The Faux Argument Around What is the Right Size of the Government
Executive Summary
- Conservatives and mainstream economists constantly propose that government be smaller than it is.
- The reality is that the size of the government budget is unrelated to taxation.
Introduction
The following quote explains the pointlessness of the discussion around the debate on government debt.
“the “right amount of government spending” is an economic and political decision that, properly understood, has nothing to do with government finances. The real “costs” of running the government are the real goods and services it consumes—all the labor hours, fuel, electricity, steel, carbon fiber, hard drives, etc. that would otherwise be available for the private sector. So when the government takes those real resources for its own purposes, there are that many fewer real resources left for private sector activity. Therefore, the way I see it, we first set the size of government at the “right” level of public infrastructure, based on real benefits and real costs, and not the “financial” considerations. The monetary system is then the tool we use to achieve our real economic and political objectives, and not the source of information as to what those objectives are. Then, after deciding what we need to spend to have the right-sized government, we adjust taxes so that we all have enough spending power to buy what’s still for sale in the “store” after the government is done with its shopping. In general, I’d expect taxes to be quite a bit lower than government spending, for reasons already explained and also expanded on later in this book. In fact, a budget deficit of perhaps 5% of our gross domestic product might turn out to be the norm, which in today’s economy is about $750 billion annually. However, that number by itself is of no particular economic consequence and could be a lot higher or a lot lower, depending on the circumstances. What matters is that the purpose of taxes is to balance the economy and make sure it’s not too hot nor too cold. And federal government spending is set at this right amount, given the size and scope of government we want. Today (April 15, 2010), it’s clear that Congress is taking more spending power away from us in taxes than is needed to make room for their own spending. Even after we spend what we want and the government does all of its massive spending, there’s still a lot left unsold in that big department store called the economy. How do we know that? Easy! Count the bodies in the unemployment lines. Look at the massive amount of excess capacity in the economy. Look at what the Fed calls the “output gap,” which is the difference between what we could produce at full employment and what we are now producing. It’s enormous.”
Source: Mosler Economics
The Objective of Mainstream Economists and Private Banking Interests
Their objectives (as economists are just PR lackeys of private banking interests) is to make the public and politicians think that a government that creates its own money must manage its finances like a household. And a second major objective is to get the government to outsource and hand over the money creation function to private bankers. Once in the hand of private bankers, these bankers will hand out free money to their friends and associates, while preaching how there is no money for social programs. This is welfare for the elite, and austerity for the masses. Once the central bank is private, governments end up having to “borrow” money, which they legally have the right to create out of thin air. This is exactly where the US now finds itself. And the longer the private banking interests are in control of the central bank, the more corrupt that central bank becomes, and the most it works against the public interest and for the benefit of the elite.