Simple Economics- Making these Giant Numbers Make Sense

If you are a stable well adjusted family you make a monthly budget of some type. You know how much is coming in and you know how much is going out. If there is more money going out then coming in you have a Deficit— if it continues for a long period of time without correction you will face economic ruin.

We all know family or friends who run their house like a 7 year old— they put ordinary items on a credit card which inflates their debt, not only does that bag of $99 groceries actually cost $145 when you configure the interest charges putting everyday expenses on a credit card is a very bad idea.

So let’s say you are a family of four— two adults, one child 17 and one child 14— you sit around the table and you’re looking at your bills and you realize there is not enough money coming in each month so you have to do something. The 17 year old should be working so they are not a drag on the family budget— I’d even argue the 14 year old should be mowing lawns or shoveling in the winter so they have their own money. Hopefully Mom and Dad are on the same page— if Dad wants to fix the budget and Mom still wants to take that Disney trip this is a problem. If her solution is to put it on a credit card and worry about it later then she is running her house exactly the way our Government runs our country. If they’re on the same page and Mom and Dad in this case either both have to have jobs then one of them needs to pick up extra shifts or a second job. If things are really bad they need to seriously look at additional educational training to get them into a higher paying job, and all of this needs to be countered with something no one likes;

Budget Cuts.

If you have a deficit, or a monthly shortfall especially a recurring monthly shortfall then you need to enact budget cuts.

Eliminate cable or satellite, change to an inexpensive phone carrier, eliminate vacations and make do with staycations for a while, cut back on driving, make shopping lists and meal plan so you aren’t impulse buying. Find a cheaper hair cut, stop taking your car to the dealership for repairs and find a local mechanic who isn’t out to gouge you. Turn off lights, turn the themostat down, yadda yadda.

We get it, right?

Well how come the Federal Government doesn’t?

Let’s go back to our Street Analogy— only this time you live in House A, acrooss the street is House B, next door on either side, House C and D— but no socialism this time—each house runs it’s own way.

So your house, House A is ecomically in trouble. You have credit card debt you are trying to pay down. You have to make budget cuts. Trouble is for years you’ve been sending money to House B because those are your cousins and you promised you’d pay for their Cable bill for some reason. House C are your in-laws and you buy their groceries every week. House D has always been a great neighbor— they even come over and mow your lawn because they know how busy you are.

House A, your house, has to make cuts. House B has come to you to ask that you pay their internet bill too. Hard to say no to House B. House C is asking if you could get those groceries at a higher end market because they feel the quality isn’t there.

Does this sound ridiculous?

It’s exactly how the United States treats other countries around the world. We pay $74 BILLION in foreign aid despite having a deficit in the TRILLIONS. Taking it back to the street, you are not going to be able to turn your family economic situation around continuing with what you are doing, and the same goes for the US Government. At some point someone has to say enough.

Do you know why some of us object to sending so much money to the Ukraine (yes it’s because you are Putin loving monsters— actually no—) before the war Ukraine was considered one of the most corrupt governments in the world— how about this from the Associated Press?

Because we continue to hurl good money after bad— HURL it. And not just into the corruption of Ukraine, but to many other equally corrupt goverments.

It cannot continue. Think about the way you run your own house— I hope and pray you are not in over your head credit card wise. Now impose those measures on our elected officials, speak up, write to them, tell them you want responsible spending in government, because the path we are on is not one of success.

Economics 101: Tax the Evil Corporations

Let’s get it out of the way- like it or not corporations for the most part aren’t evil. What’s the biggest business in the United States? Microsoft? Apple? Amazon? GM? Nope, it’s the United States Government— it has gotten so big that it is the number one employer in the US— that is an astonishingly frightening thought if you’ve ever spent any time at the Post Office (yes not paid for by us I know), the DMV, The Social Security Office, City Hall or watched a road crew where one guy is working and eleven guys are standing around watching him work. The thing that boggles my mind is those are OUR tax dollars. People get all kinds of excited when somehing is “Federally” Funded— where do you think those funds come from in the first place? So the least efficient corporation in the United States is the one WE THE PEOPLE pay for?

Wow.

Okay, tax the hell out of corporations. There is a proposal to Tax Corporations 28%— that’s only fair right? Coporations only duty is to answer to the share-holders— which once again, surprise! It’s us. Or those of us who invest in such things.

