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Economic Illiteracy

Ok, so I’m sitting at work talking to a customer and we were mutually griping about the shitty economy (10.2% unemployment*, maybe they should sell shirts saying “Unicorns?  Rainbows?  I voted for Obama and all I got was this T-Shirt) and I commented that it would have made FAR more sense to simply suspend the income tax for a year.  Overhearing my comment my dipshit co-worker said “No dummy, if you do that people will just pay off debt, they won’t spend it on consumables, the economy just needs time to fix itself”

Ok, let’s look at this comment piece by piece:

– If people didn’t have to pay income tax for a year would they not spend it on consumables?  Hmmm, take a look at how many restaurants have closed in the past year as the economy has gotten worse, food is about as consumable as there is and with less money in people’s pockets they’ve drastically cut down on going out to eat, so why is it so out of the realm of possibility that if they had more money in their pockets they wouldn’t go out to eat more often?

– Assuming people just paid off debt with their extra money, would that not help the economy?  I’m thinking that would mean more people are paying their mortgage and not getting foreclosed on, yeah, that would just suck, and those lenders actually getting paid back, that would mean they would have more money in reserve, I’d bet that would make them more likely to lend some of that money.  The talking heads on TV go on about the government trying to get the banks to loan more money, the more transactions that occur the better an economy is, this means there is less point of banks trying to withhold funds so they can scoop up assets when the price of those assets bottoms out.

– Lastly, why will time alone fix the economy?  Does time have some magical quality to it or is it perhaps that certain things occur over time that will wind up improving the economy, like markets forces doing their job if they’re not handcuffed by the government.  We didn’t come out of the Great Depression until WWII kicked off and other countries started buying from us like crazy, this inflated demand meant factories were hiring people to produce goods once again, and by war’s end we were the only industrialized country with an unmolested industrial base.  The Brits, who got off relatively easy, immediately installed a socialist government that went to work on handcuffing their economy.

Even though suspending the income tax makes a ton of sense you’ll never see it happen because of what the government fears more than anything: people wanting to keep their money!  If we got a taste of keeping our own money many wouldn’t want to give that up, this would be a problem for all the King’s men who consider your money rightfully theirs.  This is why, when we saw a surplus under Clinton, he insisted on using it to pay off the national debt instead of for a tax break, like it’s impossible to reduce taxes some AND pay off debt.

Long story short, very few people know a damn thing about even basic economics and even fewer people bother to actually think about things.

 

* This official figure does not take into account people who are unemployed and no longer get Federal Unemployment benefits, people who are worked for a whole lot less than what they had made, and people who decided to stop working because working doesn’t pay enough to justify remaining employed.  The real unemployed/underemployed number is a good deal higher than the official 10.2%.

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November 15, 2009 - Posted by | Uncategorized

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