Government officials in Washington would have you believe that the economic decisions they are making are in the best interest of the public and that chief economic advisors agree they are doing the right thing. These officials would have you believe that running a country (economically speaking – macroeconomics) is vastly different than running your small business or your individual budget (microeconomics). This is what they want you to believe, but in reality they are wrong.
Whether you are running a household, a business or a country, certain firm concrete realities exist. The biggest one of those is: if you spend more money than you bring in, you WILL go broke! Allowing our government to spend more than they bring in on a continuous basis is a crime. If we tried that, we would go bankrupt. Eventuallty, we would run up against a huge wall and have to pay the consequences of our egregious spending. Yet U.S. citizens sit back and allow it to continue happening believing somehow that those in authority in Washington know more about what they are doing than we do.
So, what should government do to get things back under control? There is really only two alternatives – 1) bring in more money; or 2) reduce spending. Of the two alternatives, the one that makes more sense is to reduce spending. Think about your household budget. You work 40+ hours a week making a certain amount of money. Which is the best way to go? Do you go out and get a 2nd and/or 3rd job and try to work more hours to increase your income, or do you evaluate your budget and see where you can cut back? Maybe you quit getting weekly manicures and pedicures. Maybe you shop for your clothes at Sears instead of Macys. If you are in drastic financials straits, you sell your expensive home and cars and adopt a more modest lifestyle.
It is the same with big government. To keep increasing taxes in order to bring in more money is ludicious and unfair to the citizens and corporations of the United States. The most sane and common sense thing to do is to scale back the size of the federal government in order to decrease the amount of money being spent, yet no one in any of the governmental agencies want to do that, because it means losing their job and/or their power. So that brings me to President Obama’s economic plan for his second term.
The Council on Foreign Affairs has a blog called “The Candidates and the World”. In their April 11th article entitled “Obama Makes New Case for Tax Hikes”, it says:
“President Barack Obama doubled down on his economic case for a second term, which he explained favors boosting social programs that benefit the middle-income Americans in sharp contrast withRepublican’s past and future proposals to spur growth with upper-income tax cuts.
“I’m saying, you’re bringing in a million bucks or more a year. Then, what the rrule says is you should pay the same percentage of your income in taxes as middle-class families do. You shouldn’t get special tax breaks. You shouldn’t be able to get special loopholes,” he said. “And if we do that, then it makes it affordable for us to be able to say for those people who make under $250,000 a year – like 98 percent of American families do – then your taxes don’t go up.”
On the surface this sounds reasonable. It does seem reasonable that the really rich pay the same percentage as the middle class. Nobody wants to pay more taxes, right? However, when you follow that logic to it’s conclusion then the middle class would end up a lot worse off than they are right now and our country would be economically worst off. I’ll try to explain how.
First, there is a story in basic economics calls “The Broken Window” by Bastiat. It goes like this:
A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers and begins to stare with quiet satisfaction at the gaping hole in the window. After a while the crowd feels the need for philosophic reflection. They remind each other and the baker that the misfortune has its bright side. It will make business for some glass-maker. As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars? That will be quite a sum. After all, if windows were never broken, what would happen to the glass business? The glass-maker will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so on. The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be that the little hoodlum who threw the brick was actually a public benefactor.
Now let us take another look. This little act of vandalism will provide more business for some glass-maker, but the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some other need or luxury). Instead of having a window and $50 he now has merely a window. If we think of him as a part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.
The glass-maker’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glass-maker. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new winodw in the next day or two. They will never see the extra suit, prescisely because it will never be made. They see only what is immediately visible to the eye.
So here is the application – if Obama raises the taxes on corporations and individuals making over $250,000, especially those making a million or more, that extra cost will trickle down to the middle class. If you are a company who now has to pay more taxes, then one of two things has to happen.
1) reduce your net profits or
2) pass the amount of increased taxes down to the consumer (us) by increasing the price of that product or service.
Neither of those two scenarios are good for the average middle class American.
In reducing their profits, they then cannot increase the amount of product they make. They cannot invent, create and grow their business. They cannot hire additional people, and may even have to lay-off people.
In the second scenario – passing the cost down to the consumer – we pay more for the products and/or services we purchase which in turn reduces the amount of money we can spend and products we can buy.
The goal of the federal government should be to make it easier in our country for our companies big and small to do business and make profits. This, in turn, will increase employment rates and decrease the cost of products and services that the middle class has to buy.
Instead Washington needs to decrease the amount of money they spend in order to decrease the deficits in Washington. They need to decrease the scope of government in order to decrease the amount of money they spend. The first step they should take is to totally shut down The Department of Education. It is a useless and damaging agency. From there, let the slashing begin.
So what is the answer to the originial question? Are Washington leaders ruining the Economy on purpose or are they just plain ignorant? Well I really can’t answer that question. Only God knows the heart of men. However, my women’s intuition says that they are purposefully trying to bring an economic crisis to the United States. For what purpose? Central Planning and Socialism maybe or setting the stage for global governance? Who knows. Let me know what you think Washington is up to!
Original Post: Faithful In Prayer