Yves here. As food and energy prices continue to soar, and the potential deflation of AI-related equity and debt bubbles looms large, a significant economic downturn appears unavoidable. The 2008 financial crisis led to the formation of the Erskine-Bowles Commission, which aimed to advance what was known as the Obama Grand Bargain—proposing cuts to Social Security and Medicare that ultimately floundered. It’s easy to anticipate another attempt to slash entitlements, particularly as social upheaval may be exploited as justification for reduced spending, jeopardizing vital social safety nets.
“[Government] ought to be so constituted as to protect the minority of the opulent against the majority.”
—James Madison, 1787
“Reagan proved deficits don’t matter.”
—Dick Cheney, 2003
Today, I want to address a less apparent form of propaganda that often goes unnoticed amid the barrage of overt messaging we encounter daily. Consider the blatant propaganda:
- Israeli actions in Gaza are acts of self-defense.
- The Ukraine war was entirely unprovoked.
- The explosive rise in AI usage is beneficial for the country.
- Oil prices are well-managed.
These are just a few examples. Now, let’s highlight the subtle propaganda—one common misconception that many fail to recognize:
- Your tax dollars finance the U.S. government.
This is fundamentally incorrect. In fact, it’s the complete opposite of the truth.
Holding this belief makes us vulnerable to being exploited by those who already possess immense wealth—individuals who pick our pockets without our consent. They are the ones who enact cuts to essential programs while rewarding themselves handsomely.
In short, this perspective is misleading. Here’s why.
Money and Zero-Sum Games
Let’s clarify this concept: For ordinary individuals, money operates as a zero-sum game. We cannot create it on our own; we must engage in activities to earn it—be it selling our labor or lobbying for government assistance.
Similarly, states like Idaho cannot generate money either. When they require funds, they must find ways to obtain them (through taxation or selling state-owned assets). For individuals and entities like these, money operates as a zero-sum game.
However, the U.S. government functions differently. For our government, money is not a zero-sum game. It has the capacity to create money from nothing. When the government desires resources, it can simply write checks, and just like that, the money appears.
So, where does the government obtain its funds? Much like how a grocery store might distribute coupons, it creates them from thin air.
Critics of government spending often refer to this process as “printing money,” and they are correct. However, it’s essential to recognize: These individuals are also aware that our assertion about money being a zero-sum game holds true—that taxes are not necessary to finance federal expenditures. They understand that the concept is accurate.
Moreover, the government also retracts money by collecting taxes. You do pay your taxes, don’t you? The government’s money supply does not increase when you do so; rather, the funds you pay simply vanish, effectively reducing the supply for the individual.
To reiterate:
• For you, money operates as a zero-sum game. For the federal government, it does not. They create it from thin air.
Airline Miles as Money
To illustrate this concept further, consider “airline miles.” These function as a form of currency. They hold value and can be spent, but you cannot create them on your own. To accumulate miles, you must engage in activities like purchasing tickets and flying. Airlines, however, can generate as many miles as they wish.
They also manage the supply of miles to ensure flights maintain their value. If a flight previously required 20,000 miles but now demands 30,000 miles, your total supply decreases faster, while the airlines’ ability to produce miles remains unchanged—just like government money. The miles redeemed, like the dollars collected through taxes, vanish into thin air.
If you internalize this idea—that our government can generate funds at will—it becomes evident how you may have been misled.
The Deceptive Narrative That Keeps People Struggling
- “Do you really want your tax dollars to fund welfare?”
- “They’re using your tax dollars to finance this war.”
At the federal level, “your tax dollars” do not correlate with spending. However, this misconception is prevalent across the political spectrum. Why is that?
There are two primary reasons: First, individuals may simply repeat what is widely accepted without questioning it. After all, your tax dollars is a phrase we’ve been hearing since childhood. Secondly, some may seek to strip resources away from you—such as welfare, food assistance, robust public transportation systems, or Social Security—and this is how they aim to persuade you.
The premise here is clear: “Your tax dollars”—the government needs funds from you. See the strategy?
Why Bring This Up Now?
So, why discuss this now? With growing media attention on our shiny two trillion dollar deficit and our massive national debt, it’s evident that the elite in power—did I say elite? I meant to say “protectors”—are preparing to take away essential resources, and it won’t involve increasing military expenditures.
Brace yourselves for more attacks on Social Security and Medicare, as this battle is recurring. From Reagan to Clinton to Bush to Obama and Trump to Biden, our benevolent leaders have continuously sought to strip away essential services, often with success, as demonstrated through historical precedents.
If they are aware that the government can finance its needs without your contributions, why do they still pursue these cuts? After all, when they desire more funding, they simply print more cash (see image above). But there’s no printing for you. It seems to stem from an underlying cruelty. The cruelty is the point.
They will ultimately triumph if you hold the belief that dollars are limited, that you are responsible for funding the federal budget, and that “Golly, we just can’t afford to spend this much” (refer to the image at the top).
To safeguard your interests, remember this:
• They do not believe the government requires your money. However, it’s crucial that you do.
Stay vigilant and informed. Protect what you have by grasping how this system truly functions.
I may follow up this article with additional clarifications on topics such as: Why do governments tax if they don’t need the cash? What is the purpose of the bond market? What does the deficit mean? And what constitutes the national debt?
If you’re interested, stay tuned.
