Doug Casey Debunks Four Myths About Trump, Taxes, and the Economy
International Man: For many years, President Trump has made no apologies for trying to pay the least amount of taxes possible. He’s clearly stated this in many interviews.
His desire to minimize his taxes has brought scorn from many in the mainstream media, and politicians from both sides of the aisle. These people are of the opinion that paying taxes is an honorable and necessary responsibility. It brings to mind the wrongheaded saying “taxes are the price we pay for a civilized society”, which came from US Supreme Court Justice Oliver Wendell Holmes. Many people believe this.
But if that’s true, how come low tax locales like Singapore, the Cayman Islands, Monaco aren’t backward hell holes, but rather sophisticated and civilized?
Doug Casey: Almost any lie can be accepted as truth if it’s said often enough and with enough certainty. That absolutely applies to what Holmes said. It’s shameful how people don’t think about its meaning, but slavishly repeat it.
Taxes aren’t the price we pay for civilized society. They’re a sign of the fact that society is becoming uncivilized. A civilized society is based on voluntarism. Taxes are all about coercion.
People don’t seem to recognize or remember that before 1913 there was no income tax in the US. There was no reporting of any kind to the US government. It was a much more civilized and far freer country then.
As far as Trump minimizing his taxes, congratulations to him. The object should be to cut the size of the US government in half, and cut it in half again, and again. And along with it, cut the tax burden that it imposes on the average American.
Trump should be proud of himself for cutting his taxes. It’s your patriotic duty as an American citizen to deny revenue to the State and the kind of people that are drawn to it and populate it.
The fact that some people resent others for not paying taxes is just evidence that they’ve been consumed by the vice of envy, which is one of the worst of the vices. Jealousy says “if you have something that I want, I’ll try to take it from you, just because I want it.” Envy says “if you have something that I want, and I can’t take it from you, I’ll destroy it and hurt you.”
It’s speaks poorly of the ethics of the average American, that they’ll self-righteously shame their neighbors for not paying “enough” taxes to the State.
International Man: We often hear from politicians and the media that some people aren’t paying their “fair share” in taxes. Who gets to define what “fair” is, and based on what justifications?
Doug Casey: Whenever you hear the word fair, start running the other way. Everybody has a different idea of what’s “fair”— it’s an arbitrary concept. People manipulate its definition to their advantage. The only way to determine what might be fair is voluntary mutual agreement. That’s not possible with taxes—there’s no voluntarism involved. They are, in fact, a levy enforced at the point of a gun.
The most creative and productive people tend to have the highest incomes—unless they’re crony capitalists, which means they’re basically using the government to steal from everybody else.
Productive people shouldn’t be penalized for supplying more goods and services to their neighbors—to the market. The money they give to the government in taxes would have otherwise been used to create more wealth for the whole world. When it’s taken from them by taxes it’s mostly squandered on welfare and warfare.
The bottom half of the US really doesn’t pay any income tax. They only pay Social Security taxes, roughly a flat 15%. It’s theoretically a pension program, although in fact it’s a Ponzi scheme. Social Security is bankrupt. If anyone gets it in the years to come it will be at the expense of future taxpayers—not because any capital has been set aside.
Social Security is, and always has been, a swindle. It makes it harder for people to save on their own. And makes them feel they don’t have to. But it’s not a real pension plan; it’s a highly politicized welfare program. People have been propagandized into believing not just what isn’t true, but actually believing the opposite of the truth. The situation is actually pretty hopeless from a philosophical point of view and it’s getting worse. The average American believes Social Security and the income tax are both moral and necessary.
International Man: Doesn’t this system—which diverts wealth from productive use into government, which is naturally unproductive—make everyone worse off? You would think the lower and middle classes would be clamoring for more wealth creation that would also benefit them. Instead, many are asking for more wealth to be destroyed.
It seems this sort of thinking helps solidify a backwards system.
Doug Casey: Absolutely. The US government and its welfare programs are actually cementing the lower classes to the bottom of society.
You get what you encourage. When you give people free money for doing nothing, that’s what they’ll do. Take personal responsibility away from a man, and he’ll tend to act irresponsibly. The next step seems to be a guaranteed annual income for everybody where—presumably—where everybody can just sit around Starbucks all day sipping latte and playing with their iPhones, and be paid for it.
This trend has been building almost 100 years, and the curve is starting to go parabolic. To use a fashionable word, it’s “unsustainable” for everyone to try living at the expense of everyone else.
International Man: Another misnomer we often hear is that “deficits don’t matter”, a saying popularized by Dick Cheney, an ostensible fiscal conservative.
Doug Casey: Well, deficits do matter. In order to become wealthy you have to produce more than you consume and save the difference. Saving the difference builds capital. And you need capital to create more wealth.
Countries without capital are poor. Places like Zimbabwe, Cuba, and Mauritania. The only capital they have is sticks and stones.
The US government is in effect training people to consume more than they produce. Now, you can do that in basically two ways. One, by borrowing capital that’s been saved and created in the past, and consuming it. Or, two, you can do it by mortgaging your future.
It’s not a pro-survival policy to consume more than you produce. It’s possible for a while, of course, but will wind up in disaster. The US government is encouraging people to do just that, however, directly and indirectly.
International Man: Yet another misguided, yet popular, saying is that we shouldn’t worry about the national debt because “we owe it to ourselves.” What’s your take Doug?
Doug Casey: It’s another glib, gigantic, lie. “We” don’t owe it to ourselves. Some people owe it to some other people. If it’s not paid back somebody is going to walk away disappointed.
In fact, most of the debt is owed to non-Americans. Directly, in the form of the national debt. And indirectly, in the form of US dollars outside the US. For many years the major export of the US hasn’t been Boeings, or IBMs, or wheat. It’s been US dollars. We run a trade deficit of about $800 billion every year. In exchange, foreigners send us electronics, Mercedes, cocaine, and other real goods. This has artificially propped up the average American’s standard of living.
Those dollars circulate in other countries; the US dollar is the de facto currency of 50 other countries around the world.
At some point—since the US dollar is backed by nothing—if confidence goes away, those foreigners are going to want to get rid of their dollars. They’ll necessarily come back to the US where legal tender laws force Americans to accept them.
There are many trillions of dollars that are now abroad are a liability. Someday they’re going to be traded for US shares of stock, US real estate, US technology, and US labor.
Americans, who have grown accustomed to an artificially high standard of living for many years, are going to have a very real drop in their standard of living when those dollars come home.
We’re sending dollars to the Chinese and other foreigners. We’re also selling US government debt to the Federal Reserve, which then credits the government’s accounts at commercial banks with dollars. But that’s another story. It’s all a moving paper fantasy. It’s going to end badly, and end soon.
It could easily destroy everybody’s savings. And that, in turn, could destroy the very basis of society.