Budget Fantasy

Before trying to unravel the meaning of the budget, I must point out that I have been increasingly unable to understand what is happening in the United States. It is as if the picture has shifted out of focus, the colors have blurred and the sound track is out of sync. Sometimes I wonder if I have lost the ability to see and hear properly. I feel like a tourist in a foreign country without a guide or dictionary.

The challenge before me is to understand the strange world of the Bandit and his gang.  The following is what I've been able to put together so far.

One clue is that conservatives are backward, although I am surprised at how far back those in charge have gone: all the way to the European Middle Ages. In Medieval, Christian Europe, it was widely held that the purpose of life was to die, hopefully to attain Heaven. That belief was very similar to beliefs of today's Middle Eastern Muslims. In fact, the modern Middle East is in many ways a picture of what Europe must have been like during the Middle Ages. That analogy helps me get the Bandit in focus. I just think of him as a Christian Osama Bin Laden, which preserves the symmetry of Crusaders and Infidels, or Jihadists and Infidels, or Christians and Jihadists. All is as it was, a millennium ago.

Medieval Europeans, like Jihadists, believed in the superiority of Church over State. Kings were subject to the oversight of the Holy See, as the Pope was considered the ultimate ruler on Earth. This idea was forcibly overthrown by the Protestant Reformation, and Henry VIII's assertion of Crown over Church. However, the idea persisted into modern times in the form of official State religion. For example, the Anglican Church was the official religion not only in England, but in many American colonies until after the American Revolution. (State religion was not finally abolished until the First Amendment in the Bill of Rights.) A logical consequence of this view of government is that religious doctrine prevails over worldly law. That is, sovereigns had to conform their laws and regulations to the determinations of religious authority, as happens today in Islamic countries such as Iran (where Mullahs rule).

One widely held Medieval belief was the illegitimacy of taxation. Although the New Testament reports Jesus as saying 'Render unto Caesar the things that are Caesar's ...", the general tenor of Medieval religion was that worldly sovereigns either ruled by force or by clerical dispensation. The Church required communicants to pay a tithe for its maintenance, a practice still approved today by Islam and Evangelical Christians, but secular sovereigns were required to support themselves (without taxes). In practice, Medieval religion disapproved of Caesar, so taxation was generally rejected. The State relied on charging fees for services rendered, or on accepting donations. The Feudal system passed the buck from the higher ranks to the lower in case of war or other State demands without formally taxing anyone. So, when a sovereign needed troops to fight a war, those who pledged loyalty (the feudatories) were required to provide those soldiers and armaments. Again, that was not considered a tax, since no non-refundable payments were made, but only the rightful due of a promise made.

When States imposed taxes, it was generally considered an illegitimate use of authority during the Middle Ages. Kings were supposed to live off their Estates by licensing their uses, or selling products. The French Kings, for example, were chronically weak and sometimes bankrupt, because they had to rely on selling the produce of the land for income. The French Kings could not rely on feudal pledges, even in the most dire circumstances. Louis XIV was a great King because he broke the Gordian knot: he found a way to make the Nobility and Bourgeois pay for State expenses, which rapidly evolved into a system of taxation.

In the pre-Renaissance period, the Italian City States were forced to use several subterfuges to avoid being seen as imposing immoral taxes. In principle, every levy on citizens was considered a loan, not a tax, to be repaid at a later date. Citizens would get a certificate promising repayment of monies loaned, which was the origin of today's government bonds. Of course, people were concerned about getting back less than they loaned (due to inflation), so the government had to offer interest. Unfortunately, Medieval Christians (like today's Muslims) believed interest was immoral, following an ancient, Aristotelian idea reinforced by St. Thomas Aquinas. So, the City States could not call amounts paid in excess of principal, "interest." Instead, they promoted a theory by which citizens were entitled to lifetime payments as a reward for helping the State (which is the origin of coupon clipping). In order to pay off the bonds they sold, the City States resorted to several schemes, such as issuing more and more fiat money, and sponsoring Pyramid Schemes. Of course, this led to the eventual, repeated bankruptcies of those States.

Now we can understand the Bandit and neo-conservatives: they are Medievals who don't believe in taxes. This is based on the idea that government does (almost) nothing useful. However, they have learned two new things:

In the Medieval philosophy, the condition of the poor and needy was regulated by the Church, not the government. Social needs generally were the duty of the Church, as determined by an interpretation of Jesus' sayings. The State was not responsible for improving the conditions of life, except so far as that led to people attaining Heaven. The State was responsible for fighting wars, provided they were "defensive" according to St. Thomas Aquinas notion of "just war." The State was responsible for maintaining order, provided the police power was used according to religious precepts.

All this brings us to our modern State, ruled by a Bandit. The Bandit view of government is just that the military and police power are legitimate, but everything else is not. This justifies refunding all taxes paid for those budgetary items which are not legitimate.

However, Bandit government does have some residual charitable functions until they can be fully transferred to the Church (as in "points of light"). These should be paid by issuing bonds, which are a form of non-taxation. In return for buying bonds, bond holders will get a regular payment of non-taxable interest. In other words, those who can afford to buy bonds offer their wealth for charitable purposes, in return for which they get a perpetual stipend and a promise of full repayment. Of course, since it would be immoral for the State to levy taxes to pay off the bonds, the State must issue more bonds or more fiat money. Either way, interest rates must rise to attract a sufficient number of bond buyers. That makes holding Treasury Bonds a form of Pyramid Scheme.

Since it is primarily the wealthy who buy bonds, their issuance supports the wealthy. That is, if bonds are issued instead of levying taxes, the wealthy are advantaged by buying the bonds because they are guaranteed full repayment of amounts invested. In addition, bond holders get to clip coupons, which means they will receive a regular income at the expense of the State. In Bandit philosophy, following Smith, the State is justified in imposing taxes to pay the interest charges, because that is a contracted debt and it is honorable to pay one's debts. Since most of those taxes will eventually be derived from the lower classes, this amounts to making the beneficiaries of government charities pay the cost, including interest, of advancing benefits to them. That's because Bandit Social Security, Unemployment Insurance, Veteran's Benefits and other advances are really loans, not grants.

All of this is extremely socially stabilizing. Issuing bonds at interest assures the upper classes of a permanent pension without loss of wealth, and without the necessity of any work other than clipping coupons. (Today, the computer does that for you.) Making the lower classes pay for the meager benefits they receive, plus the premium (interest) to support the upper classes, insures the lower classes will be forever laid low. Thus, God is in Heaven, and everything is in its place.