Foreword
Over the last few years I’ve noticed our leaders in Washington and the state capitols enacting ever more policy that is ultimately harmful to our economy. Whether wasteful programs, unsustainable deficits, or business-strangling regulation, we see law after law get passed as people who consider themselves the most brilliant minds in the country seem genuinely surprised that we see rising deficits and inflation, high unemployment, and a housing market that can’t seem to recover.
Then I realized something as I interacted with many of the people who live in this town, whether as politicians, staffers, members of the Non-Profit/Non-Governmental Organization Industrial Complex (H/T to the Destroyer of Colons for that term), career bureaucrats or think tankers – they shared a fairly common thread. Very few of these people have lived outside of this town or state houses or worked in jobs where employment depended on producing a good or service that customers would willingly buy rather than on ensuring that whichever member of congress funds your program is happy. They throw around platitudes like "living wages" or "social justice" without considering the implications of what their policies actually do. They are more interested in what they want their policies to accomplish rather than what their policies actually accomplish. The problem is that having never lived out in the real world they have no frame of reference as to what it’s actually like out there and how real people actually respond to their mandates.
That’s the purpose of these posts – to educate our sheltered ruling class. What follows below is the first of a nine part series called "Economics for Politicians". It is targeted toward our elected leaders to help them understand why economies behave as they do, laid out in nine basic lessons put in layman’s terms. I’ll be releasing a new one roughly once every week or two, so without further ado…
Lesson One: It’s Not Your Money
Have you spent your entire career in the DC Beltway, in a State House, or in a news room or college campus? Do you walk around saying that deficits don’t matter or that you should spend more money to keep from going bankrupt? Do you pass laws designed to punish job creation and investment and then wonder why jobless rates "unexpectedly" rise? Then this series is for you! In the nine part series we will discuss the basics of Micro and Macroeconomic theory, show examples of unintended consequences, and even provide advice that will help you improve the economies of your town/county/nation that will achieve your number one objective in office – reelection! Before we can start you need to understand one basic principle:
It’s not your money. If that previous sentence sounded like a foreign language or the rantings of some angry Tea Bagger, then read it again. And re-read it. And keep re-reading it until it sinks home. Until you understand this, there is no point in reading any further.
Under a libertarian definition, government is an entity designed to provide for whatever the private sector is unwilling or unable to do – highways, fire departments, and the military are often cited examples. Over time, this has expanded far beyond that scope, but ultimately, we as a society come to an agreement to allow our government to do everything that it does. There are things that some of us want and things that some of us don’t want, whether it be for highways, a powerful military, generous pensions for public employees, regulatory agencies, offices to provide foreign nations the means to interact with our government, or insurance for our unemployed. In that last sentence I listed things that almost everyone reading this will like and dislike to varying degrees, but regardless of it we pay our taxes to fund the package as a whole.
Now read that last sentence again. It is the people who pay these taxes, whether directly or indirectly. Every penny that goes into your budget comes from us, whether direct taxes – income, property, sales, or indirect taxes- taxes on the business that we interact with who then have to pass those costs along to us as part of their cost of doing business. Taxes on the wealthy? Yes, even regular citizens feel the impact of that favorite remnant of Marxism to which the left desperately clings. We have a progressive tax system where the wealthy and businesses pay most of the share, but ultimately every dollar that you collect comes from a person whom you were elected to serve. That’s it – that money is there to serve your constituents and nobody else.
To give a simple example I used to manage a rec league co-ed flag football team. The league charged a flat fee for teams, so to figure out everyone’s dues I took the total team fee, divided by number of people who we had recruited, and rounded up by a few dollars to cover the eventual few people who never show or disappear without paying, and have a few dollars left over. I kept tight records and used all of the extra money on the team, buying things like Gatorade and water to bring to our games. Whatever was left over at the end of the season was used toward the tab at our last happy hour. In my last season my initial calculation used a number that was a few dollars off of the league’s individual person fees, and the fact that I had recruited a small army would have had the total dues collected at a relatively high individual fee, but still cheaper than if anyone had joined individually. Then I did my calculations and realized I would have collected a $400 surplus. I considered ways to spend the money – bringing food to the games, buying the team a good night out at the end… and then a radical idea hit me.
