Operation Gratitude Care Package Weekend!

Friday, July 2, 2010

A simple economic primer for Nancy Pelosi and other Democrats...

...who obviously desperately need one:

UNEMPLOYMENT BENEFITS DO NOT CREATE WEALTH. GOVERNMENT BENEFITS DO NOT CREATE WEALTH.
I know, it's a shock,but bear with me...

First off, unless they run gold mines or oil wells (okay, let's not think about the latter), governments have no wealth of their own.

All the 'wealth' a government has comes from, is taken from, its citizens,whether in the form of taxes, fees, eminent domain appropriations,White House shakedowns, etc.  Governments can print money but that no more constitutes creating wealth than xeroxing a rental agreement makes someone a building contractor.

Now a government may choose to pass some of that money back to people other than those they took it from, whether you call that 'social justice','spreading the wealth', 'buying votes', whatever, so those recipients can spend it.  In other words, those people are putting wealth back into the economy that the government took out of it in the first place, and which would already have been in the economy if the government had just left it there.

Well and good,but a huge portion of that wealth never makes it back into the economy.  Take for example federal unemployment benefits.  First you have the expense of extracting that money in the first place, incurred by the IRS that collects the taxes, and the federal departments that impose the fees, and the Congress and Administration that enact the taxes and fees.  A sizable proportion of every dollar the government takes out of the economy disappears right here.  Then there is the expense of the state administrations the remaining money is passed on to, Another piece disappears. Then there is expense of the city administrations the state passes some portion of the remainder onto.  Another piece disappears.  And every missing penny goes into the hands of people who do nothing but pass that shriveling dollar from hand to hand. They don't make things, fix things, sell things.  They just compete to buy things with the people who do. And their demand (backed by wealth extracted from the economy without service or creation) competes with the demand of the people who genuinely do create wealth, for the same goods, raising their cost to everyone.

Meanwhile, the people who are supposed to be helped by this benefit are getting only the few leftover pennies that filter through the governent... in much the same way grass filters through a cow.

Wealth is not created. It is only moved around, and in the process too much of it is turned to crap for government benefits to ever work.

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