Economic Update: How Deficits and Debts Rip Us Off
Summary
TLDRIn this episode of 'Economic Update,' host Richard Wolff discusses the global issue of national debt and deficits, explaining how governments borrow money to fund public services when tax revenue falls short. Wolff argues that this practice disproportionately benefits corporations and the wealthy, who lend to the government instead of paying taxes, effectively shifting the burden onto the general population. He criticizes the system as a 'disguised tax' and a 'scam,' highlighting the political influence of the rich and the need for a more equitable economic structure.
Takeaways
- 📚 The host, Richard Wolff, introduces a new book 'Understanding Capitalism' as a culmination of his years of teaching and hosting the show.
- 💡 The program aims to clarify the often misunderstood topic of national debt and deficits, explaining why countries borrow and who benefits from it.
- 🏦 Governments raise funds primarily through taxation but often find themselves needing to borrow when their expenditures exceed their tax revenue.
- 💼 When governments borrow, they issue IOUs in the form of government securities, bonds, or bills, promising to pay back with interest.
- 🔢 The national debt is the accumulated total of all past deficits minus any repayments, representing the money owed by the government to its lenders.
- 💰 The national debt is portrayed as beneficial for corporations and the wealthy but a hidden tax on the general public.
- 🌎 Wars are cited as a significant cause of government borrowing, as they are expensive and often unpopular, leading to a preference for borrowing over taxation.
- 🤝 Corporations and wealthy individuals are the primary lenders to the government, effectively receiving tax breaks in exchange for lending money.
- 💡 The script suggests that tax evasion by corporations and the rich is a significant driver of government borrowing and national debt.
- 🏷️ The host criticizes the use of lotteries and tariffs as alternative forms of taxation that primarily affect the less affluent, further benefiting corporations and the rich.
- 🚫 The script concludes with a call to action, urging the audience not to be fooled by the complexities of deficits and national debt and to understand the underlying issues.
Q & A
What is the main focus of the 'Economic Update' program presented by Richard Wolff?
-The 'Economic Update' program, hosted by Richard Wolff, focuses on the economic dimensions of our lives and those of our children, providing insights into various economic issues and concepts.
What is the new book 'Understanding Capitalism' by Richard Wolff a part of?
-'Understanding Capitalism' is the final piece of a trilogy by Richard Wolff, which also includes 'Understanding Marxism' and 'Understanding Socialism', summarizing and compiling the problems, myths, and crises of capitalism.
What is the primary reason governments borrow money according to the script?
-Governments borrow money primarily because they have more demands for spending than they can raise through taxes, leading to a deficit which they finance through borrowing.
What is the term used to describe the amount a government borrows in a fiscal year?
-The term used to describe the amount a government borrows in a fiscal year is 'deficit', which is the difference between government spending and tax revenue.
What is the difference between a government deficit and national debt?
-A government deficit is the amount by which government spending exceeds tax revenue in a given year, while national debt is the total amount of money that the government has borrowed over time and has yet to pay back.
Why do governments issue IOUs when they borrow money?
-Governments issue IOUs, in the form of government securities, bills, or bonds, as a promise to repay the borrowed money with interest to the lenders.
What is the role of taxes in the context of government spending and borrowing?
-Taxes are the primary means by which governments raise money to fund their activities. When tax revenue is insufficient to cover spending, governments borrow the difference, leading to deficits and national debt.
How does the script describe the relationship between government borrowing and corporations or the rich?
-The script describes a situation where corporations and the rich benefit from tax evasion by lending money to the government instead of paying taxes, which then becomes a burden on the general public through deficits and national debt.
What are some of the myths or misconceptions about national debt that the script aims to clarify?
-The script aims to clarify that national debt is not just a result of excessive government spending but is also a consequence of tax evasion by corporations and the rich, who lend money to the government instead of paying their fair share of taxes.
What is the script's stance on the use of lotteries and tariffs as forms of indirect taxation?
-The script criticizes the use of lotteries and tariffs as forms of indirect taxation that primarily affect the poor and middle class, while benefiting the government and corporations without them having to pay their fair share of taxes.
