Oh Those Taxes!

It is income tax time again so I want to follow up my previous post with this question - where do our federal tax dollars go? Silly question you say. I suspect most of us assume that our federal taxes go into the Treasury's own bank account and that the Treasury uses that money to pay federal bills, expenses, benefits, and giveaways. That is what it looks like on the surface, but looks can be deceiving.

Recall from my previous post that US dollars are simply federal government IOUs, redeemable in nothing but other dollars. When the federal government collects your tax dollars from you, it retrieves from you some of its own IOUs that have found their way into your pockets. So, let us do a little analogy. You sell me your old pickup truck for $500, but instead of giving you cash or a check, I hand you my signed personal IOU for $500. You expect to redeem that IOU later, at which time I would hand you $500 US dollars and you would hand me back my IOU. My IOU is worth $500 to you when you have it. What is my IOU worth to you when I have it? If you said ZERO then you can see where I'm going with this.

So how about we change this up a little and instead of my giving you $500 US dollars and taking my IOU back, I hold a gun to your head and simply take my IOU back? Now in my possession, how much is my IOU worth? Zero because you no longer have it, and because I cannot owe myself.

My point is this: an IOU in the hands of the issuer has no value. Thus, a dollar in the hands of the federal government has no value. It is gone, destroyed, out of existence. When the federal government takes your tax dollar, that dollar is gone for good. When the federal government spends, it issues new IOUs (aka: dollars) and it can issue those IOUs (aka: dollars) in unlimited quantities, subject of course to Congressional authorization. Federal taxes are unneeded to pay for federal spending. Income taxes pay for nothing. Payroll taxes pay for nothing. Inheritance taxes pay for nothing. Gasoline taxes pay for nothing. Federal tax dollars pay for nothing. They cannot because they are zapped, destroyed, out of existence as soon as they come into federal possession.

So then, why does the federal government levy taxes? It has its reasons, but those are for a later post.

(Oh, by the way, if you think about what I just said, you should conclude that Social Security is always solvent and that it can never suffer a shortfall. Again, that is fodder for another post.) 

A Word About the Economy

Kick this notion around and see if it registers with you. When it comes to finances, North Carolina is just like your family, and your family is just like Radio Shack, and Radio Shack is just like the Town of Kinston, and the Town of Kinston is just like Greece. No, I don't mean they are all broke. I mean that each of the aforementioned entities must find a way to rake in as much, or more, revenue than they spend or each will eventually end up insolvent and maybe in bankruptcy court.

Did you notice that I included a household, a business, a local government, a state government, and a country? All households, businesses, local governments, state governments, and countries like Greece share a common financial constraint - they are users of money, not issuers. Notice too that I did not mention the United States among this group. Not all countries are subject to the financial constraints of Greece and the other entities I named. The US government, like Japan, China, Brazil, Australia, and some others, but unlike Greece, is the sovereign issuer of its country's currency, the US dollar, and despite artificial debt limits and the (mostly hollow) threat of inflation, the US government can always create as many dollars as Congress desires. The upshot of that simple notion is that the US government can always pay any debt, regardless of size, as long as that debt is denominated in US dollars. It also means that a federal deficit is not in the least bit scary. It also means that federal taxes and federal borrowing are not necessary for funding federal spending, not when the country has the ability to create and issue dollars. In fact, the US does not actually borrow, but that's a topic for another post.

A US dollar, you see, is nothing more than a federal government IOU, payable not in gold or silver or a fresh-killed chicken, but in only another federal IOU. Unlike your IOU or your neighbor's IOU, everybody in the USA and in many other countries gladly accepts federal IOUs (that is, dollars). What does it cost the federal government to issue an IOU? Nothing. Sure a dollar is a federal liability, but guess what else it is - an asset to the holder. In fact, all US dollars are private sector financial assets. If the government did not spend, or if it took back in taxes all its spent dollars (otherwise known as a balanced budget), then we in the private sector would have no money to spend, save, and invest. Thus, for the sake of a growing and healthy private sector economy, especially in times of money shortages, low demand, and high unemployment, the federal government should consider spending more and taxing less. Federal debts, remember, are also private sector dollars. Without one, we would not have the other.    

Gatlin Was No Stranger To Tragedy

Richard C. Gatlin (1809-1896), former US Army officer and Confederate general from Kinston, NC was a man of the 19th century, an age when personal tragedy was commonplace and childhood death visited many families. During his long and fulfilling life, Gatlin endured his share of low points and heartbreak as outlined below.

