An alternative to popular faith

The media frequently claim federal deficits spend taxpayers’ money. This is, as Star Trek’s Mr. Spock said, “illogical.”

If deficits spent tax money, they wouldn’t be deficits. “Deficit” means spending beyond tax receipts.

“Ah,” you say. “But our children and grandchildren will pay the taxes.” Wrong again. There is no historical relationship between tax rates and deficits. In more than 50 years, tax rates have gone down or remained level, depending on your income. This, despite huge deficits and even a couple surpluses.

Tax rates 60-09

Since taxes do not supply the money for federal spending (the government creates money ad hoc, for all its spending) your children and grandchildren will not pay for today’s deficits, which can and will continue forever.

So don’t be concerned if GM and Chrysler don’t pay back their loans. In fact, be concerned if they do. Any payback merely takes money out of the economy and costs jobs — call it an “anti-stimulus” — and doesn’t put one penny in your pocket.

Rodger Malcolm Mitchell
For more information, see http://www.rodgermitchell.com