The little subsidy that couldn’tPresentation Transcript
(And his twin, Stimulus Package, who couldn’t either)
Bob makes $100,000 per yearBob has his own business.Living expenses are $70,000 per year Bob
Fred makes $75,000 per yearHis living expenses are $45,000 per year Fred
Roy makes $25,000 per yearHis expenses are $25,00 per year Roy
Josh has no income.His living expenses are paid by family members and the government. Josh
The tax people take $25,000 from Bob.The tax people take $25,000 from Fred.The government gives Roy $15,000 from taxes so his income is more in line with Bob and Fred.The government gives Josh $35,000 because not having any income is not fair.
Bob cannot expand his business because he has just enough left after taxes to cover expenses.Fred makes just enough to cover his expenses.Roy is doing well enjoying the money he is entitled to.Same for Josh.
There can be not economic growth because no person has enough income to expand a business and Josh has no incentive to work since his money is for “free”.Bob decides he is not really in love with Josh taking his earnings and lays off employees and reduces his earnings, cuts his expenses, and makes only $50,000 a year, cutting his tax bill by 2/3.Fred also decides paying 1/3 of his earnings to the government is not what he wants and cuts back his working hours. He has less disposable income now.
As a result of Bob and Fred’s actions, Roycontinues to receive some government payments,though there are complaints from some peoplethat the country cannot afford this.Josh loses part of his compensation, but continuesto live comfortably with the help of relatives.The economy simply cannot grow with thisscenario. There is no money for growth, justmoney shuffled around and eventually lostbecause there is no reward for working.
Bob retains 90% of his income. He can expand his business or he can use the extra income to make purchases and go on vacations.Fred retains 90% of his income and puts much money into savings, allowing banks to have more capital for loans to those needing them..
Money that went to subsidizing projects, many of which were not actually economically viable, now goes into the private sector and creates products that salable.All four individuals are free to follow whatever path they chose without losing the fruits of their labor and without dependence on the government for support.
Roy is motivated to try and increase his income and moves up to a better paying job.Josh can now find work because of business expansion by Bob (or due to other “Bob’s” spending on goods) and those stores hire Josh
We have Bob, Fred, Roy and Josh stranded in the desert.Bob has 5 bottles of water, Fred 3, Roy 2 and Josh did not bring water.The “fair” way of dividing water says: Bob gets 2 ½ , Fred gets 2 ½ , Roy gets 2 ½ and Josh gets 2 ½.
However, it is impossible to walk out of the desert using 2 ½ bottles of water so all 4 perish in the heat.
Bob realizes he has a chance of making it out if he keeps all 5 bottles of water and strikes out at dusk.Fred, Roy and Josh have 5 bottles between them and use the water sparingly.Bob makes it out of the desert and brings back water and help.
What if Bob is an evil corporate dude who takes the water and leaves the other three stranded? He lives, they die. Not fair, you say. No, it is not fair. But remember, they all die with equal shares. Certain death versus possible rescue. You do the math.What if Roy, Josh and Fred can’t survive on the water left. Again, sharing equally among the four means certain death.
Bob inherited a huge mansion with 3 floors. He has over15,000 square feet in his home.
It is unfair that Bob inherited a hugehome. To make this fair, Fredmoves into the second floor of thehome.Roy and Josh move into the thirdfloor.Now it’s fair—no onehas house paymentsand everyone lives in a Our beautiful,huge, beautiful house. happy, free home
As this practice spreads—thosewith less moving in with thosewho have more than they areentitled to or unfairly received afree home from their parents,houses start going empty.
The housing market collapses. Theconstruction market collapses. Withrealtors out of business, furniture andhome furnishing salesmen losing themajority of their business (Fred, Roy andJosh have no need to buy furniture, etc,as Bob is providing this), andconstruction workers laid off countrywide, the economy takes a seriousdownturn.
Bob’s business begins to suffer aspeople lose their incomes andmove in with others. More andmore people are needing “fairhousing” from the people whohad high incomes, but theincomes are being lost.
The “fairness doctrine” of eachperson giving their fair share and noone being allowed to benefit unfairlyfrom the work of their parents orgrandparents has collapsed whatcould have been a robust economy.
No matter what a politicianclaims, taking money from onegroup and giving it to another,CANNOT GROW THEECONOMY.
Soak up billions of dollars that could have been used to create jobs in corporations.Hold the record for the highest costs of any type of job creation.Encourage projects that are doomed to fail.Make your congressperson look like a hero for taking all the money he/she could from others and sending the money back to your state.
Couldn’t save the economy because shuffling money around does not make jobs or allow people to purchase more.Couldn’t prop up a business that was poorly planned, even with massive amounts of money.Couldn’t make people want a product they didn’t want in the first place.Couldn’t make life “fair” and give everyone equal opportunity.Couldn’t save the day.
The Little Subsidy (and his twin, the Stimulus Package) couldn’t save the economy, couldn’t save jobs and couldn’t push poor ideas to be successful in the marketplace. What he did was drain the budget, encourage poor planning and eventually drive the country into a bad credit rating and possible bankruptcy.