What is the script's final message regarding the responsibility of the public in addressing the issue of national debt?
-The script's final message is a call to the public to understand and address the core issue of tax evasion by corporations and the rich, which contributes to national debt, and to not allow this scam to continue without challenging it.
Outlines
📚 Introduction to Economic Update and New Book
The script opens with a warm welcome to the 'Economic Update' program, hosted by Richard Wolff. It emphasizes the show's focus on economic dimensions affecting our lives and future generations. Wolff reminds viewers of Charlie Fabian's role in gathering suggestions for future programs and teases the release of a new book titled 'Understanding Capitalism', which completes a trilogy alongside 'Understanding Marxism' and 'Understanding Socialism'. The book is described as a comprehensive summary of capitalism's issues, myths, crises, and future prospects, presented in an accessible and engaging manner. The episode's main topic is introduced as the global problem of national debt and deficits, discussing why countries borrow, who benefits from such borrowing, and its impact on elections and media portrayal.
🏦 The Mechanics of Government Borrowing and Deficits
This paragraph delves into the concept of government deficits and national debt. It explains that governments need to raise funds to fulfill their responsibilities, such as social services and defense, primarily through taxation. However, when government spending exceeds tax revenue, the shortfall is covered by borrowing. The government issues IOUs in the form of securities, bills, or bonds, promising to repay with interest. The accumulated sum of these borrowings is the national debt. The paragraph suggests that while the national debt may benefit corporations and wealthy individuals, it is a hidden tax on the general public, contributing to the ongoing trillion-dollar deficits.
💡 The Role of War and Government Services in National Debt
The script discusses the role of war and government services in contributing to the national debt. It points out that significant government borrowing often occurs during unpopular wars, which are expensive and can lead to substantial public debt. The United States' funding of wars in Ukraine and Gaza is cited as an example, costing over a hundred billion dollars. The paragraph argues that if these costs were covered by taxes, the public would be more acutely aware of the financial burden of war, potentially leading to greater opposition. Instead, borrowing obscures these costs, allowing governments to avoid public backlash.
🤔 The Dysfunctional System of Taxation and Borrowing
This paragraph examines the systemic reasons behind government borrowing, highlighting the tension between public expectations and the unwillingness of corporations and individuals to pay higher taxes. It suggests that politicians use borrowing as a means to satisfy voter demands for services without raising taxes, which could jeopardize their re-election. The paragraph criticizes this approach as dysfunctional, creating a cycle of deficits that primarily benefits corporations and the wealthy, who can afford to lend to the government, rather than the general populace.
💼 The Impact of Tax Policies on Deficits and National Debt
The script addresses the impact of tax policies on government deficits and national debt. It argues that corporations and the wealthy often avoid paying their fair share of taxes due to favorable tax laws and the use of tax havens. As a result, the government is left with less revenue, leading to increased borrowing. The paragraph suggests that this borrowing is effectively a form of tax evasion for the wealthy, who lend to the government instead of paying taxes, thereby shifting the burden onto the general public who will ultimately repay the loans through future taxes.
🎟️ Alternative Forms of Taxation: Lotteries and Tariffs
This paragraph explores alternative forms of taxation, such as lotteries and tariffs, which are not explicitly labeled as taxes but serve a similar function. It criticizes the lottery system for disproportionately affecting poorer individuals who buy tickets in the hope of winning, while the government collects significant revenue with minimal payouts. The paragraph also explains that tariffs, which are taxes on imported goods, are ultimately paid by American consumers, contrary to misconceptions that they are paid by foreign countries. The script argues that these methods of indirect taxation further contribute to the fiscal imbalance and debt.
🏛️ The Consequences of Tax Evasion and the Sham of Deficits
The final paragraph concludes the script by emphasizing the core issue of tax evasion by corporations and the wealthy, facilitated by politicians. It suggests that the national debt is a result of this evasion, with the burden of repayment falling on the general public and future generations. The script calls for awareness and action against this systemic scam, warning that allowing it to continue reflects poorly on society as a whole. It ends with a call to question the status quo, especially in light of national holidays like July 4th, which celebrate independence and freedom.
