This is a clever commentary about a recent noxious emission from an economic eminence. From John Tammy at realcearmarkets.com:
In a recent opinion piece for the Wall Street Journal, Harvard economist Kenneth Rogoff declared that there’s “little debate among law-enforcement agencies that paper currency, especially large notes such as the $100 bill, facilitates crime.” Rogoff would like to discontinue the $100 in order to – try not to laugh – reduce crime.
Can the eminent economist really be so naïve as to presume that the disappearance of a piece of paper would prove effective at making the U.S. (and the world) more honest and safe? Apparently he does, while lightly acknowledging what economists refer to as the “substitution effect.” If $100 Federal Reserve notes prove scarce, then similar euro and Pound bills will do the job, as will 10,000 yen notes. If $100 bills simplify big criminal transactions, wouldn’t little gold coins simplify crime even more?
While Rogoff is fully focused on the problems presented by $100 bills for government, he ignores how problematic it is that our government is so large and intrusive as to want to take away something that we the people (law abiding and not) find convenient. Did it ever occur to Rogoff that maybe there are too many laws and too many crimes as opposed to too many $100 bills? To you the reader, if cocaine and heroin are legalized tomorrow, will you become users?
As opposed to wanting to abolish the $100 bill in order to increase our individual freedoms, Rogoff seeks an end to the $100 to increase the size and scope of government. A principle reason Rogoff is in favor of abolishing the C-note is because “Cash is also deeply implicated in tax evasion, which costs the federal government some $500 billion a year in revenue.” Lower federal revenues are apparently bad in the eyes of Rogoff and his ilk, but they’re surely good for the rest of us. Ignored by Rogoff, or worse, understood by the Keynesian thinker, is that a dollar collected by the IRS is an extra dollar for Congress to spend.
The above matters simply because the only true “multiplier” in economics concerns government spending: once Congress spends on anything, whether it works or not the spending increases by many multiples in future years and decades. Medicare began as a $3 billion program, one paid for by a revenue surge that sprung from the 1964 tax cuts. By 2020, this program will cost U.S. taxpayers $1 trillion annually despite it having routinely failed to secure universal medical care for the very elderly it was intended to help.
Stated simply, rising federal revenues beget more government spending, and yes, more borrowing from Treasury. Governments can only spend what they’ve taxed or borrowed from the private sector first. All of this in mind, the last thing the already overburdened American taxpayer needs is for an already-too-large federal government to be able to tap into yet another revenue stream that will increase the burden that is government even more.
To continue reading: Let’s Discontinue Kenneth Rogoff’s Commentary, Not the $100 Bill
