An alternative to popular faith

On 4/7/10, The New York Times wrote: “G.M. reiterated a commitment to pay off the balance of its debt to the American and Canadian governments by June. It made payments totaling $2.8 billion, including interest, in December and March toward an initial balance of $8.3 billion.”

That’s $8.3 billion leaving the U.S. economy and disappearing into the American and Canadian governments’ maws, never to be used or even seen, again. Financially, this is an $8.3 billion invisible tax increase – about $28 taken from the pockets of every man, woman and child in America.

The New York Times article continued, “Most of the $50 billion G.M. borrowed was converted to a 61 percent equity stake held by the Treasury Department. The only way the Treasury can recover that debt is through the sale of its stock. (Chief Financial Officer Chris) Liddell said a public stock offering would occur ‘as soon as it makes sense,’ but only “when the markets and the company are ready.”

The private sector will lose whatever the government receives for its stock – another invisible tax increase. The $50 billion will amount to $166 in stealth taxes taken from each American. In addition, the stock sale will depress the value of privately held stock, a loss for American shareholders.

Question: What is the difference between a federal government profit and a tax increase? Answer: Essentially none, if the profit comes out of the U.S. economy.

Moral: The federal government, as the creator of money, never should take money from the private sector. Ask your Congressperson: “If the deficit spending, for which you voted, stimulates the economy, what will be the effect of taking all those billions back out of the economy?”

Amazingly, the media and the politicians, and even some economists, will ignore the pain experienced by people in the private sector and cheer the government’s not taking a loss.

And that is why we have a recession every five or six years, in America.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com