Editor’s note: Joe Johnson is editor-in-chief of
Business Reform magazine. Click here for a
special subscription offer available only to BizNetDaily readers.
It would be nice if bureaucrats in Washington understood a little about business. Then maybe they could really stimulate the economy.
Here’s a short lesson. Let’s say you own a business and revenues decrease because demand is down. You then have two choices: you can cut cost and try to increase revenue or you can decrease revenue and increase cost.
If you have any business experience whatsoever – or just a brain will do – you know that you need to decrease cost and try to increase revenue if you want to make it. Otherwise, the only way you can survive is by borrowing money to keep things afloat while you lose your shirt. You will only last while you have the ability to borrow, until the big day comes – at which time you are forced to declare bankruptcy.
Our friends in Washington – and specifically, the Bush administration – have decided to do just that, carrying on a 70-year borrowing habit our country just can’t seem to break itself of.
The typical stimulus package is all too common and looks something like this: increase cost (government programs and benefits), decrease revenue (cut taxes), both of which combine to result in a major loss. Then, you are forced either to raise taxes again to make up for the loss or pass on the problem to someone else.
Passing on the problem seems to be a much better choice to us because then we don’t have to deal with it ourselves. The perfect political model: Get a ton of credit, satisfy a greedy nation with it, get reelected, pass the buck to the next generation, and simply continue the process that has been going on since the Great Depression.
Now, this philosophy is all fine and dandy if you hate your children and grandchildren, just as the inventor of this economic philosophy did. When asked about the problems with the long-term effects of this philosophy, John Maynard Keynes said, “Who cares about tomorrow, for tomorrow we die.” Luckily not everyone is like Mr. Keynes. Luckily some people actually love their children.
So, what do we do now? Well for starters, let’s slash taxes (revenue) because the government is not supposed to be in the business of increasing revenue. Their job, instead, is to decrease it. On that point, then, we can agree with Mr. Bush. If you slash revenue and don’t cut spending, however, we might as well file for bankruptcy.
You see, Mr. Bush’s plan has several contradictions. Although his talk about needing to deregulate, permanently end the death tax, eliminate double taxation in dividends, and cut additional taxes is music to any godly citizen’s ears, the problem is that if you do all those things and then increase government spending by aiding states to help the unemployed, you just created another program, which costs money. And if taxes (revenues) have been cut and then you increase spending – such as additional unemployment aid – what you have is a borrowing nation.
“But no problem,” says the government. “Let the next generation deal with it.”
Another contradiction: our President said that consumer spending is the driving force of our economy, yet only a few sentences later he said that Americans have too much debt. My question to Mr. Bush is, “What besides consumer spending do you think causes consumer debt?”
Productivity through investments and entrepreneurship is the driving force of our economy, not consumer spending. In fact, too much consumer spending and not enough savings and investments is what got us here in the first place, thanks to the caring and loving advice of Mr. Keynes.
In order to stimulate our economy and love our children, we need to deal with our debt problem today and refuse to pass the buck onto the next generation. The government itself needs to return to its constitutional and biblical limits, thereby cutting a ton of programs and spending. Then we can pay off what we owe, and there won’t be much need for taxes.
Do it and your children will love you. And if you don’t – well, at least then we know how much you really care about them.
Read more of Joe Johnson here