Re: Refuting supply-side economics

From: Mark Monson (m_monson_at_ztech.com)
Date: 09/25/04 

Date: Sat, 25 Sep 2004 17:30:32 -0400

"William F Hummel" <wfhummel@comcast.net> wrote in message
news:4v37l0p9kpn9t4i8h43umicctg5emfmj3b@4ax.com...
> On Thu, 23 Sep 2004 22:59:40 -0400, "Mark Monson" <m_monson@ztech.com>
> wrote:
> >
> >"William F Hummel" <wfhummel@comcast.net> wrote in message
> >> >>In the borrowing option, since there is no tax to pay up
> >> >>front, the taxpayers could invest 10 billion to earn interest equal to
> >> >>the interest due on the debt, and pay off the debt when due.
> >> >
> >> >??? That is of course just flat wrong. Private investors can't
> >> >invest one more dime in anything productive if government borrows
> >> >instead of taxing. They will use the exact same $10G that would have
> >> >been paid in tax to buy $10G worth of government debt. Hello? Give
> >> >your head a shake.
> >>
> >> Roy fails to see that the private sector (in the aggregate) buys
> >> government bonds with the dollars that the government spends. But few
> >> recognize this, so its not surprising he missed it.
> >
> >Bill, take your eye off the dollar signs for a minute and look at what happens to
> >actual products of labor. When bondholders cash out and buy shoes and
refrigerators
> >with the interest, they get labor and give no labor in return. People have to
> >work to produce shoes and refrigerators. In the aggregate, if there are people
who
> >consume without producing there must be people who produce without consuming.
No
> >amount of balance *** number crunching can change that.
> >
> Do you have savings on which you earn interest or dividends? If so,
> you are a bad boy. Do you have parents or grand parents who are
> retired and living on the income from their savings? They are naughty
> people because they are not producing what they consume. Have I got
> that right?

No. It depends what is invested in. An unproductive investment like Usury or land
speculation doesn't earn the returns it gets because these investments don't
increase the total stock of goods or services. A productive investment into
capital tools earns its return because the total stock of wealth is increased by the
use of the tools.

In the case of the government borrowing money at interest, this scheme is
unproductive for taxpayers because all the things the government spends this money
on come from the produce of the nation. Taxpayers receive more benefit from their
tax dollars when all tax dollars are exchanged for government goods and services
rather than part of the taxes being used to pay interest on public debt.

>
> Now those who are living on the income from stocks or bonds are
> obviously not working to produce the goods and services the borrowers
> are producing.

Not necessarily. When you loan your production to further aid production you have
a legitimate claim to part of the increase. By loaning capital you are in fact
using your stored up labor to aid production. In this way you are being
compensated for labor when you receive interest.

>They are also bad guys, right? Then it follows that
> we should outlaw all lending at interest and stock dividends, right?
>
> Okay, these are rhetorical questions, but they follow logically from
> what you imply when you say "In the aggregate, if there are people who
> consume without producing there must be people who produce without
> consuming."
>
> >> The only reason the government sells bonds is to recapture its deficit
> >> spending, including interest payments on the debt. For a given level
> >> of spending, the only alternative is to increase taxes so there is no
> >> deficit. As explained earlier, to first order the cost to the private
> >> sector as a whole is the same for each option.
> >
> >The private sector as a whole includes those who pay interest on public debt and
> >those who consume that interest. The entire public debt scam is a transfer of
the
> >fruits of labor from producers (taxpayers) to non producers (bond holders).
> >
> To be precise, only the Treasury pays interest on the public debt.
> The public pays taxes, a portion of which is used to service the debt.
> But note that bond holders and tax payers are not mutually exclusive.
> In fact bond holders as a group probably pay more in taxes than
> non-bond holders. But that's an aside.

The bond holder as bond holder is the privileged recipient of tax dollars without
giving anything of value to taxpayers in return.
>
> What you seem to misunderstand is that some public debt is inevitable
> because tax revenues cannot be continuously matched with expenditures.

Expenditures over revenue can be made up by the government spending base money into
circulation, later corrected through taxation so as to avoid inflation.

MM

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