All of my kids now have a piggy bank, and are showing a more than casual interest in money. Recently, I decided to try and teach them about economics in today’s age of big, intrusive government, so I wrote a glossary of terms with definitions that kids can understand.
Asset: Anything you own that is paid for. Your skateboard, Playstation II, television, etc.
Liability: Legal fees your parents owe to a strange little man with round glasses, perhaps named Mr. Cohen, after your friend fell off the skateboard in your living room, onto a joystick from your Playstation, and in painful reaction, thrusted backwards and put his head through your TV screen.
Tax: Money taken from you by the government, usually “for the children.” Let’s say you helped your neighbor carry in her groceries, and she gave you $2. The tax is the dollar that the government took. Chances are that, if this makes you angry, you’ll be called greedy, get frustrated and stop helping your neighbor carry in her groceries. The government will then borrow against taxes it hopes to collect from your future grocery-carrying jobs – which you have no intention of taking – so they can pay $500 per bag to your neighbor’s new federal grocery carrier.
Unemployment: After your neighbor’s taxes were raised to hire the new federal grocery carrier, she couldn’t afford much food anymore, so there was nothing to carry. The federal grocery carrier was laid off after the Department of Utilizing Money Badly (DUMB) was shut down, you’re not working, and Bart, the bag-boy at Carl’s Grocery, loses his job because Carl can’t afford to pay him due to the fact that they’re not selling groceries to your neighbor. The three of you are unemployed, but the government hopes you’ll all feel good about it because, after all, the taxes were “for the children.”
Capital gains tax: If you bought a bicycle for $50, and sold it to your friend Timmy for $60, the government takes $4 of the $10 you made, then gives the IRS $1 of that $4 so they can pay people to figure out how to get your remaining $6. Many of the more cunning find ways around these taxes, treating them as you should drugs, alcohol or invitations to jammy parties at the Neverland Ranch – with avoidance.
Zero-sum game: Theory that claims any gains made by one is exactly balanced by losses to the other. Imagine that you’re playing baseball and the score is 4-4. Your team scores a run, so the other team loses a run, making the score 5-3. If you score another run, the score would be 6-2. The good news for the team with two is that by applying “zero-sum game,” even though they’re down by four, they’ll only have to score two runs to tie the game. You’ll find, as you go through life, that those who embrace the zero-sum game theory are usually the ones who are behind.
Supply-Side Economics: If you rake somebody’s leaves, and they give you $8 for your piggy bank, the government may end up with $4. “Supply Side” says that if the government only took $2 of it, then more of your friends would want to rake leaves, each giving the government $2, thereby increasing the amount the government collects. Less per kid but more kids raking. This is about the point where some Democrat will propose federal regulation of rakes.
Net worth: All of your toys minus the toys that the bank doesn’t own, or that the government can’t take away if your parents don’t pay their taxes. “Net worth” is often referred to as “zilch”, “nada” or “zip.”
Aggregate demand: You ask your mother for a slice of cheese, your brother asks for a cookie, and your sister asks for a glass of milk. Your demand is only the cheese, but the “aggregate demand” on your mother is all three. By the way, all three of you may end up getting Ramen noodles (see “Tax”).
Savings incentive: Something that makes you want to save your money. That incentive used to be more money, but now it’s usually a toaster or a cheap knockoff of the “George Foreman Grillin’ Machine.”
Laffer Curve: Chart showing the highest amount of your babysitting money that can be taken from you without making you think you’re wasting your time babysitting. Draw a graph with an up-and-down line inside of a curve that looks sort of like half of Anna Nicole Smith laying on her back. This graph clearly concludes that Art Laffer had latent Freudian issues.