Where Are the Feds Getting All That Money?

$2 trillion! That is the amount of free money that the feds are distributing to the American people to help them get through the coronavirus crisis. Most everyone is receiving a part of this free money.

And the feds are just getting a good start! When the gift-giving is all over, it is expected to add up to $6 trillion!

Aren’t you happy that you live under a government that is so good, kind, compassionate, caring, and benevolent? Imagine living under a communist regime, where government officials are so selfish that they keep most of their money to themselves and refuse to share it with their people.

What would we have done in this coronavirus crisis if the federal government wasn’t helping everyone? Why, we all would be doomed. Doomed!

But a question does naturally arise: Where are the feds getting all that money? Oddly, it’s not a question that the mainstream press, including investigative reporters, is interesting in asking. To them, the question is irrelevant and immaterial. Who cares where the government is getting the money? What matters is that it is sending it to us to help us out.

Many people believe that the federal government is like Amazon or Microsoft in that it makes its money in the same way as they do — by selling goods and services that other people buy. Thus, the notion is that just as Amazon and Microsoft get rich and have lots of money, so it is with the federal government. The mindset is that the federal government is just another actor in the marketplace, albeit a super big one.

Alas, such is not reality. The federal government does not get its money like Amazon and Microsoft do. It gets its money by taxing people.

Tax money is different from money acquired by selling goods and services to people. Taxes are collected by force, while money acquired by selling things to people is consensual. If you don’t believe me, try not paying your income taxes while loudly proclaiming it from the rooftops. The IRS will come slamming down on you, seizing your assets, imposing liens on your home, garnishing your bank account, and attaching your income. Moreover, the Justice Department will secure a criminal indictment against you and do its best to get you convicted and incarcerated. If you decide to resist any of this with force, they will shoot you dead and call it “resisting arrest.” There is nothing voluntary or consensual about taxation.

Given that the federal government gets its money by taxes, let’s do a thought experiment. Let’s imagine that the federal government is going to send every American $1,000 per month for free.

Where would the government get the money to do that? Again, with taxes. That’s the way the government gets its money.

So, to get the money to send everyone his 12 free $1,000 checks over the course of the year, the government taxes each and every American the sum of $13,000, $12,000 of which is for the free monthly checks and $1,000 of which is to pay the salaries of the IRS agents and the federal bureaucrats who distribute the money for performing this service.

Now, you might say, “Jacob, that doesn’t sound like a good deal to me. I want my free $1,000 a month but I don’t want to be taxed for it. I want the federal government to tax everyone else.”

But the problem is that everyone else feels the same way! They too want the free money but they don’t want to pay the taxes that fund it.

That, of course, brings to mind the point that Frederic Bastiat made in his little book The Law: “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.”

We all know that before the coronavirus crisis, the federal government was broke. In fact, it was worse than broke. It already owed some $23 trillion. This year alone, it was spending $1 trillion more than what it was bringing in with taxes. That meant that its debt was rising to $24 trillion.

And now it’s spending another $2 trillion. Experts are saying that that will soon increase to $4 trillion and then to $6 trillion.

Where are those good-hearted, benevolent federal officials getting all that money? Did they have it hidden under their beds the whole time, just ready to help us out with free money in an emergency?

After all, we know that they aren’t raising taxes. So, where are they getting all that money?

They are borrowing it! The $24 trillion in debt they owed before the coronavirus crisis is being increased to $26 trillion and then to $28 trillion and then to $30 trillion.

So, who owes all that debt? Why, that would be American taxpayers. They are the ones who ultimately are on the hook for all that borrowed money.

So, under our hypothetical, the government goes into debt for the sum of $13,000 so that it can send $1,000 a month to each American citizen for the next 12 months. And then, when the debt comes due, the feds will tax each American citizen the sum of $13,000 to repay the debt that was incurred to send them all that free money (plus the salaries of those federal bureaucrats who performed this service for us).

Oh, let’s not forget the role of the Federal Reserve in all this. They are printing the money that will be used to pay off much of that federal debt. Isn’t that a nice thing to do for us? Never mind that much of the value of our income and savings will be wiped out through debasement of the currency. Never mind that Federal Reserve inflation is just another form of taxation, albeit secret and surreptitious. What matters is that the officials in the Federal Reserve mean well and love us just as much as those other kind, benevolent, caring, and compassionate officials within the federal government.

Aren’t federal officials wonderful? Aren’t you glad they are there to help us out, especially during this crisis? Aren’t you proud to be an American, where at least you know you’re free?

The post Where Are the Feds Getting All That Money? appeared first on The Future of Freedom Foundation.