What Every Voter Needs to Know About Economics

If the Federal Government were sitting on tons of money and they spent it during an economic slowdown, this would have a temporary stimulating effect on the economy as the money changed hands. This is known as a "Demand Side" economic stimulus. That would be fine if the government were sitting on a pile of money,,,that was already collected. But sadly, it does not have any such money to spend. A full one-third of the money the U. S. Government spends each year has to be borrowed. One hundred percent of any new spending has to be borrowed from future generations.

Now, borrowing, per-se, isn't bad if you are borrowing in order to construct a wealth generating enterprise. For instance, if an individual borrows to buy a car that allows him to drive back and forth to a higher paying job for the next five years. The individual would create more wealth for his family and be able to repay the loan out of that wealth generated. Or, if an entrepreneur borrowed thousands of dollars to build a plant that generates electricity from garbage, he has taken a previously under utilized resource (garbage) and turned it in to wealth (electricity). Out of that wealth, the loan gets repaid, people get hired to run the plant, and more electricity is made available for businesses and consumers. But, borrowing money to give to the government to temporarily fund a wish list of big government non-essentials, not only generates no wealth in and of itself and gives no incentives for the currently depressed business to expand, it has to be repaid with interest, by taxing any future productivity of the currently depressed private sector.

Consider this hypothetical scenario. Let's say the government wants to "create a job." Let's make it a good paying $100,000 a year job, studying say, the mating habits of earth worms. In order to pay this "worm scientist" $100,000 a year, the government would have to tax either 100 people (or businesses) one thousand dollars a year or tax only ten people, $10,000 a year. So the created job, not only does not create wealth, it actually consumes the wealth generated by scores of others, who must somehow create that wealth, all the while trying to support themselves and their families, and keep their business producing the goods and services society demands. However unfortunately, about $100,000 worth of those desirable goods and services won't be generated by those business.

Remember, every penny taken out of the private sector is exactly that much less available for businesses to invest and consumers to spend. This is why the big government, pork barrel, "Stimulus Bill," was really just a big government, swindle of the American People.