The current coporate tax rate in the United States is 21%. Let’s not forget that Colleges and Universities are generally exempt from taxes despite massive profits. Funny how no one seems to want to go after them. At 21% that’s fairly high on the world stage but it’s workable, at 28% all you will do is send those same corporations to Ireland where the Corporate Tax Rate is 12.5%. Say goodbye to the local jobs and money that goes into the economy, 12.5% is pretty enticing.

All you do by raising the minimum wage and the corporate tax rate is create Detroit. Been to Detroit lately? When the car companies pulled out they took the high paying jobs with them and they left an economic ghetto in it’s place. Detroit has been on a rebound but its nowhere near it’s glory days of manufacturing.

It’s simple economics.

It’s why Socialism doesn’t work. If we take it to a local level, and I mean really local, imagine for a minute that you live in House A— on either side of you are houses B and C and across the street is house D.

You and your spouse work and you make a pretty comfortable income of $125k per year. When you were a kid you thought this would make you rich, but the reality is you still have to shop sales and probably use coupons. Of your $125k you pay roughly 22% in taxes so $28k goes to Uncle Sam and Auntie State. You still have $97,000 left over (and I also want to remind you there was a time when we paid NO INCOME TAX and when they introduced it they told us it was temporary). Well, bad news because under socialism you have to give some to house B and C because they don’t choose to work. Lucky for you, house D also works so you and they will split the bill— but after the first year guess what, house D decides to sell and move somewhere else that doesn’t enact such a proposterous idea and now you’re left with the whole bill.

It’s simple economics. The “rich” are far more likely to donate to causes, support public funding, help charities until they are forced to do so— then they take their money and they move somewhere else— probably Ireland. And now that neighborhood that you lived in is occupied by four families who don’t choose to work, so the cancer spreads to the houses adjacent to them, now houses E, F, G and H have to foot the bill for the four houses that don’t contribute.

And I’m not saying there should not be a support system for people down on their luck. Unempoloyment insurance is something we all pay into, but it’s benefits are limited because it’s designed to be a step not a crutch.

Social Security? I think we don’t pay out enough- if you worked your whole life and you retire you should have no ecomomic worries, and we could do that if we didn’t waste so much money everywhere else, including the Deficit which no one likes to think about because when you’re talking about a Trillion Dollars our calculators explode.

I’ll wrap up simple economics tomorrow.

My Semi-Annual Plea to take a minute to understand Economics

As an artist myself many of the visitors of this Blog are like-minded, and I’m afraid that many of us artists are not business minded folks— something sounds good— we want to go for it without considering what we’re actually agreeing to. “Make the corporations pay more!” “Make the Rich pay their fair share of taxes!” These are battle cries that certainly makes sense! “Raise minimum wage to a liveable $20 an hour!” All good.

This year we’ll be voting in Massachusetts to raise tip workers to minimum wage— and that sounds good, right? We need only look at California to see the devastating results. Don’t trust those “right wing” news sources? No worries, do a simple Google search of economic results of raising the minumum wage in California. Here’s a great report from the CATO institute.

It’s as simple as this; costs of goods has risen dramatically— some will blame this on the pandemic which was handled so poorly that every single person of authority in our government who stuck their hands in it should be fired and probably prosecuted. There is also the end of domestic oil production which was a result of a policy of our current administration which caused gasoline prices to rise— when gas goes up not only does it hurt us driving to work everyday— it costs much more to bring items across the country— because the number one way anything gets from Point A to Points B, C, D and E in the United States is via Truck.

Raising the minimum wage results in McDonald’s raising the prices on it’s menu, it results in Dunkin installing kiosks instead of cashiers, it results in Wal*Mart installing self checkouts so now ONE cashier oversees NINE checkout lanes. It’s very simple economics. If the cost of goods goes up it is passed on to the consumer. Is this a result of those evil greedy corporations trying to screw us over? Nope. In the Grocery Business which I had some fifteen years experience in management our margins are around 2%— you’re reading that right 2%— that means we have to control tightly every single expense we have and Payroll is almost always your biggest expense. So you cut workers, you close stores. In California Kevin Hart just closed his chain of Vegan Restaurants putting some 150 people out of work because he can’t afford to pay them and keep the menu prices low enough for a happy consumer. When menu prices shoot up, people start cooking at home.

It’s simple economics.

Tomorrow let’s look at Taxing Those Evil Corporate Fat Cats.