The Spiraling Cost of "Free"

We all know how great it feels to be offered something for nothing. Most of us have rushed to the store to cash a coupon for a "free" item happily. But while the price to us on the spot is nothing, the actual cost to produce that item still remains and must be recouped. The sad and ultimate truth is that nothing is "free". I know, it sounds cliché, but it is true.

You know that "free" roll of paper towels you just got? The money that was lost by not selling it to you was not really lost. No, instead it was wrapped into those other rolls of paper towels you will buy over the next year or so. Why? Because the laborers that made that roll of paper towels didn't do it for "free". They want to feed themselves and their family and buy nice things after all. So they demanded that they get paid for their work. And to get paid, the company needed to make money somewhere. You can do the math yourself and prove that if you make zero dollars you cannot turn that into how many ever dollars an hour companies pay their employees.

You certainly could not survive if you began building widgets and gave them away when it cost you $200 apiece to make them. Eventually you would run out of money. Even if you had a very large pile of money when you started, you still would run out. It might just take a longer time to do so.

Everything that is offered for "free" costs someone somewhere eventually something. This is just as true of promises by the government. The costs are still real even if the price is nothing.

Government often convinces people that it is giving them something for "free". Take someone on any number of social welfare programs for example. Persons on such programs usually pay little if any taxes but receive "free" money from the government. But that money still had to come from somewhere. There is not a magical money tree at the United States Treasury where federal employees just harvest dollar bills after all.

That somewhere from whence this money comes is out of the pockets of Americans that make enough money to have the oh so pleasant fortune of being taxed each year. You might know them better as the evil "rich".

They are the doctors, engineers, nurses, and small businessmen in the upper 25% of income earners who pay 84% of taxes. They are the ones that incur a cost when they contribute to that pot of "free" money so many other Americans enjoy the benefits from.

Do they sit there and take it? Well, they could.

But if they did what would that mean? It would mean that they ultimately they would have less disposable income. And when you have less disposable income you do not tend to buy things that you do not need.

Take $20,000 in taxes from a doctor because she can "afford it" and she has $20,000 less to spend. That means that maybe she does not hire (for example) the contractor to come to her home and add a family room. In turn the contractor does not hire an electrician or a carpenter or a person to hang dry wall. The contractor also does not buy nails or lumber. Which means the lumber mill and the nail plant need fewer workers. Then the steel plant that provides the steel for the nails casts less metal and also needs fewer employees and the iron mines need less labor as well and so on down the chain.

All this happens when you levy taxes on the "rich" to give "free" stuff to others. You might ding the "rich" in the pocket book but the ripple effect hurts the low skilled and low income workers the most. When the lumber mill or the nail plant or the steel mill or the paint manufacturing plant or the dry wall factory reduces its work force or perhaps shuts down entirely who really suffers? Not the doctor making $100,000 a year who sees only $80,000 because of taxes as much as the workers at the nail plant who have gone from $25,000 a year to $0.

Sure, that money that was taken and which began this vicious spiral downwards will be given to these now struggling workers by the benevolent government. But would they not rather actually be working hard and have job security and being productive rather than sitting around and waiting for government assistance?

And on top of this as the downward spiral continues to shut down plants, businesses and factories the "rich" who owned them and used to make that money which was taxed make less money as well. That means there is less and less money to send down to the social welfare recipients. It's not a good outcome for anyone except maybe those that have been given the power to control such programs.

Ok, now must we return to reality. In reality, the people who are taxed don't usually just "take it". Nope, they do something about having their pocket books raided.

They make up for the chunk of money taken from their paychecks by raising their rates for the goods and services they provide. They pass the cost of the "free" stuff on. Then the next person in the chain passes on this increased cost plus ads in their own and so on. Ultimately, the ability to pass on costs hits a dead end where those at the bottom of the ladder are left with no one else to pass the incurred costs to. They are essentially left holding the bill for their own "free" money and bear the cost of everything they have struggled to gain or, more correctly, that they have taken from the labor of others.

This certainly is no better than if the "rich" just sat there and took it when the government raided their salaries. The poorest Americans still suffer in a no-win situation caused by ever expanding government which requires more and more money to feed its hunger.

So the question is why do we continue to delude ourselves into clamoring for "free" stuff be it a welfare check or universal health care schemes? And why do we turn to the government for it when it is only hurting us in the end? I suppose we are just gluttons for punishment.