Re: When Our Gov Spends Money

Healdsburg CA

Description

In case you missed the post yesterday regarding "when our government spends money", I copied and pasted it below for your review. There are two points to make: The opening comment asks, "... where do you think that money goes?" Before that question, one should ask, "where does that money come from". As you know, money doesn't grow on trees. Before government can give money to anyone, they first have to collect it from someone else (taxes), or borrow it from those who have money (increase the debt). Tax increases are never popular, unless you are not paying taxes, and increasing the debt has many problems too. Think of the debt as your credit card balance. The larger the debt, the more of your take home pay goes to pay the interest on the card. The percentage of one's take home pay that goes to pay the card interest depends on one's income and balance on the card. If you are unfortunate enough to get laid off and collect unemployment, a larger percentage of what you take home goes to pay the interest on the balance. The same is true with our government. A certain percentage of each year's budget goes to pay the interest on the national debt. When times are good, and tax revenues are high, then that percentage drops, but when times are bad (1930s, 2008 to 2011 due to the housing crash and 2020 due to covid), the percentage goes up plus the interest paid on the debt cannot be used for other meaningful projects. The national debt now is just under 29 trillion dollars or over $87,000 for every person in the US. (National Debt Clock). Just as when your personal debt climbs to a certain percentage of your income, and your banker becomes concerned you may not be able to pay back your loans, so do world lending agencies get concerned when governments' debts get out of proportion with their earnings. Each country has a credit rating and the interest they pay on their debt will rise or fall depending on that rating. Countries such as Argentina, Greece and Italy have spent more than their ability to tax and are now have interest rates far higher than we in the US, but we are heading in their direction. The second point is increased government spending might sometimes be good and sometimes not. During the Great Depression, we had huge numbers of unemployed workers looking for jobs. We had great national industrial and farm capacity sitting idle for want of consumers to buy goods and services. The administration of FDR borrowed billions of dollars to finance government work projects (WPA) which put people to work, gave them money to buy things thus inducing industry to hire people to make things. It was known as "pump priming". We do not have the same situation today as the Great Depression. First, we do not have millions of unemployed who cannot find jobs. We can find on every street "Help Wanted" and "Now Hiring" signs as business struggles to fill positions. We have capacity to make things, but without qualified workers, things cannot be made. Farmers cannot grow more of anything without water and water has been diverted to send to residents in cities. Prices are rising mostly due to shortages of everything from tooth paste to gasoline. When people have more money than goods to buy, they offer more than the next guy for the same thing and prices rise. Businesses have the money to hire people, but, for whatever reason, they are not taking the jobs. Pumping more money into the economy is just throwing gas on the flames. There still would be a shortage of goods but now more money bidding for those goods. Even higher inflation. This is not the right time for government to be spending more money. When our government spends money, where do you think that money goes? The money that our government. spends goes directly in to the pockets of the private sector. Bankers, contractors, manufacturers, suppliers, transportation companies, white collar workers, blue collar workers are just a few sectors that benefit directly from government spending. As this people profit/make money, they spend. Farmers, retailers, food industry, hotel industry, airlines, etc all profit next. This is how a capitalism works. Conservatives talk like government. spending equals throwing money down a black hole. Government spending is "Trickle down economics" which is a fundamental republican policy. Republicans like government spending when they ge too choose where the money goes, but they resist when the democrats get to prioritize the funds. None of us want to see governent wasting our money. But we all benefit from government spending out money.