Government Debts as Class Swindles
By Richard Wolff/ Common Dreams/ January 31, 2020
In modern capitalism, governments routinely borrow money. They do this to finance budget deficits that occur when governments raise less in taxes than they spend. Governments also borrow to invest in long-term projects of economic development. The swindling occurs when the lenders and borrowers—usually private financiers and career politicians—negotiate loans that serve their own particular interests at the expense of the taxpayers who eventually cover the costs of repaying the government’s loans plus interest on them.
If governments raised enough taxes to cover their desired levels of spending, they would not need to borrow. Taxes imposed on the wealthiest corporations and individuals would be the most equitable strategy. The corporate wealthy protest, of course, threatening that if taxed, they might reduce their contributions to the economy (investing less, etc.). Most government politicians sympathize with those protests. Many come from the ranks of the wealthiest corporations and individuals (or aspire to join them). They share similar ideologies and depend on campaign donations from them. Compliant politicians typically exaggerate the negative aspects of taxing corporations and the rich. They rarely compare them to the negative effects of the alternatives: taxing middle and lower income people more or cutting government spending.
Government borrowing to cover budget deficits has its own negative effects on the economy. Many variables influence the impacts of taxes and deficit borrowing. Because those variables’ effects cannot be known or measured for years into the future, no one can know which is better or worse for the economy in the long run. When the corporate rich and their political allies stress the negative effects of taxes on the rich they usually carefully neglect the other side of the story as when advertisers mention only the positive side of whatever they are paid to promote. Their goals are simply more profits and less taxes.