Yves here. Between rising food and energy costs and a seemingly inevitable deflation of the AI equity and debt bubbles and related private debt tsuris, a meltdown or at least a bad economic downdraft seems inevitable. Recall that the 2008 crisis produced the Erskine-Bowles Commission, to advance the Obama Grand Bargain and “reform” Social Security and Medicare, which fortunately went splat. It’s not hard to see that another go at slashing entitlements is baked in, since upheaval will serve as a pretext for cutting spending, which translates into shredding social safety nets.
“[Government] ought to be so constituted as to protect the minority of the opulent against the majority.”
—James Madison, 1787
“Reagan proved deficits don’t matter.”
—Dick Cheney, 2003
I want to talk about a piece of propaganda that hides among the obvious propaganda we’re bombarded with. The obvious propaganda:
- Israeli action in Gaza is self-defense.
- The Ukraine war was totally unprovoked.
- The AI usage explosion is good for the country.
- Oil prices are doing just fine.
I could go on. Now the hidden propaganda, the lie most people don’t spot:
- Your tax dollars fund the U.S. government.
Wrong. Totally false. Backwards, in fact.
Believing this makes us willing to be robbed at will by people who have too much, people who pick our pockets without a complaint. People who cut programs we need while giving big gifts to themselves.
In short, this is bamboozlement. Read to see why.
Money and Zero-Sum Games
Let’s start here. For us, money is a zero-sum game. We can’t create it, so we have to do things to get it (sell our labor, our couch, or lobby the government for gifts).
States like Idaho can’t create money either. When they need it, they have to do things to get it (tax people, sell state-owned land). For us and entities like these, money is a zero-sum game.
The U.S. government is different. For our government, money is not a zero-sum game.Our government can make it from nothing. When it wants things, it simply write checks and poof, the money exists.
Where does our government get money? Where does Kroger get coupons? Same place. Out of thin air.
Enemies of federal spending call this “printing money” and they’re right. But note: People who say this also know that our zero-sum statement is right — that taxes aren’t needed to fund the federal government. They understand that the statements above are right.
Government also destroys money by taking it back. You do pay your taxes, right? The government’s supply of money doesn’t go up when you pay taxes — infinite dollars + your payment is still infinite dollars. The money just disappears, and for us, supply goes down.
Again:
• For you, money is a zero-sum game. For the federal government it’s not. They make it from air.
Airline Miles Are Money
For an analogy, consider “airline miles.” This is money in exactly this sense. Airline miles have value. You can spend them, but you can’t create them. To get them, you have to do things (buy tickets and fly). Airlines, however, can make as many as they like.
Airlines also control the supply of miles (which makes sure flights aren’t too cheap) by taking them back when they like. Remember that trip that once cost 20,000 miles? If it now costs 30,000 miles, your supply of miles goes down faster. Yet the airlines’ supply doesn’t go up — infinite miles + 10,000 is still infinite miles. The miles it takes in, like dollars the government takes in, just disappear.
If you keep that idea in mind — our government can make dollars at will — I can show you how you’ve been fooled.
The Lie That Keeps People Poor
Despite the fact the statement above is true, almost everyone with a voice and a mic says the opposite:
- “Do you really want your tax dollars to pay for welfare?”
- “They’re using your tax dollars to fund this war.”
At the federal level, “your tax dollars” have no relation to spending. Yet you hear the opposite a lot, from both left and right. Why?
There are two reasons: Either 1) people mechanically repeat what “everyone knows.” After all, your tax dollars is a phrase we’ve been hearing since birth. Or 2) they want to take things away from you — like welfare, food stamps, good railroads or Social Security — and that’s how they plan to get you to go along.
“Your tax dollars” — the government needs money from you. See how that works?
Why Say This Now?
Why say this now? Because there’s a lot of noise these days about our shiny two trillion dollar deficit and our high-trillion dollar debt. This tells you the 400 overlords running this place — did I say overlords? Of course I meant protectors— are fixing to take things away, and it won’t be more missiles or bombs.
Hold on to your Social Security and Medicare, such as it is. The assault is coming, just like it always does. From Reagan to Clinton to Bush to Obama and Trump to Biden, our betters have constantly tried to take things away. And mostly they’ve been successful.
Why do they take things away if they know the government can fund whatever it wants? After all, when they want more money, they just print it up (see graph above). But no printing for you. I think it’s because they’re just mean. The cruelty is the point.
How will they win? They’ll win if you think dollars are limited, that you fund the federal budget, and “Golly, we just can’t afford to spend this much” (see image at top).
To protect yourself, just remember:
• They don’t think government needs your money. But it matters that you do.
Please, don’t be fooled. Protect what you have by knowing how this actually works.
I may follow this piece with further small explanations: Why do governments tax if they don’t need the cash? Why does the bond market exist? What is the deficit? And what is the national debt?
If you’re interested, stay tuned.
