–What will help the poor? Taxes vs. Spending

The debt hawks are to economics as the creationists are to biology. Those, who do not understand monetary sovereignty, do not understand economics. Cutting the federal deficit is the most ignorant and damaging step the federal government could take. It ranks ahead of the Hawley-Smoot Tariff.

Now that the new tax bill has passed, three related issues will remain in the news:

1. Will tax reductions cause inflation? (In the unlikely event they do, the Fed will prevent/cure inflation by raising interest rates)

2. Will tax reductions bankrupt Social Security and Medicare? (No. Because the federal government is Monetarily Sovereign, federal spending is not constrained by taxes. If FICA were reduced to $0, this would not affect by even one penny the federal government’s ability to support Social Security and Medicare. Tax reductions cannot bankrupt the U.S. or any of its agencies.)

3. Should taxes on the rich be increased as soon as the current law expires? That is the question discussed in this post.

Some people favor higher taxes on the rich, because they believe this somehow will help the poor. The concept is that by taxing the rich, we close the “gap” between rich and poor, and this closed gap benefits the poor.

I discuss this “gap” further at Closing the Gap and at A Partial Solution for the Gap.

I strongly empathize with the desire to aid the poor. But bringing down the rich is not the way. Whether Bill Gates has $50 billion or is brought down to “only” $10 billion, does not affect the poor. We have had 90% top tax rates, and that did nothing to help the poor. In fact, increasing taxes on anyone, rich or poor, removes money from the economy, which slows the economy. Slowed economic growth always hurts the poor more than the rich, as witness the most recent recession. Who was hurt most, the rich or the poor?

As I mentioned, the federal government does not spend tax money. Unlike state and local governments, which are not Monetarily Sovereign, the federal government spends money it creates ad hoc. If the wealthy were taxed at the 99.99% rate, this would not increase by even one cent, the federal government’s ability to spend, i.e. to help the poor.

The poor benefit most when the economy is growing fastest, because that increases the availability of jobs and money. So to help the poor, we must stimulate the economy. That is, if we want to help the poor, we very simply should help the poor. The Federal government could:

–Increase Social Security benefits.
–Initiate free universal health care insurance.
–Increase unemployment benefits.
–Pay a salary to all students. ( SALARY)
–Eliminate FICA. (FICA)
–Increase the standard deduction on income taxes.
–Allow home rent to be tax deductible.
–Increase food stamps.
–Pay states and cities to reduce sales taxes

There are many ways to help the poor. We should focus on that, not on punishing the rich, which may provide some emotional satisfactions, but does not provide financial benefits to anyone. Let me see some of your ideas for helping the poor.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity. Those who say the stimulus “didn’t work” remind me of the guy whose house is on fire. A neighbor runs with a garden hose and starts spraying, but the fire continues. The neighbor wants to call the fire department, which would bring the big hoses, but the guy says, “Don’t call. As you can see, water doesn’t put out fires.”

One thought on “–What will help the poor? Taxes vs. Spending

  1. You want some ideas on helping poor people?

    Roger let me start by saying many people will think I am not serious or being silly or mean with what I am about to post, but that is not the case, I am being dead serious.

    I just returned from Honduras, and everyone was very poor, constantly hustling me for money, even little children who should be in school and whose innocence is gone because they have had to learn the evils of money so young. In my city in the USA there are many poor people too. Now for me personally, millions of years of evolution has resulted in the joys of a female making me very happy. I see in your picture you are hugging a female very tightly, so it is obvious millions of years of evolution and biology makes you want a female around too. The problem as I see it though is modern christian ideaology that to PAY for this company – IE the oldest profession in the world, is very evil, but even Jesus walked with a hooker.

    I talk to many men in the USA who tell me – why work – why earn money – I can’t legally buy what I want – the services of the oldest profession in the world, so they don’t work Roger – the mules sit down. I relate to this mindset, why work and contribute to society if I can’t get what I want back out of that society.

    I talk to the needy women, they say I would rather DIE than make money doing the oldest profession in the world, and some do. They have been trained/educated since birth that the oldest profession in the world is the worst thing, even sexual involvement with a man you are just dating is a no go for many women, they want marriage and a claim on half your financial assets before they will have sexual relations.

    Many men I meet now say it is not worth it, so the millions of years of evolution and biology that has made them CRAVE reproduction has been squeezed out and strangled to death by this society and its rules and expectations. Look around at many western countries and you will see HORRENDOUS demographic crisis approaching because the babies are not being made. The women have been taught they can get free resources from the government for nothing (welfare, section 8, etc etc) and the men have been taught they won’t get what they want (sexual relations) no matter what.

    I would love to get up and work hard and contribute vastly to this society and then take my money and go buy what I want, but that is not legal, so I am sitting down. This society and its laws is at odds with human biology, I really feel lots of you economists are like the silly creationists, you don’t use REAL science to do accurate paradigms. As long as you try to structure social programs that end up in lower birthings, and shape society in ways that kill the natural rewards system that mother nature has decided on over millions of years of evolution, you are lying to yourselves. Laws and economic policies can only go do far on a tangent outside the creatures that mother nature has made us before it all collapses.


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