  

o    After graduating from West Point in 1832, Richard C. Gatlin reported to Fort Gibson, Indian Territory as a brevet 2nd lieutenant. In his first month on active duty, a percussion cap from his gun exploded into his left eye leaving a metal shard that surgery could not dislodge. He went on medical leave in New Orleans then back in Kinston until October 1833 when, after the "inflammation subsided", he returned to Fort Gibson. He appears to have never regained the sight in his left eye.

o    On December 28, 1835, Gatlin's older brother, Assistant Surgeon John S. Gatlin was one of the last of 106 men killed in the infamous Dade Massacre in Florida. Seminoles ambushed a column of 108 men under Major Francis Dade near present-day Bushnell, Florida. Only two soldiers survived and one of them died just days after the attack. John S. Gatlin fell in a hail of bullets after firing all four shots from his two double-barreled shotguns. Six months later, Gatlin's father died, reportedly despondent over the death of his older son.  

o    On September 23, 1846, while leading his 7th Infantry Company F in house-to-house, hand-to-hand combat in the streets on Monterrey during the Mexican War, Gatlin took a bullet through the shoulder. The wound knocked him out of action for several months. Gatlin did however earn a promotion to brevet major and a commendation for "meritorious service".

o    In July 1849, Gatlin married for the first time, at age 40, to 22 year-old Scioto Sandford. Their first child, Johnny, was born in July 1850. On December 27, 1851, while Gatlin commanded the post at Fort Smith, Arkansas, Scioto gave birth to the couple's second son, Alfred, but a week later on January 3, 1852 Scioto died followed by the newborn baby on January 11, 1852. Scioto and Alfred were interred in a single crypt at Fort Smith.

o    On February 16, 1854 in St Louis, Gatlin and 3 1/2 year-old son Johnny boarded the steamboat Kate Kearney for a short trip upriver to Alton, Illinois. As the big boat backed out of its slip, a boiler exploded spewing steam and shrapnel. The explosion slightly injured Gatlin but severely scalded Johnny who, after a ten-day hospital stay, died from his burns.

o    Gatlin's career low point came on March 15, 1862 when, as a Confederate general, he was relieved of command of the North Carolina Department, ostensibly due to "illness", following a Union invasion of the North Carolina coast and their occupation of the town of New Bern in Gatlin's department. The local press excoriated Gatlin, falsely accusing him of drinking and cowardice when an illness prevented him from leading his troops at the Battle of New Bern. The press later recanted and absolved him from blame.

o    The 48 year-old Gatlin married for the second time in January 1857 to 20-year-old Mary Ann Gibson at Fort Smith. During their 39-year marriage, the couple had seven children of which five died before reaching the age of ten. One-year-old Sallie died in Raleigh in 1864, while in Arkansas infant Robert died in 1866, nine-year-old Richard died in 1869, three-year-old Louis died in 1871, and nine-year-old Bettie died in 1880. Scarlet fever and respiratory diseases appear to have been the cause of all the deaths. Only their oldest daughter Susie (1857-1904) and youngest daughter Mary (1875-1973) lived to adulthood, but neither had children of their own. The youngest child, Mary Knox Gatlin, was born in 1875 when Gatlin was 66 years-old. Mary died in Chapel Hill, NC in 1973 just shy of her 98th birthday.

While perhaps not entirely typical, Gatlin's experience with death and tragedy was certainly harsh. The deaths of his children were particularly distressing to Gatlin, but he seems to have taken each experience in stride, and he did not succumb to depression nor immerse himself in strong drink as did so many of his contemporaries. 

  Richard C. Gatlin Jr Tombstone, Fort Smith, AR

Who Was Richard Caswell Gatlin?

