This whole economics thing was boring as hell until Republicans started getting creative. Then we discovered worm holes. So wade in with me until you see how this adventure turns out. Ready?
Adam Smith, in his Theory of Moral Sentiments a quarter of a millennium ago, kind of started the theory of economics. His contribution was the invisible hand. The invisible hand works this way. There are two lines for every widget. Supply goes uphill with prices, and demand goes downhill. When prices get to where supply rises and demand drops and they pretty much match, well that's where the price of widgets settles down and lives. That's Adam Smith's invisible handshake.
Seems pretty simple now, but the entire idea was an epiphany back in 1759. Publishing was harder back then, and a lot of folks wanted to read his book, so the price must have been pretty high. On the other hand, fewer folks could read, so that would reduce demand. The invisible hand took care of all those considerations, so Smith made out okay.
It was those darned outside conditions that sort of upset the apple cart. It was like the invisible hand was connected to an invisible arm in a mad victory fist pump that took the entire model up and down at unpredictable times. People would get scared of some event that might make prices go up, so they would stock up on widgets in advance, and that in itself made prices go up. Then some event would make folks think the price might go down, and the reverse would happen. Same thing with employment since people were commodities, bought and sold in anticipation of what might happen. Serious business, though. People were starving in alleys.
In the early part of the twentieth century, Maynard Keynes came up with a new theory. Money flow was the trick. Because buying less meant jobs would vanish, people got scared and started to buy and spend less when they anticipated that everyone else would get scared and buy less. Who wants to spend when everyone is on the edge of unemployment? So government could and should take up the slack. Government didn't have to survive by figuring out what everyone else would do and doing it first. In fact, government could help everyone by doing the opposite of everyone. When everyone was hoarding and hunkering down, government should begin spending to get things moving again. When everyone's secure and spending freely, government should cut back to keep inflation from spinning out.
Which brings us to a new, new theory.
Two weeks ago, Republicans released a new document, a plan for stimulating the economy by sucking money flow out. There are lots of folks who work for the government. The Republican theory is that producing unemployed firefighters, police officers, teachers, construction workers, janitors, hedge trimmers, and Park Rangers will help the economy. The plan only seems counter intuitive until you see how it works.
The GOP document (pdf) is a pretty big file. If your computer can't bring it in, this summary by the National Journal might help. The key sentence is on page 7 of the plan. "A smaller government workforce increases the available supply of educated, skilled workers for private firms, thus lowering labor costs." That "lowering labor costs" is central. The invisible hand is at work the way we were taught. You fire skilled government employees, it increases the supply of workers, which lowers everybody's paycheck and throws more folks out of work.
But that's only part of the program. The Republican plan is that, as the firings lower labor costs, it will result in employers hiring more people. That will bring more jobs, and that will force paychecks to shoot way up.
That second part is not exactly the way we were taught, but every theory needs updating every 250 years or so. The Republican invisible hand will sort of dribble the economy, bouncing it like a basketball. The intersecting lines will just naturally shake up and down, back and forth, like a seismograph in an economic earthquake.
Throw enough folks out of work, stop bridge construction, reduce fire protection, cut way back on catching criminals, let kids go uneducated, drop employment until it hits rock bottom, and everything will bounce back better than ever. Everyone benefits.
What could go wrong?
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The unemployed fireman, the uneducated children and the homeless will all do better than you think.
Here is the point you are missing: Bill Gates eats a sandwich, right? He does not eat the whole sandwich. Crumbs fall from his chin and into the mouths of hungry children. The more money Bill has, the more sandwiches he consumes. Pretty soon, he is letting the hungry children clean up more and more debris that falls from his mouth while he eats. Eventually literally everyone is on their hands and knees sweeping Bill’s leftovers into the greedy mouths.
Don’t you get it? As long as Bill Gates has sandwiches, it is virtually impossible for homeless children to go hungry.
If Bill Gates has tons of sandwiches and homeless children are not hungry, then what more does the country need? It needs to pay its debts. Since we found a way to feed everyone without expanding our government, why not do that? Mr. Deming, you also can crawl on your hands and knees for discarded crumbs. This is America. We all can.
When the government does not have any money in reserve to prime the Keynesian pumps of the economy and they choose to print dollars or digitize the money, all that does is create inflation, since there is no value behind that newly printed cash.
Now the poor have to pay $4.00/gal for gas instead of last week's $3.50/gal. The same goes for that loaf of bread, or junior's new Nikes.
When one spends significantly more than one has, and doesn't have the means to recoup that "investment" in a somewhat timely manner, household budgets and national economies collapse.
The return on investment in our current national case is going to be a long time coming considering we have at least $14 Trillion dollars in national debt already, sir.
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