Earth to New York Times: Governments Are Broke
It can't be ignored.
During a recent interview on Russia Today about the end of NASA’s space shuttle program, I said that the U.S. government was broke and Washington needed to curtail spending. However, I now stand corrected, at least according to the New York Times and the ubiquitous Michael Moore.
Declaring “broke” a “hollow cry,” the Times says that recent statements to the contrary by prominent Republicans are false:
It’s all obfuscating nonsense, of course, a scare tactic employed for political ends. A country with a deficit is not necessarily any more “broke” than a family with a mortgage or a college loan. And states have to balance their budgets. Though it may disappoint many conservatives, there will be no federal or state bankruptcies.
The problem, the Times says, is that government does not tax people enough, nor does it spend enough money.
Filmmaker Moore recently agrees He told protesters in Madison, Wisconsin, that the only problem is that taxes on wealthy people are too low:
America is not broke…. Wisconsin is not broke. The only thing that’s broke is the moral compass of the rulers.
Moore added that America is “awash in wealth and cash” and all that is needed to put the economy back on track is for the government to seize additional property from Americans who make more than he deems “moral.” (Note that Moore, a millionaire many times over through movies that trash capitalism, does not offer to give all his wealth to the needy.)
I suppose that both Moore and the Times are correct that if the government were to seize most or all of Americans’ cash and property holdings, the federal budget most likely could be balanced. For now.
The problem here is obvious on its face. If people had all their earnings confiscated by the State, they would no longer be willing to work and the government then would have nothing or almost nothing to tax in the future.
Borrowing to Pay Debts
There also is a huge problem with the Times’ mortgage analogy. The Treasury is borrowing money to make payments on previously borrowed money. If I were paying for my groceries with a credit card and borrowing money to make my mortgage payments, and it was clear my projected income over many years would not cover my expenses, that would be the very definition of “broke.”
No doubt the Times editors and Moore would counter that the government can ramp up tax rates and also create money to pay its bills (unlike you and me since the law forbids us to steal and counterfeit). But by forcing up taxes government would consume even more wealth produced by private individuals, and creating new money to pay its bills is a fraud that steals purchasing power from the rest of us.
I suspect these things are lost on the Times and Moore, who declared that wealth is “a national resource” to be confiscated by the State.
The wealth Americans produce does not come from a bottomless well, and it is clear that the current fiscal crisis is not due to government’s undertaxing the people. Rather the crisis exists because government spends too much, while taxation, regulatory, and monetary policy prevent economic recovery.
Any entity that has to borrow money to stay afloat because long-term income prospects are dismal is broke. True, government can temporarily hide the crisis by more borrowing and inflating, but in the end the bankruptcy cannot and will not be hidden.
Comment by Roy Cordato on 9 March 2011:
The government is never broke so long it has guns and we have wealth and income.
Comment by norman on 9 March 2011:
Sorry I missed you on the Russia Today news program. I catch it once in awhile on PBS. In my opinion it is one of the best news shows on TV, much better than NBC, NPR or CBS news. It amazes me that the Russians cover American news better than Americans do? Their guest interviews are much more interesting. Many guests are free market oriented. The commentator is better informed and the discussions are much more incisive. Do you agree?
Comment by Chris Cantwell on 9 March 2011:
Excellent commentary. The economic realities will sooner or later hit. The more government expands the worse things get, and the worse things get the more government expands. A tipping point will come if we do not take action to avoid it, and sadly I do not expect that we will take said action because too many people are listening to the Michael Moore’s of the world who say the answer is more government, or the John McCain’s of the world who say the answer is more government in slightly different language.
Comment by Ralph Hood on 9 March 2011:
One huge problem we have is that so few people truly understand how the free market works (when allowed to). We teach the virtues of democracy, but not those of the free market.
Ralph Hood
Comment by John on 9 March 2011:
The problem with this commentary is that it twists the words of Michael Moore. I listened to Moore’s speech. Neither he or other liberals want to confiscate ALL of America’s wealth. The point is this: There is a lot of money in America. But those at the top want it all for themselves. As a society, we have to make a choice. We either place the burden on the current financial crisis on the backs of lower and middle income people, or we ask for with the most money to kick in more of their share. I see nothing wrong with this. I don’t understand why you do.
