The Proper and Improper Role of Government: Chapter 4 – Tax Freedom Day – Do you know why this is important?

Working DollarIn 2019, Tax Freedom Day was 16 April 2019.  For those not in the loop, Tax Freedom Day is the day all Federal, State, County, and Local taxes are paid from your paycheck.  This date gets further into the new year every year, and with the amount of inflation seen since 16 April 2019, you can bet that Tax Freedom Day will shortly be in the middle of May or July.

What is Paper Money?

Dr. Clarence Carson wrote an article about paper money and the US Constitution, quoted heavily below.  Paper Money, “… Paper that was intended to circulate as money but was not redeemable in gold and silver was technically described as bills of credit at the time of the Continental Congress and writing of the US Constitution and US Bill of Rights. The description was (and is) apt. Such Paper is a device for expanding the credit of the issuer.”  The credit of the issuer is improved, not the benefit of those forced to use the Paper as credit.  Hence, the US Government, to improve its credit, began printing money, and the problems in American Economics took off like a rocket sled on greased rails!Plato 2

Paper Money only has value when the person holding that Paper has confidence in the government printing that money.  In every nation across the globe, the only thing keeping value in the paper currency is confidence in the government by citizens paying taxes.  Hence, the problems with depressions, the confidence in value are shaken, and the holders of Paper Money become restless and lack confidence that their money is valuable.  Bills of credit, Paper Money conveying the value of debt have been around for a long time, as discussed in a previous article on money.  Why did the USSR fall; the currency had been worthless for years, and when the citizens had finally had enough, the government fell apart.  A fitting tribute and pattern to be heeded from history if we, the government owners, cannot get the government to cease and desist forthwith!

Government and Paper Money

The US Constitution, as originally written, forbids the US Government from printing paper money why; because of how fast the government abuses this power, creating inflation.  The Continental Congress was well aware of government abuses with Paper Money, thus restricting the Federal Government to coinage and tying the value to the gold standard.  Inflation is nothing more than a hidden tax, where the government controls how much value your money is worth.  Every person using US Dollars to make a purchase pays this tax.  Thus, by the time a consumable product has been paid for in a store, that tax, inflation, has been paid multiple times, and the consumer is always worse for every point of inflation the government allows.

IronyDid you know that the Federal Government allows 2% inflation every year as a “target?”  Consider this for a moment; the government wants your money and calls this tax a “good thing” for the economy.  Thus, your prices for everything increase 2% or $.02 every year because the government wants it to.  The 2% devaluation of your money is part of the Federal Reserves’ “Dual-Mandate” to achieve 100% employment and price stability.  Do you see any logic in making money less valuable as a means to improve employment and stabilize prices?  I don’t!  Now, consider this, inflation has hit a this year (2021) and has not stopped climbing.  Worse, inflation is expected to continue to grow as the government prints more Paper Money, which will eventually end in a depression preceded by massive deflation of the value of the US Dollar.  Keep in mind; inflation has become a global problem, as the majority of governments spent money they did not have during the pandemic.  Imagine lemmings racing for a fiscal cliff.

Lemmings 5Josiah Quincy wrote George Washington “that there never was a paper pound, a paper dollar, or a paper promise of any kind, that ever yet obtained a general currency but by force or fraud, generally by both.”   Yet, Congress still refuses to learn the lessons taught during the Continental Currency.  Debts, runaway inflation, legal enforcement to demand paper money be accepted, all of these lessons were experienced by the Founding Fathers, with Rhode Island being the Continental equivalent of California for bad fiscal policy and idiotic fiscal enforcement.Tax Scheme 2

The founding fathers met during an economic period of deflation, which quickly became a severe depression caused by states issuing paper money that was useless.  The founders “hoped to erect a system that would endure, and to do that, they wished to guard against the kind of fiscal adventures that produced both unpleasant economic consequences and political turmoil. Paper Money was reckoned to be one of these.”  Paper Money, without the backing of silver and gold, has led to speculation, inflation, deflation, cycles of economic depression, and Congress essentially stole the right to print paper money and borrow from the citizens unconstitutionally!  This cannot be stressed enough; there is a direct causal relationship between Congressional action, Executive Orders, and the economic problems America is suffering, including the bondage of debts insurmountable and the abuse of tax schemes!  All of which were powers strictly limited in the US Constitution because the founders knew the government would abuse the power of Paper Money!Bait & Switch 2

