They first confiscate it from you and me, whether we want it or not.
A common misconception, but one that doesn't match reality. Governments create money through the treasury and central bank (a.k.a. federal reserve in the US). Government spending doesn't proceed from money taken in by taxation; rather, money is created ex nihilo and electronically credited to appropriate accounts, then spent. There's no constitutional requirement that the money removed from circulation by taxation has to balance spending in pretty much any developed country in the world: the two are not operationally linked. Indeed, one of the major purposes of taxation (besides reducing the money supply) is enforcing the use of the official national currency -- and that's why you can only pay your taxes in that currency. Tax "revenue" is not for extinguishing debt. And the debt issue itself is another one attracting misunderstanding, because of the tendency by people to apply microeconomic "common sense" to macroeconomics, which is a well-known fallacy. The majority of the debt of a nation like the US is just a number registered between treasury and central bank/fed, and is like debt between husband and wife, pretty much an accounting fiction that doesn't have to be repaid (reducing it, however, makes for good politics); of the rest, much is held by nationals, not foreigners/foreign governments. This configuration gives governments great power to influence their economies through control of the money supply, something they have exclusive legal power to as monetary sovereigns**. Whether this is generally done correctly, incompetently, or abused, is a matter of politics. I'll point out this, however: the common argument against government spending -- inflation -- only applies when you're close to full employment; otherwise, spending feeds aggregate demand rather than inflation.
** The glaring exception being, of course, the euro currency, which nicely shows how attempting a monetary union without having a fiscal and economic union only benefits those who can maintain a trade surplus (Germany), thus beggaring their neighbors in classic mercantilist manner.
Some further reading: http://papers.ssrn.com/sol3/pa... http://bilbo.economicoutlook.n...
Disclaimer: my post is descriptive, not prescriptive. I'm simply pointing out how things are, not passing judgment on whether this is how they ought to be, and will keep my opinion to myself as I've no interest in a political discussion on Slashdot.
