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The little subsidy that couldn’t

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The little subsidy that couldn’t

  1. 1. (And his twin, Stimulus Package, who couldn’t either)
  2. 2. Bob makes $100,000 per year Bob has his own business. Living expenses are $70,000 per year Bob
  3. 3. Fred makes $75,000 per year His living expenses are $45,000 per year Fred
  4. 4. Roy makes $25,000 per year His expenses are $25,00 per year Roy
  5. 5. Josh has no income. His living expenses are paid by family members and the government. Josh
  6. 6. 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.
  7. 7. 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.
  8. 8. 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.
  9. 9. As a result of Bob and Fred’s actions, Roy continues to receive some government payments, though there are complaints from some people that the country cannot afford this. Josh loses part of his compensation, but continues to live comfortably with the help of relatives. The economy simply cannot grow with this scenario. There is no money for growth, just money shuffled around and eventually lost because there is no reward for working.
  10. 10. 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. .
  11. 11. 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.
  12. 12. 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
  13. 13. 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.
  14. 14. However, it is impossible to walk out of the desert using 2 ½ bottles of water so all 4 perish in the heat.
  15. 15. 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.
  16. 16. 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.
  17. 17. Bob inherited a huge mansion with 3 floors. He has over 15,000 square feet in his home.
  18. 18. It is unfair that Bob inherited a huge home. To make this fair, Fred moves into the second floor of the home. Roy and Josh move into the third floor. Now it’s fair—no one has house payments and everyone lives in a Our beautiful, huge, beautiful house. happy, free home
  19. 19. As this practice spreads—those with less moving in with those who have more than they are entitled to or unfairly received a free home from their parents, houses start going empty.
  20. 20. The housing market collapses. The construction market collapses. With realtors out of business, furniture and home furnishing salesmen losing the majority of their business (Fred, Roy and Josh have no need to buy furniture, etc, as Bob is providing this), and construction workers laid off country wide, the economy takes a serious downturn.
  21. 21. Bob’s business begins to suffer as people lose their incomes and move in with others. More and more people are needing “fair housing” from the people who had high incomes, but the incomes are being lost.
  22. 22. The “fairness doctrine” of each person giving their fair share and no one being allowed to benefit unfairly from the work of their parents or grandparents has collapsed what could have been a robust economy.
  23. 23. No matter what a politician claims, taking money from one group and giving it to another, CANNOT GROW THE ECONOMY.
  24. 24. 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.
  25. 25. 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.
  26. 26. 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.
  27. 27. Beware of

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