It seems that Democrats and Republicans in Washington finally agree on a major policy proposal: “The American people need a stimulus due to the slowing economy”.
What is a stimulus?
Referred to by supporters as a ‘relief package’, ‘liquidity’, ‘quantitative easing’, and many other benign terms, it is when the government ‘stimulates’ economic activity by infusing the private sector with money, generally by giving money to individuals and businesses. Where does the government get all of this money from, though?
If you read The Liberty Block, you know that, generally speaking, governments do not ever rightfully acquire money (or any other form of property). Government could only obtain money via theft or extortion. In this instance, it is unlikely that the federal government would immediately increase tax rates by massive amounts to pay for the stimulus that they are promising. People and businesses are struggling financially, so taxing them right now would be such a horrible idea that even D.C. politicians know better than to try it. So, they are left with two more options:
1) The federal government could authorize the US Treasury to either print another trillion dollars, or issue the money to individuals and businesses via electronic transfers. This would result in tremendous inflation due to the massive increase of dollars in circulation. This would hurt everyone in the US, including politicians and other government officials. The more US dollars you have in savings accounts, pensions, and cash, the more inflation hurts you by devaluing those assets. Yes, the US government has the power to – and regularly does – take your money without ever touching your wallet or your bank account via the long arm of the Federal Reserve. This is not an acceptable option.
2) The only other option seems to be borrowing another trillion dollars and adding to the debt. Considering that the US debt is already over 23 trillion dollars, borrowing another trillion dollars would be a terrible idea. Who does the US government borrow money from? As of yet, we are still without an answer.
Late Tuesday evening, CBS reported that the US government is planning to spend six trillion dollars on their latest ‘relief’ package for the Wuhan Virus crisis. Keep in mind that this recession was caused by the media deliberately blowing the virus out of proportion to cause hysteria, civil unrest, and economic turmoil, and to then blame Trump for the resultant overreaction.
What exactly is ‘federal reserve lending power’?
It’s not clear, but we can be fairly confident that it roughly translates to ‘dangerously massive inflation’.
Perhaps the best way to explain the scale of such a tremendous bailout is to compare it to the entire US government’s annual revenue and expenditures. Again, this bailout would occur in one moment, not over the course of a full year. The entire federal government collected $3.46 trillion in 2019. That figure has been increasing at a rate of only a few billion dollars per year, so the government estimates that it will take in around $3.8 trillion in 2021. The government’s projected spending for 2021 is just under 5 trillion dollars.
Back to this one-time stimulus package: It will seemingly cost the US government around $6 trillion. This would amount to nearly $24,000 cash for each adult in the US. That sounds interestingly close to the median total tax burden for an adult in the US, doesn’t it?
So….the US government takes $24,000 from each adult, plays some games, returns it to them and plays the hero? That’s not right.
Is there a ‘good’ kind of stimulus?
As we just discussed, the greatest ‘stimulus’ of all might simply be abolishing taxation. Nearly all of the 3.5 trillion or so dollars the US government takes each year comes from taxes on employers and employees. Abolishing the individual income tax and the payroll tax – permanently – would set off the US economy with such a bang that we’d become more prosperous than we could ever imagine. Net wages would increase by around 25% for the median US worker. Entrepreneurs would save huge amounts of money, which they could then reinvest in their companies. Americans would save countless hours that they otherwise would have spent filing taxes, and the IRS could essentially be completely dismantled at a tremendous net cost savings.
Cut the red tape
Another form of ‘stimulus’ would involve deregulation. So far, the Trump administration has been the most deregulatory administration, possibly since Coolidge. They have reportedly cut 22 regulations for each new one, though it’s difficult to know how burdensome the new regulations will be. Decreasing the number of regulations is a good start. Still, Trump has not resolved the main issue which causes the US economy to lose trillions of dollars a year due to onerous regulations: Trump should abolish whole regulatory agencies. Of the 400+ federal agencies, very few are constitutional and barely any of them would be missed should they cease to exist. Other than abolishing taxation, the only way that the government could ‘stimulate’ the economy and help struggling Americans is by getting rid of anti-prosperity regulations.
Earn money properly
Many people become anxious and even angry when they hear such radical proposals as abolishing taxation and regulation. The most common questions asked by skeptics are, “How would consumers remain safe without regulations?” and “How would the government function without taxes?” I’m honestly astonished that nobody seems aware that governments on every level can – and already do – earn money without the coercive extortion. The Liberty Block published a heavily sourced, data-driven article in 2018 explaining just a few of the many ways that governments could earn money without violating people’s natural rights.
The US is going through a terribly difficult time right now. Although the Chinese coronavirus is super-sensationalized by the media, COVID-19 has infected thousands and killed a few hundred in the US. Politicians in nearly every state have essentially shut down businesses, leaving a large portion of the workforce in limbo with no paychecks, bills piling up, and no idea when they’ll be allowed by government to return to work. I agree with the politicians and pundits that ‘something must be done’. However, instead of calling for tyranny and eternal debt, I propose giving people the most valuable resource of all: liberty.
The views expressed in this article do not necessarily reflect the views held by The Liberty Block or any of its contributors or members.