01 April, 2008

Borrowing from our children

Have you spent your stimulus check yet?

In case you haven't been paying attention, the government is trying to bribe us into spending money. Why? Apparently they measure the health of the economy by how much money we spend. They esteem our spending to be too miserly, so they're going to print some checks and mail them out to the "deserving" among us.

I am among the deserving. I've even checked it against an online calculator that the IRS has conveniently provided. If I filled it out correctly, I am set to receive a handsome sum.

The system has, of course, been rigged: rich people don't receive a stimulus check. Who are rich people? Stop asking questions! (Although the answer to that question is part of the entertainment, too.) Last week, one would-be wit wrote on a political weblog,

Somewhere, some rich person (possibly you, dear reader) is paying more than his proportional share of federal taxes this year so that $600 of it can be reistributed to me, and another $300 to a non-taxpayer.

Allow me to express my gratitude: "Thanks, sucker!" (And yes, I'm definitely keeping the money.)
I think he was joking. In any case, I sent in a response, part of which he later quoted! I will copy my entire response below. He omitted the part that I considered most important, so I will emphasize that.
[O]ur burgeoning national debt implies that the money for this incentive package won't come from current tax revenues.

Rather, your descendants and mine will have to repay the money that is being borrowed to give us an incentive to spend. There's no guarantee that our dependents will in fact be rich. Future governments saddled with a weakened dollar and a massive debt may find themselves constrained to tax everyone, rich and poor, at an unreasonable rate.

With that in mind, I plan to deposit my incentive into an IRA or ESA. With like [I meant, "With luck"], the interest gained might offset the interest on the government's corresponding debt to China, Japan, Saudi Arabia, or whatever rich person can afford to buy the savings bond the Fed will issue to pay for my incentive check.

Our "conservative" Bush administration at work. Who's the sucker now? :-)
To me, this is a troubling aspect of the checks: the money coming in the mail is not money that the government has extorted from a rich person. The money coming in the mail is money that the government is borrowing from people with extra money lying around; that is, is borrowing from the rich. Implied is a promise from the government that someone will repay this money.

Consider now the fiscal record of the early 21st century, we observe,
  • Medicare Part D;
  • weapons systems that go billions of dollars over budget;
  • bridges to nowhere;
  • a misbegotten, mismanaged war;
  • government grants to college students who are utterly unqualified for high school diplomas, let alone college;
  • economic stimulus checks;
...the list goes on. These trillions of dollars that we pile onto our national debt must one day be repaid; that is the nature of debt. Do you really think that we who now borrow this money, largely without need, will repay it any time soon? Rather, our children will have to repay it.

We are, in that sense, borrowing from our children. If they choose to borrow from their children, the chain perpetuates. If no one chooses to take responsibility for this mess, the United States will turn out like those Southern American republics that started the 20th century wealthy, but collapsed after accumulating massive national debts.

Here, then, is how it is rigged: the government has set this up to make you think that the rich are not benefiting from this, while the not-rich are. To the contrary, the rich will collect this debt, with interest, and the not-rich will have to repay it one day.

Paradoxically, the government gives us a chance to avoid this, if only we have the discipline not to do what they think we ought to do. Take the check, and deposit it into a Coverdell Education Savings Account, or perhaps an IRA, in your children's names. More likely than not, your children will recover the money you borrowed from them, with interest. You won't get to spend it, and the economy will look bad to the people who think its health should be measured by the quantity of spending, but your children will benefit.

Aren't our children worth that sacrifice?

1 comment:

Clemens said...

Now I am a little worried Jack. I couldn't have put it better myself. Not only do I think the stimulus, the tax cuts, and the rest are nuts, and are going to ultimately rob your children (and my nieces and nephews), it will have bought us ... absolutely nothing. (except, of course, that bridge to nowhere, and perhaps a bunch of votes for someone or other).