Lately, we hear media and government hype that the latest coronavirus requires government to further restrict our natural rights to use our labor and property to add value. We also hear media and government hype that the coronavirus shutdowns, like every recession in living memory, requires government to borrow even more, even faster.
What does government people’s borrowing mean for you? It’s simple. Government borrowing means that you owe the government’s creditors.
Government people don’t add economic value, so it’s not their money that they use to pay their IOUs. When government issues an IOU to a creditor, what it’s really issuing is a You Owe Them, a UOT.
Government people borrow so they can spend more now. You always pay more, now and later. The money you’ll earn later is being spent on what government people want now The rationalization is always that they’re spending now for you, so let’s start there.
Others Spending ‘For You’ Don’t Buy What You Want
When you spend your own money, you spend it for you. You consider your needs and wants now and in the future. You shop for the product. You satisfy yourself that one particular make and model, at the price currently offered, will provide what for you will be the optimum value for your money. If you choose to talk about what you spent, you emphasize how little you spent to get what you chose.
When government people spend your money, they spend on themselves. They consider their needs and wants now and in the near future. Shopping is hard, and anyway, their suppliers are happier when the prices are higher. So they emphasize how much they spent to get what they chose. This takes lots of gall, but they don’t realize this or don’t care.
What government people buy, in the end, is always the same: future votes that will return to office these same government people, the ones who use your future earnings to borrow money and spend your future money on themselves now.
Government Spending Messes Up Your Life
That’s the overall process. Overall, it’s bad. But the specifics are even worse. Government people spend on exactly the things that add the least value for you.
In good times and bad, they spend to increase how much money you are required to spend, for example, on health-payment people, and on health-care people whom government has granted crony privileges to test drugs, produce drugs, perform exams, request tests, perform tests, prescribe drugs, and provide medical therapies.
In bad times, they spend on themselves, further restricting our rights to use our liberty and property to add value, and ultimately shutting down our businesses. They spend to keep in business the people who are adding the least value, who would otherwise have to give up their control of employees and assets to other businesses, who would add more value. They spend to take the place of far-more-efficient voluntary charity.
In each case, we would take our money and use it well to get what we choose, while government people take our money (which, to them, is other people’s money) and use it not so well to get what they want.
Pay Now, and Pay Later
In the end, government spending always works out even worse than all of this already sounds, because of government’s effect on our whole system of people shopping and producing together. Government people do a poor job of controlling those who add value, while we shoppers would otherwise do a great job of controlling those who add value—starting with ourselves.
Under government people’s control as the central planners, people in business stay in business who add less value. Under our control as shoppers, people stay in business by adding more value. So no, government people aren’t spending on your behalf. But you’re paying on their behalf.
The companies that you haven’t been choosing with your shopping choices, loaded with debt subsidized by you, keep producing more of the products you don’t want. You pay the interest on all the new debt. All the interest they commit you to pay continues forever. The only time the national-government debt was ever paid in full was in 1835.
You also lose the value of your future Social Security checks. If government people would keep the quantity of money constant, then the interest you would pay on the government debt would be at a real rate of around 3 percent, significantly more than the real rate in recent years, around 0-1 percent.
Instead, so far, the government people keep working with bankers to increase the quantity of money. So instead, your future Social Security checks, although partly adjusted for cost-of living-increases, will buy much less.
Pay More to Get Less
We can visualize what to expect in the future by examining the mostly-consistent past performance, and by paying close attention to the change in those overall trends.
Figure. The relative product value that could be bought for a dollar, shares of company ownership that could be bought for a dollar, and numbers of people whose actions supported each dollar, from 1970 to June 1, 2020. Data sources: fred.stlouisfed.org/ series CPIAUCSL, WILL5000INDFC, M2SL, and POP, accessed 16 Aug. 2020; Siegel, Jeremy J., “The Rise in Stock Valuations and Future Equity Returns,” Journal of Investment Consulting, vol. 5, no. 1, Summer 2002, pp. 9-19.
The solid curve at the bottom shows the driving force: government people increasing the quantity of money. Across five decades, each dollar came to be used in the commerce of a much smaller number of people. This crucially means that a given amount of government debt has come to be serviced by the future incomes of a much smaller number of people.
The jagged, dotted curve shows one response, that after taking out the average 6 percent annual real return, the shares of company ownership that could be bought for a dollar became even smaller.
The smooth, dashed curve shows another response, that the product value that could be bought for a dollar became dramatically smaller. Here the decline looks like it was slower. This anomaly is worth examining.
It’s noteworthy that in the everyday product value per dollar, a subset of products consisting of high-priority purchases, the decline was faster. In the overall final-product value per dollar, a superset consisting of all allocation choices by individuals, the decline must also have been faster. After all, ultimately all products serve the needs and wants of individuals, and all products are affected by the driving-force solid curve of the number of people whose actions support each dollar.
Fewer People Supporting Much Higher Spending
This effect can be harder to see since price changes reverberate across all products for at least a decade. Even so, human actions often continue in similar veins for time periods that are even longer. Over time, then, the driving-force curve will increasingly bend the response curves into the same shape, apart from a slight leveling out due to productivity increases. When the driving-force solid curve of the number of people supporting each dollar has a decline that’s fast, the overall final-product value per dollar must eventually have a decline that’s similarly fast.
In the meantime, until the product-value decline fully registers, the cost-of-living increases in people’s Social Security checks will be smaller, while the actual increases in people’s costs of living will be larger.
It’s deeply alarming that the decline in the driving-force solid curve of the number of people whose actions support each dollar already by June 1 was by far the steepest and deepest in five decades—dramatically more than even in the 1970s Great Inflation.
Government people’s actions now are making you pay now by making interest payments on their borrowing. Government people’s actions now will make you pay later by getting fewer consumer goods and services from the lower-value dollars they will send you as your Social Security checks.
We Can Do Better Than This
There is never a reason we as individuals should accept government people borrowing by spending more of our money. To government people, our money is other people’s money. To us, our money is our money. Nobody looks out for our needs and wants as well as we each lookout for our own needs and wants.
Government people are able to get away with this not because we don’t have a good sense about what they’re doing, but rather because Progressives in government form a permanent monopoly. Democrats, around half of the elected representatives, are fully Progressive. Republicans, around half of the elected representatives, are on average half Progressive. Bring them together, and every new Congress is around three-quarters Progressive — that is, strong-supermajority Progressive.
Monopoly power means that they don’t really have to represent us. And they don’t represent us. They just do what they want.
We can do better. The first step is to admit that we have this problem. An immediate next step is to actively resist unconstitutional orders that throttle our earning power, endanger our health, and give government people excuses to rationalize borrowing more and taking more control over us.
An ongoing next step is to use our votes to select constitutionalists in primaries and to elect constitutionalists in general elections. Voting for the same Progressives every time will get us the same results every time. We can do better. Each vote for each office can be a step away from Progressive control and towards constitutionalists and freedom.