How government deficits favor the wealthy.
Government deficits favoring the wealthy is not a topic I've heard brought up in any political forum.
If you have buttloads of money you can't possibly use but don't want to lose, how would you rather support government? With taxes or with loans?
And who has the most wherewithal to buy bonds at auction? The rich the middle class or the poor?
The wealthy of course, making a loan is far better than being taxed. The wealthy can collect a cut on their mature bonds, of course, and have then always have the option to sell the debt to recoup their principal.
Therefore, deficits turn the government into an investment for the wealthy. Now ask yourself how does the government pay on these loans? This has an easy answer: the greatest proportion comes from the taxes paid by the lower and middle classes.
Capitalism has its own force of gravity: money attracts money. (Money also has its own law of entropy, but that's a different topic.) Like physical gravity, it's something you don't notice until massive amounts of currency are involved. The key behind this gravity is compound interest.
Nobody yet has seen that it's in the interest of the wealthy to have government deficits. And though I can't prove this, my guess is that's the real reason why we have runaway government debt for decades. Meanwhile, lacking the reserves of cash to make significant loans, the lower and middle classes have an interest in supporting government through taxes. (No pun intended). Taxes favor the lower and middle classes, loans favor the wealthy. If the lower and middle classes would catch on to this, the Tea Party idiots wouldn't be clamoring for lighter taxes and "not punishing" the wealthy. By not "punishing" the rich, they reward the rich. It guarantees the rich will get richer, and definitely, they will get richer at the expense of everyone else.
However, there is a limit to how much a government can loan, and these loans only work for the wealthy if the government doesn't default. That's why you're hearing all these calls for austerity because default is becoming a danger. My guess is, propaganda and deliberate mis-education are behind those calls.
Austerity is nothing but the wealthy demanding they be paid no matter what. It never works for fixing the economy as the wealthy promise. Heinrich Bruning, Chancellor of Germany in 1930-32, forced through an austerity program. Bruning was a trained economist and not a bad man. His economic measures discredited both himself and his Center Party, the last moderate political entity to stand against Hitler. He became known as "the Hunger Chancellor." We all know how well this ended, and it goes to show, austerity is socially destabilizing.
However, then as now, austerity was considered a sound program, because more than half of economics is influenced by the interests of the wealthy.
My sense is that governments have become another investment bubble. Remember when housing was "safe?" These days, when word gets around that any investment is a safe bet, that's when you have to worry. They'll milk it until it's no longer safe, then they'll milk its blood until it's dead. That's what happened to the housing market.
The US government is a two-generation-old bubble. Now Europe's a bubble, too. So are most governments of the world.
So, don't fool yourself about class harmony. Class division is really what's behind the fiscal failure in our state and federal governments. And the first shots in the class war were fired in the '60s, by the wealthy, at the middle class. People need to see it and need to understand how harmful loans at compound interest can be, generally, and how they are particularly set to undermine government. Debt is the leading cause of slavery in the world now. What happens when whole governments are made into slaves?
You either have to default, or tax the rich to cover the debts that they own.
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