The Government Doesn't Make Money—You Do

How do you make money? You probably go out into the world and work in exchange for a paycheck, which allows you to purchase goods and services.

You may work in a factory building cars, work as an engineer writing software, work on a farm helping to grow food or work in a grocery store, selling that food to consumers.

You earn money and build wealth on the back of your efforts, experience, skills and risk-taking.

But it’s very different for the government.

How does the government make money?

Does the Commerce Department manufacture computers, phones, and TVs and sell them to millions of customers?

Does the Department of Transportation build planes, trains, and automobiles that generate billions in revenue?

Does the Food and Drug Administration plant and harvest food, open grocery stores, and sell the food to shoppers?

No, no, and — no. And, by the way, we don’t want them to! The computers would be bulky and slow. The cars would be ugly and wouldn’t work half the time. And the food … we’d probably starve.

So, where does the US government, really any government, get its money?

It takes it.

Yes- the government doesn’t make money, it takes money.

And it doesn’t create wealth, it consumes wealth.

Around 95% of federal government “revenue” doesn’t come from productive earning, it comes from the money it takes from you and me.

Almost all of this is through taxes: whether that be individual income taxes, Social Security taxes, Medicare taxes, corporate taxes or other taxes.

Then the government moves that money around based on… whatever it feels like!

But you can’t grow an economy that way.

If Lisa pays the government $10,000 in taxes and the government redistributes that $10,000 to John, there was no growth because now Lisa has $10,000 less to spend.

Of course, the more that Lisa earns and contributes to economic growth, the more that she is taxed. Whenever money moves — between a customer and a business, between an employer and an employee or otherwise — the government charges a toll: taxes.

Add on income taxes, property taxes, sales taxes and other state and local taxes and you will find quite a few hands in the pockets of those who productively contribute to the economy.  

Even worse, no matter how much the government takes from you, they always want more. 

Despite the federal government taking an estimated $5 trillion from us per year and growing, they still manage to spend more than they take in! 

Did you ever have a friend who constantly asked you to help them out with money, then still overspent their budget and came crawling back to ask you for more? Well, we all have that friend; it’s the US government. 

Except, unlike with your friend, with the government, you have to comply or face stiff penalties. You can’t just ghost their texts and unfriend them on TikTok.

Of course, we need a military and court system and other government services, but shouldn’t there be a limit? The roughly $5 trillion that the government takes from us annually, well that’s more than the entire GDP of every country in the world, except for the US and China!

The government takes from us every year more than entire countries produce, yet they still come back each year, hat in hand — well actually gun in hand — wanting a bigger slice of what we earn.

And it’s not like the outcome is so great, either—we are not more prosperous and do not have our rights better protected because of government spending. In fact, the more the government spends, the less prosperous and less free the average American seems to be.

It doesn’t stop there. When the US government overspends, they take more from you again, as they “print” money which takes away your purchasing power. That means that your paycheck, which used to be able to easily afford rent and groceries, is struggling to cover these basic needs.

Whether the government takes from you directly or through the theft of your purchasing power, you are still worse off. You have to work harder for less, while the government asks you for more.

But the path to prosperity is a government that asks you for less so that you can keep more.

Because everything done through the government is done at your expense, quite literally.

When a friend overspends, you don’t keep giving them more. Friends tell friends, “We’ve given you enough money. If you can’t do your job with 2 or 3 trillion dollars, we’ll elect someone else who can.”

I’m Carol Roth, author of You Will Own Nothing, for Prager University.