The stimulus Ponzi scheme
The government is giving us $1,200. What is not to like? But how many of us have contemplated where that money is coming from?
There is a famous quote attributed to many different economists that tell the story. “The government cannot give to anybody anything that the government does not first take from somebody else.” You see the government, with its myriad of programs and departments, does not generate even one dollar of wealth. The government creates nothing of monetary value. It taxes and spends, period.
So it works like this. When the United States Treasury (government) needs more money, it prints up some fancy looking pieces of paper known as Treasury Notes. These are basically IOUs to be paid back by the taxpayer with interest of course. They trade these IOUs to the Federal Reserve Bank for more money to spend. When we talk about the almost $25 trillion national debt, it is referring to all of these IOUs that have stacked up over the years from the government spending more money than it receives in taxes.
So to answer the original question: where did the $1,200 come from? It came from additional debt that we the taxpayers now owe. So if you are a taxpayer, the $1,200 is simply a loan that will need to be repaid in the future via your taxes.
OK, we are a society that has become accustomed to debt. Most people are like J. Wellington Wimpy of Popeye fame, gladly taking the hamburger today if they can promise to pay for it tomorrow. There are two problems with that analogy.
First, we cannot possible repay the debt that we the people have already accrued. Or put more appropriately, the spendthrift politicians have accrued. Each of us, all 328 million of all ages, owes nearly $75,000 to the holders of those Treasuries. Let that sink in for a moment. If you are a typical family of four, you owe $300,000.
Some would say, just tax the rich. That would pay the debt. If you confiscated all the money from every billionaire in the United States, you would generate a little over $3 trillion. In other words, be able to pay off one eighth of the national debt. Even raping the rich wouldn’t put a dent in the debt.
As for the $1,200. There are 57 million taxpayers. The stimulus package was for $2.2 trillion. Through the magic of government, each taxpayer accumulated $3,900 of debt to receive $1,200. What a bargain!
Had we heeded the words of Thomas Jefferson we would not be in this fix. “It is incumbent on every generation to pay its own debts as it goes.” And, “That we shall all consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves; and consequently within what may be deemed the period of a generation, or the life of the majority.”
Would you buy a car and drive it, passing the payments on to your grandchildren, great-grandchildren … who would never have the opportunity to ride in that car? That is exactly what we are doing. We are accumulating massive debt paying for social welfare programs that benefit only those current recipients, passing the payments on to future generations. This process is known as “generational theft.” It is not only immoral, under that Constitution it is illegal.
The Fifth Amendment states, “nor shall private property be taken for public use, without just compensation.”
If the debt that is being passed on to future taxpayers is being used to pay for programs that benefit current recipients, where is the just compensation for those future taxpayers? Even a legalese inept rube, such as myself, can understand that these redistributive programs that provide no dividend for the future taxpayer are unconstitutional.
Our country was created on the premise of “no taxation without representation.” Citizens yet unborn will be born tens of thousands of dollars in debt. They did not vote for any of these politicians that put them into this debt. They were not alive to benefit from any of the programs financed by this debt. So this is a clear case of taxation without representation. I’m sure the Founding Fathers are proud of our actions (that is sarcasm for the nuance challenged).
So why do I refer to this as a Ponzi scheme? Well, we have put ourselves in a position where spending is never reduced. We don’t generate enough revenue to pay for all of the so called entitlements. So the government just borrows more and more money digging us deeper and deeper into debt. At some point, just like a Ponzi scheme, there is going to be a collapse and a depression like has never been experienced before. When that happens, cemeteries will become open air restrooms as our descendants relieve themselves on our graves.
For everyone who has children, I suggest you write a letter of apology. Apologize for allowing these big government, big spending politicians to cripple their future. Apologize for being so self-centered, so myopic that we didn’t demand the government operate under the same financial principles that we must follow, only spend what you can afford. Apologize for being so complacent while our founding principles are being undermined by this profligate spending. Apologize for allowing the social justice warriors to silence our common sense. And please, put your letter on archival paper as is it must last to be read by many future generations.
Jack Loesch is an area resident and Associate Professor of Economics at the University of Akron for the past 27 years whose columns appear periodically in the Salem News.