Communism is coming. The current economy produces $21 trillion per year. A third of that is now outlawed, and we reasonably can expect half of the total economy to vanish in the depression as other sectors contract. For example, construction workers legally may build a theater, but with operation of a theater outlawed, no one can afford to construct one. So they too lose their jobs. And so too do the manufacturers who otherwise made equipment with which to construct such theater. We’ll presume that our president does an optimal job of managing the economy under the circumstances, and place future gross domestic product at $10 trillion.
After current bailouts, federal spending jumped from $4.4 trillion last year to more than $7 trillion. Congress never reduces spending, so expect this to continue or even to increase. Total gross domestic product includes government spending. State and local spending constitute roughly $4 trillion of the economy today. We can expect some reduction in this spending if only because state constitutions require balanced budgets, but many entities will raise taxes, perhaps doubling the current rates. Lawmakers especially will raise property taxes because they do not depend on the capacity of the property owners to pay. As a result, vast hordes of homeless persons will lack property entirely, for whatsoever they acquire, the government will tax away. The property taxes can drive the effective total tax rate above 100% of income, thus depriving the multitudes of any assets. In Illinois particularly, government spending on pensions cannot be reduced as a matter of constitutional law, so taxes must increase, swallowing the entire private economy and private invested wealth.
No one will lend to the feds at some juncture, especially with a collapsing birthrate and economy and with no apparently payback prospects from a collapsed or outlawed private economy. So, Congress must raise taxes to sustain spending. Expect federal tax rates above 80% with progressively fewer exemptions, mostly trained ever more narrowly at a few oligarchic sponsors in exchange for gigantic bribes.
Nevertheless, that calculation leaves little room for any private economy, and most of that economy will operate underground under increasingly severe repression. Expect government to expropriate private assets to meet its expenses.
Welcome to communism, where the private sector is effectively outlawed or taxed unto oblivion.
A few thoughts:
1) When the USSR went broke, did anyone want to put the big centralized power back together? study that recent history as well as the demise of other great powers.
2) Becoming? Our economy IS the government. read the Vampire Economy and tell me that isn’t what we have today.
https://mises.org/library/vampire-economy
3) The 2nd amendment may still be our saving grace. When the guns are gone, I will be less hopeful.
4) There is no doubt there are tough times coming. How the story ends is not determined at this point.
Interesting analysis there. Thanks for posting it.
As I see it, the federal government will eventually have to pick some combination of these four choices:
1. Drastically raise taxes (as you discussed).
2. Simply print money - inflate their way out of debt.
3. Seize IRA’s and 401k’s. Replace them with garbage federal bonds paying maybe 1%.
4. Default on the federal debt.
I’m guessing it will be a blend of 1 and 2. But when some Elizabeth Warren type eventually becomes president, anything is possible.