crypto · Economic History · Federal Government

Deficits and Myth

Economic orthodoxy has a habit of permeating. Whether Left or Right, the political spectrum generally falls around some common first principles regarding how folks perceive public money and its relation to the taxpayer. As conventional wisdom holds it, we taxpayers fund the government, which then goes about its business in a variety of convoluted (and often reckless ways). Dissenters complain about how funds are spent, but they typically fall in line to avoid IRS sanction. The process continues from time immemorial until the state collapses, or otherwise changes shape.

Some would beg to differ, however. A strident example is Stephanie Kelton, author of the fascinating and eminently controversial Deficit Myth book. Kelton prevails as a stalwart promoter of Modern Monetary Theory (MMT), which manages to simultaneously irritate both conservative economists and their compatriots in the Keynesian column. At stake is MMT’s core implication that the state is not in fact reliant on our tax dollars, but rather independent of the stereotypical “family budget” analogy pushed by politicians. In reality, the government simply wills itself into existence by virtue of an inherent capacity to print money.

Now, some might pose an immediate counterpoint: will this not lead to runaway inflation? Well, MMT proponents have a rather clever way of squirreling out of the problem: they make a distinction between weaker economies deprived of reserve currency status and even Euro-utilizing nations tied to the European Central Bank, which prohibits them from deficit spending (borrowing and printing) their way out of the hole using former national currencies. The United States need not worry about this concern, or at least not to the same restrictive degree.

The purpose of citizen revenue is notably separate from the traditional view as well. According to Kelton, the reason why the Uncle Sam collects taxes involves three separate logical angles. First, it provides something of a check on inflation. Money taken out of circulation based upon paycheck confiscation or other state-mandated fees prevents an overabundance of cash in the system and limits the serenade hysteria of those on the Plural Right, or at least appears to do so. As to what level taxes must be, or what point spending may indeed be excessive, the MMT brigade is not terribly specific.

A following dynamic to taxation is its role in giving the dollar more value by creating a sense of scarcity among the citizenry. Consider the implications if people received their entire compensation without any current or future deductions; would there not be a potential motivation to work less, due to the availability of that additional dough? Over the course of a consumer-worker’s lifespan, it’s a lot of lost productivity on the overall market front. Many people would forgo second jobs, overtime hours, and bridging loans to simply enjoy the freedom of being off. True, there is the possibility of them becoming greater consumers with the extra funds, but whether it would make up the difference is questionable. Such conditions would also lend themselves to individuals having more time to educate themselves and question the state, hardly a positive aspect from the standpoint of the watchers.

This brings us to a third factor relating to legitimacy of the state. By collecting taxes under threat of serious penalties for failure to pay, the government puts up a credible stance versus the liberty-minded activist who conjures some idealistic claim that income tax is unconstitutional. Sure, you can hold that opinion, but the courts will see otherwise. This helps explain why even the most ardent libertarians are sure to file away by April 15th, conscious of their futility in resistance to a behemoth of entrenched administrative power.

Naturally following is the reality that tax protests would be unlikely to effect any major change on the government. The HHS and DHS will not cease to exist simply because a few hundred thousand refuse to pay into the IRS what they are expected to surrender. For one, monies are already deducted automatically from a paycheck if you are not self-employed, and even so, the government would just print or borrow more dollars. We already see this in the aftermath of major tax cuts like Trump’s TCJA; the federal state did indeed lose revenue and expand the deficit, but no crushing blow brought the Treasury to its knees. Business merely continued as usual, albeit with grimmer figures on the leader board.

Does this make us all conservative and libertarian coping clowns? Perhaps, unless the collapse becomes realer than your friendly neighborhood podcast suggests.

crypto · Culturalism

The Good Citizens

Worth documenting here, as I’ve seen so many cases like this on Twitter:

What a nice man

He’s an empowered feminist as well:

Some people try to reason, but then we get a healthy dose of Kevinism:

The importance of these images lies with what they signal about the folks around you. For years we’ve heard of “La Resistance” courageously fighting back against fascism and evil Nazis. Today, they happily relish the opportunity to round up others. Such upstanding citizens.

crypto · Culturalism · Economic History · Federal Government · investing · Uncategorized

Are We Wrong About Welfare?

An especially frightful bogeyman mustered by folks on the Plural Right to win elections is the idea of the welfare queen. This horrendous creature oozes about in life, deviously attempting to confiscate as much from the public dole as possible, and using taxpayer dollars to fund her luxurious lifestyle. She is often paired with her live-in boyfriend, a clownish drug dealer who uses his perch in a Section 8 housing complex to make tax-free money by selling controlled substances. Topping off the vignette are their countless children, who assist in generating those lovable food stamp checks which are annihilating the economy.

