The remedy and the reality

Am I saying that’s all there is to economics? Not at all. What you have learned are some of the basics which have a direct effect on the welfare of each person in the world; basics that apply everywhere and at all times, basics that do not change. Basics that apply to any economic entity. Is our country being destroyed from within? Economic advisers might say, “Yes.”

But a couple of things should become very clear to you. Politicians keep passing laws and spending money resulting in lowering production, and they keep passing laws and spending money increasing the size of government, and this results in the constant weakening of our country. Also, the way they’re able to get away with all this by paigning. But what you might not understand is how we got into this mess in the first place. You may never ask a more important question in your life. The answer goes back over two centuries.

When our forefathers wrote the Constitution they produced one of the most ingenious instruments in the history of the world. What developed from that document was a land of freedom and prosperity, the likes of which had never been seen on earth. But remember it was developed by people . . . not magicians . . . it was developed by men who could see only the world around them, certainly not the world of the future. They could envision the future, but they couldn’t see it. In no way were they perfect! Evidence this by the many amendments to the Constitution. And think, if you would, of one graphic example of their imperfection . . . the leaders of our country in their day condoned slavery and today we despise it.

When the Constitution was drafted it was supposed the government would be made up of Page-111-Kvolunteer politicians who would do their politicking on a temporary basis and then return to their original businesses. In other words, the farmer who became the Representative would serve for a few years and then go back to the farm. The lawyer who was elected to the Senate would serve his term and then go back home to be a lawyer. Never in their wildest dreams could our forefathers have imagined the career politician, much less the career bureaucrat, who today control our country.

The unfortunate truth of the matter is that most of our politicians, their first day in office and all the following days of their term, are preoccupied with being elected for another term, and another term, and another term. And the longer they are in office, the better they get at paigning.

Think the people can’t see through this? Let me draw an example. Let’s say a drug addict is talking with Doctor A. The drug addict says ‘doctor, I’m hurting bad,’ and the doctor says, “My advice is to go to a drug rehabilitation clinic . . . this program will take many months. The first thing you do is go through withdrawal and you will be completely miserable, but in the end there will be a decent chance of kicking your dependency on drugs so you may straighten out your life.” Now let’s suppose this same addict is talking to Doctor B who says, “You’re hurting bad . . . oh you poor thing . . . would you like me to give you a fix?” Which doctor do you think he would choose? No contest, right?

Now let’s look at the ECONOMIC ADDICT who is addicted to government checks. He talks with politician A who says ‘you vote for me and I will show you how, if you are willing to bite the bullet, to wrestle with initial hard times so we may strengthen the country by increasing production and seriously roll back the involvement of government in order to reduce spending . . . part of which is your paycheck . . . and thereby raise the Gross Domestic Product in order to make the country more prosperous so you will be able to get away from your dependency and be your own person. Then he talks with politician B who says, “Vote for me. I know you’re hurting and I will see to it that the government gives you bigger checks.” Politician B wins in a landslide.

Politician B wins, the checks get bigger, the inflation gets worse, the economic addict is back where he was before because his bigger check won’t buy as much as his smaller check bought before. And all the while he’s waiting to get back where he was, his check buys less and less, and poor people can’t afford anything less! To the economic addict, politician A is evil because he won’t get a fix from him and he will no doubt vote for politician B again, and again, and again.

Couldn’t we do something so the addict would understand? I’ve learned from this stay on earth that people listen to what they want to hear. I’m not saying people are bad or dumb. I’m only saying people are what they are.

Do all politicians paign? No just the overwhelming majority; and it’s amazing how many sincere, non-paigning campaigners learn the hard art of paigning their first day in office because that’s when they start running for their second term.

What makes politicians that way? I’ve got them down to three categories: Category 1 is the politician who is not only a confirmed liar but may even be crooked. His purpose for being in politics is self-serving. He will do or say anything to serve himself first, regardless of the cost to others. We’ve seen many of them. Some of them come to office poor and leave rich, some get indicted and go to jail, some even resign under fire. They say, “I will help you because it will help me . . . I don’t care who I hurt . . . but what I want is your vote.” I would guess this represents a small minority of politicians.

The second category will say,  “I will help you,” but what they really mean is, “I will help you . . . I am oblivious to any harm it might do,” and should something arise whereby ‘helping you’ looks like it may lose votes for him, he will then change accordingly. In other words he is basically a good guy with good intentions until the situation looks like it may take some votes away from him, and then he will act like the fellow in category 1. I would guess that the majority of our politicians are in this category.

The third bunch are the ones that say, “I will help you,” and they do. They will even help you if it kills you or someone else. Helping is akin to breathing. Stop helping and you might as well stop breathing. Don’t ever evaluate what harm all this helping may do to others as long as you help, help, help . . . because it’s right, right, right. These, Tom, are also in the minority but by far are the most dangerous. Why? Well, they believe so fervently and act out of such strong conviction and they are so dedicated that sometimes the sheer force of their beliefs of what is right and what is fair carries through to government programs, and more government programs, and more government programs. Understand? Taken alone each of these things seems to have merit, but put them all together and the camel’s back breaks. And, in order to give someone something, it first has to be taken away from somebody. In order to help someone, they have to hurt someone else.

NOW YOU UNDERSTAND. So now how do you feel about economics? It’s easy to understand.

