Just Blowing Smoke: Government ‘Prop’agandaWritten by Tim Higgins | | email@example.com
The President is out on the political stump, raising money for his upcoming re-election bid and pushing for quick passage of another Stimulus package. It’s a package that has yet to be scored by the CBO to discover its true cost, needs its accounting examined closely to determine how money that we weren’t going to spend in the Middle East anyway can be counted as ‘savings’, or even officially submitted to either House of Congress. In the spirit of full disclosure, I must point out that it’s I and not the President who’s calling it a Stimulus package, under the ‘looks and quacks like a duck postulate’.
Setting aside some of the nonsensical rhetoric designed to stir up his political base in an election run-up, let’s turn instead to the general principles of government spending as imposed onto the national economy, with reason to challenge some of the propaganda being passed out for these ‘props’ to various parts of the economy.
So for example, government can prop up the price of corn or wheat with subsidies in order to allow a farmer to sell his crops at a higher rate, allowing him to spend the rewards he reaps on things to stimulate the economy. When you do, however, the price of each product of which these grains are a part also increases. Everything from bread to animal feed goes up, and food becomes less affordable. Money spent on higher food prices by taxpayers contributing to these props takes away that they could have used on other things, and the economy stagnates.
Now that you understand the general principles involved, let’s get more specific with the plan proposed…
Government can cut Social Security taxes deducted from the paychecks of workers, but doing so will mean that a program already all but bankrupt will have even less money coming in. When it runs out (soon), funding for the program will likely need to come either from government borrowing money and paying more in interest on its debt or be confiscated from taxpayers in increased taxes. Both functionally give them less to spend, negating the principle and causing the economy to stagnate.
Government could waive payroll taxes to businesses that hire new workers, but such a waiver will be far more temporary than the long-term cost of the employee hired. A stagnant economy (created by the previously mentioned effort), has no need of the goods or services that such a new employee would provide anyway, which will means they will likely drain such businesses to the point failure and place a greater burden on the economy. Meanwhile, the waived taxes will further add to the national debt, to the borrowing thereby required, and to the interest on that debt, causing the economy to stagnate.
Government could prop up the condition of the nation’s infrastructure with construction projects. Setting aside their necessity, however, the insistence of that same government that such construction be done by union laborers or at pay rates consistent with such labor means that these projects will be more expensive. More expensive projects mean that fewer of them can be done with the available capital. Not only will less of the threatened danger (real or imagined) be averted, but fewer workers will be employed by such projects and less of the taxpayer money invested will be returned to the economy as a consequence. Instituting such projects will also mean that the nation will be borrowing even more money and more will be paid on that debt’s interest, causing the economy to stagnate.
Sure, the government can raise taxes on those making over $250,000 per year to prop up funding for all of the other props they’re attempting to create, and since the IRS is not an agency to trifle with, all will pay them. Warren Buffet and Ron Howard tell us that these ‘exceptionally rich’ will in fact be more than willing to pay it. (Strange, since they have spent great sums in the past to minimize their tax burdens and refuse to voluntarily contribute in spite of being able to do so.) Of course, most of those nearer the $250K level are more likely to be those who pay their corporate taxes as individuals. Such tax increases will therefore likely mean that they will either not be able to afford to buy things either for themselves or that would allow them to expand their businesses and hire people. (Though in fairness, no one will be able to afford the things that their companies can’t provide anyway; which I suppose makes the whole thing alright.) The result again is an economy that remains stagnate.
It seems the economy might be better served with less government props and even less government propaganda.