We are not more or less poor because we under tax ourselves, in fact the economy doesn’t really care as long as the government keeps spending. The economy only knows who is spending not who is acquiring assets and who is acquiring debt. As long as the government spends the same and goes into debt and the rich keep saving the status quo remains. If the rich were to start spending all of their money the economy would try to compensate by devoting more resources to what rich people would buy, prices on other things would go up, the quality of life of everyone else would suffer.
The country actually isn’t going more and more broke if it has more and more money out there it could tax. As our assets grow relative to the size of the economy (work) it puts more of a burden on labor.
Of the National Debt
- About 2/3 we owe ourselves
- About 1/3 is held by foreign entities
- US Individuals also own foreign debt. What’s in your mutual fund?
- The net debt or surplus is relatively minor
- When we don’t tax ourselves, it is the untaxed getting rich, not the bondholder
- Countries get in trouble when they owe other countries on a net basis, especially if they don’t control the currency
- All the major governments of the world are in a similar boat (the collective government account owes the individual accounts of the citizens)
All that’s really happened over the last 40 years is we’ve acquired a bunch of debt from the government and given it to the top. If a just tax system was in place much of the wealth accumulation would not have taken place.
Some conservatives call for the federal debt to be forgiven and some rating agencies have called our bonds risky. There is no need for this as the government has the power to tax and the power to print money. It can print money and decrease both wealth and debt or it can tax those that benefited the most.
1. U.S. Bureau of Economic Analysis. Gross Domestic Product. Supplemental Information and Additional Information Tab. Current-Dollar and “real” GDP. https://www.bea.gov/data/gdp/gross-domestic-product. Accessed June 7, 2020.
6. Treasury Direct. Historical Debt Outstanding – Annual. https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm. Accessed June 20, 2020.
7. Board of Governors of the Federal Reserve System. Distributional Financial Accounts. https://www.federalreserve.gov/releases/z1/dataviz/dfa/. Accessed June 20, 2020.