You most likely won't understand this but I'll try anyway. A deficit-financed cut in current taxes results in fully anticipated higher future taxes that have the same net present value as the initial cut. The net economic effect of deficit spending is equivalent to a spending through taxation.
A.) If our government eliminated all taxes and used newly created money from the Federal Reserve to fund their operations, our national capital would be devalued and thus it would be partially destroyed.
You aren’t trained in economics so you use terms loosely. National Capital has what meaning to you?
People use capital to mean money. Money is a store of wealth and a medium of exchange. A hyperinflation would increase the transaction costs of using dollars as a medium of exchange – most likely individuals would switch to another medium of exchange.
As for wealth there would be no net wealth effect - however there would be a large transfer of wealth between debtors and lenders. In and of itself this has zero economic effects assuming each economic agent is equivalent, However this simple assumption is generally not acceptable – therefore there will be an immediate economic disruption and much pain for some.
The most severe economic effects would due to the percent of GDP that is constituted from government spending. Many individuals, such as most government employees, research engineers producing nothing but reports, and economists would find it exceedingly difficult to find employment at productive jobs.
Surprisingly, to the extent the move to devalue the currency is anticipated some of the economic effects would be mitigated. In the end, the economy would be far stronger and most likely a private issue money or a foreign currency would become the money of choice in the US.
Capital, in the economic sense, is really the knowledge imbedded in a society about how to organize and how to create, combined with a willingness to take risk, in order to satisfy the wants and needs of yourself and others. Remarkably, if you care to study this type of thing, you will observe that even after a severe economic crisis that a society quickly reorganizes to produce above trend economic growth until their former wealth is attained. So in this regard, although disruptions would arise, our national capital would actually increase.
You obviously have no idea how wealth is created.
B.) If our government borrows a large amount of money from China to pay for "tax cuts" or other subsidies, (the George W Bush solution) the national wealth has been transferred to China. You may argue the wealth still exists, it's merely owned by someone else - but once again you have missed the point.
You have yet to make one coherent point in any of your posts i’ve read over the last year.
C.) If the US cut back on spending we could actually increase national wealth.
Yes, this is true in general.
1.) Let's say Bush surrendered to Iraq - we could immediately save at least $87 billion and add that to our national wealth.
Yes in the short run this is true – the question is whether this is in the national interest in the long run.
2.) Let's say Bush cut back on his newly enacted farm subsidies - we could immediately save even more and add it to our national wealth.
True as well.
An education in economics will help clarify these matters for you further.
LOL. I’ll work on that.
Spending cuts increase national wealth - tax cuts do not.
Now you’re getting it. But you need to make one more connection. In general, tax and spending cuts are consistent with wealth creation. |