I could give it back to them and let them choose how to best spend their money. If the team wanted more happy hours or better food and drink games they could choose how to do so. So after calculating what each person’s share would be and building in a small buffer the dues came down to far lower than my initial SWAG (Start With A Guess), with the few dollars left over being used to buy water and Gatorade and ice for the cooler. For all of the time and effort I put into organizing the team nobody would have begrudged me if I kept a few dollars at the end, but that’s not a good path to start down. I could easily see myself thinking that I would be deserving of some compensation (recruiting and managing a team is a bit time consuming) and then next season maybe I might feel I deserved a bit more, and more and more after that… I’m only human and just as susceptible to greed as anyone else. Obviously I don’t have much of a future in politics..
This is not to pretend that running a nation’s government is as simple as running a flag football team. But the basic principle still stands – the money needed to run any organization belongs to the people who fund it, not the leaders who impose the taxes and not the bureaucrats who administer these budgets. We understand that to some degree we’re going to see public funds used for political payback – it’s a reality of a system that we’ve come to expect when our candidates win and tolerate when our candidates lose. There are limits, though. If one of your biggest campaign contributors is part of a massive company and is a major reason for why it’s unprofitable, handling that contributor control of the company, installing some crony of yours with no background in the industry to run it and rewriting bankruptcy law on the fly to further reward your contributor would be an example of going too far.
When the day comes that you start seeing tax revenue as your personal re-election fund, it’s time to retire to private life. And if the day comes that you see tax revenue as your reward for your service, then chances are you’re probably involved in some activities that warrant jail time. If your constituents are luckily, you’ll actually end up there. Or maybe you’re well connected enough to get away with it. But always remember, it is not your money.
On deck: Lesson 2, Introduction to Microeconomics, or Prices do matter!
Cross Posted at Brother Bob’s Blog
I think we all pretty much understand the problems by now. The question is: What are we going to to about it?
Thanks for shinning the light of truth on this racist organization. I had to deal with la raza as part of my networking with churches, schools, police/probation depts, businesses, etc.. and I have never seen such blatant racism supported in part by tax payer dollars in all my life. They receive grants are they do. Even my own hispanic friends refused to do business with them for their twisted beliefs. La Raza is the opposite of the radical whites who demand racial purity, and control. But those white are few in numbers, and not supported and or courted by presidents, and politicians for their votes. But here comes the Great One who talked how he would bring us all together as one big happy family, yet he has managed to separate us more so than any other president. He should be ashamed of himself for supporting an organization which encourages more segregation of the races, and that one race is better than another race.
First off I am having a problem with the term LEADERS. We are not in the USSR. They are our EMPLOYEES and should be treated as such. # 2. I learned that lesson that the monies in washington was not theirs while in a heated debate on welfare. I was advocating that there should be a safety net for some and this gentleman pointed out that I was a STUPID SOB and I should read this, http://www.juntosociety.com/patriotism/inytg.html then get back to him when I was more educated. I read it and admitted he won the debate. ITS NOT YOURS TO GIVE. Is and has been my motto. Great guy smart and I am glad he opened my eyes.
First off, thanks as always for posting me, Curt!
@ John: Solutions will be in the final chapter. No point in explaining what to do if they can’t understand why they should do it =8^)
@Cold: Like it or not, they are still our leaders – Obama is the Commander in Chief of our armed forces. Damn it hurts to type that. But I do wish that they did a better job of remembering who they serve. Great link on Crockett, BTW – thanks for sharing!
@Coldwarrior57:
I first read that excerpt from that book about Crockett a couple of years ago. I already had a head start on the idea presented within, but that excerpt really brought everything together. This is why I advocate a complete return to Constitutional conservatism where our government is concerned.
Excellent point, it is OUR money that we GIVE them to work FOR us.
This needs to be said every now and then.
Good post, Brother Bob!
@ brother bob. he is the leader of the military but he is still an elected official and only that.He is not our leader because the majority of us arent in the military. He could lead, if the had the ability to do so but he has shown he doesnt have that ability. so he is just an elected official.