Effective as the idea may be for politicians, it betrays a fundamental unwillingness to understand the nature of the public support system, along with the actual status of people involved. Thus we must provide an overview of precisely what is available to welfare dependents, and for how long. Hopefully, a measure of clarity can help eliminate the misconceptions that inevitably fuel terrible corrective policy on the part of the State.

The first salvo ought to involve a popular 2012 study from Wisconsin distributed inside conservative circles. According to the authors, a family on welfare in the Badger State can rake in $35,000 annually post-taxes by yukking it up with a variety of government programs and not working. A similar 50-state analysis by the Cato Institute confirms such alarmism, noting how places like Hawaii grant payments of almost $50,000 a year to government dependents.

There is no doubt the proponents of such studies have justifiable concern about the nature of welfare. Unfortunately, they rely on rather self-serving conclusions to fit the bill of lolbertarian ideology. For one, the Wisconsin study relies upon an assumption that eligibility automatically equates to acceptance. In reality, analysts have concluded that less than 300 Wisconsinites would be able to draw the $35,000 amount of income, this in a state of almost 6 million people. Further complicating the matter is how most welfare programs require participants to be seeking a job or working, stipulations which undermine the suggestion they are simply mooching because they can.

Perhaps more critical to mention are the limitations on welfare programs themselves. In the case of SNAP benefits (food stamps), users without children are limited to 90 days in the service within a 36-month period by a federal law enacted in 2008, unless they can meet certain work requirements. When paid out, benefits average about $256.00 per month for a household or $127.00 a person, and come to around $1.40 for each meal. Higher payments materialize in the event of a household being extremely low income or with many kids, so not everyone receives the same amount of money.  It is worth noting that the Obama Administration promulgated an $8.7 billion cut to SNAP, despite its supposedly progressive credentials.

Section 8 housing also gets a bad rap due to the poor reputation of such communities, yet it too has strict standards for access, cutting out sizable swaths of the general population based on income and family status.  Quite crucially, the voucher system does not cater to illegal immigrants, as applicants must be citizens or possess eligibility for citizenship. The closely-associated LIHEAP program gives recipients help with heating and cooling bills providing they meet certain requirements. Strangely enough, President Obama also made repeated requests for Congress to cut funding to LIHEAP, instigating a move by the late Hugo Chavez to donate heating oil to Americans.  

Some critics will aim their guns at the Temporary Assistance for Needy Families (TANF) cash support program to satisfy notions of dependency. Here again the issue is complex. TANF operates not as a long-term solution to poverty, but merely the helping hand to bring people back on their feet during hard times. Benefit checks in July 2020 ranged from just over $300.00 in Texas to $1,086 in New Hampshire, reflecting cost of living and state government decisions. The final point is important because individual states control the destiny of TANF money block-granted by the Fed, and are not obliged to offer a large (or elevated) amount. Furthermore, recipients are limited to 5 years on the TANF dole throughout their entire life, so it is hardly a career dependency model.

Welfare alarmism also flies in the face of the historical record. The 1996 welfare reform bill signed by Bill Clinton had the effect of eliminating the “entitlement” concept behind such programs by instituting stricter work requirements. Since 1997, spending on TANF has remained largely unchanged at $16.5 billion, and broader welfare caseloads have increased to 15 percent, while the assistance rolls remain down by 68 percent from the pre-reform highs, this even with the effects of the recession and Corona. As a percentage of the total federal budget, the programs amount to $361 billion, or 8 percent.

One final point to acknowledge regarding the 1996 reform lies with the impact on child support enforcement. Prior to the legislation’s passage, the State’s involvement in collection and insistence on men paying was decidedly more limited. Clinton’s bill changed that by requiring state authorities to more aggressively pursue orders on child support, and encouraging women to pursue it. So in a sense men replaced the State for a portion of the payments, arguably leading to the disaster of family courts today.

At the end of the day, I can appreciate the rage against welfare. Those of us who work feel indignant about folks who simply take checks and live on the dole. Of course the truth is that many of the “takers” are actually employed, yet simply do not make enough to survive. Perhaps our bigger focus should be on the creatures and organizations regularly taking trillions from the government to bail them out whenever the economy turns south.

crypto · Economic History · Federal Government

They’re Getting Fearful

Today as I was browsing Twitter the following article popped up:

Imagine that. UBS is warning people that the major threat to cryptocurrency as a dominant means of exchange lies with the inability of central banks to control it by limiting total money supply. This honestly sounds like the product of some bizarro alternate reality. Such organizations have (at least in recent history) printed money and flooded the market with extra cash, not restricted the amount available. Do I sense a desire to manipulate the market and maybe snag some cheaper BTC for late-arriving buyers at UBS?

Time will tell. It’s no secret however that UBS has been on the warpath with their fear predictions, as seen just a week prior:

Of course if they do manage to drive the price down, smart folks will pick up a little more. The big shots will catch up, eventually.