Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy at Harvard University and ex-Chief Economist of the IMF, thinks we should get rid of most of the cash—paper currency—we have in circulation. Rogoff claims to not want to do away with cash altogether, but regardless of his goal, it’s clear that eliminating a particular cash instrument can only be a first step and not a last one.
[P]aper currency lies at the heart of some of today’s most intractable public-finance and monetary problems. Getting rid of most of it—that is, moving to a society where cash is used less frequently and mainly for small transactions—could be a big help.
There is little debate among law-enforcement agencies that paper currency, especially large notes such as the US $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.
This would matter if we had a fundamentally criminal society operating in a fundamentally criminal economy. We have, though, a nearly $18 trillion economy, and crime—crime where cash matters, which is largely limited to the categories identified above, don’t play that big a role. This is not to say that these crime types aren’t worth worrying about, but it’s better to deal with the crimes themselves rather than manipulate our cash forms or availability.
But Rogoff gives the game away with this:
According to the Internal Revenue Service, a lot of the action is concentrated in small cash-intensive businesses, where it is difficult to verify sales and the self-reporting of income. By contrast, businesses that take payments mostly by check, bank card or electronic transfer know that it is much easier for tax authorities to catch them dissembling.
That’s the rub. Reducing the availability of instruments for cash transactions—pushing ordinary American citizens into transaction mechanisms which Government can track—facilitates exactly that: Government tracking of the activities of American citizens, a tracking in which Government most assuredly engages, sometimes for legitimate reasons, but far too often for no better reason than that a bureaucrat has a prurient interest. And worse, because Government dislikes particular groups of Americans and so engages in any fishing expedition it thinks it can get away with.
The upshot of restricting cash instruments, then, is that everyone gets punished for the misbehavior of the few, and worse, the power of Government to track our private doings, for any purpose at all to which a bureaucrat might take a notion, is enhanced.
How very Progressive of Rogoff.