History shows that when paper money was discussed, the states overwhelming voted to remove the power to print money from the US Government, seeing this as the best method for long-term economic success in America.  “The vote was overwhelmingly in favor of removing the authority of the United States to emit bills of credit. The delegates voted by state, and 9 states voted in favor of the motion while only 2 opposed it. (New York delegates were not in attendance, and Rhode Island, of course, sent none.) It is a reasonable inference from the discussion that the delegates believed that by voting to strike out the words, (from the Articles of Confederation, which made up the bulk of the US Constitution), they had removed the power from the government to emit bills of credit.”  It is important to note that allowing states to issue bills of credit, print their own money, or stamp coinage was also forbidden.  To avoid the economic crisis, the founding fathers were in the middle of when framing the US Constitution and the US Bill of Rights from the Articles of Confederation.  How many problems, and how much lower would your taxes be if the Federal and State governments had simply followed the law instead of stealing rights and powers from the governed?

Facts About Tax Freedom Day

IRSPlease note, the federal deficit, state deficits, pension crisis, student loan debt crisis, and interest are not included in the numbers quoted below.  The following information comes directly from the Tax Foundation (linked above):

      • Tax Freedom Day is a significant date for taxpayers and lawmakers because it represents how long Americans as a whole have to work to pay the nation’s tax burden.
      • This year, Tax Freedom Day falls on 16 April or 105 days into the year.
      • In 2019, Americans will pay $3.4 trillion in federal taxes and $1.8 trillion in state and local taxes for a total bill of over $5.2 trillion, or 29 percent of the nation’s income.
      • Americans will collectively spend more on taxes in 2019 than they will on food, clothing, and housing combined.
      • If you include annual federal borrowing, representing future taxes owed (interest on the debt), Tax Freedom Day would occur 22 days later, 8 May.
      • Tax Freedom Day in 2018 and 2019 was five days earlier than it was in 2017, primarily due to the recent federal tax law, the Tax Cuts, and Jobs Act.
      • From 1930 to at least 1995, Tax Freedom Day has taken 1.27 days longer per year to reach. – I do not have an updated reference for this information since 1995.
      • In 2019, on average, it took:
            • 42 days to pay the income taxes
            • 26 days to pay payroll taxes
            • 15 days to pay sales and excise taxes, not including surcharges and government fees for services
            • 11 days for property taxes – states control this, some municipalities, it took a lot longer
            • 5 days for Corporate Income Taxes
            • 6 Days for other taxes that always get passed along to the consumer.

Tax BurdenI have read economic reports from noted minds in economics that claim had the dollar not been loosed from the ties to the gold standard, America could not have produced the tools needed to win WWII.  To which I continue to claim, as Colonel Potter from M*A*S*H so aptly stated, “HORSE HOCKEY! and BULL COOKIES!”  Having Congress issuing massive letters of credit, borrowing tremendous sums of money, and the economic fallout remains a millstone about the financial neck of this country.  How much longer will Americans pay for debts created during WWII?  What about the ever-increasing debt burden and interest that is driving prices and taxes ever upwards?

Knowledge Check!The US Government has acted improperly since establishing the Department of the Treasury and the Internal Revenue Service.  Not just improperly but illegally under the US Constitution as drafted.  Illegally, immorally, and unethically towards the founders, and distorted the intent of the US Constitution to protect America from runaway government debt and inflation/deflation/depression cycles common when issuing Paper Money.  This is the utter truth, and until this problem is rectified, removing paper money is the right thing to do, even if it means some financial hardship!  America can survive financial difficulty; we cannot survive the bondage of runaway debt, interest that sucks all the GDP, and the socialism projects being paid for by tax dollars to buy votes from envious people looking for “equality and fairness.”

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.

$1.8 Trillion Annual Deficit – The Problems with Biden’s Budget

Angry Grizzly BearWith gratitude to the National Conference of State Legislatures (NCSL), their analysis of the proposed budget was broken down, and some sense was made.  Not that the news is logical, acceptable, or palatable, just that the budget documents were broken down, which was helpful.  We start with the most bass-ackwards aspect of the budget by asking one question, “Where is the money supposed to come from?”

