Government Spending is the True Tax

Democracy and Power 104: Future Debt Burden

A government debt is a government claim against personal income and private property – an unpaid tax bill. —Hans F. Sennholz

Government Spending is the True Tax

Increased spending is the gigantic mistake of the country’s recent “Budget Deal.”   Over the next two years, our government expects to spend $45 billion more.   Nobel Laureate Milton Friedman once taught us that government spending is the true tax: 

Keep your eye on one thing and one thing only: how much government is spending, because that’s the true tax … If you’re not paying for it in the form of explicit taxes, you’re paying for it indirectly in the form of inflation or in the form of borrowing.

As Friedman explained, this is an added $45 billion tax.  Unfortunately, few Americans realize they have just been taxed…again.  Meanwhile, politicians are ecstatic that the last minute “compromise” increased spending.  Senate Appropriations Committee Chairman, Barbara A. Mikulski (D-MD), equates the increased spending to winning a football game with an extraordinary field goal.

“I’m like a Raven: It’s the fourth quarter. There are seconds to go on the clock. And I’m ready to kick a 61-yard field goal,” said an exultant Mikulski, referring to Baltimore’s come-from-behind victory over the Detroit Lions on Monday Night Football.

Mikulski will not receive a Nobel Prize in economics and will likely become a former politician remembered only because her name will adorn a post office or another federal building.  However, in the near future, she will most-likely be re-elected and continue to work hard to dismantle the only law that actually reduced spending – the sequester, a miniscule step in the correct direction.

America must enact Constitutional restrains on spending.  In looking around the globe, Switzerland has a restraint on spending in relation to the country’s income.  Couple this standard with Friedman’s advise to hold down spending as a fraction of our income and we may have a solution to our looming financial woes:

The thing you should keep your eye on is what government spends, and the real problem is to hold down government spending as a fraction of our income, and if you do that, you can stop worrying about the debt.

The issue of our time is reducing government spending and enacting a structural restraint on government spending and ecstatic, incompetent politicians.  If we can hold down government spending to a fraction of our country’s income, we will save democracy and Western Civilization. 

Yes, it’s bit more important than kicking a field goal, and a lot more difficult to achieve.

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