Paygo, false consciousness and the IRS

Why we can’t have nice things.

John Steinbeck diagnosed an important American pathology in 1966 when he called the US a nation of “temporarily embarrassed capitalists” — people who see themselves as the wealthy-in-waiting and therefore fight policies that reduce the power that comes from wealth.

It’s a restatement of Engels’ idea of “false consciousness,” and it’s the result of a deliberate strategy on the part of wealthy people — many of whom believe that they were literally genetically destined to be wealthy — to convince the rest of us that “anyone can succeed.”

Part of the false consciousness program is the money story that goes like this: the US government takes away “taxpayers’ money” from “makers” to fund “programs,” the bulk of which go to the “lazy takers,” who experience the “moral hazard” of subsidized unemployment.

But of course, that’s not how money works. Money originates with the federal government (and its fiscal agents, the banks). In order for the public to have money to pay off its tax liabilities, the government must first spend that money into existence.

The IRS doesn’t take our tax dollars, pile them up, and give them to Congress to spend on programs. When the IRS taxes our money, they annihilate it, removing it from circulation. When…