Mindmap
Keywords
💡Economic Update
💡Capitalism
💡Deficits
💡National Debt
💡Taxation
💡Government Securities
💡Interest
💡Corporations
💡Politicians
💡Tax Evasion
💡Lottery
💡Tariffs
Highlights
Introduction of the new book 'Understanding Capitalism' as a culmination of 12 years of the program and 40 years of teaching economics.
The problem of national debt and deficits is a global issue affecting many countries, including the United States.
Governments need to raise money through taxes to fund public services and infrastructure.
When government spending exceeds tax revenue, the government borrows money, resulting in a deficit.
Governments issue IOUs in the form of government securities, bills, or bonds when they borrow money.
The national debt is the total amount of money the government has borrowed and not yet paid back.
National debt can be beneficial for corporations and the wealthy but detrimental to the general public.
Wars are one of the major sources of government borrowing, often funded through debt rather than direct taxation.
Politicians often avoid raising taxes and instead borrow to maintain voter support and fulfill campaign promises.
Corporations and the rich benefit from tax breaks and then become lenders to the government, avoiding tax payments.
The national debt signifies that politicians have capitulated to the interests of corporations and the wealthy.
Lottery systems are a form of hidden tax that disproportionately affects lower-income individuals.
Tariffs are taxes on imported goods, paid by American consumers, not by the exporting countries.
The national debt is a scam that allows corporations and the rich to avoid taxes while the general public bears the burden.
Politicians, government officials, and the media often fail to clearly explain the true nature of the national debt.
The national debt is a reflection of tax evasion by corporations and the rich, with the cost ultimately borne by the public.
The speaker calls for public awareness and action against the systemic issues related to national debt and taxation.
Transcripts
[Music]
Welcome Friends to another edition of
economic update a weekly program devoted
to the economic dimensions of our lives
and those of our children
I'm your host Richard wolf let me
quickly remind you that Charlie Fabian
is ready and willing to take whatever
suggestions ideas documents you might
want to send our way to help us plan
future programs you can reach him at
charlie.in
438
gmail.com I want also to take a moment
to tease you a bit we have finished a
new book book it's called understanding
capitalism it is if you
like a kind of final piece of a Trilogy
we've already produced understanding
Marxism and understanding socialism
which many of you have kindly ordered so
this is understanding
capitalism it's a completion of that
three-part project but it is also a
culmination of 12 Years of doing this
program every week plus 40 years before
that of teaching economics at half a
dozen
universities I think you'll find it an
extraordinary summary and
compilation of capitalism's problems the
myths that support it the crisis it now
faces and what comes afterward
in a way that is readable accessible and
above all
interesting look for it it's coming soon
today's program is devoted to a
particular topic Global in importance
crucial in many many parts of the world
including the United
States it's called the problem of
deficits the problem of the national
debt it's all about out why countries
borrow money from whom they borrow who
benefits from all that borrowing it's
now in the many trillions of
dollars both in the United States and in
most of the other countries of the
world it's a factor in elections all the
time it's not a boring topic although it
is often presented in the media
in details that lose the whole
picture I'm going to try to focus on the
picture I'm going to try to make sure
you understand what's at stake in a
topic you
often look away
from okay let's get into
it governments do many things as you
know and in order to do them whether
it's helping older people whether it's
teaching school maintaining roads a
National Defense or
whatever it has to raise money to do
those things the United States
government for example is an
overwhelmingly dominant major employer
in the United
States state and local governments add
to the number of governmental B IES that
hire people as well as do all sorts of
things and to hire people and do things
the government has to raise
money and how does it do
that well the number one thing
governments have been doing as far back
as we can remember is
taxing the government's major way of
raising money in most societ ities has
been to
tax now whom do they
tax they tax
businesses a share of the profits are
taken as taxes and they tax
individuals a share of your and my
income is taken by the
government together with the money they
take from the profits of
Enterprise and then the government
spends that money to do whatever it is
the government in each country is called
upon to
do it happens and here we get to the nub
of the issue it happens that in a
society like
ours more money is demanded of the
government that is we want it to
spend then the government raises in
