Amazing isn't it? Without interest on the national debt, we would save enough to reduce corporate taxes and eliminate personal income taxes altogether. Unfortunately, under present policies and programs, that is not going to happen, because Congress does not live within its income. Many expenses are paid, not from taxes, but from selling government bonds and going deeper into debt each year. So, even though we could save enough to eliminate personal income taxes, it would not be enough. The 1. The gross interest was running $300 billion. Some of that money, however, is paid to federal agencies which hold some of the debt, so it is a case of the government paying itself. Furthermore, the Federal Reserve returns to the Treasury some of the interest it receives—the amount left over after the cost of operating the system.
2. See Harry Figgie, Jr.,
DOOMSDAY MECHANISMS
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government would still go into the red to keep up its present life style. However, if a reduction in the size and scope of the bureaucracy were accomplished at the same time, then personal and corporate income taxes could be entirely eliminated, and the government would have an annual surplus.1
THE DOOMSDAY MECHANISM
Unfortunately, the locomotive is running in the opposite direction. The size of government is growing larger, not smaller. There are more people working for government than for all manufacturing companies in the private sector. There are more bank regulators than bankers, more farm-bureau workers than farmers, more welfare administrators than recipients. There are more citizens receiving government checks than there are paying income taxes.
By 1996, welfare benefits in 29 states were higher than the average secretary's wage; and in 6 states, they were more than the entry-level wage for computer programmers. When it is possible for people to vote on issues involving the transfer of wealth to themselves from others, the ballot box becomes a weapon with which the majority plunders the minority. That is the point of no return, the point where the doomsday mechanism begins to
accelerates until the system self-destructs. The plundered grow weary of carrying the load and eventually join the plunderers. The productive base of the economy diminishes further and further until only the state remains.
The doomsday mechanism is also operating within government itself. By 1992, more than half of all federal outlays went for what are called entitlements. Those are expenses—such as Medicare, Social Security, and government retirement programs—which are based on promises of future payments. Many of them are contractual obligations, and millions of people depend on them.
That does not mean they cannot be eliminated. For example, entitlements include $24 billion per year for food stamps. There is no contractual obligation to continue those, only political expediency. By now, most Americans have stood in grocery lines and 1. The federal government derives substantial revenue from sources other than income taxes, such as excise taxes and import taxes. These, plus occasional assessments to the states, were the only taxes which the founding fathers intended for the federal government. The arrangement worked well for 135 years until the income-tax was adopted in 1913.
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THE CREATURE FROM JEKYLL ISLAND
watched the well-dressed customer in front of them use food stamps for ice cream, pretzels, candy, and wine and then drive away in a late-model car. The political function of the food stamp program is not to help the hungry but to buy votes.
The programs that do involve contractual obligations—such as Social Security and Medicare—could be turned over to private firms which would not only operate them more efficiently but also would pay out higher benefits. Congress, however, does not dare to touch any of these entitlements for fear of losing votes.
