The Left is Winning Some Battles but Losing the War (Vol. 202)

Bad Economic Policy May Help Win Elections, but Eventually Produces Decline, Debt, and Pain for the People

I saw a cartoon recently with the caption:



When you are dead, you don’t know you are dead; the pain is felt by others. The same thing happens when you are stupid.

I have seen so many stupid remarks about economics, this applies. When you propose and enact policy that is just stupid economically, it causes pain for everyone. The pain may not be immediate, but it will come and then most people feel the real pain.

Examples abound. Take Venezuela as a perfect example. They were doing quite well economically into the late 1990’s. That is when Hugo Chavez proposed the glories of Socialism. It sounded great and he sold it well promising many benefits for the working people. And that got him elected. He did what he promised – benefits for the working people, nationalizing the industries with his incompetent cronies running them, and wrecking the economy in the process. It evolved into a military dictatorship and 75% of the population in poverty unable to even feed themselves adequately. Millions fled the country due to the dire conditions his policies created.



How’s that for pain?

Many people believe in socialism, or various forms of so-called ‘democratic socialism’. I assume Chavez did, but I cannot know that for sure. But if you understand good economics, you witness and recognize the stupid proposals virtually every day. And many of them are actually implemented, and these will cause pain – and not always for the person you intend to hurt.

For example, there are many forms of ‘tax the rich’. This stems from the many social programs and entitlements we have enacted which has caused spending to skyrocket and create huge deficits. To pay for this, no problem, just tax the rich. These folks are either stupid or pandering to get votes. Many believe that is a good answer. Of course, the rich should pay more than the poor. Guess what? They already do pay more, much more.

The top 10% of earners pay 70% of the income tax; the bottom 50% pay 3% of the income tax.

Another guess what? If you took all of their income it would not cover the giant deficits we have created. And these are the people who create products and jobs for many millions of citizens who are not in the top 10%. Take enough of their income and wealth and their incentives are gone along with the jobs they create.



Think about how that would impact our economy, and the incomes of all those they intend to be helping. And what is happening in selected states that overtax high incomes or expensive property or anything they can think of – they vote with their feet, and move away taking their income and taxes – and jobs – with them. That is just hurting the remaining population who may not be able to escape so easily to other states.

Here is the best solution for poverty: a good job. And good jobs come from a growing economy. And a growing economy comes from good economic policies.

Good policy begets growth, and growth begets good paying jobs and good paying jobs raises the standard of living for everyone. Isn’t that the objective? Or is the objective to make everyone more equal - and poorer? I think not; I hope not.

If your objective is to bring down the rich, you could with bad policy, but you will be bringing down the ‘not so rich’ too. The economic pie is not static, if the rich get richer, that doesn’t mean the poor get poorer, usually just the opposite, they are growing the economic pie for themselves and everyone else. Isn’t that what we want. Who cares if they get richer.

If you want growth, there is an empirically proven path – small government, balanced budget (or at least debt growing slower than the economy), and maximum freedom. Want examples? Try looking as Switzerland. It has a well-managed decentralized government, and control over spending. They have reasonable debt levels. That yields strong growth and good credit. What good credit gets them is an interest rate on their debt of under ½ of 1%. Think about what that would do for us. Our rate is well over 4% today for 10-year bonds and we spend over $1 trillion in interest on over $39 trillion in debt.

Yes, the leftists are winning some battles at the federal level and many of the states. And that results in big problems today or down the road, causing pain for the folks they are trying to help.

BOTTOM LINE

The message is this: stop listening to stupid and focus on good economic policy. You will be glad you did.

Do it right now, no procrastinating allowed!

I started Main Street Economics 7 years ago to address this challenge. The problems and suggested solutions are covered in layman’s language on our website – MainStreetEconomics.org. And while you are there, Contact Congress, just click on a simple link on the site – it will send a message about your concerns to your representative and Senators. https://www.mainstreeteconomics.org/contact-congress