Lifeguard Economics
There is an illustration going around about the Obama Administration’s use of bailouts to save the economy. It pictures President Obama and his team trying to make the shallow end of a swimming pool deeper by getting buckets of water from the deep end, and pouring them into the shallow end.
The purpose of the illustration, popularized in conservative media, is that the administration does not understand that there is only one economy, and does not understand it's structure. To take from the rich to give to the poor, does fleece the rich but does not save the poor. The metaphor is colorful, and a good talking point, but it also fundamentally misses the point on how the real economy is structured.
A better metaphor, using the same illustration would be not the rich in the deep end supplying the poor with their excess, but to reverse the pool by using the water as a symbol of the cost of living. It costs so many dollars to feed , clothe and shelter a family in the
Those of better means have less trouble staying afloat, and it is the rich in the shallow end of the pool. They have little difficulty in keeping afloat, the cost of living is ankle deep for them. They can afford to go into deeper waters without additional threats to their well being.
The Obama solution is to save the poor from drowning in the cost of living. He seeks to take buckets of debt from the deep end, and throwing onto the shallow end for the better off to compensate for. To paraphrase his famous campaign gaffe he is spreading the debt, rather than spreading the wealth. This does little except to make the rich uncomfortable in the splash that occurs as the debt is transferred to them. They seek a way to avoid the discomfort of the cold water being thrown on them.
The debt bailed from the deep end provides a temporary decline in the level of the cost of living. Once poured into the shallow end, it brings the water level back to where it was. The higher cost of living that those of better means are saddled with are passed down through the economic chain in the form of higher prices to consumers to offset the increased costs levied on those who are better off. In the starkest terms, taxing the Walton family for being rich, in order to save the poor from being poor, winds up in higher prices at Wal-Mart to offset the increased costs to the Wal-Mart Corporation. In the end, it is giving to the less fortunate with one hand, and talking it away with the other.
This point in theory is recognized by the government. It recognizes that the costs of additional taxation are passed back to the consumer, and it recognizes that the poor pay the highest price for it's economic policy not working very well.
This is where the divergence between political philosophies becomes apparent. The Obama Administration, with it's deep history in advocating for those most in need, recognizes this injustice in the system, and seeks to alleviate the pain that it causes. Their solution is to provide a life preserver to those most in need so that their suffering is minimized. This is a laudable goal in the temporary - unemployment insurance, Medicaid and food stamps all have a useful purpose in helping a family survive the rough cycles in the life of the economy. It is akin to tossing a drowning person a lifesaver and pulling them to shallow water. Where this noble idea goes horribly wrong is when the life preserver becomes a pool chair.
This is the not so well hidden secret of the welfare program. The New Deal gave birth to the Great Society. Aid to displaced workers was amended to shield the poor from poverty. The incentive to improve one’s situation was replaced by the mindset that with the government would keep the individual from bad circumstance.
The individual is given the impossible choice of accepting money from the government, and living to the terms that come with that cash. Often the terms require the person to avoid helping themselves in order to maintain the payments that allow the individual to remain fed and housed. What individual would refuse the certainty of government money and risk the uncertainty of trying to improve his own situation, and winding up again in desperate circumstance?. An empty stomach knows only one problem. Generational welfare grew from this as initiative was replaced with an ever growing dependence on the government. This does not seem to be a productive course.
The alternate theory is to enable those in the deep end, where the cost of living threatens their existence, to be taught how to swim. If the individual is given the capability to both maneuver through the high cost of living and to find the slope up to the shallow end, that person will be lifted out of the desperation of his situation.
This was attempted with great success in the Welfare Reform package passed by the Republican congress and signed into law by then President Bill Clinton. In it, those who had been subject to the generational poverty that grew from the dependence forced upon the poor, were given the tools that they needed to prosper. The pool chair of inter-generational welfare was removed and replace with a temporary life preserver. Swimming lessons were provided in the form of job training and education in life skills .Value was placed on individual responsibility, and millions stepped out of poverty. This was genius based entirely on the principles that founded this country.
