Ben Treece: Faulty logicWritten by Ben Treece | | email@example.com
Last week, U.S. citizens and political junkies everywhere were treated to the sound bite of White House Press Secretary Jay Carney stating that unemployment benefits could create 1 million jobs in the US economy, which can be found on RealClearPolitics.com. This statement should not be taken at face value and cannot go unchallenged. It needs to be addressed and confronted for a myriad of reasons.
It should be duly noted Jay Carney is a journalist who has worked for the Miami Herald, CNN, Time Magazine and contributed to ABC’s “This Week with George Stephanopoulos.” Mr. Carney apparently decided to use his earned credibility in the journalism field to respond to White House correspondents regarding unemployment benefits instead of citing facts or statistics. No reports have been found thus far (and I’m sure they will never be due to their inexistence) from the Department of Labor or the Department of Commerce to substantiate these claims by Mr. Carney. Such a statement should be backed up by facts and citations, as a journalist Jay Carney knows this. By failing to provide any credible citation he has shown, once again, this administration’s willingness to push propaganda and deplorable rhetoric.
Looking at this from an economic point of view, the theory that Carney purports is not incorrect, but his implementation of the theory is quite perverted. His idea touches on Supply Side economics, which states that when people have more money in their pockets and there is less regulation in the market place (making goods easier to produce and distribute) there will be a heightened demand for the goods which can be provided at lower costs to consumers. The increased demand for cost effective goods would theoretically result in the need for more workers to cater to this demand. This all is based on the assumption that consumers will purchase goods and services as opposed to paying down debt, but that’s another debate for another time.
We couldn’t agree more with this school of thought, Carney’s means were just the incorrect route to the ideal ends. The exact same goal can be accomplished with (in our humble opinion) drastically greater results by cutting taxes ACROSS THE BOARD and eliminating useless regulations that result in higher prices to consumers (this may sound familiar from Economics 101: Common Sense which was penned about 6 weeks ago).
Sadly Mr. Carney and many others in this country will tell you that this would be the application of a faulty logic. He would say that yes the lower and middle classes need tax breaks but the top 10%, who make up 70% of the US income tax revenue according to the National Tax Union (http://ntu.org/tax-basics/who-pays-income-taxes.html) aren’t taxed enough, and should go back to 1945 tax levels in which millionaires paid a 66.5% income tax rate (http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph), or higher! The fact of the matter is that corporate taxes in the US are some of the highest in the world and we live in a country where instead of everyone truly paying a “fair share” we push class warfare to try to tell the wealthy that they should pay more and more and more. Mind you, a 100% tax on the wealthy and corporations wouldn’t even make a dent in our mounting federal budget deficit, as pointed out on the House Floor during Paul Ryan’s budget plan debate by R-SC Tim Scott.
Why would Carney have pushed for Supply Side economics by encouraging unemployment benefits as opposed to tax cuts? Sadly, for political purposes and nothing else. Think about it logically; cutting taxes means less revenue for the government which means less money to toss around to special interests and in the form of federal grants. With the public sector work force growing at an alarming rate (15% growth in the public sector work force in the last decade as opposed to just 1% in the private sector), the federal government needs every last dime it can get in order to survive. Personally, I want to increase the size of the economic pie while limiting the size of the slice that government takes. The federal government obviously has far too much money if they are allocating financial resources to study brine shrimp running on treadmills and robots folding laundry (yes, these are real federally funded projects http://abcnews.go.com/Politics/oklahoma-sen-tom-coburn-report-shows-taxpayer-money/story?id=13689403).
Real economic growth is easily attainable and Carney was on the right path by unknowingly touching on Supply Side economics, but growth cannot be achieved by reaching in to one tax payer’s pocket in order to fill another’s. As the old saying goes, “You cannot help the poor by destroying the rich.” By putting more money back in EVERYONE’S pockets and letting them pay down some debt, you will undoubtedly see an increase in the demand for goods and services which will require increased domestic labor to match this demand. If you disagree, prove me wrong…I’ll gladly take the blame for its failure if I’m also guaranteed the credit for its success.
Ben Treece is a 2009 Graduate from the University of Miami (FL), BBA International Finance and Marketing. He is a discretionary money manager with Treece Investment Advisory Corp (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.