Richard Caswell Gatlin was a Confederate Brigadier General noted for commanding the Confederacy's North Carolina Department from August 19, 1861 to March 15, 1862. Major Gatlin resigned a laudable 29-year army career on the day North Carolina seceded from the Union, May 20, 1861, to serve his home state as a militia general. When the Confederacy took responsibility for North Carolina's military defense in August 1861, Gatlin became a brigadier general in the Provisional Confederate Army and assumed command of the newly formed North Carolina Department. Despite planning a solid strategy and enlisting the aid of Generals J. R. Anderson, D. H. Hill, and Lawrence O'Bryan Branch, Gatlin was unsuccessful in garnering from the Confederate War Department enough resources to ward off a Union invasion and occupation of the North Carolina coast. Union attacks on Hatteras Island in August 1861, Roanoke Island in February 1862, and New Bern in March 1862 resulted in Gatlin's dismissal from command. Eventually, Gatlin was absolved from blame for the Union occupation and he went on to serve as North Carolina's Adjutant General under Governor Vance from August 1863 until the end of the war. Gatlin, a grandson of North Carolina's first governor, Richard Caswell. was born January 18, 1809 at the Red House Plantation in Lenoir County, NC, near the town of Kinston, to John Gatlin and Susannah Caswell Gatlin. After the war, he retired to his wife's family farm in Fort Smith, Arkansas where he had commanded an army post in the 1850s. He died at age 87 in Mount Nebo, AR on September 8, 1896 and is buried at the Fort Smith National Cemetery beside his two wives and two of his children.

Gatlin is one of the unheralded Confederate generals and 19th century stories. Besides being the first Lenoir County native to graduate from West Point (1832), he, with the US Army, helped open the American west, and he is the only Confederate general from Kinston and Lenoir County. A privately funded commemorative highway marker erected at the Kinston/ Lenoir County Visitor Center in 2014 and an exhibit of some of Gatlin's possessions, soon to be displayed at the CSS Neuse Civil War Interpretive Center in Kinston, indicate a growing recognition for his place in history. My new book, Richard Gatlin and the Confederate Defense of Eastern North Carolina, is essentially a Gatlin biography covering his early days in Kinston, to his army life in the wilds of America, to his Civil War experience, to his death in Forth Smith. If you read it, I think you will find Gatlin to be quite a likeable fellow and a man for his times.

Next time we'll talk about the many tragedies in Gatlin's life.

Welcome To My Gatlinbiographer Blog

My name is James L. Gaddis, Jr, better known as "Jim" Gaddis. I am a new author, an old musician, and a would-be economist in keeping with my BA in Economics from NC State. This blog will be open to whatever interests me and whatever I feel like discussing at any given time. Initially though, the blog is intended to publicize and promote my first book, Richard Gatlin and the Confederate Defense of Eastern North Carolina, now available for pre-order from amazon.com and barnesandnoble.com. Feel free to visit those sites and check out the book cover and the promo blurbs. 

Gatlin (1809-1896) was a Kinston, Lenoir County, NC native who was the first from his home county to graduate from West Point (1832). He went on to a distinguished career in the US Army before resigning in 1861 to lend his services to his home state which had seceded in May 1861.  I've studied his comings and goings since about 1999, learning bits and pieces about his intriguing trek through the history of the 19th century. The turbulent 19th century carried Gatlin to Indian Territory and Texas during Indian Removal,to upstate New York for the Patriot's War, Florida for the 2nd Seminole War, New Orleans in a brief peacetime, Mexico for the Mexican War, St Louis and Fort Smith for the 1850s, Nebraska and Utah Territory during the so-called Utah War, and finally back to North Carolina as the ill-fated commander of the Confederate Department of North Carolina. Along the way he was blinded in one eye, was wounded in action, buried his parents and siblings, was praised and excoriated by the press, and married twice and lost a wife and seven of his nine children to illnesses. Gatlin's career is historic in its own right, but around here, in Kinston, NC, his biggest claim to fame is being Kinston's own Civil War general. I'll be telling you more about Gatlin as time goes by, but you will get to know him fairly well by reading my book.

I am also intensely interested in the US monetary system which I believe is one of the least understood, or most misunderstood, topics of our times. I have come to believe that federal taxes destroy money and do not fund federal spending, that the federal "debt" is better viewed as private sector "savings", and that federal deficit spending is responsible for any and all aggregate private sector net savings and financial assets. You can file those ideas under the headings of Monetary Soverignty and Modern Monetary Theory. 

So join me if you will. Let's talk about Gatlin, Civil War, monetary and fiscal workings and policy, and, oh yes, Ian Tyson music. 81 year-old Ian will be flying east for a one-time concert up in Alexandria, Virginia in May and I already have my tickets.

Hope to see you along the way.

And check out these two booksellers:

amazon: http://www.amazon.com/Richard-Confederate-Defense-Eastern-Carolina/dp/162619842X/ref=sr_1_1?ie=UTF8&qid=1424140299&sr=8-1&keywords=richard+gatlin

barnes and noble: http://www.barnesandnoble.com/w/richard-gatlin-and-the-confederate-defense-of-eastern-north-carolina-james-l-jr-gaddis/1121010525?ean=9781626198425