Common Sense Dictates
The laws of economics are as solid as the laws of science. Just as water seeks it’s own level, an individual prospers when he is enabled to, and when value is placed on that prosperity. Value is placed on an individual prospering when that person gets to keep what he earns.
This is a lesson that gets relearned with every social experiment attempted to work around that fact - from the disastrous original Mayflower Compact to the collapse of communism. When there is no ability to improve one’s circumstance, there is no incentive to improve it. This applies equally to those of means who have their earnings taken away as to those of desperate circumstance who must maintain that state in order to keep government assistance coming in.
While we are in difficult economic times, the Obama Administration must keep this basic law of economics in mind. Alleviating the pain in the short term is of importance, though there are those who maintain that this is not the function of government. Regardless of that debate, it is important to not repeat the miss-steps of the past.
Running buckets of water from the deep end of the pool to the shallow end is a pointless exercise. It contains no long term solutions for the poor, and throws a monkey wrench in the private sector’s ability to rise and meet the challenge of creating jobs. Indeed, it is punitive to the poor in eliminating jobs and raising costs to the very people it is supposed to be helping.
The Obama Administration would do better by abandoning it’s efforts to recreate the welfare state. It should follow the example of the Clinton Administration and promote a reduction of the welfare rolls by spending the taxpayer’s money on lifting those dependent on the current system into productive lives. Common Sense dictates that enabling people to care for themselves is a better thing than cowing an entire generation into dependence on government.
RLB
Categories: political leadership, The Economy
Tags: economy political leadership
This makes more sense than the other way around. Cost of living is a constant. Spreading the wealth around implies that Obama just wants to play Robin Hood. I think that he's genuinely concerned with people in bad times. It's not so much for him that he wants to grab money from the rich, but he wants to make sure that those in need get the basics. In the end, the best solution is to get as many people as possible to be self-sufficient. That answers the problem, not just the symptoms.
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I'm not so much concerned with the money grab. What makes me crazy is the absolute lack of understanding of anything economic. After tossing another 2 trillion dollars in debt on the country, Obama decides to freeze spending on discretionary spending. He specifically excludes social programs and national security spending. That works out to 15% of the federal budget. Out of that 15%, the freeze amounts to 1%. BFD!!! O has nothing but smoke and mirrors to cover his bankrupting our children and grandchildren. Everyone is going to drown in this tsunami of debt.
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It all concerns me. Obama lacks understanding of basic economics, and the people surrounding him orchestrated this mess under Bush. Geithner ran the NY fed, Bernake was a Bushie, and Greenspan's untintelligble nonsense fed both the dot-com bust and the housing bust. Everyone who understands this is invested in it so deep that no matter what happens, the players win. Morgan Stanley made record profits last year. The money men are getting the gold and we are getting the shaft. Obama is just the current nitwit who thinks that he's in charge. All any politician can hope to be is a shill for the special interests. None of them represent regular people anymore.
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In case no one has noticed, there are a lot of people hurting nowadays. Oh, and the job of president is probably the hardest one of all. Maybe he doesn't understand all of the details of every issue, but it is his job to decide on a course. I think that he's doing what he thinks is best. Maybe he's right and maybe not. If he is right all will be good, if not, he'll be back in Chicago in 2012. It does no good to fold him into some banking conspiracy theory. The illuminati really doesn't run things.
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Some lifeguard - Between Obama, Geithner and Bernake is like the 3 stooges starring in "A Day at the Pool". I hope we don't all drown in the meantime.
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OK, I've been down on this whole thing, from the bank bailouts to the stimulus and everything else. It's been all I can do to hold onto my home and keep my family fed. Just got the word today - my wife gets to go back to work. She's a teacher, so I guess some of the Obama money is finally helping my family out. We're still not anywhere near out of the woods, but there's some good being done.
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Glad for you Dunston. It was a long way to go for that benefit though. While I appreciate the benefit that your family is getting from this, your family and mine is now saddled with $40k in debt that's added onto the deficit that was already there. That's what another couple in trillion of spending gets us. It would have been a better idea to set up the climate for business to generate new jobs rather than to create them out of "make work". For every dollar going to getting a teacher rehired, there were about $300 going out to chase wind farms and biodiesel. I'm not saying that some people weren't helped. I'm just saying that this wasn't thought through well. Ramming stuff through in a hurry is pretty much always a bad idea.
