I personally would prefer a leaner federal state but it's not clear how to get there.

http://econlog.econlib.org/archives/2013/04/starve_the_beas_...

https://en.wikipedia.org/wiki/Starve_the_beast#Economic_anal...

https://niskanencenter.org/blog/cant-make-government-smaller...

You get there by enacting rules that make it really hard (politically damaging) for the government to spend what it does not have.

In order to tax, the government have to spend before.

Yes, the fiscal multiplier is important, but simple problems like corruption (regulatory capture and federal/state/county/municipality contracts to clients) and (very) unequal accumulation of wealth leading to serious power inequality seem more relevant today.

Re: corruption and concentration of wealth, I see no reason why government should have a monopoly on that. The 2007 crisis, and Enron before it, and countless other scandals, are evidence of the former being rampant in capitalism. The observation that without exogenous (non-capitalistic) forces, return on capital will always outpace economic growth (popularized by Piketty) is evidence of the latter.

Private corruption is many orders of magnitude a smaller problem, because there the agent-principal problem is less relevant. Enron had shareholders, they were lazy, but it was their money. The voters in public elections are playing with others' money too.

How do you come the conclusion that gov't corruption is "orders of magnitude" worse? I see nothing quantitative in your reasoning. Voters in public elections are playing with others' money, as are lobbyists for corporate interests. Private corporations play with others' land sea and air regularly. It's a flawed system as a whole, agreed, but getting rid of government influence is not the answer, as that leaves the economically powerless truly and utterly powerless.

And it seems you don't have an answer to the accumulation of capital. Left to its own devices, any capitalistic system will concentrate and grow wealth at a faster rate than economic growth. This is why a countervailing force is necessary, whether in revolution or governance.

edit re the agent principal problem: you forget the vast majority of people who are too poor to be shareholders or board members anywhere. The only shares anyone is guaranteed in society (in theory) is the equal and inalienable share in governance amounting to 1 vote. I shudder at the thought of a future America where your votes are directly proportional to your wealth, and seats on the Board of Directors of the USA are bought.

That would be just business as usual. In most countries and until very recently, only the owners of property were allowed to vote. We forget that 'natural state' of things to our own danger.

Sure, but in order to interact, private entities, use money, that it's backed and come from the government. If you "starve the beast" you could discover that it's all of us who are feeding from its blood.

That's not so strange, because, after all, the beast is all of us.

Banks create an asset in their balance, but they create a liability at the same time. Only governments spending create net financial assets in the economy (that is not the same that real assets, of course).

https://fernandonogueiracosta.files.wordpress.com/2011/08/cu...

(If it's too long, see 'vertical transactions')

http://www.bankofengland.co.uk/research/Pages/workingpapers/...

https://pediaview.com/openpedia/Modern_Monetary_Theory#Verti...

http://www.nakedcapitalism.com/2015/01/bill-mitchell-demysti...

(thanks for the link)

I agree one is created as debt which will be destroyed ultimately on repayment. However this is the nub - they create 100 and demand back 110 at a later date, therefore more must be lent in the interim to avoid a deflationary collapse.

From my point of view, cryptocurrencies are financial assets but not money. They are not an IOU (https://en.wikipedia.org/wiki/IOU).

Government money is a IOU because you are promised that it (and only it) will be accepted as a payment by the state.

Anyway, state money can never be totally replaced at least that the government accept payment taxes in the new currency. And why people would start using other currency if they have to get the official currency for taxes payment?

I recommend you to investigate Modern Monetary Theory. It's what made me fill the holes in my understanding (the bigger holes, at least).

http://positivemoney.org/how-money-works/how-banks-create-mo...

https://mises.org/blog/myth-half-americans-dont-pay-federal-...

Income tax -> Federal income tax (discretionary spending)

Payroll tax -> Social security and Medicare (non-discretionary spending)

Everyone pays into entitlements via payroll tax. Not everyone pays into discretionary spending (everything except social security and medicare).

Sure, it's great that in theory your payroll tax is converted into a bond, and then when you retire they sell it and pay you from that, but ... that's not what's happening in the big picture, because if there's surplus then it just lowers the yearly deficit in the federal budget. (As it happened for years, but the fund will be depleted around 2034.)

You start looking at it hard and the pyramid shape begins to appear.

I'm young enough that I plan my retirement assuming 0 money from Social Security despite the vast amounts I pay in. I see it as wealth redistribution from the young to the old who are already better off.

Just curious where you get your belief from since the data shows otherwise.

http://www.cbpp.org/research/social-security/social-security...

