Could This Be The Secret To Keeping Government From Spending Itself Into Collapse?

It seems like the tendency of governments to grow, and to increase their spending to fund that growth, is written into the DNA of government.

One reason is that the number of people who receive the financial benefits from any one government program have a much larger incentive to lobby for spending on that program, than tax payers have to lobby against it.

 

Here's a quick video from learnliberty.org explains how this works.

 

It's not just pressure from special interests that drives government spending. 

Since  government bureaucracies have to continually justify how much money is budgeted for them each year, there is an incentive for them to find ways spend all the money they are allotted; even if they don't need to do so.  They can then use that spending as an excuse to ask for more the next year.

 

Before governments gave themselves the power to borrow money into existence by using a central bank to turn IOUs into new money, a government's tendency for out of control spending was restrained by the limitations of physical reality. 

Gold and silver coins were used as money, and a government's spending was, to some degree,  limited to it's ability to tax, and by it's credit worthiness as a borrower.

 

However, with the relatively recent example of Greece, we can see that a government's creditworthiness as a borrower will only restrain government spending, if lenders stop lending.

Since Greece delegated it's power to print money to the E.U., it wasn't able to print money to continue it's out of control spending, but willing lenders enabled it to contue spending long after they should've stopped buying Greek debt.  Even a decated after the debt crisis, the people of Greece continue to suffer the effects of their government's out of control spending.

 

The combination of  legal tender laws, income taxes, and central bank, money printing breaks the connection to physical reality that put the breaks on spending.  Governments can't  print new gold or silver, but they can print more bank notes that they call legal tender.   Reality catches up eventually, but not before the money has been printed and spent. 

I'm not a lawyer, but it's my understanding that the U.S. federal legal tender law does not penalize people for refusing to accept the dollar,  It sets the standard for what is considered to be money, but it doesn't require you to accept it.   _{(Legal tender laws might work differently in other countries)}

 

Alternative currencies are treated as commodity goods for tax purposes. It makes them function as a sort of barter token; even if you're not part of a barter network. It's my understanding that using alternatives to the dollar is seen by the IRS as performing a barter transaction, and  the dollar value of of the barter tokens you receive may need to be recorded for tax purposes.

Needing to account for barter revenue in dollars, and the possible need to account for capital gains, when spending with an alternative currency,  make using alternatives to government money complicated,  at best.  Income tax accounting doesn't just make using alternatives difficult. It also adds a legal risk that you don't have, when transacting in government money. _{(None of this is tax or legal advice. It's simply my understanding of how this all works.)}

 

It's a sort of sneaky, underhanded way of coercing people into transacting with dollars, and keeping them from using alternatives like gold, silver, and cryptocurrencies.

 

When you factor in the way governments coerce their residents to use government money, and central bank money printing, it's easy to see how governments sometimes spend themselves into hyperinflation.

Politicians need to provide value to their campaign donors and to their constituents, if they want to get and stay in power.  This need incentivizes politicians to spend in ways that make them happy. There isn't much of an incentive for politicians to find reasons to spend less, but what can be done about it?

 

Incentivize Reductions In Government Spending

Government money printing, a.k.a. monetary inflation, is a hidden tax that gives to the rich, and takes from the poor, and causes a tremendous  amount of suffereing as a result.

If I could flip a switch, and end legal tender laws and the U.S. federal income tax, I would. 

It wouldn't stop out of control government spending, but it would remove the legal barriers that keep people from choosing alternatives go government money.  That option would enable people to protect themselves from being robbed through monetary inflation.

 

Even without a modern central banking system, and being  restrained by the limitations of physical reality, didn't stop the Roman Empire from using monetary inflation to spend more than it collected in taxes.

The incentives for politicians to spend in ways that cause their supporters and constituents to want them to stay in power puts constant upward pressure on how much a government is inclined to spend.  I believe this constant upward pressure on government spending is what has driven governments to spend themselves into collapse; repeatedly, throughout history.  What is needed, is a counterincentive that puts constant downward pressure on government spending.

 

If annual reductions in government spending were incentivized by, rewarding politicians and government employees with a percentage of that reduction, it would put constant downward pressure on spending.

Just like any other human, politicians and government employees are self interested creatures, and the prospect of receiving a reward for annual reductions in spending would give them an incentive to find ways to spend less. 

 It'd also give government employees an incentive to police each other's fraud, waste, and abuse.