“My Two Cents”
By Andy Sutton with contribution from Graham Mehl

11/02/2006

Like everyone else, we are sick of hearing commercials on every possible medium lauding the voting record of one politician and smearing the name of whoever the opposition happens to be. What we continue to find amazing is how this election campaign is being run on a host of non-issues at least from a fiscal sense.

We're told to vote for so-and-so because they will increase benefits, programs and the like - and at the same time keep the tax cuts permanent! Their financial calculators must work differently than ours, that's for sure. Maybe it's the batteries. In any case, it is high time this fraud was laid bare for exactly what it is.

There are three and only three ways a government can obtain money. It can tax the population, steal it, or print it. Since for the last 6 or so years we've heard about nothing but tax cuts, and at the same time government spending has gone through the roof, it must be that either the government is stealing the money (which may be true) or are printing it. Government officials will be quick to tell us how corporate taxes have made up for a lot of that spending. Which brings up another thinly veiled fraud: Corporations do not pay taxes. Period. Any increase in taxes to corporations simply gets tacked onto the cost of their products to maintain their margins. The consumer pays all taxes. Even with the increase in 'corporate taxes', we are still running a gross shortfall at virtually every level of government. This is the Keynesian equivalent of 'Student Body Left'; lower taxes, ramp up spending and fire up the printing presses.

People generally understand taxes, but tolerate them mostly because they never see the money anyway. It has been proven time and time again that we don't miss what we never had. Which brings us to the other two options. The money could be stolen and that might work for a while, but we don't believe that is what's going in America. We firmly believe the government's position is that it can print enough money to keep everyone happy, create inflation, then lie about the cause of inflation and blame consumers and oil companies for increases in price levels. By executing this strategy, inflation will sap away purchasing power the government would never be able to take via taxes.

In case anyone doubts this, look at the loss of purchasing power in the dollar over the past 75 years and then take a look at money supply and GDP numbers. Money supply growth has outstripped GDP growth for decades, which means this excess money was created essentially from thin air. A gold standard would have prevented this since our fairly stagnant economy would not have allowed us to accumulate more gold thereby preventing the printing of more currency. However, we have chosen to import rather than export, borrow rather than save, and therefore the gold standard is no longer an option.

We love a good conspiracy as much as the next guy. Much has been made in contrarian circles about the fact that the Fed is no longer publishing the M3 money stock numbers. They told us they wanted to save the taxpayers money and it cost too much to tabulate the numbers and they weren't useful anyway. There is, however, another distinct possibility: The real inflation is about to begin and the Fed et al want to make sure that it happens in relative obscurity. Purchasing power indeed may become like sand in our hands. No matter how hard we squeeze we just can't seem to hang on to it.

As we near yet another election, nary a whimper of the hidden tax has made it into the mainstream. Is it the most important issue? That is up to individuals to decide. Our goal is for the average person to at least be aware it exists. Incidentally, neither political party has the intestinal fortitude to fix this problem. Fixing it would almost certainly require admitting that it existed to begin with, and once people realize how they have been robbed, well, it just wouldn't be cool to be a politician anymore

Andy Sutton holds an MBA in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics.

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