Our national debt is currently sitting around 26 trillion dollars. Unfortunately, even this dollar amount does not fully represent the financial liability that we hold on behalf of our government spending. The U.S. government does not include in this calculation any unfunded obligations such as social security and medicare or federal employee and veterans benefits. According to the USDebtClock.org, unfunded liabilities currently sits around 148 trillion dollars.
Dividing the combined national debt and unfunded liabilities of 174 trillion dollars by the 124 million US taxpayers equals 1.4 million dollars. That is the extent to which each taxpayer has been indebted by government spending.
Everyone agrees across the political spectrum that our debt and unbridled spending is huge a problem. Unfortunately, as of yet no political candidate has been willing to take the unpopular position of addressing our reckless spending and so only manages to contribute to the pending disaster by continuing to kick the can further down the road. The only tangible strategy in play over the last many decades has been to hope that it will be our children or their children that will pay the inevitable price and not us.
As voters increasingly see government as providers they increase the incentive for government to continue reckless spending since it is largely the promise of government spending that buys votes. Voters have become enamored by the allure of “free” healthcare, education, disaster assistance, protection, housing, food and any other expense that political campaigns can think to offer their perspective voters.
The concept that has eluded these voters is that the government does not produce anything, and subsequently have nothing to give other than what they must first take. Governments have three means of acquiring money, by taxing, by borrowing, or by printing money. Many young voters associate money printing with the free creation of money and view it as something the government aught to do in order to provide for the population.
The problem with any currency, including the mighty U.S. dollar is that it operates under the principle of supply and demand. No longer backed by gold, money itself is worthless, it serves only as a medium of exchange for goods and services. When we print money it has no effect whatsoever on the availability or output of goods or services, it only increases the money in circulation.
When the amount of money in circulation increases our natural tendency is to put that money to use by purchasing additional goods and services thus driving up the demand for those goods and services. Since increasing the money in circulation does not increase the availability or output of goods and services, the increased demand for those goods and services makes them more valuable resulting in higher prices thereby negating any perceived benefit of printing.
Because printing money does not increase our GDP, it does not increase our national wealth, nor does it provide our government with an improved ability to provide those now more valuable goods and services to the people. It merely increases the amount of fiat currency in circulation.
Unfortunately, there is a very negative consequence of increasing the amount of money in circulation. When the available supply of money increases the overall value of the money decreases. Anytime the government prints money, more of it will be required for goods and services. This means the purchasing power of the money you already have is decreased. Money printing devalues savings and wages and is therefore destructive to our prosperity.
Some may argue that this only requires we raise wages but its analogous to a dog chasing its own tail. Printing money increases the demand for products which increases the value and subsequently the cost of those products. The increased costs in turn lowers the standard of living for anyone who needs these products so employees negotiate for increased wages. Companies faced with paying both higher wages and with higher costs for materials used in production have no choice but to increase the costs of their goods or services to maintain their profit. Round and round we go, chasing our own tail thinking there must be some magical formula that will enable us to get ahead of that elusive tail which will result in some form of financial equality.
All of this is not just destructive to our prosperity, it is also destructive to our liberty. When people come to rely on governments to provision their basic needs they become dependent upon government. When people are dependent upon government for their healthcare, education, housing, food and so on they are greatly disadvantaged to hold that government accountable to their interests.
Because any of the actors or representative within government are cut from the same imperfect cloth as the rest of us, it is inevitable to expect some level of corruption within government. The defense against this corruption or tyranny is a strong independent population that can hold their representatives accountable through elections or other legal means. Our ability to hold the representatives of government accountable is greatly diminished when we are dependent upon them for our general wellbeing.
When we view the role of government as that of provider we naturally feel compelled through our own interests to vote for the greatest provider, or in other words, the candidate who can promise us the biggest monetary reward, paid by our own taxes, in exchange for our vote. Under different circumstances this would be considered a form of coercion.
When we vote for governmental provisioning we are voting for them to tax us, or to devalue our savings and wages. In either case, we are incentivizing political parties to compete against each other to see who can purchase the most votes which is destructive to both our prosperity and to our liberty.