The 2022 Budget Proposal left President Biden’s desk requesting Congress to spend $6 Trillion and add $1.8 Trillion in new deficit spending to the bloated debt the government already owes.  “Who is going to buy the bonds and make money on this debt?”  When a person employs a search engine, asking this exact question, many answers come forward, and some do not make any sense.

Peter Schiff stated:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Thus the first problem with America’s debt and proposed budget transparent; there is no money that government can spend unless it first forcefully removes it from the owner.  That is theft, or as we recently discussed, legalized theft.  The Supreme Court of the United States (SCOTUS) has ruled that legalized plunder, legal theft, or forced taxation are the price we pay for civilization, thus making legal the government’s actions to steal money.Government Largess

Let me be clear; I am not an economist.  I select several very bright and experienced people to help explain things to me.  However, I can help others with less interest in economics understand what is happening in America right now to answer the question put forward, “Who is buying America’s debt instruments?”  The simple answer is that the Federal Treasury is buying the debt instruments, as the whole world sells their bonds and other American debt instruments.  What the Federal Reserve is doing is called “monetizing debt.”

Monetizing Debt

Gravy Train 3The definition of monetized debt is as follows. “Debt monetization or monetary financing is the practice of a government borrowing money from the central bank to finance public spending instead of selling bonds to the private sector or raising taxes. It is often informally and pejoratively called printing money or money creation.”  Money can only be created in two ways: selling products and services and lending money where the borrower pays interest.  While there are many different debt instruments, i.e., credit card, home loan, student loan, bonds, Treasury Notes, etc., the principle remains the same: you either sell goods and services to make money or lend money and make money on the interest.

Why does monetizing debt matter?

Two simple reasons the government allows debt to be monetized.  To hide debt, it doesn’t want the public to know about, and to absorb cash on the market as a tool to fight inflation.  Here’s the problem, there is too much debt on the government’s books to hide it from the public any longer.  Add to that the sheer volumes of cash in the marketplace after handing out money during COVID, and the Federal Reserve will monetize debt.  Even if the chair of the Federal Reserve denies monetizing debt, debt is being monetized.Burning money - THE JOSIAH BARTLETT CENTER FOR PUBLIC POLICY

In short terms, your pocketbook is going to take another hit on the chin, and possibly two.  First, your interest rate on privately held debt, credit cards, student loans, homes, etc., is going to go up, all while making lenders nervous and refuse to lend money.  Second, inflation is already making the dollars held less valuable.

Inflation first; inflation is the devaluation of dollars.  The government floods the marketplace with cash, and the currency you hold will drop in value.  For example, recently the inflation was reported to have been 4.6% higher year-over-year.  This announcement was made in April 2021, so all the money you earned last year suddenly became 4.6% less valuable this year, all before the interest rate increases affected those dollars.Inflation - 8 Things Everyone Ought To Know.

Case in point, the US Government sent me $1000 in January; I held onto those funds due to a move that was coming and spent the money in June.  However, between January and June, inflation moved up at a steady pace, and when I went to spend that $1000, it was only worth $850.  That is the power of inflation in your pocket.

Have you asked for a credit increase recently and been denied?  What about your credit limits on your credit cards, have they shrunk?  Both are indicators that the lenders refuse to lend due to the tremendous risks caused by fiscal insanity in the Federal Government.  What about home loans, have you had to produce more documentation, prove more income, and work harder to qualify for a loan?  What about student debt?  The government controls the lending of student debt.  Even here, the Federal Government cannot demand a lender loan money to student’s and many students have found their college expenses grow, and their ability to borrow shrunk.Inflation pickpocket | Cayman Compass

In a simple fact of life, every household in America understands perfectly. When your credit scores go down, your ability to borrow reduces, and it becomes harder to meet all your bills every month.  Every city, county, state, and even the Federal Government should know this lesson, but they refuse to believe problems arise when credit scores go down.  All because those elected believe they can tax some more, and the money magically appears.