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Nothing like raining on the parade. Congratulations to your wife dunston. Hopefully things will be better now that she's working again. This is how fixing an economy works - 1 job at a time. It took a couple of decades to create the problem, it's boing to take awhile to fix it. Just in case you didn't notice, we need energy alternatives, and it has traditionally been the government that kick starts those kind of things. Everything from satekkite TV and cell phones to the internet started out with the government ponying up money. Then business figures out how to make a profit off of it. If you can tell me the stimulus was a bad idea in 20 years, and show me how, I'll give you your point. The jury is still out.
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Gotta go with govissue on this. The government just throwing money blindly at a problem is no solution. All we are now is deeper in debt. The stimulus was not a jobs bill, or even a recovery bill. It was a grab bag for all of the special interests. Out of the 700 billion allocated in the stimulus, only 300 billion was to go to jobs projects. The whole shovel ready concept did not greate permanent jobs. Most were resodding parks or filling potholes. The infrastructure projects represent only 30 billion dollars. I'm not saying that there was no place for the government in this, but they could have thought things through a bit. As for Sat TV, cell phones and internet - all of these government sponsored ideas came with a plan. No one just used a panic button to throw money at them. We need responsible government, not knee-jerk reactionaries. The congress is supposed to be a DELIBERATIVE body. That implies thinking before doing.
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I'll say that government has no place in it. This is supposed to be a free market economy. People take risks, and some win and make a profit. Some lose and go out of business. The only real function of our federal goovernment as it is laid out in the Constitution is to raise and maintain the military, deal as a unified voice representing American interests abroad, and to keep out of the way of individual liberty. Nowhere does it say "spread the wealth around."
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I've gone through a lot of changes in my thinking lately. We claim to be a free market, but there's a lot of regulation. Most of it was written by lobbyists to game the system. It almost seems like that was less harmful than the stuff congress thought up. My brain wants to explode with the whole mortgage crisis. Banks loaning money to people who can't repay the loan. Congress demanding that they do it. Banks covering these bad loans by selling them off as securities. Congress looking the other way. Housing prices going out of control and creating a huge bubble. Then crash - the market corrects. Congess and Obama do a housing rescue that only rescues the people who can't afford to pay back the loan they couldn't pay back before the crash. Now congress is pushing those bad loans again, with Obama cheering them on. They really don't know what they are doing.
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Obama always was and always will be an empty suit. He has skated by on image, there is no substance. All he knows is how to shake down people for money, and when that doesn't work,tax people and give the money to the poor. That's what you get when you elect a community organizer with no other identifiable skills. Of couse he doesn't understand the economy. He doesn't even understand the Constitution.
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"Where this noble idea goes horribly wrong is when the life preserver becomes a pool chair." That was really clever, and I don't mean that sarcastically. I like that you mentioned the Clinton Administration towards the end, but I wish you would have detailed what the Clinton Administration did - I think that political discussions would benefit from people citing history more often.
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It's NOT "Rocket Science!" It's ECON101A... Most 5th Grader's have a better understanding... I believe they KNOW EXACTLY what they're doing... "Operation Dissolve America: Death by a 1k Paper Cuts.
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There is much that the city commissioners, county guardians, or
the state Treasurer as well do not understand, or is it that they
,just wish to ignore the facts and the process involved in placing
their cities, counties, and states in the B...LACK once and for all.
It would work like the Ron Popel ads “set it---forget it”. But of
course then the FAKE government heads wouldn't be able to
maintain their CONTROL over the people. The lies and the
SCAMS would no longer be justified ( never have been in the 1st
place)
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While this did work to some extent in the 1990s, it will not work as well today. It is great intentions to teach the people some new skill, but remember, the Mines and Drilling have been shut down, the refineries have been shut down, the factories have been shuttered. This Nation needs to take basic resources and build something to sell to the World again to have a basis of an economy.
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Nice job, as always
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Wish Obama was a faster learner or had better counsel. Maybe if he had surrounded himself with better advisors he'd not be in so much quicksand and we would be better off.
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