Repeat after me, unless we run a budget surplus, taxes are never and in fact could never be used to "pay off our debt". And this post will definitively demonstrate this blindingly obvious reality. So here we go.
Sometimes its hard to know if the authors of articles written about Federal Govt financing are purposefully misleading readers with propaganda or if they are honestly misleading readers due only to ignorance and incompetence. I have to believe the following article written by Terence P. Jeffrey over at CNSnews.com (formerly the Conservative News Service, founded and owned by Brent Bozzell Jr.) must fall under the propaganda category. Here is the link and the opening paragraph:
http://www.cnsnews.com/...
The Daily Treasury Statement that was released Wednesday afternoon as Americans were preparing to celebrate Thanksgiving revealed that the U.S. Treasury has been forced to issue $1,040,965,000,000 in new debt since fiscal 2015 started just eight weeks ago in order to raise the money to pay off Treasury securities that were maturing and to cover new deficit spending by the government.
So far so good. At least Mr. Jeffrey knows what the Daily Treasury Statement is and where it can be found. This little corner of the internet only holds some of the most valuable evidence for understanding that the Govt's budget is nothing like a household budget. And if more people would avail themselves of this information, the confusion about how our national finances work would be decreased and the opportunities for rational policy making would be significantly increased.
Here is the Daily Treasury Statement Archive link for my fellow bookmark junkies:
https://www.fms.treas.gov/...
And here is the final statement for FY 2014 (which happened to be Sept. 30, 2014)
https://www.fms.treas.gov/...
I've pasted the table thats relevant to this discussion below:
DAILY TREASURY STATEMENT PAGE: 4
Cash and debt operations of the United States Treasury
Tuesday, September 30, 2014
(Detail, rounded in millions, may not add to totals)
______________________________
TABLE III-A Public Debt Transactions
______________________________
This Fiscal
Issues Today month year
to date to date
_______________________________
Marketable:
Bills:
Regular Series $ 0 $ 364,981 $ 4,773,969
Cash Management Series 0 15,000 236,005
Notes 106,000 260,000 2,007,289
Bonds 0 13,000 191,011
Inflation-Protected Securities Increment 31 -160 20,698
Federal Financing Bank 0 0 9,305
Nonmarketable:
United States Savings Securities:
Cash Issue Price 2 69 1,014
Interest Increment 2 477 5,783
Government Account Series 264,233 5,434,392 62,250,161
Hope Bonds 0 0 0
Domestic Series 0 0 0
Foreign Series 0 0 0
State and Local Series 571 5,692 82,117
Other 925 19,896 236,475
Total Issues $371,764 $6,113,346 $69,813,829
(Stated at face value except for savings and retirement plan
securities which are stated at current redemption values.)
______________________________
This Fiscal
Redemptions Today month year
to date to date
________________________________
Marketable:
Bills $ 0 $ 420,999 $ 5,128,966
Notes 75,709 182,880 1,409,866
Bonds 0 0 1
Federal Financing Bank 0 0 1,388
Nonmarketable:
United States Savings Securities 35 814 10,058
Government Account Series 252,457 5,408,440 61,840,795
Hope Bonds 0 0 0
Domestic Series 0 0 0
Foreign Series 0 0 0
State and Local Series 46 5,464 100,528
Other 933 19,850 236,339
Total Redemptions $ 329,180 $ 6,038,447 $ 68,727,941
Net Change in Public Debt Outstanding $ 42,583 $ 74,899 $ 1,085,888
So follow below the fold to see what the hell I'm going on about.
Obviously, there is alot of information in these tables, but the operative numbers are the two lines the I put into Bold-face. Total "debt" issuance and redemptions. And as the table is formatted (in millions), those respective numbers are $69.8 TRILLION and $68.7 TRILLION.
Thats right, just last fiscal year alone the Govt issued and redeemed almost $70 TRILLION worth of our mis-named national "debt". So any time you hear Obama, Democrats, or Republicans talk about how we need to make "shared sacrifices" RE: cutting spending that benefits the middle class, so we can "payback" our national "debt" just remember that every year we "payback" an amount equal to our national "debt" multiple times over, and nobody even knows. How is that possible?
Its simple really, the Federal Reserve is a bank, and just like any bank it has different types of accounts.
-Demand deposit accounts are called Reserve accounts and are only slightly different than a checking account you have at your local bank. The main difference being that these checking accounts are only for banks and other depository institutions, not for the general public. And the Fed is the monopoly issuer of this type of "money":
As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills.6 In this sense, the government is not dependent on credit markets to remain operational. Moreover, there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets (by virtue of never facing insolvency and paying interest rates over the inflation rate, e.g., TIPS—Treasury Inflation-Protected Securities).
http://www.stlouisfed.org/...
-Term deposit accounts are called Securities accounts and are only slightly different than term deposit accounts aka CD's at your local bank. The main differences being that these term deposit accounts are marketable (you can sell them) whereas generally your 6-month CD at Chase is not. And TSY-securities accounts are offered at longer terms and are accessible to everybody. They are the means by which the Govt allows citizens to deposit money at and thus use the world's largest and safest bank, the Federal Reserve. So for anyone who says that we shouldnt issue "debt" aka TSY-securities, what they are really saying is that we shouldnt allow Joe Six-pack to use our National Public Bank only depository institutions and banks.
So how does this relate to the redemption and issuance operation? When the Govt "pays back" TSY-securities, its bank, the Fed simply uses its computer to debit a securities account and credit a reserve account. Just like Chase would debit your CD account and credit your checking account when your term deposit matures. Nothing physical changes hands. No printing press was involved or wheelbarrows full of cash or gold coins, just digital 1's and 0's. Therefore, the ability and capacity of the Govt to change digital entries on its computers is practically infinite, in the same way our ability to send emails is practically infinite
Nobody's taxes were involved in paying back our "debt". Nobody's grandchildren were hurt in the process. Nothing happened.
And this brings us back full circle to Mr. Jeffrey's article:
During those eight weeks, Treasury took in $341,591,000,000 in revenues. That was a record for the period between Oct. 1 and Nov. 25. But that record $341,591,000,000 in revenues was not enough to finance ongoing government spending let alone pay off old debt that matured.
Seriously? This guy just linked to the information that proves the point that taxes are not used to "pay off old debt that matured." Unless of course he doesnt understand that $68 TRILLION is bigger than $3.5 TRILLION (which is the amount of money the Federal Govt removed from the economy via taxation last year). How can you use $3.5 T to redeem $68 T? You cant, and We dont.
So is this guy being honestly misleading or purposefully misleading? You decide.