Does money magically appear in your pocket; of course not!  It must be earned through working, selling goods and services, or trading your time for employment with an employer for a paycheck.  Does the law allow you to write blank checks, kite checks, backdate checks, or simply float a check waiting for a future payday; of course not!  Yet, this is what the government is doing right now with your money.  The government is spending money, promising the lenders that a future payday will be theirs, but the government has to spend money to get money.  Does that excuse work for you when the electric company, gas company, cellphone, and other bills arrive?A Helpful Chart : How Inflation Changes Mortgage Rates

The most heartbreaking statement I have heard in a long time was recently made by a physician’s assistant, who claimed, “Aren’t we all just one paycheck from disaster?”  The simple truth, mostly, yes!  Studies exist that talk about financial resiliency in America.  Financial resiliency is all about being able to weather a patch of trouble without losing your possessions in bankruptcy.  The conclusions were all but unanimous. Along with most industrial nations, America has no financial resiliency due to government fiscal policies that hinder saving money and the need to live on credit cards to keep the basics of life paid for each month.

When inflation is stealing the value of your money, no wage can compete with government theft, all before taxes.  Add in tax laws that are counter-productive, job-killing, and increase the cost of doing business, and the job you have becomes tenuous at best.  Add in the hidden debts the government is trying to hide, and nobody in America is making money.

QuestionWhat about those who consider themselves “Rich?”

The same problems you are having with inflation are the same problems everyone is having with inflation.  Let’s go back to my $1000 that became $850 through six months of inflation.  We all spend the same money, and inflation is killing everyone’s dollar equally!  Hence, I beg you, do not allow the media hype about rich versus poor to derail the point.  Inflation and monetized debt are killing the US Dollar, which is why so many foreign investors have dumped their US Debt instruments for safer financial shores.

While some people have more financial resiliency than others, everyone’s dollar is dropping in value.  Inflation and low financial resiliency mean making budget cuts to charities, hiring someone to maintain a lawn, and a host of other ways and means American’s share our money.  It can mean turning off services, weighing how much fuel can be used, and a host of other belt-tightening decisions.  All things the government should first be doing, and they refuse.24+ Inspirational Quotes For Unemployed - Audi Quote

Yours and my liberty and freedoms depend upon stable economic policy, firm fiscal policies, and elected officials scrutinizing the government for waste, fraud, and abuse.  Yet, what do we regularly find; fraud, waste, and abuse!  The Department of Defense has lost multiple trillions of dollars; not a single politician is asking for an audit and an explanation or is willing to withhold additional appropriations until the lost money is accounted for.  The Department of Veterans Affairs continues to mismanage funds, misappropriate funds, and waste money like overripe fruit; yet, still, we have zero interest from the politicians elected to scrutinize government.

I repeat Peter Schiff, only for emphasis:

The government doesn’t have money that it doesn’t take. Any dollar that the government spends is a dollar that the private sector can’t spend or can’t invest. The government has to take money out of the economy before it can put it back in. Nobody seems to understand this basic point because they see the Fed creating money, and they think, well, we just print money. They don’t realize that when they print money, they destroy the value of the money that’s already there. So, they’re not adding new purchasing power. They’re just redistributing it” [emphasis mine].

Inflation Quotes | Inflation Sayings | Inflation Picture Quotes - Page 2In redistributing your money, the government has proven they are the problem, and the solution begins locally!  Change your mayor, city council, county board, school boards, and every other elected official.  Getting the local governments in fiscal shape allows state governments to begin practicing fiscal health and sanity.  Then, we put people into the Federal Office more interested in scrutinizing the government than in writing endless laws and abdicating their legislative role to the executive bureaucrats and the judicial branch.

Knowledge Check!The budget put forth by President Biden is the height of insane, and I have only covered less than 1/10th of the budget problems in this article.  Granted, I covered the most egregious problem, but the fact that the legislative branch is even negotiating a compromise is beyond insanity and borders on criminal negligence!  We, each citizen of a representative government, must stand and tell our representatives NO MORE!  No more fiscal insanity, borrowing to buy votes, entering into debt obligations that make captives of unborn millions of other people.  No more will we allow them to buy votes to maintain power.  End the financial abuse of the taxpayer; your wallet will thank you!

© 2021 M. Dave Salisbury
All Rights Reserved
The images used herein were obtained in the public domain; this author holds no copyright to the images displayed.