taxes and then the government has to do
what you and I have to do if we spend
more than we take
in the government
borrows that's right the government
borrows the money so you get The Simple
Solution here we go what the government
spends is equal to what it picks up in
taxes plus what it
borrows the amount it borrows is called
the def deficit it's called that because
it's the difference between what the
government spends on everything
combined relative to how much it takes
in in taxes the more it takes in in
taxes the less deficit it needs to
have when the government borrows it does
so typically in the following
way it issues pieces of paper like an
IOU the government having Bor OED owes
whoever lends to the government and it
writes out an
IOU called a government security or a
government bill or a Government Bond the
words don't
matter the idea is the government
borrows promises to
repay the
borrowing gives the lender a piece of
paper that has on it you will be paid
back on such and such a date two months
two years 20 years from now and each
year we will give you so much in
interest because you have lent us the
money that's what governments do they
have to pay interest when they borrow
just like anybody
else if you add up the total amount of
outstanding
IUS borrowings that the government did
in
1849 in
1924 and last year minus whatever
portion of that the government may have
paid back and it does do that sometimes
what you're left with is the total
amount of accumulated deficits and the
word for that is the national debt it's
the total amount of money that the
government has borrowed and not yet paid
back
it's what the government owes to the
lenders that have come forward to enable
the government to
borrow that's all these words
mean don't get lost in the
weeds but it turns out that when you
look at this as we're about to
do you will discover that the national
debt is a wonderful thing for
corporations and people but not for you
and not for
me for us it's an immense
ripoff it turns out as I will show you
that it's just a
disguised tax you might call it a
postponed
tax I'll explain all that and then
you'll understand why we are as a nation
in many trillions of dollars of deficit
this
year on top of much more in the way of
trillions of dollars of accumulated
national debt and we are not in any way
unusual among countries in doing this it
is a big capitalist
problem when capitalism came into
existence there were already National
debts but capitalism far from solving or
removing or fixing the problem made it
infinitely worse here in the United
States for
example one of the biggest sources of
government
borrowing reveals what's going
on let me tell you about it when
governments do something that is
unpopular
that large numbers of people and maybe
even majorities don't want and don't
like that's when they
borrow I'll give you exam an example the
biggest amount of borrowing is typically
happening when the United States and
this is not again unusual among
countries goes to
war wars are often things Americans
don't want
don't like or maybe at the beginning
they do in patriotic fervor but not for
long governments kill people governments
hurt people and governments in
war but don't just kill people and hurt
people in
war but they cost a lot of
money so the question becomes in every
war for example right now the war in
Ukraine which is fought by
ukrainians and Russians but is funded by
the United States on the Ukrainian side
and ditto the war in Gaza waged by
Israel but paid for and funded and
weaponized by the United
States the government of the United
States pays for these wars huge amounts
of
money Israel and Gaza for example and
the Ukraine if you put them together
have cost us already over a hundred
billion
dollar the government could raise that
money by taxing
us if they D do that which they don't
but if they dared then we would be
reading in the newspaper not only the
Grizzly details of death and destruction
in Ukraine and in
Gaza we would be also reading
stories that would explain to the
American people that if that's to be
paid for by taxes it'll cost us $300 to
$400 per American citizen that's a 122
$1,500 per family per
year if you think there's opposition to
war now
I can assure you that opposition would
be 10 times larger if the people who are
paying for it understood it because they
got a tax
bill so governments don't do that they
dare
not instead they borrow the money
because that way they can talk about the
war and not have the danger that people
understand what it costs and what part
of that cost each of us are going to be
asked to
pay
okay why in
general even when there isn't a war do
governments borrow money as they do as
the United States government has done
all along for a long long time and the
answer is our
system and in the time remaining in the
first half of today's show quickly I'll
tell you what it is about our system
that makes it work like
that taxes are paid by corporations and
by individuals neither of them wants to
pay the taxes both of them want all
kinds of things from the government
corporations want lots of services and
lots of subsidies and lots of help
marketing their goods and getting their
