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Comment by toomuchtodo | Hacker News Reader

That's not withholding though (as the parent referred to; withholding towards your federal income tax bill); as you mention, that's payroll taxes, which you're going to get in retirement back as entitlements.

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.

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"IRS gets a loan" is metaphorically true in a sense but really doesn't hold up to scrutiny. The IRS doesn't actually get money from taxpayers at all. The IRS is just the bureaucracy that determines things. The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation.

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...

> The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation.

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.

Yes, it's TOTALLY different. The U.S. power globally is EXTREMELY tied to the use of the dollar internationally. Everyone else who uses dollars (or has currency pegged to the dollar) is under major economic control and influence of the U.S. Oil priced in dollars is huge.

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).

No it's not. Don't spread bullshit.

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.)

Are you actually aware of the points in the link I posted?

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, it isn't.

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.])

Money is fungible. It doesn't make sense to say that these dollars that "disappear" are completely separate from these other dollars that magically "appear" out of nowhere. In real terms (we'll call it wealth, but you can call it purchasing power, or whatever other term you want to use for what dollars represent or enable), the wealth the US government spends comes from the actual people who get taxed, in the proportion in which they are taxed, plus the extra provided by inflation, which comes from everyone who holds dollars.

Yeah, but that's not contrary to what I'm saying. The real point is that the question of how much "revenue" in taxation vs spending is more of a matter of policy and purchasing power etc. to further economic and social goals and not something that has any inherent need to balance out.

> The money that you "pay" in federal taxes is just dollars that are deleted out of existence so that the dollars created by federal spending don't create inflation.

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.

Yes, spending is real spending, but no taxes are not revenue. Read the link I posted. This isn't that hard to understand. The entire concept of federal budget is a balance between "revenue" and spending in order to keep the monetary supply stable. But seriously, just read the link, you don't seem to understand the basic facts I'm expressing.

> Read the link I posted.

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.

> you're going to get in retirement back as entitlements

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

"which you're going to get in retirement back as entitlements."

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.

There is NO SUCH THING as SS bankruptcy. It makes NO SENSE as a concept at all. It's a complete fiction. There is NO scenario in which the federal government can't just cash every SS check.

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

Social security is not funded to pay back what current workers pay in

The funds are not held in escrow. The obligation is a social contract with the government.

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