 And how would you feel about the politician, students, who says, “economics is far too complicated to understand . . . don’t try to be simplistic . . . trust me, I know what’s best for you . . . vote for me.” He’s paigning. He probably doesn’t understand economics himself so he says to everyone who does that they are being too simplistic. Or, all he wants is the vote.

All right, we have come to a crossroads. We understand that:

– When production goes up, people are better off; when production goes down, a few persons may or may not be better off but people in general are worse off.

– As Government grows, the economy weakens and people are worse off even though a certain few people, due to the programs, could be better off.

– Government programs are like straws on the camel’s back.

– Each government program is like taking blood from one’s body and there comes a point when the body cannot survive.

So tell me, what do we do about it? Good grief, I don’t mean a revolution! This is just what happens in many countries. We’re not at that point. Why don’t we just figure out what our options could be? There is a serious movement going on to amend the Constitution so Congress must maintain a balanced budget all the time. Would that work? In reality this is something of an effort made out of futility by people who are sick and tired of government irresponsibility. But, in reality, I don’t think it will help. Why? Well, first of all, the attempt now is only to convene an assembly where such an amendment would be considered. No way does that mean an amendment would be adopted, only considered. And let’s suppose it is adopted. Chances are the economy would collapse before this rather long and tedious process was consummated. And even if it were consummated before a collapse, you can be pretty well assured there would be enough loopholes to allow the politicians to get their pet vote-getting programs enacted.

And a balanced budget is NOT the central problem. A budget can be balanced by simply raising taxes, but we’ve learned that raising taxes . . . that is taking money from workers for any reason . . . lowers their Standard of Living. And history shows every time taxes are raised, the politicians just spend more. However, balanced budgets would indeed halt inflation because, as we saw before, inflation comes when the government spends more than it taxes and borrows, and then has to print money. Nice try though, but there are no solutions unless Congress rolls back spending.

Maybe we should only vote for politicians who promise to balance the budget and never to paign us. Well the thought is fine. However, in real life most politicians promise just that and then revert to doing whatever it is they wanted to once they get in office. Seems to be quite a difference between what’s promised and what’s delivered. It seems like the problem with our economy is politics. I wonder if there isn’t some way we could change the system so as to prevent what’s been going on.

Could it be possible to make it so politicians could only serve one term? That way they wouldn’t need to go through the paigning process to get re-elected once they get in office, and could put their energies into doing something good for the country, instead of for themselves. Not a bad idea. That’s a step in the right direction. Our country used to be something like that. But it seems our country is so much more complicated these days. A man who has been in office several terms has gained so much knowledge and experience, and you would lose that knowledge and experience if politicians could serve only one term. True, but on the other hand, would you rather have economic ruin with lots of political expertise, or economic health sacrificing some expertise? Case dismissed.

Now let’s develop this. Suppose we had politicians who could serve only one term. It’s obvious much good could be derived from this. What else do you suppose we could do to avoid a collapse? Could be we should never elect anybody who wants to spend more than the country takes in, in order to stop inflation, so we can get poor people out of the trap they’re in. That’s fine, however, just by saying a budget must be balanced certainly isn’t the whole answer. You do understand that politicians can keep increasing the budget and yet balance it with more taxes. Instead of just balancing the budget it also needs to be limited or else the national debt will keep going up.

Did you ever think about those words? NATIONAL DEBT. What’s a debt? A debt is something . . . it’s an obligation to repay something. Do we have a national debt? The money the government borrowed . . . is it going to pay it back? Have you ever heard in all your lives a single politician say he is going to see to it the government repays its debt? It borrowed money, the money is to be repaid. If the government said it wouldn’t repay its debts, the economy would immediately collapse because its health depends in part on people’s confidence in its integrity. Money is a notion backed by confidence; no confidence, no money, so defaulting is not an option. But, have you ever heard even a mention of how it’s going to be repaid?

The only talk seems to be on paying the interest. And remember how the amount of interest we pay today could have run the entire nation just a generation ago? And how the interest is the fastest growing part of the budget . . . entirely out of control. It’s a scandal.

You might way, “But don’t we just owe that money to ourselves? What’s the harm?”

No, we don’t owe it to ‘ourselves.’ The debt is owed to specific people, specific banks, specific foreigners or foreign nations. Should the government say it won’t repay, the economies of those people, those banks, those nations would collapse. And anyway, if we just owed it to ourselves, we certainly wouldn’t charge ourselves interest and be in this mess. So if it’s not really a debt, what is it?

It’s your children’s and grandchildren’s legacy. The government borrows money for one of its pet projects, spends the money and passes the debt on to future generations. Sounds like politicians don’t give a hoot about kids. Okay, that’s a little strong. Apparently it’s just that your votes are more important than your children.

How about branding politicians’ foreheads with a scarlet ‘P’when then paign us? Wouldn’t it be great if politicians were accountable like the rest of us! Would that really put a damper on what’s going on? I’m an economist, not a lawyer, and especially not a Constitutional lawyer, so I don’t know if such a thing is possible, but it sure does sound intriguing, doesn’t it. Maybe they should have to look at every law or program and ask, “if it causes production to increase, it’s good; if it causes production to decrease, it’s bad and what can we do about it?

Page 119NewUnfortunately just knowledge of economics is pointless unless politicians are limited to a single term, are held accountable for their promises, and that they be forced to evaluate, improve or remove laws and programs of the past.

There would be problems for a country doing these things, but AT LEAST THERE WOULD BE A COUNTRY.

Professor Frankum
How to Understand Economics in 1 Hour

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