Friday, July 9, 2010

Sit Down Quickly

Here is logic that I dispute:

  • Fact: Taxes are too high.
  • Fact: Government collects all that tax revenue, and still has huge deficits.
  • Conclusion: Government spending must be excessive.

I don't dispute the facts, just the conclusion. The conclusion is based on the view that excessive spending creates debt. But debt is not created by spending. Debt is created by the use of credit.

The Prodigal Son went out and spent his whole inheritance, and returned home to Daddy, broke. That was excessive spending.

Nothing in that story says he returned home in debt. The Prodigal Son is an example of excessive spending, apart from debt and deficit and the use of credit.

Oh I just noticed this: The very next story after the Prodigal Son is about the Steward who cut the debts that people owed to his boss. Now that is a story about the use of credit. And, notably, the boss was happy with the steward's work. (Perhaps because business picked up as a result.) Take thy bill, and sit down quickly, and write fifty. That's the solution to our problems, right there: Cut the debt, quickly. But I wander.

The Prodigal Son is a story about excessive spending, where the use of credit is not involved. On the other hand, the person who can barely make ends meet, the person who doesn't have the money to pay for gasoline but must put it on a credit-card in order to get to work -- this is a story about the use of credit, where excessive spending is not involved.

Excessive spending is one thing; the use of credit is another. Sometimes, perhaps often, the two are combined in a single act. But that is not always the case.

The whole world thinks we have to balance the budget, and we have to cut spending to do it, and spending is excessive. Even the people who make up the "special interests" think that way. But not me.

I think economic policy removed money from circulation, and encouraged the use of credit in its place. The result was that we learned to use credit for money. And the consequence of that was debt. Grotesque levels of debt.

It is our policy to fight inflation by removing money from circulation. It is our policy to stimulate growth by encouraging spending and the use of credit. And it is not our policy to encourage the repayment of debt. Policy -- not excessive spending -- is the source of our economic troubles.

It is time for policymakers to sit down quickly.

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