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Sunday, July 26, 1998

Monetizing the debt

By Jim Ferrin, Contributor, The Daily Republican Newspaper

Related Story: National Debt Clock.

In the DR column Taking issue with debt thinking on Friday July 24, 1998, Professor M. Meeropol challenges anyone to explain how "our country" was harmed by the national deficits of the 80's and 90's.

I suppose that if one thinks of the country as the federal government, one must conclude that during the decade from 1988 thru 1998 our country was "helped" as gross governmental employment and overall governmental spending went up.

Yet, when one views the country as the people who live in the U.S., it is difficult to imagine that the deficits helped the people who pay an ever-increasing percentage of gross earnings in taxes. Clearly, the taxpayer has not benefited and is left with less and less to show for his effort.

Much of Meeropol's argument is based upon a faulty premise. When the deficit was reduced it was only through a process called "monetizing the debt." That means the government just went to the Treasury Department and ordered more dollars printed and placed in circulation in order to up government spending. That's the result of weak monetary policy in the White House.

The "monetizing effect" on the worker is that purchasing power is diminished as one's life savings is quickly depleted. The retired are forced to rely on government subsidies in the forms of Social Security, medical care, and housing. Its like relying on the burglar who steals your cow to give you milk. Wouldn't it be better just to keep the cow, in the long run?

Too many in government service seem to ignore the loss of one's savings. Perhaps the professor wants to focus on what we get for our tax dollars. True, we get highways and national security (ignore, among other things, our government's transfers of missile technology to China and communist ICBM's aimed at U.S. cities. -- I wonder if Wash. DC and Stanford Univ. are among the targets?)

We pay too much for too little. Our highways are built from gas taxes (which by the way are also used for social engineering and for the general fund). Our military spending in real dollars is down, our enlistment is down, our military readiness is down, our society is over-regulated.

In calculating the employee's gross income the government ignores the "employers share of Social Security and Medicare." Government figures mislead us.

There is 9% that is added to the cost of goods or services. That is a hidden tax that we all pay.

Free competition forces a market price for all products. That "competitive" price is based in part on obtaining a market rate of return. If the costs of production (wages, taxes etc.) increase to eat up that profit, the employer will go out of business or will opt to open another business with a better profit margin.

And don't forget the contemporaneous effects of taxation. Instead of people spending their own money to buy the things they want, government taxes its workers' payroll to buy the things it wants.

It buys agencies, controls, more regulations, foreign aid and more.

Stop and think about how much better our society would be if people were only required to pay a small tax (or an exclusive and disguised consumption tax) for which the various governmental agencies would then have to compete against each other. Government would become a great deal more efficient and a lot less wasteful.

Then, Americans could get back to living the only life they'll ever know and have the blessing of liberty in the pursuit of individual happiness.

[Note: G. Roberts also contributed to this story.]

Copyright 1998. By The Daily Republican Newspaper. All rights reserved.

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