"Social Security Keeps 22 Million Americans Out of Poverty: A State-By-State Analysis"

"Social Security Lifts 15 Million Elderly Americans Out of Poverty"

"Social Security Lifts More Than 1 Million Children Out of Poverty"

62 million receiving social security.

Using your numbers, that means 40 million aren't in poverty receiving it, while there are 7 million non-elderly receiving it who are kept out of poverty.

My claim, if I make it a bit more wordy is that the elderly receiving social security have more wealth on average than those paying into it. To be a bit more exact, I was referencing those young enough to not be receiving it anytime soon. I didn't exactly give an age range, but we can go to the following site and see some interesting findings.

https://dqydj.com/net-worth-by-age-calculator-for-the-united...

For example, $10k for a 25-29 year old was about the 50 percentile. For someone 65+, it is the 12 percentile. You can try a number of data points and see that the trend is that the older have more wealth.

>Because most of them are just kept out of poverty by social security.

Most? Even with the worst numbers, it is only around 2/5 of the elderly who receive it.

Social security is a large regressive tax. It is generally paid by younger people who have less wealth and goes to older people who have more wealth.

> The government bond traded for SS and Medicare funds is not sold on the open market.

https://www.stlouisfed.org/publications/regional-economist/j...

"Government debt of the United States is typically issued in the form of U.S. Treasury securities. These securities—simply called Treasuries—are widely regarded to be the safest investments because they lack significant default risk. Therefore, it is no surprise that investors turn to U.S. Treasuries during times of increased uncertainty as a safe haven for their investments. This happened once again during the recent financial crisis. In fact, the increase in the demand for Treasuries was sufficiently large so that prices actually rose with an increase in the supply of government securities."

http://www.cbpp.org/research/social-security/policy-basics-u...

"The Social Security trust funds are invested entirely in U.S. Treasury securities. Like the Treasury bills, notes, and bonds purchased by private investors around the world, the Treasury securities that the trust funds hold are backed by the full faith and credit of the U.S. government. The U.S. government has never defaulted on its obligations, and investors consider U.S. government securities to be one of the world’s safest investments."

https://www.ssa.gov/oact/progdata/fundFAQ.html

"By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

In the past, the trust funds have held marketable Treasury securities, which are available to the general public. Unlike marketable securities, special issues can be redeemed at any time at face value. Marketable securities are subject to the forces of the open market and may suffer a loss, or enjoy a gain, if sold before maturity. Investment in special issues gives the trust funds the same flexibility as holding cash."

Special issues are literally more valuable than gold, backed by the taxing authority of the US government.

And that should have NEVER been legal. That money should have stayed in the funds. Any growth from those funds should still be in the funds. If they had not effectively stolen the money for other uses, those programs would not be in the mess they are in now.

Consider what would happen if the IRS was efficient enough (through these automated tax accounting systems) to not get an interest free loan from working America for an entire year (ie dynamically modifying every pay period how much was collected in federal tax withholding based on estimated total year tax liability); the federal government would have to be more judicious about its cash flow.

You'd think that's something Republicans and small government advocates could get behind. Go figure. "Fiscal conservatives" in name only.

EDIT: For the pedantic: s/IRS/US Treasury/ in my comment.

The federal government's "cash flow" is made up entirely of creating dollars out of nothing by spending and deleting dollars out of existence by taxing. The federal government doesn't "have" dollars.

http://www.moslereconomics.com/wp-content/powerpoints/7DIF.p...

No, it's not. Federal government revenue is real revenue, federal government borrowing is real borrowing, and federal government spending is real spending. The Federal Reserve creates and destroys money, but that monetary action is separate from the fiscal action of government revenue, borrowing, and spending.

I read it, and the point you are using it to support is still not true; the government could, Constitutionally, do what you describe (and what the linked article is part of the author's failed Senatorial campaign advocating), but it doesn't, for the same reason that the Fed exists; moneterizing spending and not unlinking fiscal from monetary policy undermines faith in the currency.

> But seriously, just read the link, you don't seem to understand the basic facts I'm expressing.

There's a difference between not understanding your claims and their relation to reality and disagreeing with the first and with your assessment of the second.

Does it mean that taxation in another country is different than taxation in US? Especially in a country where local currency has a fixed exchange rate to US dollar? They presumably can't create money that easily.

The same cycle goes around in other countries, the fixed exchange rate (it's called "pegged to the dollar") means that the central bank has to do open market transactions (on/in foreign exchange market venues) to achieve that fixed ratio.

That means that in case the rate of inflation, economic growth, balance of accounts of foreign trade, etc. differs between the particular country's and the corresponding metric of the USA, then they will have to act. (Of course it's not a top-to-bottom thing, but it's directly influenced by forex markets, therefore there are a lot of speculation when central banks try to maintain a fixed ratio of anything to whatever. [You might remember when the CHF/EUR ratio started to go haywire and the Swiss central bank intervened ... and then suddenly stopped that intervention.])

