Tax and Spend

Support for repudiating the national debt.

"One myth about "debtors'" relief is that debtors are habitually poor and creditors rich, so that intervening to save debtors is merely a requirement of egalitarian "fairness." But this assumption was never true: in business, the wealthier the businessman the more likely he is to be a large debtor. It is the Donald Trumps and Robert Maxwells of this world whose debts spectacularly exceed their assets. Intervention on behalf of debtors has generally been lobbied for by large businesses with large debts. In modern corporations, the effect of ever-tightening bankruptcy laws has been to hobble the creditor-bondholders for the benefit of the stockholders and the existing managers, who are usually installed by, and allied with, a few dominant large stockholders. The very fact that a corporation is insolvent demonstrates that its managers have been inefficient, and they should be removed promptly from the scene. Bankruptcy laws that keep prolonging the rule of existing managers, then, not only invade the property rights of the creditors; they also injure the consumers and the entire economic system by preventing the market from purging the inefficient and improvident managers and stockholders and from shifting the ownership of industrial assets to the more efficient creditors."

Wall Street banks are probably the world's biggest debtors. They call debt leverage.

"Not only that; in a recent law review article, Bradley and Rosenzweig have shown that the stockholders, too, as well as the creditors, have lost a significant amount of assets due to the installation of Chapter 11 in 1978. As they write, "if bondholders and stockholders are both losers under Chapter 11, then who are the winners?" The winners, remarkably but unsurprisingly, turn out to be the existing, inefficient corporate managers, as well as the assorted lawyers, accountants, and financial advisers who earn huge fees from bankruptcy reorganizations."

Government exists to support the status quo, making the plutocrats richer at everybody else's expense.

"Most people, unfortunately, apply the same analysis to public debt as they do to private. If sanctity of contracts should rule in the world of private debt, shouldn't they be equally as sacrosanct in public debt? Shouldn't public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people. The reason is that the two forms of debt-transaction are totally different. If I borrow money from a mortgage bank, I have made a contract to transfer my money to a creditor at a future date; in a deep sense, he is the true owner of the money at that point, and if I don't pay I am robbing him of his just property. But when government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color."

The government never gets penalized.

"The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract."

It's great work if you can get it.

"Establishment economists, including Reaganomists, cleverly fudge the issue by arbitrarily labeling virtually all government spending as "investments," making it sound as if everything is fine and dandy because savings are being productively "invested." In reality, however, government spending only qualifies as "investment" in an Orwellian sense; government actually spends on behalf of the "consumer goods" and desires of bureaucrats, politicians, and their dependent client groups. Government spending, therefore, rather than being "investment," is consumer spending of a peculiarly wasteful and unproductive sort, since it is indulged not by producers but by a parasitic class that is living off, and increasingly weakening, the productive private sector. Thus, we see that statistics are not in the least "scientific" or "value-free"; how data are classified — whether, for example, government spending is "consumption" or "investment" — depends upon the political philosophy and insights of the classifier."
"It is for all these reasons that the Jeffersonians and Jacksonians (who, contrary to the myths of historians, were extraordinarily knowledgeable in economic and monetary theory) hated and reviled the public debt. Indeed, the national debt was paid off twice in American history, the first time by Thomas Jefferson and the second, and undoubtedly the last time, by Andrew Jackson."
"Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington."
"Specifically, of the 28 American states in the 1840s, 9 were in the glorious position of having no public debt, and 1 (Missouri's) was negligible; of the 18 remaining, 9 paid the interest on their public debt without interruption, while another 9 (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states."
"The next great wave of state debt repudiation came in the South after the blight of Northern occupation and Reconstruction had been lifted from them. Eight Southern states (Alabama, Arkansas, Florida, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia) proceeded, during the late 1870s and early 1880s under Democratic regimes, to repudiate the debt foisted upon their taxpayers by the corrupt and wasteful carpetbag Radical Republican governments under Reconstruction."
"So what can be done now? The current federal debt is $3.5 trillion. Approximately $1.4 trillion, or 40 percent, is owned by one or another agency of the federal government. It is ridiculous for a citizen to be taxed by one arm of the federal government (the IRS) to pay interest and principal on debt owned by another agency of the federal government. It would save the taxpayer a great deal of money, and spare savings from further waste, to simply cancel that debt outright. The alleged debt is simply an accounting fiction that provides a mask over reality and furnishes a convenient means for mulcting the taxpayer. Thus, most people think that the Social Security Administration takes their premiums and accumulates it, perhaps by sound investment, and then "pays back" the "insured" citizen when he turns 65. Nothing could be further from the truth. There is no insurance and there is no "fund," as there indeed must be in any system of private insurance. The federal government simply takes the Social Security "premiums" (taxes) of the young person, spends them in the general expenditures of the Treasury, and then, when the person turns 65, taxes someone else to pay the "insurance benefit." Social Security, perhaps the most revered institution in the American polity, is also the greatest single racket. It's simply a giant Ponzi scheme controlled by the federal government. But this reality is masked by the Social Security Administration's purchase of government bonds, the Treasury then spending these funds on whatever it wishes. But the fact that the SSA has government bonds in its portfolio, and collects interest and payment from the American taxpayer, allows it to masquerade as a legitimate insurance business."

I could have quoted the whole thing.