Quantitative Easing Is Really A Tax

I am one of those people that actually record the reports that the Federal Reserve Bank Chairman gives to congress. I work during the day, so I cannot cut away to listen. As a result of paying attention, I have become aware of a few things that really trouble me. I sometimes talk about this stuff with my friends. Recently, I was explaining the role of "quantitative easing" to a friend of mine and I called it a tax. He freaked out and said that it is not a tax. I hold my position, and here is my explanation.

When the government prints more money, they call that "quantitative easing." Printing more money effectively dilutes the value of each dollar in circulation. The way that the United States balances the books for issuing more dollars is to increase borrowing (mostly from China).

Our government has set the debt ceiling at $16Billion. Sequestration is in place, effectively forcing the government to cut deficit spending to stay under that debt ceiling. The first cut has already taken place, and more cuts are planned. Nobody in government wants these cuts to happen.

Today, the US Senate, House of Representatives, and the White House are engaged in a great debate to create a grand compromise. The goal of the compromise is to get the debt ceiling raised to $21 or $22 Trillion.

Today, there are 138 Million tax filers in the United States. If you divide the $16 trillion in debt by those 138 million people, you will come up with $115,942.03 of debt for every tax filer. If the debt ceiling is raised to $22 Trillion, that would roll out to be $159,420.29 per tax filer. That equates to $43,478.26 per tax filer.

*By the way, the number of tax filers is going down. As a reference, in 2008, there were 141 Million filers. 52 Million of them did not have any tax liability. In 2010, the amount of income that a family could earn and still be non-payers was $51,000. Most of those non-payers also get checks back like the Earned Income Tax Credit and the Child TAx Credit. Payments for these two credits alone totaled over $70 Billion. About 1% of the tax filers in the United States pay about 40% of all taxes. The upper 10% of taxpayers pay 75% of all taxes. The lower 50% of tax payers only pay 3% of taxes. The Upper 50% pay 97%.

When you think about government debt, you need to think in terms of our collective obligation to pay for that debt. We pay for that debt through taxes.

Both parties are playing games with your life. The Republicans politic on "no new taxes" or "tax reduction." The Democrats politic on taking more from the top earners in America and robust programs for those in need. In the end, the tax discussion is all about politics.

You see, politicians lose elections when they raise taxes, but many in the general public do not feel it when the government prints more money, or takes on more debt. I claim that this is a tax. Our nation's debt is the primary driver of unemployment in America. Soon, it will be a driver of inflation. Even Federal Reserve Chairman says that "money from heaven will be the path to hell."

Lets face it. Our standard of living has risen too high in America. It is about time that renew some courage in ourselves, and in our nation. We desperately need to cut medicare benefits, social security benefits, and wars. We also need to cut the costs of managing those programs. Something is wrong when it costs $2 to give a person in need $1. We can't afford it.

If you have not noticed, our economy has gotten more fragile over the years. The first stock market crash was in 1929. It lasted until 1941. Look at what has happened since 1997. Tech Bubble Crash, 9-11 Terrorist Crash, and real estate bubble crash. This stuff impacts not only the United States, but the entire world.

The United States was always well respected globally for its financial stability, and for its rights and sovereignty. The world makes its investments and does its banking here. The instability of our markets and the lack of fiscal responsibility of our government puts all of that at risk. We need to stop crashing!

This stuff troubles me, but I am not sure why I bother to write it down and publish it. I guess it is because I am a son, a father, and because there are dozens of families who rely on payment from me to live. I would like to think that a great team working hard on the right business will produce long term results. But it doesn't unless our government debt and stock markets remain stable.

In some way, I hope that those of you who read this will consider the following.

Quantitative Easing is government debt.
Government debt is really your debt.
If you want to maintain government services, you need to lobby for higher taxes.
If you want to maintain current tax levels, you need to lobby for spending cuts.


  1. As of 7/31/13, the FY2013 federal budget deficit was $607 billion, down from $973 billion on 7/31/12, and the full year FY13 deficit is projected to be $759 billion, down from $1.089 trillion last year. Revenues to date are up $278 billion, while outlays are down $88 billion. The deficit as a percent of GDP was 6.5% in FY12 and is projected to fall to 4.4% in FY13.


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