Since I’ve stated that taxes “don’t” fund spending and you are the one who insists on connecting them having a tax argument serves no purpose. I don’t even believe taxing business is a good policy in general, and I certainly don’t want to punish people for being successful in an economy that runs on people being successful. I’ll leave that for the liberals, which I am not, that are mired in identity and envy politics. My sole purpose is in turning around how we manage spending so that we are concentrating on improving the economy, not simply servicing a number. If people must be miserable to achieve some “balance” in a budget process then lets do the reasonable thing and remake the process, but I don’t believe that to be the case. We simply need to become aware of how the process works and then elect people who will best use that process to the benefit of the people instead of constantly beating square pegs into round holes.