Comment by John on 9 March 2011:
The problem with this commentary is that you are twisting the words of Michael Moore to make your point. Moore and other liberals are not advocating, as you say, that government confiscate ALL of America’s wealth and property. The point is this: There is plent of money in America, but those at the top want to keep most of it for themselves. As a society we have a choice. We can either solve this financial crisis on the backs of lower and middle income people, or we can ask those with the most money to kick in more of their share. I see nothing wrong with this. I don’t understand why you do.
Comment by Dan on 9 March 2011:
John,
There are a lot of reasons that liberal argument faulters and if you come back to this post over the next few days you’ll read many of them. Here’s a starter:
First, taxing the wealthy more to cover the current gaps doesn’t solve the problem of ongoing gaps.
Yes it does, you may argue, because we keep that higher rate in place to cover for it. You really should say that it’s a temporary gap that will immediately be remedied by lower government spending but that’s not likely.
Secondly, to assume that taxing wealthy folk more will fill the coffers now and forever is to ignore history – that the raising of taxes and the amount of subsequent increased revenue isn’t there. Raise the taxes on the wealthy and they move their money. When states have done this, the millionaires moved IN DROVES. When the Fed does it, the millionaires move their company.
That isn’t to say a higher rate won’t increase tax receipts at all, just that it isn’t linear. And it demoralizes and depresses the economy to do it. How?
Next point, taxing millionaires depresses the economy and here’s how. I know several millionaires and most of them are active with their money, reinvesting it to grow it further. What gets forgotten is that money invested = jobs. If a business owner pumps his equity into his company it allows to expansion (hiring), it allows for equipment purchases (increased business at the equipment maker = jobs), etc. If the millionaire invests in stocks instead, that shores up someone else’s business = jobs and stronger economy. If the millionaire just hides his money in a bank, that = jobs at the bank, the bank lends it to small business which = jobs, and so forth. Only that 1 millionaire out there who is putting all their cash in a mattress is not improving the economy by being wealthy.
Tax the wealthy harder and each penny of extra taxes into the furnace of government spending is a penny that WOULD have gone directly into funding economic activity.
Comment by Joker on 9 March 2011:
Roy Cordato: All the more reason for the people to obtain the guns in any way possible. My name has meaning after all…
John: I would agree with you, except that the top 5% of citizens in the country already pay what… 60ish+% of the government’s bugdet? They are already paying their share, and then some. Besides, if you impose high taxes on the rich, what incentive do I have to work harder to be “rich”?
and while we could place the burden on any one we wanted… Why is there such a heavy burden at all?
Comment by Steve Hogan on 9 March 2011:
@ John,
Marxist thinking lives on! You don’t understand why people who earned their money might want to hold onto it? Hello!
A simple question for you, John: What percentage of someone else’s wealth is considered “fair” to take at gunpoint? Is it 60 percent? Eighty percent? What is the tipping point where fair becomes not so fair?
Has it ever dawned on you that people respond to incentives? If you take most of what others earn, they stop earning. Who would then be left to bilk to pay for the programs you think are worth funding? Wasn’t it Margaret Thatcher that quipped that socialism works until you run out of other people’s money?
By the way, “society” doesn’t choose anything; individuals do.
If it makes you feel any better, all those rich and greedy people won’t be for long, as the government you think is so wonderful is quickly debasing the money in monetizing its mountain of debt. Too bad the poor and middle class you purport to care about will get wiped out too. C’est la vie!
Comment by Joker on 9 March 2011:
Roy Cordato: All the more (get it? Ha ha ha) reason for the people to obtain guns in any way possible. My name has a reason after all…
John: You make a lot of sense at first glance… But… And it’s a big “but.” The top 5% of the population already supports what… 60ish+% of the government’s budget? Besides, when you impose heavy taxes on the rich, what incentive do I have to work harder to become “rich”?
Of course we can burden any one we want with the national debt. But why is there such a massive burden to begin with? If it wasn’t so big, we wouldn’t be in this situation.
Comment by Nonarchist on 9 March 2011:
@John
I thought theft was theft, regardless of whether a rich person is stolen from, a middle class person, or a poor person.
