Wednesday, December 1, 2010

Unemployment Stimulates the Economy: My Economic Manifesto


We heard this first from Nancy Pelosi last year, about how the best way to stimulate the economy is through unemployment.  Al Franken uttered the same comment.  His logic is that these people will spend their money on rent, and toys, and food.  Basically, they will spend the money they get.  Obviously, this is the most ignorant statement a Senator can make about the economy.  If giving people that are not producing anything an amount of money so that they can spend the money to stimulate the economy, why not give them each a million dollars.  Why not give everyone an unemployment check to go spend on the economy.   If some money stimulates the economy, won’t more money stimulate the economy more.  Clearly, it does not. 
Let’s say we had a balanced budget so that money was real and not printed debt.   If 10% of workers get a check, that comes at the expense of 90% of works.  This means that the 90% of workers had less money to spend because it was given to the other 10%.  The net impact on the economy is 0% in real dollars.  The other affect it has on the economy is to disincent the producers from producing as the reward for being productive is diminished.   It also disincents the unemployed from being employed.  Being employed helps to increase the overall productivity.   Think of wealth like a carrot crop.  If there are 100 people that eat carrots, but only 90 of them work to produce the carrots, there is a negative effect to the overall production of carrots.  Those 90 must work harder so that they can have their portion of carrots as well as provide for the other 10.   If the 10 are not given free carrots, they must then work with the other 90 to produce carrots, thus increasing the total output by 11% while not increasing the total cost of producing carrots.   Quite the contrary.  If 90 people can produce enough carrots for 100 people, then 100 people could produce enough for more than 100.  So, if the desired output remains carrots for 100 people, 90 people will have to work 11% less to produce the carrots, which will give them time to pursue other endeavors.  Isn’t this the essence of how we thrive? 
Becoming efficient enough at a task to allow one to pursue other tasks of their own choosing is a sign of a thriving society.    We reached the peak of this equation at the end of the 20th century and have since begun a process of increasing the burden of work per worker by increasing the number of non-workers.   There are so many reasons that have caused this, many of them date back as far as the 1930’s, but our current problem is allowing the non-worker to remain a non-worker indefinitely.   We are actually putting more effort into subsidizing non-work than work by means of debt.  Debt is the only way to cause this equation to become out of balance.  Debt allows for false resources(money) to be poured into non-productive endeavors.  The net effect is to decrease the value of productive endeavors.   It would be like redefining the value of 1 full carrot to be equal to the value of 3/4th of a carrot.  Then the ratio of carrots to people remains the same, but the actual value of the carrot is decreased as it takes 1.25 carrots to equal one full portion.  This is called inflation.    I’m sorry Al and Nancy, but the simple mathematics of it says that productivity is the only way to stimulate the economy.  We have to get people off of the government milk and out on their own.   We have to create a climate that makes it easy for entrepreneurs to start businesses. 
My Theory
We have to shed the conventional thinking that it is through the action of government that we can grow.   It is neither through the action or inaction of government that our economy will grow, but through the unaction of a century of legislation that has caged in the bull that is the American worker, removing taxations and regulations, removing minimum wage and subsidies, removing OSHA and the EPA and incentives for unions.   
And what about the ill effects of the mistreated worker from the industrial revolution.  I say that mistreatment still occurs through the use of illegal workers, as incentivized by minimum wage and other regulations.  I say that abuse occurs to the dignity of the provider that relies on a government check.  Have we learned nothing as a society that squeezing and mistreating workers does not increase productivity that we would want to return to this method if not for our father government.    Our current economy is based on a premise that business, run by inheritently flawed men, will do evil unto its work force and customers if not for the supervision of a government run by an equally flawed group of men.  This a is a cycle of flaw whereby flaw begets flaw.  We must change our premise to say that it is business as a whole, left to its own, that is more capable of responding to the morality of a Christ based society, as its success is more closely tied to those for which it serves and employs.   Reliance on government is a barrier to the reliance on God and for the skills with which he has equipped us with.  Through productivity, may charity abound and welfare subside. 

1 comment:

Kansas Bob said...

I agree with you that government must be scaled back. Now where our lawmakers will do it remains to be seen.