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Which is kind of crazy, if you think about it: The federal budget is coming from taxes. So the deal is that Trump is destroying valuable services of federal institutions and only 20% of the "savings" are getting passed on? While normal people will have to pay for stuff like the weather forecast?
Another 20% would go towards paying the federal debt. Ok, but that still leaves out 60%.
What do you suggest they do with the other 50%?
10% should probably go into a slush fund for the emergencies this is going to cause
What do we do with the remaining 25%?
Why do people think the federal budget comes from taxes?
The government prints money, pays for its budget, and THEN it taxes. It can’t wait for tax dollars to pay for the budget. Taxing is to make the dollar necessary and force its flow back to the government.
They mostly “burn” all your tax dollars…
Like the gvmt is not a company. It doesn’t have “obligations” and “revenue”. It fucking PRINTS the money. If any company could print money, they would stop giving a fuck about revenue instantly.
...and other ridiculous things libertarians say.
They're describing modern monetary theory, which is very much the opposite of a libertarian position. MMT is a strong argument for more government spending., not less.
Modern monetary theory says that the government can just solve problems by printing more money? Maybe it's ridiculous too in that case, since there are multiple examples of that being a terrible idea.
There are a lot of excellent examples of governments solving problems by printing money. Most notably, basically every case of hyperinflation ever has been solved by printing money. Noted economist Mark Blyth goes into this extensively in Austerity: The History of a Dangerous Idea.
What MMT posits is not that governments can freely print money with no consequences, but rather that we're looking at the question if printing versus borrowing versus taxation backwards.
The basic theory of inflation is that too much money chasing the same quantity of goods and services pushes up the prices of those goods and services in an effect rather like a bidding war.
What MMT points out is that from a government finance perspective, this implies that the chief concern is the amount of money in circulation. If money is removed from circulation, via taxation, that becomes a control on inflation. This allows a radical rethinking of government spending, since your chief concern is no longer the balance of the budget, it is only the balance of the economy.
This also gives you new tools with which to combat inflation. Right now, in contemporary liberal economics, the only control we have for inflation is interest rates, which disproportionately harm the least affluent. But by considering taxation as an inflation control we can shift the greatest burden of combating inflation onto the wealthiest instead.
Cory Doctorow gets into a really good and approachable explanation of this in one of his more recent articles, when pondering the question of whether it is beneficial or even possible to eliminate the national debt:
https://doctorow.medium.com/retiring-the-us-debt-would-retire-the-us-dollar-30f366e0bc40
I'm citing Doctorow here rather than academic sources because he's very good at explaining this stuff in comprehensible ways. For a more extensive breakdown The Deficit Myth by Stephanie Kelton is regarded as an excellent resource. Kelton, BTW, was formerly Chief Economist on The US Budgetary Committee; she absolutely knows her stuff when it comes to government level finance.
No idea why you deleted that comment. You're right.
The bank bailouts in 2008 didn't cause the tiniest bit of inflation. Again, Mark Blyth calls this out specifically in his book and many of his lectures. The predominant question plaguing economists in the 2010s was "Where the fuck is the inflation?"
Japan has an incredibly high debt to GDP ratio, and their main economic constraint right now is too little inflation.
Once you start looking for the examples they're there. This whole idea that government spending = inflation is a total myth.
Meant to post it below, so wrong comment, but it was sarcastic and incorrect intentionally. The US economy is not the same as a household economy, nor is it the same as the state or city economy. State and local governments have to stay balanced, unlike the federal government which prints money.
I think we are in agreement on this
What??? Libertarians are almost all against income tax, they are literally stating it's necessity to the current system. Even if you don't believe them your statement makes no sense.
Before currency was even invented, taxes were levied in the form of precious metals, livestock, crop harvests, and other resources. The government can't print a chicken.
In the US, the first issuance of currency happened centuries ago. The government's spending comes from tax revenue (and issuing bonds and other stuff).
That was only true when money had any relation to a physical good like gold.
Fiat money dominates, and it’s not bound by anything.
Like I’m not saying any crazy conspiracy theory. It’s just how the world has worked since Nixon…
I'm not sure why you're getting down voted for stating a fact: money has to be created through direct spending or back stopping the creation of money by private banks via the reserve system before it can be taxed away.
You can't tax back something that doesn't exist yet.
Just because it's not "our tax dollars" doesn't mean is isn't OUR public money.
They are getting downvoted, because they are obviously wrong. Of course the government is "creating" the money. But it can't just print money and spend it. Countless governments tried it and it always led to hyperinflation - and therefore the budget of course has to come from taxes
How is it wrong if it’s factually what happens now? People have a “common sense” understanding of how the government works, and THAT is wrong.
Ever since fiat became the norm, all governments all over the world that print their own money and have debts denominated in their own currency simply print money to spend, for their budget. That is a FACT.
Only countries that have the majority of their debt denominated in another currency (the dollar mainly) that face inflation when printing money.
The US and Europe printed trillions during covid, and that barely caused a blip in inflation. Inflation only came after supply chains shock and the war.
Like do some basic research, if I’m so obviously wrong it will be very easy to see..:
Idk why you are getting down voted, what you are saying is also how I largely understand things. Props to you for following through on replied.
Most people have fallen for neolib propaganda… of “we don’t have enough money for free universal healthcare”, “if you want free university we’ll need to raise taxes” etc etc.
They think the government is a household.
I still remember 2020 and 2022, it's not that long ago. So Covid started to hit the US in spring 2020. And take a look at inflation rates:
Yeah, it took some time, but you really can't deny that there was "barely a blip in inflation" and that it came only after the war started.
As I said, the initial inflation was caused by supply chains shock. Many countries had lockdowns. Like China, who produces the majority of everything anyone purchases around the world. Then when the lockdowns ended there was a shortage of shipping containers.
Inflation is caused when money is printed and sits in financialized investment. If it’s used to increase productivity it causes the opposite.
China has been running massive deficits (printing money like crazy) for over a decade and they have very consistent and low inflation.
Nah see, it only causes inflation when we help Americans with their student loans, or raise unemployment benefits and other social programs.
But when we bail out banks with hundreds of billions of dollars it doesn’t cause inflation at all…
They're being downvoted for suggesting that the government can create value just by printing more money. That actually causes inflation.
I think you are wrong here dude
It’s just that this argument, based on things that are not facts since the 70s, is used to cut social programs, investment in education, infrastructure etc.
When it makes no sense. The gvmt is not gonna go broke from paying its programs. It prints its own money, and all its debt is denominated in dollars.
We SHOULD cut military spending, subsidies to harmful industries, to private prisons, police forces etc. The way the money is spent SHOULD reflect the will of the people more.
But this argument about “revenue” and “public debt” are literally from the mouths of establishment neoliberal ghouls who have no objective other than enriching their friends. It’s not reality and is only used for harm.