Foundational Problems of the Left Part II: Progressives and Errant Views of Inflation

As an addendum to yesterday’s post, before I begin, I’d like to clarify the point that taxes reduce spending power and thus, can reduce the spending power of the rich whilst raising the spending power of the poor. When progressives say, “tax the rich!”, what they’re saying, though they do not know it, is, “destroy currency that is in possession of the rich!”. Under our current fiat monetary system, that is precisely what taxation does. It doesn’t get collected by government then respent on social programmes, or the military, nor does it end up in the hands of the poor. The national government does not need revenue today enabling it to spend. In fact, the national government’s job as a sovereign currency-issuer is to conjure currency out of thin air and then spend it into the economy. Progressives fail to realise this and so, their mantra of tax the rich will do nothing to help the poor in any way, nor will it secure and fully fund necessary public programmes. The illusion that taxing the rich funds national spending comes when progressives then spend an amount equal to what was destroyed in taxes. 

The Foundational Problem of the Left - The Taxation of the Rich Prior to Spending

In furtherance of my series on what’s wrong with the left, today I wish to discuss national taxation and how it relates to the left’s strategy. The fundamental problem is the errant notion that capital is somehow greater than its sovereign, the currency-issuing national government. The left sees the world through the eyes of Eugene Debs and so, sees a world not of free-floating, inconvertible fiat monetary regimes, but of fixed exchange systems, such as the gold standard. Grounding its strategy commensurate with this viewpoint both demonstrates the folly of progressives and dictates their failure. For Debs, the strategy made sense. The left had to fight on two fronts. Firstly, against capital itself going head to head with it for better pay and working conditions and secondly, politically for power in government to codify labour’s demands as law and to shift fiscal policy towards full employment and the public purpose. The left’s strategy was fine tuned to the reality that government’s fiscal space was constrained under a gold standard.

The Difference Between You and The Federal Government is Authority and Access

I’ve discussed many times now that the US dollar is just a number with a “$” symbol in front of the number. It is not a commodity. It is not finite; it is infinite, because numbers are infinite. Anyone who tells you that the US dollar is finite, or that the US government does not emit US dollars, doesn’t know what they’re talking about. At all times, when the US government spends, it is spending US dollars into existence via keystrokes, by entering an account and typing a number. That number becomes US dollars. At no point in time does the US government need your numbers before it can type them into someone else’s account. The notion is patently absurd. To illustrate the absurdity, let’s use you as an example.

Federal Taxes: They Aren’t Funding Federal Spending

Since it is tax season, I want to again discuss how federal taxes work. But this time, a little bit more in depth. I wish to demonstrate the concept of federal taxation by pretending that I am the federal government and that there are three people in the non-government sector, Bob, Patty and Jane. Afterwards, we will discuss where your tax dollars actually go and why you pay federal taxes.