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Government spending, worse than taxes

April 15 is behind us, and that gives a feeling of relief to those Americans who labored and toiled in 2015 to provide for themselves and their families while seeing billions of  dollars confiscated from their earnings.  (And, now they must keep records for years just in case they are later audited by the IRS.)

Ryan McMaken, editor of Mises Daily and The Austrian, says that it is not government taxing that that is the greater evil but what government does with the money once it has it, distorting the markets and causing misallocation of funds.

In “Four Reasons Why Government Spending Is Even Worse Than Taxes,” McMaken points out that once money is extracted from an owner in the form of taxes, the money leaves the realm of the marketplace and of market prices; and, it is placed at the whim of politicians who distribute goods and services according to the political power of interest groups.

He further condemns central banking as a great evil, noting that when central banks are present, there is essentially no practical limit on the amount of government spending that can take place.  Central banks simply create money “out of thin air,” which results in inflation that destroys the purchasing power of savings, life insurance policies, CDs and other fixed-dollar investments.  Inflation (and the fear of inflation) is the primary reason people buy gold and silver.

In reason #3, McMaken notes that government spending consumes scarce resources and distorts the economy.  In short, when government gets involved in buying resources for make-work projects and other political schemes, it uses up and drives up the prices of valuable resources.  A perfect example is light rail projects that costs billions of dollars but move only a tiny fraction of the people.

Reason 4, although not often discussed because of political correctness, is as insideous as any of the other three: government spending creates political dependency, which, in turn, strengthens the state as the spending creates vast coalitions of voters and interest groups that oppose cuts to governments programs.  According to some estimates, 20 million Americans have free government cell phones.  Try cutting that program!

Read McMaken’s piece here.  It’s a short read and well worth the time.

2 Responses to “Government spending, worse than taxes”

  1. Eric Mecham

    So the real trick is going to be predicting the final collapse. Or rather, not if it will come, but when. It is going to be difficult to figure out the tolerance people have for the ongoing dilution of their hard earned money. So far, it appears that since people in the US still have the ability to pay their bills, buy food, clothing, shelter, and a modicum of other services that are required in day to day life, they will tolerate the incredible abuse at the hands of their government masters.

    I propose that the collapse and ensuing revolution will not appear in earnest until the welfare checks start to bounce.



    • Bill Haynes


      Final collapse is hard to predict, if it has ever been done. However, inflation (here meaning rising prices) is not. Massive increases in the money supply will result in higher prices, it’s just difficult to say when. Now, talking about higher rates of inflation, Lawrence Ball, economics professor at Johns Hopkins University, only last year called for a fed inflation target of 4%.

      Higher inflation rates will be achieved, and with them will come increased gold and silver prices. Further, increases in gold and silver prices will be higher (on a percentage basis) than the general price level increase resulting in gold and silver investors profiting by buy at these levels.


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