by Don Fredrick, TheCompleteObamaTimeline, ©2021
(Jul. 15, 2021) — An acquaintance of mine recently became exasperated with another acquaintance who warned about the rising national debt. He asked, “Why do you keep bringing up debt? These trillions will be paid for with tax increases!”
The national debt is in the neighborhood of $30 trillion. Divide that by 325 million residents of the United States and you get $92,308 per person. But we do not have 325 million taxpayers. Children, illegal aliens, people on welfare, and many low-wage workers do not pay any income tax. There are probably no more than 150 million taxpayers in the United States. That means each taxpayer’s share of the $30 trillion debt is about $200,000.
Even if the government’s deficit spending were to stop immediately—which it most certainly will not—it would be impossible to raise taxes to a high enough level to pay off that debt. There would be a monumental revolution, and taxpayers would head to Washington, D.C. by the millions with pitchforks, tar, and feathers.
Even a small tax increase would be fruitless because it would likely result in less federal tax revenue. Why? Faced with much higher taxes, many people would work less, stop working altogether, go on welfare, or seek jobs that pay under-the-table cash that can be hidden from the IRS. The more taxes are raised, the more the economy slows down and the more unemployment increases.
An unconstitutional wealth tax has been suggested by some leftists (including Senator Elizabeth Warren), but that would also not result in much additional tax revenue—even if it made it past the not-always-up-on-the-Constitution U.S. Supreme Court. Such a tax would encourage the wealthiest Americans—and their businesses—to flee the country. France tried such a scheme and it had disastrous results. The higher the tax (whether an income tax or an asset tax), the more productivity is discouraged.
The reality is that a nation’s taxes can generally never consistently exceed 18 percent of GDP. Once they reach that level (which is about where they are now) “peak revenue” has been attained. The more the 18 percent rate of theft is exceeded, the more productivity is reduced. People simply give up and say, “Screw it! I’m not working so hard anymore.”
What then does the government do? It has only two options: borrow more money or inflate the money supply. Borrowing has its limits, however, as foreigners eventually realize the United States is one big Ponzi scheme. They eventually stop lending money to the United States, or they demand a much higher rate of interest. We are now at a point where the federal government would come close to collapse if interest rates had to be increased by more than a small amount. The biggest expense of the federal government would be interest payments. The spiral would continue: raise taxes and harm the economy, be faced with even greater revenue shortages, engage in still more deficit spending, be forced to borrow even more, and have to again raise interest rates to cover the increasing debt. The nation eventually collapses.
The United States is barely surviving now and is doing so with smoke and mirrors. Eventually the world will stop treating the U.S. dollar as the most reliable and exchangeable currency. (Remember that the U.S. government went after Saddam Hussein and Muammar Gaddafi because they wanted gold, rather than dollars, for the sale of their oil. That is why they were taken out—to protect the U.S. dollar.)
Borrowing will eventually cease being the answer, which means the U.S. government will have to rely even more heavily on expanding the money supply to pay its bills. The Federal Reserve was created for just such a purpose, and it has been doing so since 1913. That is why a candy bar that used to cost a nickel now costs $1.50. The candy bar is not worth more; the U.S. dollar is worth less!
Every Congress and every President in the last 100 years has spent money like there is no tomorrow. (Calvin Coolidge had some common sense on the matter, as did some pre-1913 leaders.) The Obama and Trump years were terrible in that regard, but Biden will out-do both of them. The White House and Congress are spending and spending, and the Federal Reserve keeps inflating the money supply. That is why consumer prices are rising. It is not because of “greedy corporations” (although they of course exist). Prices will continue to escalate in 2021 and will likely go higher in 2022. American jobs and lives will be destroyed.
Democrat politicians will certainly pay the price in the November 2022 elections, but the Republicans cannot solve the problem either. The solution is to end deficit spending and default on the debt. Pull the band-aid off quickly and let the chips fall where they may. It will not be pretty, but if we keep doing what we have been doing the result will be even worse.
Technically, of course, the government has been defaulting on the debt since 1913, because anyone who lends money to the U.S. is paid back with devalued dollars. Whether you buy a Savings Bond, Treasury Bond, Treasury Bill, or Treasury Note, when you eventually redeem it, you are paid back in dollars that are worth less than they were when you loaned the cash to the government! (If, for example, you lend a friend $100 with the understanding that he will pay you back $110 in five years, you are not $10 ahead if government-caused price inflation means that $110 can only purchase what used to cost $95! Your friend pays you back with $110, but if consumer prices have gone up substantially since the loan was originated you are worse off.
That is how the government has been and continues to default on the debt. But many people are wising up. Some own gold and silver. Others are buying “crypto currencies”—which may or may not be a good idea. (Some 80 percent of the world’s central banks are looking into the potential use of digital currencies.) The donkey fazoo will strike the rotating cooling device when China and other countries finally say, “Scr** the U.S. dollar. We will trade with some other currency.” That will signal the collapse of the U.S. economy and the collapse of the federal government. Trump should consider himself lucky he is no longer in the Oval Office. Even though there will be more than enough blame to spread around, the people in D.C. when everything falls apart will wish they were somewhere else.