I'll be honest. I'm not entirely sure how you come to the conclusion that the taxpayers don't finance the government. You seem to be talking about seigniorage right? (Correct me if I'm wrong, I'm a constitutional law scholar, not a reserve banking expert. Kind of out of my depths a bit here) The ability of the government to make and sell currency? If the government is making a 20c piece for 4c, it's making a 16c profit or tax on that coin when it is issued. I would argue that the process of seigniorage is inflationary and a really bad way for the government to raise revenue. It's also a tax (at least of sorts) because the government is still collecting revenue. The money is still coming externally. We saw what happened in Zimbabwe when the government was raising half of its revenue through that process.
Of course you could be talking about the measures the RBA could take in order to deleverage debts such as by paying it down, inflating your way out of it or defaulting on your obligations. I accept that the second option out of the three is an option, which would in effect guarantee endless money for infrastructure projects, I would argue that it attracts a whole number of other problems, such as those facing the US right now. Unlike the US however, we can't afford to have effectively no interest rates. We're not known as the bastion of financial security like they are. It disincentivises thrift, foreign investment and punishes savers (especially problematic given our mandatory saving structure, superannuation).
So you could in effect create as much money as you wanted for projects like the NBN, I just don't see why the consequences of such moves should be something we would want to bear. Especially when normal taxation, the kind where you collect money from private industries and the public at large to service the normal operation of government, wouldn't produce anywhere near the same types of consequences when adequately managed and used sparingly. (
I don't really agree with your premise here. I don't personally believe that the government's default fiscal position should be to take money out of the economy for no purpose. My position as that Taxation should be capped at the point of revenue the government requires to perform its functions. My default position is that the state has nothing except what it takes from its citizenry so any surplus should either be invested or given back to the people, with a commensurate tax cut in order to not needlessly take money out of the economy.
Forewarning, I'm not particularly happy with what I've written below, it's late. Post-Keynesian Monetary Theory, Chartalism and Modern Monetary Theory (MMT) are all schools/sub-schools/movements which acknowledge/deal with these concepts, if you're ever really bored. I'm skipping over the external sector and if/how banking sector finances are endo- or exo-genous.
What I'm discussing is not seigniorage but rather the mechanisms by which government spending is actually executed. Currently, the government spends by crediting private bank accounts, which is basically as close to a resource free transaction as you can get. In Australia, regulations have been introduced which require the government to issue debt to match any deficit spending. This in itself gives away that the government is not revenue constrained; if the regulation is the reason the government must issue debt, ergo the debt is not required to spend. This is a political constraint, not an economic one (note that I'm not necessarily debating whether it's a good regulation or not, only pointing out what it means for the nature of government spending). As I previously mentioned, the actual flows of taxation, debt and spending are distinct. This may seem moot/esoteric, but it's helpful for understanding where the mainstream conception diverges from reality. So if bonds do not finance spending it must be taxes right? Once again, there is an almost stupidly simple factor which shows that calling the relationship between spending and revenue "financing" or "funding" is both incorrect and an oversimplification. If the government is the monopoly issuer of the currency, how did the money that the taxes are paid in make its way to the private sector in the first place? By government spending. Obviously, something cannot finance another thing that precedes it temporally. So taxes and bond sales don't finance government spending per se, rather they provide room in the economy for the government to spend. As an aside, in the US, taxes paid in physical cash are shredded or burnt. Like, with fire. You can get shredded notes as a souvenir. Anyway, this flowchart explains it more simply than I'm doing currently:
If the government runs a surplus on any given day, then competition for reserves increases, at which point the central bank (RBA) must intervene in order to keep the interest rate at the desired level. In order to do so, it buys back bonds by simply creating money. OTOH, if the government has credited bank accounts by an amount larger than the quantity of reserves it has withdrawn (tax) then it has created net financial assets (which once again, are backed by debt even though they technically don't
have to be, what with being created before the debt itself is issued and all). So whilst in the short term deficits decrease the interest rate by reducing competition for reserves at the end of the day, in the long run the finances they create act like any others. For thought experiments, it can be helpful to detach from the bottom line entirely. Imagine that instead of directly selling bonds to "finance" the NBN (in actuality just ensuring that the total amount of active financial assets remains unchanged) the government simply created the money to pay for it, letting the RBA deal with the consequences. Let's also imagine that the NBN was created on time and within budget (I know you're probably smirking by now but it's a thought experiment) and that the capacity it added was greater than both the demand generated by its construction and its initial use. What is the inflationary consequence? If it is financed by bond sales and becomes a highly productive asset, what are the implications for debt sustainability?
Incidentally, what is often overlooked are the major problems in Zimbabwe which were caused by social policy, which redistributed productive capital into the hands of those who did not know how to use it. This is basically a supply side reform which drastically reduces productive capacity, which obviously causes inflation.
As for the last point, I wasn't necessarily talking about yourself, but I don't think you'll disagree that surplus fetishism is more common on the right/conservative side of politics. However, as you may now be aware if I've been convincing enough (I suspect I haven't, it was a long, hot day) your default position "that the state has nothing except what it takes from its citizenry" isn't quite accurate, seeing as everything the citizenry has (in financial terms) came from the state in the first place.