inputs and hiring their workers and
teaching their work workers in schools
they want the government to do a lot but
they don't want to pay taxes and the
mass of people don't want to pay taxes
but they want the government to help
them with a good hospital system a good
road system and lots of other things so
you got the two sources of taxes
corporations and individuals who don't
want to pay but who have huge demands
they put on the
government okay this is crazy if the
government's going to do what people
want it has to raise the money if you
don't let it raise the money it can't do
what you
want here's the
solution politicians figured it out you
can give people what they want and not
tax them by borrowing instead and that's
the reason we have the deficits we do
it's a
dysfunctional system we live in after
the break we've come to the end of the
first half of our show
I will go into showing you who benefits
and who loses from this irrational way
of
organizing modern capitalism stay with
us we'll be right
[Music]
back friends as you know any project
like this takes money and we don't want
to bore you or burden you on the other
hand you our audience are the source of
our funding and we wouldn't have it any
other way if you can please consider
making a donation it will be enormously
appreciated welcome back friends to the
second half of today's economic
update we're devoting today's program to
these questions of deficits in National
debts to make sure that we all
understand the basics and are not fooled
by the way that politicians
academics and the people who should know
better government
advisors the way they tell the story
it's lost in details that make most
people's eyes glaze over before they
change the channel but in fact it's
crucial to your life and mine and that's
why we're doing this okay we left off as
I
explained that governments borrow
because it's the politician
cheap way out that is the politicians
can give us no increase in taxes you
notice how they stumble over each other
promising that meanwhile giving
corporations what they want and giving
the public as much as they can what they
want why do they do that well clearly
from the public they need votes and
Beyond a certain point you can't tax
people without them coming back and not
voting for you they've all learned that
listen corporations it's a little
different if you tax them they won't
give you a money donations pay for the
lobbyist to do your job give your party
the money it needs for expensive tv ads
thereby jeopardizing your election so
the corporations know you're going to
take care of them by not taxing
them and the corporations repay your
kindness they give you the big doar
donations the big
contributions and what do the
politicians use them
for to not explain or rather to explain
falsely what's going on here to hide
from most of you what is in fact going
on here is the key
Point corporations get out of paying
their fair share just like rich people
do do all tax studies show you that take
a look I've done it on this program
countless times you should
know corporations get out of paying
taxes many of the biggest corporations
pay no taxes year after year the tax
code is written to enable them to do
that the same is with rich
people the most important single
economic Act of Donald Trump's four
years in office was the tax cut of
December
2017 which was an enormous gift to
corporations in the rich and that's the
normal behavior and Mr Biden didn't undo
that basically left it in
place okay so the
corporations get a tax break and the
rich
do and in return they fund
the politicians who do that and they
give those politicians enough money so
that they can run glitzy ads and hire
lots of public relations people to make
sure you don't understand what deficits
in national debt actually mean so here
we go when the government borrows who do
you think it borrows from has a
government agent recently visit visited
your home and asked you to lend to the
government of course not you have no
idea about that cuz that doesn't happen
to you but if you're a big bank and
you're a big Corporation you deal with
the government and buy bonds I lend
their money all the
time it's a normal part of big
Corporation
activity it's even a normal part of rich
people's portfolio at their stock broker
buying and selling government
bonds so here's the
point the corporations don't have to pay
taxes and the rich don't have to pay
taxes because the politicians arrange it
for
them then of course the government
doesn't have those taxes so what does
the government do
borrow because it's not raising taxes
from corporations and the rich but for
from whom does it borrow here we go
corporations and the rich they're the
major lenders to the government what
they lend to the government is what the
government did not tax from them if the
government had taxed that money from
them the government wouldn't need to
borrow and if the government didn't need
to borrow we wouldn't have deficits and
we wouldn't have a national debt
so when you hear about deficits in debt
here's the key point it's a sign that
politicians have caved in to
corporations and the
rich and we know how they do it first of
