On Government Spending: Where's All This Money Coming From?

Our federal government can allocate a trillion dollars to infrastructure renewal. None of us have to pay for it. What a concept!

Somewhere along the line in Washington, an old idea got lost: That when the government spends money, it has to raise revenue.

A national debt approaching $25 trillion — about $76,000 for every man, woman and child in the country — attests to how completely that idea has been banished.

As I write this, a day before the inauguration of President Biden, I am expecting Congress to vote soon on a plan to send my wife and me $1,400 apiece in what are called “survival checks” to help us somehow make it through the COVID-19 pandemic. The only problem is, we are “surviving” just fine without government assistance.

What exactly is the rationale for sending money to people like us who have stable incomes and are under no economic stress? And where exactly is this money supposed to come from? And where will the money come from to fulfill the long-promised campaign to improve our water, wastewater and other infrastructure? Amounts like $1 trillion or $2 trillion have been tossed about as needed for that purpose.

Who is the government?

All this relates to another lost idea: That we the people are the government. That is, the federal government is not some beneficent entity that can simply bestow benefits on us. In a very real sense, we bestow benefits on ourselves, in return for which we expect to pay taxes. You know, consent of the governed, elected representatives, all that stuff.

What fun it must be as a member of Congress to dole out free money — magic dollars if you will. You want a multibillion-dollar Medicare drug program? No problem. How about $50 billion to repair hurricane damage? Charge it, please. A trillion-dollar tax cut? Sure, why not? And so on, seemingly ad infinitum.

The point is not to pass judgment on these and other adventures in deficit spending. The point is to question the wisdom of decoupling government benefits and actions from sources of revenue. David Obey, while a congressman from my state of Wisconsin, introduced a bill during the Afghanistan and Iraq wars that would have required taxes to be raised to continue the conflicts. His proposal was treated as if it were the craziest idea to come along in years.

But how crazy was it? If we want our government to do something, we should be willing to pay for it, right? A little thing about bills: They have a habit of coming due. And we are running up some enormous bills that will one day fall on my kids and grandkids, and yours.

Whither infrastructure?

So by the time you read this we likely will be in pandemic recovery. There’s an economy to rebuild, people and businesses need help to get back to normal. These are times that call for deficit spending. A good case can be made that infrastructure does, too. It’s an initiative with long-term benefits, the kind of thing (like a home mortgage) that’s wise to borrow money for.

My fear is that as a country we’re so married to the idea that taxes can never, ever be raised that we’ll deficit-spend ourselves into such a hole that a calamity will befall us that make things like the 2008-09 recession look like an ice cream social.

Sooner, not later, we need to re-establish the connection between spending and taxing. The basic laws of economics and mathematics require it.   


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