When the U.S. left the gold standard it was giant fuck you to all the countries who held dollars and could no longer exchange them for gold. The U.S. maintains and exercises military power globally in part to protect the dominance of the dollar.

Note also that state/local taxes in the U.S. are completely different from federal because they can't just make dollars and can only spend dollars received through taxes (which are not deleted in that case) or received from federal spending (or in some cases through the state itself doing business in the market).

Taxation works pretty much the same way everywhere. The central banks are separate entities in any modern state/economy/monetary zone. The federal and state/local taxes are the same. The federal government takes on debts like states. You might remember the brouhaha about the debt ceiling and the big sequester in the past few years.

The Bretton Woods system was doomed to fail anyhow, it was a nice try to help the non-US post-war economies, but obviously as soon as some problem arose in the US (looming rise in unemployment), the system fell apart.

The petrodollar thing is real, but it's not important. The US import-export is enormous, the trade with China/India and the EU has a lot more influence on the dollar than oil interests. (And thus conversely the US power structure won't use the US central bank to try to exert power, because it'd fuck up its own economy the fastest - because the US benefits the most from global trade.)

The import/export issue is real in the sense that Chinese folks holding U.S. dollars could buy up lobbyists and land and such in the U.S. if we let them. It's not real in the sense that we could, if we wanted, just give every U.S. citizen an extra $50,000 to dilute the buying power of foreign holders of dollars. That would be aggressive for sure, but we have the power to do that. It's a complex set of arrangements here.

Yes, the U.S. benefits the most from the current arrangement, so we aren't interested in screwing that up. But we could and would take action if the foreign-held dollars started getting used in ways that were bad enough for us to do something about it.

No. Taxes are not prepayment for services in the future.

I doubt it. By the time I retire I expect that SS will be bankrupt. It has been going further down that road for years, and I don't see anything stopping the train.

http://www.moslereconomics.com/wp-content/powerpoints/7DIF.p... fraud number 4. Short read, but easiest to understand if you read the first frauds.

> Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself.

Does it mean that taxation in USA works differently than taxation in a country with currency tied to US dollar by a fixed exchange rate? In that country government can't, I assume, so easily print money and delete them.

but YES, different

Federal "revenue" is a mistaken concept. The federal government just deletes money via taxation in order to offset the created money from spending. The government doesn't need or have any dollars, they are the source of the fiat currency in itself.

The entire point of any tax or spend decisions is to further some political objective. For example, we tax everyone in order to assure the fiat currency has value. We also tax to discourse certain behaviors. We tax to have some impact on who has how many dollars in order to address social issues.

https://en.wikipedia.org/wiki/Loss_aversion#The_endowment_ef...

Historically the french have done pretty much that.

In fact it was even more painful as the historical method was to provide advance payments by thirds (IIRC the first two thirds would be based on your tax estimate, and the last one would be the net, or a reimbursement in case of misestimation) so you'd send the taxman a check 3 times a year (or go to the bank for a wire).

No more outrage than most anywhere else, just a lot of wasted time and necessity to plan for and remember to send your advance payments.

I have no idea what the correct policy would be, but I think a lot of people would feel very differently if they had to write a check for their taxes every time they received a paycheck instead of not thinking about it for 12 months and then getting a refund (which makes them feel like the government is doing them a favor). I'm not sure we can just dismiss out of hand the idea that the way people interact with their government affects their opinions on policy.

I certainly wouldn't go so far as to say we should make filing taxes painful, I'd personally just as soon never have to file a tax return, even if that meant my taxes weren't quite as optimized, but I know a lot about my tax situation. I guess it feels somehow more... honest (I'm not sure if that's the right word) if people viscerally feel how much they're paying in taxes, just like they feel how much they spend on utilities or groceries.

Filing taxes was pretty alien to me. I'm used to it now, but it seems there are simpler ways.

This strikes me as a recipe for disaster in the long run. For any group of people who have tremendous power, not just the government.

You're saying people can "use" the government to compensate for the government itself preventing competition with their cronies.

Isn't that a bit of a fool's errand, even disregarding the fact that in reality we don't use the government - the government very much uses us.

No, we put the government and the rules it has to follow in place to ensure that it has our best interests and nothing else in mind. They are a tool we use to make sure the state is run the way we want it to be.

Well, the government is no more awful than any other Mafia.

Think about it. If you don't pay protection money / taxes, you get kneecaps busted / imprisoned.