all the tax laws are written to favor
them then there are trillions we've that
done the
research of assets held by corporations
in the rich
in places called get it tax Havens you
know why they're called tax Havens and
they include places like Caribbean
islands or the state of North Dakota or
all
kinds or maybe it's South Dakota one of
them there are all kinds of tax Havens
where you can go and hide your money and
not pay
taxes that's the game friends the Govern
government says to corporations in the
rich you don't have to pay instead you
can lend the money to us and of course
for corporations and the rich this is a
no-brainer rather than have your money
taken as a tax like we all do in our
weekly
check instead of being taxed you give
that same amount of money to the
government same government but it's a
loan and the government pays it back
plus
interest and where will the government
get the money to pay back the blenders
plus interest well from you and me
because we can't play that game we don't
have the money to lend the government it
is a scam and a ripoff and it always has
been it is one of the greatest gifts
modern capitalist governments give to
their corporations and the
rich and if you haven't understood it
you now understand why you haven't
understood it why it hasn't been made
clear don't get lost in the details
that's the core
reality politicians can no longer push
more taxes on the mass of people there
would be more of a tax revolt we've
already seen it and the corporations in
the rich tell the politicians you dare
tax me I'll give more money to your
opponent and you will be out of here and
replaced by a politician who will
recognize how he or she got into office
and never do that
again that's the game and so the
politicians borrow
from the corporations and the rich to
whom they give in effect tax
exemptions when I say don't get lost in
the details let me bring a couple up to
you so you understand how the game is
even played beyond what I have just told
you about deficits and national debt I'm
going to start with two ways of taxing
you without calling it a tax
here's the first one the lottery system
this is cute you go to the mass of
people and you say give me your money
but you don't call it a tax you say buy
a lottery
ticket here is a piece of paper cost the
government nothing you give us $2 $5 $10
whatever the ticket
costs and for the next few hours maybe
even a few days you can have a
fantasy about what would happen and what
you could do if you
won meanwhile the government very
carefully takes hundreds of millions of
dollars every month out of the pockets
of the mass of
people and gives very little back big
prizes but only to a handful of
people the net money raised by the
government is
fantastic and if you look at who buys
lottery tickets yep it's the poorer
people the middle class and the lower
rich people don't buy the lottery
tickets and corporations don't
either it's a tax but by calling it a
lottery the government gets away with it
corporations again giggle as they keep
in the hands of the government that
serves them most the bulk of the money
paid for by people who buy lottery
tickets here's another
one
tariff that's a tax put on things coming
into the United States from
abroad Mr Trump was famous for saying
he's going to slap the Chinese with
tariffs which he
did then Mr Trump said something which
is embarrassing
he said that Chinese are going to have
to pay these tariffs no Mr Trump you
clearly never took an economic course or
if you did didn't pay much attention
tariffs are not paid by the countries
from which the goods come tariffs are
paid by the Americans who bring them in
tariff is just a name for
attack we pay tariffs taxes to the US
government when Mr Trump imposes a
tariff or Mr Biden or anybody
else so in addition to the scam of
deficits and national debt you have the
scam of lotteries and the scam of
tariffs and if I had more time i' go
further don't be
fooled no the cause of this problem
isn't the spend ing that the government
does the problem is the tax evasion that
corporations and the
rich pay the
politicians to make
legal and it's all
handled in these lovely buildings in
Manhattan where government agencies get
together with the biggest
financiers to nego iate the deficit
financing that produces the national
debt we call it national and you know
why because in the end the tax is not
paid by corporations in the rich when
they lend instead to the government we
all will pay the taxes and our children
will that pay them back those loans they
never never pay their taxes we
do and if we allow it as a
people and I say this right around the
time of July 4th our national
Independence celebrating holiday if we
allow this as a people then in the
end it's not just shame on them who pull
this scam
the government officials the
politicians the
academics the
journalists who keep going and talking
about this without explaining clearly
what the scam at the core of it is all
about it's not just shame on
them it's more than that for allowing it
to go on as long as we have some of that
shame
rubs off on
us thank you for your attention and as
always I look forward to speaking with
you again next week
5.0 / 5 (0 votes)