The Government’s Stimulus ‘Only Stimulates’ The Government

Money in circulation does not fuel our economy. It lives on the money’s circulation. Money is irrelevant. It moves a lot. Buying equals moving. The economy grows when movement accelerates. A simple two-person transaction can demonstrate the principle. Gus pays for his lunch at Flo’s eatery with a new $10 bill. The next day, Flo gives Gus the same bill for delivering fruit. The same $10 bill now covers both lunch and food delivery. That 10-spot will no longer be crisp in a year, but it will have paid for 52 meals and food deliveries. The daily practice would have paid for 365 meals and deliveries. Wow! In this case, there is only one $10 banknote. But it moves fast and employs two people.

The faster money moves, the more vibrant the economy. The economy grows as sales increase. Taxation impacts the economy. Assume Gus gets his usual meal and pays with his 10-spot. Uncle Sam appears from behind the counter to pay income taxes, sales taxes, property taxes, gasoline taxes, and licensing fees. Now Flo has to work two more days to pay Gus for the next delivery.

Flo saves enough, and Gus delivers. But then Uncle Sam shows up to “wet his beak” and takes Gus’ 3-dollar cut. Gus must now work two extra days before he can buy lunch. Taxation has slowed growth. Because currency exchanges hands less frequently, it buys less over a year.

Every dollar taken from taxpayers slows the economy. Government spending boosts the economy. Politicians assure us that a little “stimulus” spending will fix any recession or job shortage. Uncle Sam will send us some “free” money to spend to jumpstart the economy. Except that everything the government gives us has to be taken from us first. The government has few ways to obtain “free” money to stimulate us. It can tax us directly. It can borrow it forever, saddling us with interest. It can print it, causing inflation and devaluing our currency. It can also sell oil or timber reserves. We’ve already paid for anything it sells. He was right, no free lunches at Flo’s or when the government “gives” us stuff.

Monopoly has a major flaw. It has a bank that sells houses. There is no government taxing property owners. The bank collects the taxes and pays them back as interest ($200 for passing go). What if we taxed the government? Change the “Go” box to “April 15” on the board. Instead of receiving interest from the bank, we receive a 1099 form and pay $200 in taxes. Fortunately, our government is kind. Every time we pass the “Free Parking” box, it generously gives us $100. What if that happened? It would end the game much faster and with less property bought. Even after a “stimulus,” taxes will have slowed the board game economy.