| SamuelRSmith said: Why is it austerity when the Government stops spending your money? I mean, this is how badly the "establishment" has engrained the need for big government in our lives... keeping more of your wealth is now a bad thing. |
We truly do have fundamentally different views of the role of currency in society.
You're more of the mindset that money ultimately comes from the people, and is taken by the government to be used for various goods. A view I once held.
I now view currency as a tool created by government to allow economic activity. Without the government first printing money, we would have none to pay back in taxes.
As a country's population and economy grow, we obviously need more currency available to represent this commerce and prevent deflation, thus a government with a fiat currency usually deficit spends to accomplish this goal. You can say that government shouldn't be deciding how we spend our money. I'm of the view that the government doesn't need any of our money to actually spend money.
In a fiat currency, taxation and spending aren't directly linked. A government spends to provide a certain level of services, to encourage economic activity, and to add more currency to the economy. A government taxes to control income inequality and to have more immediate control over economic activity. In times of decreasing activity, they can then cut taxes to spur growth. If things start growing too quickly, and inflation becomes a risk, they can then raise taxes to curb growth. This has no bearing on how they're spending money.
Government could theoretically spend without taking in any taxes at all. It would just lead to hyperinflation, assuming the influx of currency outpaces the growth of our economy in terms of real wealth. Thus, a balance between the two must be struck. But by balance, I don't mean a truly balanced budget. There is nothing inherently wrong with a deficit.
Of course, none of this holds true for governments tied to some sort of standard (gold) or governments that do not print their own currency (the Eurozone), for whom debt is a very real concern.
If you're interested, I would recommend reading Warren Mosler's Seven Deadly Innocent Frauds of Economic Policy.
