(Jim Clark) – There is a nuance to the “stop the spending” tea party message that should be explored.
I am indebted to Incline Village’s Jerry Stewart for bringing to my attention a fascinating critical analysis of the entire “tax and spend” mantle Republicans hang on Democrats at all levels of government. The analysis was by Libertarian economics commentator John Pugsley, a UCLA graduate who has authored Common Sense Economics and New York Times bestseller The Alpha Strategy, a primer on financial survivorship in inflationary times.
Of current conditions he wrote: “Obama pointed to the dire economic plight of the working Americans and argued that their taxes should be lowered while businesses and the wealthy should pay more. Republicans, pointing to the economic boost provided by the Reagan tax cut in 1981 and the Bush tax cuts in 2001 and 2002, adamantly maintain that the way to boost the economy out of the depression and really help working Americans is to lower taxes on business and capital gains.”
Puglsey asserts that both claims are balderdash. His rationale is that the actual amount of taxes levied is not that which we send to the Internal Revenue Service (IRS) every year but is in fact the amount of total government spending. To better illustrate he defines “tax” as money collected by government to cover its expenditures. Government raises this money in two ways; first by force which is the method Obama and the Republicans are referring to. “Government demands that individuals and businesses pay a percentage of their income to the IRS. If they refuse they are faced with fines, imprisonment or both” he writes.
The second method is by fraud. Politicians take as much through taxes as is politically possible but when they reach a certain level they risk getting “tossed out of office” . . . that’s when they borrow. This is fraud because there is no chance that the US Government will ever repay the money it borrows except by borrowing more to refinance the debt. A century ago, Pugsley writes, the US owed less than $2 billion. Now direct Treasury debt is over $8 trillion plus another $60 trillion in pension and medical care obligations. If you borrow money with no intention to repay it you have robbed the lender just as surely as if it had been taken at gunpoint. That’s why it’s fraud.
How do we calculate our losses when the government borrows and spends our money? Answer: price inflation. “As the government borrows interest rates rise; the central bank then lowers those rates by monetizing the federal IOUs” Puglsey writes. “In 1910 a $20 bill could purchase an ounce of gold. Today it would take forty-seven $20 bills to buy that ounce of gold. That means” he continued “the Feds ‘taxed’ away forty-six of them through the fraud of government borrowing”.
Pugsley differs with the tea partiers. He contends that the pain of excess government spending will be felt by each of them, not just their grand kids. Puglsley’s day job is recommending investments in an inflationary economy. This is a political column so I will not go there but readers can Google John Pugsley to get that information.
His recommendation is to totally ban government borrowing theorizing that if every dollar spent came directly out of taxpayers’ wallets politicians would find it impossible to fund their vast pork barrel spending programs.
Sounds a little bit like Switzerland. Maybe we should try it.
(Jim Clark is President of Republican Advocates, a vice chair of the Washoe County GOP and a member of the Nevada GOP Central Committee)