An alternative to popular faith
You have been led to believe recessions are an unavoidable part of the natural business cycle. Like bad weather, there is nothing we can do to prevent them, and when they come, we simply must deal with them.
Wrong. Recessions neither are unavoidable nor natural. They always occur because of mistakes, both innocent and deliberate, by our political leadership.
Today we experience a classic example. For the past two years, the economy has experienced a money shortage, also known as a recession. In belated response, the government properly has pumped stimulus money into the economy via deficit spending. This addition of money to a money-starved economy is beginning to help (though the stimulus has been too little and too late — but that’s another story.)
Where did the government obtain the stimulus money? Not from taxpayers. The definition of “deficit spending” is money spent without taxes. The government created the money simply by crediting bank accounts and debiting its own balance sheets. Despite what the media say, tax payers and tax money, which never pay for federal spending, were not involved.
Read this article — wording in green:
“1/15/10: WASHINGTON — President Barack Obama told banks Thursday they should pay a new tax to recoup the cost of bailing out foundering firms at the height of the financial crisis.”
If stimulus spending helps the economy grow, what will new taxes do? Right. Help the economy shrink.
“‘We want our money back,’ he said.”
He neglected to indicate who “our” is. Surely not the American public, who have paid, and will pay, nothing for the bank bailout funds. And why does the government want the money? It has no use for it. In fact, money sent to the government immediately is destroyed when federal balance sheets are credited. The government has the unlimited ability to pay bills by crediting bank accounts. Unlike you, me and every other U.S. entity, the government does not use income to pay its bills.
“In a brief appearance with advisers at the White House, Obama branded the latest round of bank bonuses as ‘obscene.’ But he said his goal was to prevent such excesses in the future, not to punish banks for past behavior.”
Typical populist rhetoric, fomenting class warfare. He’s a benevolent Robin Hood, taking from the rich and, oh yes, also taking from the poor by removing money from the economy. Taxing banks does punish them, but President Obama doesn’t want to punish banks. Sure. Believe that and I have some costume jewelry I want to sell you.
“The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion over the decade, according to administration estimates. ‘If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers,’ Obama said.”
That’s $90 billion to be ripped out of the economy and destroyed. Does anyone really believe they will see one penny of that $90 billion? Does anyone believe that will put even one nickle in their pockets? If so, contact me about that jewelry.
“Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.”
Instead of paying bonuses and salaries to living people, who then will pass the money on by spending and saving, the government wants the money extracted from the economy, then sent to the government, where it will be destroyed. (If you don’t believe the government destroys all money sent to it, tell me where the government stores the tax money it receives.)
By the way, did I mention that President Obama has other populist taxes in store for you? Think about the tax on what he calls “Cadillac” health plans.
And this is why future recessions are certain. They neither are normal nor unavoidable. They are caused by politicians who either through ignorance or populist electioneering, actively cause recessions.
If banks don’t want to pay this extra tax, and unions don’t want the “Cadillac health plan” tax, they will have to bribe Democratic legislators to vote “properly.” This is the old political trick of proposing something onerous, so the prospectively injured party pays up. Cynical, but effective, and no one ever said President Obama is not an effective politician.
Rodger Malcolm Mitchell