How Did The Us Gov’t Fund The Tax Rebate This Year?
Posted by China Sourcing CommentatorNov 26
My mother swears she saw on the news that Bush borrowed money from China for this, and I cannot find any source to support or deny this when searching on line. I just want to know the truth about where the money came from.
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I didnt think that China was the answer either, but i attached an article about it…pretty interesting.
Actually the money was “borrowed” from next year’s taxes, but they didn’t really advertise that aspect very much. Basically they gave a one time tax credit that will have to be covered by paying higher taxes in the future, or going into further budget deficit.
What that means is that the money wasn’t directly borrowed from China, but it probably was in the interim at least.
Really “great” economic “stimulus” package right? I don’t think so either.
Like all Governments the USA has essentially 3 sources of cash ..
1) TAX .. if people spend more, then more Tax is collected . (or, in the UK, the Government can invent new Tax’s)
2) Borrowing – they can issue loan notes = Government Bonds (in UK theses are called ‘Gilts’, in USA ‘Treasuries’). Bonds are traded on the stock exchange – anyone (including the Chinese) can buy them.
3) Print it – however this causes inflation – printing money steals value from all existing money .. every new dollar printed ‘dilutes’ every existing dollar (whilst every new asset created adds value to each dollar).. so most Governments try to avoid printing too much money.
US Treasuries pay a good rate of interest and are backed by the world’s biggest economy, so they are a popular choice for savings amongst those who do not trust their own economy (Japan) or their own Government (China etc) – however no Government explicitly ‘borrows from China’ ..
Deficit spending– meaning they spent money they didn’t currently have collateralized against next year’s anticipated collections. Robbing Peter to pay Paul.