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Free Money Ain’t Free

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Census figures show that over a third of Americans are receiving some means tested welfare; i.e., Medicade, food stamps, housing assistance, and other forms of Temporary Assistance for Needy Families as was reported by Fox News in late August. Of course, this is not surprising to anyone paying attention. This so-called recovery which we are told we are experiencing has been very lopsided in favor of the upper income folks and especially the Wall Street crowd. Inflation is low according to the Federal Reserve, but most people are seeing their cost of living go up while income is stagnant or declining. I think it was economist Charles Hugh Smith who said it best a while back: “we are experiencing deflation in things  we don’t need and inflation in the things we do need”. The unemployment rate is falling while the percentage of working age Americans with a job is decreasing. The jobs that are being created these past six years, which the Obama loves to brag about, are not keeping up with population growth and they are disproportionately low-income and/or part-time jobs.

If the politicians and think tanks on the Right have a plan for improving this moribund economy, I’ve not heard it. On the Left, however, “plans” abound from raising minimum wage to guaranteeing a “living wage” to “universal income” to, as reported here at  Asylum Watch, the Council on Foreign Relations (CFR) has written a white-paper proposing that the Fed’s Quantitative Easing program of giving free money to Wall Street be replaced with a program to give free money to the good folks on Main Street. CFR believes this will get the masses spending more and drive up demand, which in turn, will cause employers to expand production and hire more workers. Although the CFR recognizes the inflationary effects of such a program, they believe the Fed could control inflation by carefully increasing interest rates.

But, here’s what the Left doesn’t tell us about their “free money” schemes:

Free Money Ain’t Free!

The Left, of course, never give a moment’s thought to what their give-away programs cost.  I t is worth noting some of these socialist/Marxist are seeing that this peace meal approach is not working and so it is time, they believe, to go all-in and implement a “universal income“, as those at The Week recently did. After a long diatribe on how the policies of the heartless Right only make matters worse and how the policies of the caring Left don’t do enough, they came to this conclusion:

Therefore, one can easily imagine the historical process described by Marx going in reverse. In today’s labor market, where there are still twice as many job seekers as job openings, the constant conservative carping about the “dignity of work” sounds more jarring and vindictive by the day

As someone with a nice, stimulating job, I agree that work can help people flourish. But in an economy that is flatly failing to produce enough jobs to satisfy the need, a universal basic income will start to seem more plausible — even necessary.

Dear friends, you need to take this “free money” talk seriously. As the middle class continues to shrink, this idea is going to gain more traction.

Fortunately for those of us who seek information from alternative sources, there are some very smart people in the blogosphere. That includes my good friend at the Spellchek blog.  (Do yourself a favor and mark his post as a must read!) My friend was inspired by the article at The Week to get out his calculator and put pencil to paper and see what kind of money this idea might entail. He used Switzerland as a base case since they will be voting referendum to provide a universal income of $33,600 per year to their citizens. The using U.S. Census Bureau numbers he began crunching the numbers: (Bold added)

What if we followed the lead of the Swiss and doled out $33,600 per year to each one of us? That equates to over $8.1 trillion dollars annually, just a tad more than the $1 trillion dollar welfare number were arguing about now. With an economy worth an estimated $17.3 trillion annually, a basic income at that level would eat up nearly 50% of everything produced. Except that doesn’t count. Only our federal budget spending does which was only a meager $3.5 trillion last year.

Worse yet, federal revenues were only $2.8 trillion. We borrowed the rest just to spend $3.5 trillion. Can you imagine if we had to cough up $8.1 trillion for a basic income program? In fact, the biggest budget expenditure we have currently is social security at $814 billion last year, or 24% of the budget. A basic income program would be ten times the size of social security.

Redistributing federal budget monies is only a partial solution. Private wealth must be tapped as well (retirement funds anyone?).

This exercise in futility is funny until you realize that so many people are serious about it. I mean, what if we just took the $1 trillion the left claims is pie-in-the-sky and divided that up amongst our 242 million recipients? That’s only $4,124 bucks a year. Think that wouldn’t send the $15 minimum wage crowd over the edge? That’s chump change to them.

The bottom line is that the seemingly eternal quest of the socialists is that spending other people’s money still doesn’t get us to nirvana. If they ever want to get serious about it than the full-fledged approach of communism is the only way. All wealth must be confiscated and handed out to the masses. And we all know how that approach turns out.

Got that? Total federal government spending would be the sum of $8.1 trillion, for the “universal income” and the current spending level of $3.5 trillion, or a total of $11.6 trillion!

Nobody is going to lend US that additional $8.1 trillion, therefore, it will have to be printed, won’t it? So, how high would the Fed have to raise interest rates to keep a lid on inflation? Right! That, as my friend said, leaves communism.

Well, that’s what I’m thinking. What are your thoughts?

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