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Why the Federal Government Doesn't Actually Budget

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To budget is to list one's priorities and then decide what can be afforded. The Federal government doesn't do this. The current system is designed to spend as much money as possible, since votes must be bought with more spending, and the president can only pass or veto the result.

There is a simple reason for this. Debt is wealth. To invest capital, it is loaned to someone. Where would all the money the government borrows be invested otherwise?

It would be simple enough to formulate an effective budgeting process for the government. For example, have the legislature break the bills into their items and have each legislator assign a percentage value to each one. The bills would then be reassembled in order of preference and the president draws the line at what would be funded. This way, the power is still divided, with the legislature setting priorities and the president setting the spending limit. The percentage voting system would allow individual legislators to fine tune the granting of favors to other legislators and lobbyists, but since the score is still graded on a curve, they would be careful what they trade. They would also be forced to actually read what they vote for.

Of course, this would never happen because it would crash our entire financial system. Oh, wait a minute! Our debt-based financial system is collapsing!

The problem with money is that we believe it to be a store of value, but it is actually a medium of exchange. We possess the money we hold in the same way we possess the section of road we are driving on. You own your car, house and business, but not the roads connecting them. Money is a similar medium. It is drawing rights on community productivity, for which we trade our surplus resources. As such its value is ultimately based on the productive capacity of the entire economy.

Believing money is a store of value encourages people to hoard it and causes excess supplies to form, above the productive capacity of the economy. Since capital is subject to the laws of supply and demand, with the lender as supply and the borrower as demand, this surplus needs demand to be created in order to maintain the value of the supply. That's why it gets loaned out to those unlikely to pay it back. The government becomes borrower of last resort and the financial industry creates enormous transactional bubbles.

If people understood money constitutes a form of public commons, then they would be far more reluctant to drain value out of their social networks and environment to put in a bank in the first place. We all like having roads, but there is little inclination to pave more than we need. In this situation, the same would apply to monetizing our lives. Other avenues of trust and reciprocation would have the space to develop, which would strengthen communities and their relationship to the environment. Money is a powerful tool of society, but it cannot be allowed to define every relationship, or those who manage it will control all of society.

Political power started as private initiative and eventually grew into monarchy. Monarchists railed against mob rule, but we eventually learned how to make politics a public trust by allocating power where it was most responsive. Why not do the same with the banking system?

Historically there were times banks were responsible for issuing and maintaining the value of the currency and, for this risk, reaped the rewards of managing it. With the creation of central banking, responsibility for maintaining the value of the currency became public, but the rewards of managing it remained private.

As long as currency is a public responsibility, profits from its administration should be public income. Like democracy, a public banking system would not be one huge behemoth, but would consist of institutions incorporated at every level of governance, so individuals could bank with the ones which funded the services they are most likely to use. Different communities would seek to provide the best services with these funds; otherwise they would lose business and citizens to other communities. Regional consortiums would band together in currency unions to facilitate broad economic exchange and for large economic projects.

It would result in a far more organically integrated society that didn't need as much government support, since those controlling the financial process wouldn't be draining as much value out as possible. It may not be as globalized a system as we have now, at least to start with, but it would provide a solid economic foundation for a more sustainable global economy to develop.

 

I've lived in Maryland and worked with race horses most of my life. As horse trading justly deserves its reputation, I have always been leery of the financial practices of the economic system. The first presidential election I was eligible to vote (more...)
 

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Why the Federal Government Doesn't Actually Budget

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