Comment by JB on 9 March 2011:
BRAVO John! You must be an Ayn Rand fan!!!!! If not, read both “Atlas Shrugged” and ‘The Fountainhead”.
Not a coincidence that they are resurfacing now……!
Comment by Libertarian jerry on 10 March 2011:
The government gravy train is derailed and off the tracks. There is nothing that a blowhard hypocrite like Michael Moore or a rag like the New York Times can say or do to change the laws of economics and to put the train back on the track. The Tax eaters are going to have to learn to be productive because their running out of people to loot. Socialism’s 1st premise is that everything belongs to everybody and that property rights are subject to democratic redistribution. In other words Mob Rule. When the mob runs out of victims,watch out.
Comment by Stefan Stackhouse on 10 March 2011:
It is true that if we were to have a national balance sheet (and the absence thereof is a major, fatal flaw of macroeconomic theory and contributes to most of the fiscal policy mistakes of the past century), we would see that there are national assets offsetting those accumulating national debts. We could liquidate much or all of our national debts. All that we would have to do is to sell or lease many of our public lands, national parks and forests, etc. We could probably get a very nice price for our overseas territories; I’m sure the Chinese would want to make an offer on Guam, while the US Virgin Islands would be a very attractive prospect for various billionaires who would like to set up their own sovereign nation. We might have to sell off a fair amount of our weaponry, too, and sub-let our overseas bases back to the host countries. Most of the gold in Ft. Knox would have to be sold off, of course. I’m sure that the original copies of the Declaration of Independence and the Constitution would fetch a good price at Southeby’s, as would many of the art works in the White House, Capitol, and other federal buildings. We might be able to get an attractive takeover bid on the postal service from UPS or FedEx, although I don’t know if anyone would be interested in Amtrak.
Of course, most people would view such a national liquidation sale as an utterly ludricous idea (although some here, perhaps, would not). This raises the question, though: more ludricous than the alternative, which is to bring federal expenditures in line with federal revenues, and thus to start living within our means?
Comment by Paul on 12 March 2011:
I think we should be nicer to John. My guess is that almost nobody here was born or raised a libertarian; we all used to believe things that simply aren’t true. If we chew John out or ridicule him we’ll never get to share our ideas with him. Besides, it’s not like he’s not asking a question that millions of other people aren’t asking, and it seemed to me like he asked it in good faith. I think it’s our duty to answer people’s questions to the best of our ability, otherwise we’ll never win anyone over to libertarianism.
To answer John’s question, libertarians do not believe in taxation both as a moral and practical issue. Taxes are always detrimental to economic prosperity and growth, whether they are taxes on the rich, middle or lower classes. The way libertarians propose offsetting taxes is by reducing spending, particularly by ending the American Empire, ending corporate subsidies and using the free market to drastically reduce the cost of healthcare. If you’re really interested in hearing a longer, more articulate response, I suggest you visit http://www.mises.org and read some articles by Robert Murphy or Ludwig von Mises. You might find them compelling or eye-opening; I know the first time I read any libertarian articles I found them to be incredibly interesting and well reasoned. Hopefully we’ll be able to someday convince you to abandon the liberals and join us.
Comment by Eric Rasmusson on 12 March 2011:
Wow, this discussion had a real neocon edge to it. Disappointing to see on a Libertarian website.
Comment by Capn Mike on 12 March 2011:
@Eric,
Huh? Are you and I reading the same thread?
Please point out the neoconisms.
Comment by Robin on 14 March 2011:
Dan said: “Tax the wealthy harder and each penny of extra taxes into the furnace of government spending is a penny that WOULD have gone directly into funding economic activity.”
Of course, government spending turns into jobs as well; it’s just that the jobs that are created through government spending are different jobs than are created through private spending. Still, that doesn’t mean that the government should be making decisions about where to apply funding. The government doesn’t have an incentive to spend those funds in the most efficient way possible; private spending is more likely to result in the greatest yield in production per dollar spent.
Comment by Damian on 14 March 2011:
The problem with the Times and Moore is that they cannot site one example of a heavily taxed, free, prosperous, and creative state.
Ain’t reality a bitch?
If wealth is indeed a national resourse than I say let the confiscation start with Morres wealth and his non-union film company. Nothing is more hilarious than the ever hypocritical left.