Neither is something you want to happen, so you pay up. Government is essentially just a vehicle for exploiting people on a massive scale.

Your average mafia couldn't possibly pull off extorting 300 million people, but a government can and does, because people believe it's necessary "for the common good".

See, e.g., https://en.wikipedia.org/wiki/Value-added_tax_(United_Kingdo....

(There are some goods - eg Fresh Fruit and Vegetables - that are exempt from it -- but if GST is applicable - then it is included in the displayed price)

[1] http://edition.cnn.com/2010/CRIME/04/11/connecticut.abuse.bi...

I just fail to understand the logic exercised by some US residents. Norquist's argument is insane, and if you're not only trying to be kind to it and not call it as such, your stance towards it seems insane to me too.

Like Alternative Truth, it has probably been around forever, but what seems to be changing is that the users of these techniques are no longer embarrassed by saying the most ridiculous things, and there is effectively no downside for a politician or lobbyist in doing so.

I have heard that the US SAT essay test scoring guidelines progressively reduced emphasis on judging content (to avoid cultural bias) in favor of judging style (to be fair, this may have changed in the 2016 overhaul.) If so, then, as teachers do teach to the test, this could only have harmed critical thinking.

Edit: Also I noticed my previous comment was missing a word. Should have been, "Especially with opponents campaigning heavily against it."

Norquist, the Republicans who sign the pledge, and the voters who demand it all apparently think that it's a good idea, it's been effective from their perspective, and it's ideologically consistent, so having someone who doesn't like its outcome call it "extreme" and "immature" doesn't really mean anything. It's just another flavor of ad hominem attack.

Just today I had to convince my girlfriend that no, just because she lives in one state and works in another she doesn't have to pay taxes twice to two states. This requires finding a different credit form for one state to claim a credit for the taxes paid to the other state. It's not exactly intuitive.

To take the charitable explanation of this position: studies have shown that prices go up when the payer gets more separated from the actual payment process: credit cards, automated tollbooths, and further open-road tolling have all been shown to significantly (statistically) correlate to higher prices. Automated billing is another great example of this.

As much as I want a simpler tax code and system (while I lived in Amsterdam I could literally calculate my own taxes in a spreadsheet. It was simple... but very expensive), given this data I don't think it unreasonable to think that putting lessening the cognitive burden of the payment process will lead to higher taxes.

Are you sure people should keep this inconvenience as a reminder of government expenses?

What I wanted to specifically notr is that this is also an effect I think it valid for Norquist to point out, not only that treating unintentional tax evasion reduction as a tax hike, which I think is a silly argument.

Forced bureaucratic form-filling is thus the most burdensome tax of all.

Grover Norquist can go stick his head in a pig... then stick the pig in a hydraulic press.

Maybe using a standard stage magician's force isn't the best way to convince people that you aren't cherry-picking.

1) if it is a simple number, it will be _easier_ to notice it rising.

2) For sure most people using software have no clue what it does. If the software told them they owe 1k more, they would pay it. So when he says that making it simpler would mean people wouldn't notice change to the tax code etc... well, I have a hard time believing they would notice in today's system!

I think he is full of s__t. He should be for a simpler system were the focus is not on detailed expenses and what not but on a simple number. This actually makes it easy to know if they went up. Intuit can then provide a software "why did my taxes go up" if it feels like it :)

Besides that, unless you have income above $1M per year or so, it usually costs the government more to audit you than they will get from you as a result of the audit. So unless you're evading so egregiously that it makes sense to prosecute you criminally, pour encourager les autres, it's better to let little cheats slide. Like over-declaring the value of the clothes you dropped off at the thrift shop as charitable deduction. There's no way those jeans are worth $20 now, you cheater. But as long as your total charitable deductions are under $500, no one cares enough to nail you for it.

Most of the people who would sign and return the pre-filled forms probably haven't ever filed a schedule A, anyway, as it would turn out to be less than the standard deduction. Unless you really care about how much you pay in taxes, there is a huge incentive to just sign and return the form the instant you get it, without even looking at it.

I agree with Grover Norquist. It might be counter intuitive but I would rather leave it to Turbo-tax to figure out the details than signing the form sent to me by IRS. Let IRS do the extra work of catching me if they think I am filing fraudulent taxes.

Grover Norquist's view might be counter-intuitive but I a agree with him.

No one is forcing you to use the IRS pre-filled form. What is the problem? Let the "idiots" pay extra taxes if they want and smart guys like you can spend extra time and money doing your taxes the old way.

As a matter of principle I am even opposed to tax deductions at source. Each individual must sign a check at the end of the year/month and pay taxes. This makes sure he feels the pinch.