Q) Federal Taxes Don’t Fund Spending, right? A) Wrong.


The National Debit website has the article Q) Federal Taxes Don’t Fund Spending, right? A) Wrong.. It nicely makes the point of whay I say that MMT proonents should stop using the meme “ederal Taxes Don’t Fund Spending”.

The oft-abused phrase “Federal Taxes Do Not Fund Spending” is not entirely accurate. I don’t question anyone’s motive saying it, to be clear, I am 100% positive that each time it is said by an MMTer (Modern Monetary Theory enthusiast), no question it is to promote MMT. Federal gov’t DEFICIT spending (the spending that is not funded by taxes) was only 15% of total spending last year. Besides not being entirely accurate, saying ‘Federal taxes do not fund spending’ veers off course from that first of Seven Deadly Innocent Frauds, which states that it is incorrect to think that federal taxes “must raise funds through taxation”, and that it is incorrect to think that federal “gov’t spending is limited by its ability to tax” (7DIF pg 13). I interpret that as saying that because the federal gov’t is now spending fiat dollars, there is no longer any constraint on federal spending, nor any solvency risk. I don’t interpret that as saying that federal ‘taxes do not fund spending’, but as meaning that the federal gov’t, while it is taking in tax revenues, while it is indeed spending those funds, because it is the issuer of fiat dollars (instead of a user of gold backed dollars), those revenues, those federal taxes are NOT NEEDED to fund spending anymore, a big difference. ’Federal taxes do not fund spending’ is a deadly innocent misinterpretation of this MMT pillar…

It is a long article. I must admit that I pooped out before completely reading it. However, I think it gets things mostly right, even if there is some quibbling over words. The point that is absolutely right is this quote.

In other words, when saying ‘taxes don’t fund spending’, these MMTers mean well, but unfortunately they are not advancing MMT (they have no idea how ridiculous they sound to a non MMTer)…

If MMTers don’t want to sound ridiculous and turn off anybody who might be tempted to look into MMT, they should stop making themselves look ridiculous right out of the gate.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.