What About That Deficit?

If you are a typical American you have been trained to believe that federal deficits are a danger to the American economy. To that I say retrain yourself. Actually, federal deficits are injections of new economy-building dollars from the federal government into the private sector in a fiscal year. Without federal deficits we would not have money growth and we would have to endure economic recessions such as that of 2008-2009 which was largely the result of Bill Clinton's federal surpluses of 1999-2001.

By definition, a federal deficit is the number of dollars the government spends in a fiscal year minus the number of dollars it takes back in taxes in that fiscal year. Thus, the only way to avoid a deficit is for the government to tax back every dollar it spends. Let me repeat. The only way to avoid a federal deficit is for the government to tax back every dollar it spends. That means no dollars available for saving or investment. No dollars available for growth. Does that sound good to you?

If you are a Democrat you probably believe that raising taxes is good because raising taxes pays for increased government spending. But you would be wrong. Federal taxes do not fund federal spending. Raising taxes just removes already-spent dollars permanently from the economy.

If you are a Republican you probably believe that cutting federal spending is good because less federal spending allows for lower federal taxes. But you would be wrong. Federal spending is not funded by federal taxes. Cutting federal spending just reduces the number of economy-growing dollars available to the private sector.

So, rather than raising taxes or cutting spending to reduce the deficit, why not rejoice in the deficit, be glad the government is there to fund the private sector economy, and demand greater federal spending and lower federal taxes -- that is -- just the opposite of what you have probably been taught to think? The only question concerning deficits should be was the money created and spent for the highest public good, not will the deficit bankrupt the government. It won't. The politics of deficits should concern how they can best be used, not how they can best be eliminated.