May 26, 2010

Obamanomics 101

By Miguel A. Guanipa

I am not an economist; but if you tell me that private businesses' incomes have gotten smaller while government-provided benefits have risen, you may not be able to call that a lot of things -- but you can definitely call it redistribution of wealth. That is a fancy way of saying socialism.

That is also the news, according to the recent finds from a USA TODAY analysis of government data.

Here's the way I see it.

On one side, we have the private sector. Let's call the private sector " Joe," as in Joe the Plumber. On the other side, we have the government. Let's call the government "The Government".

Now, "Joe" goes to work. He makes a couple of thousand dollars a week. Then comes a representative from "The Government" and tells Joe, "Joe, we need to take $600 out of your earnings so that we can fix the potholes in the street you live in, keep the air you breathe clean, educate your children, and help the family down the street whose head of the family is currently unemployed."

Joe has no problem with that, so he gladly surrenders that portion of his hard-earned money to pay for those necessities and/or obligations.

This is somewhat of a tolerable state of affairs, since Joe is fairly happy that he is able to keep some of his earnings, is living in relative comfort, and is also glad that he can indirectly assist those less fortunate than he is.

So far, so good.

Now, let's say that "The Government" comes and knocks at Joe's door again and tells him that it is time to increase his "contribution." This time, Joe has to relinquish nearly half his income so that "The Government" can keep Joe's neighborhood safe, the air clean, and food on the table for an additional family in dire straits.

Now Joe becomes a little more concerned. But he still acquiesces, mainly because he has little choice.

No sooner does Joe get comfortable than "The Government" comes and knocks at his door one more time. Joe is informed that he now needs to pay "The Government"'s representative, whose primary job is to knock at Joe's door and take more of his funds.

In the end, Joe's private earnings have been reduced to less than half. This means that more than half of what Joe earns has been "redistributed" to pay for keeping the street that he lives on safe, the two families that live down the street clothed and fed, the air that he breathes clean, etc.

It will not be long before Joe begins to reassess his personal financial situation, without even taking into account that the air that he breathes is no cleaner than it was when "The Government" started drawing funds from his account, the potholes in his street have not yet been fixed, his children are not receiving an education that meets his own standards, and the heads of the two families that he is helping to clothe and feed are still unemployed.

Now Joe may hope and think that things will eventually get better. But that probably will not happen as soon as Joe thinks. And when he realizes that -- on top of what has been mentioned already -- the fellow who comes knocking at his door is faring much better than he is, Joe may just decide that he also wants to work for the government and have somebody else pay his salary. At the rates stipulated, he could very well be making more money than if he had his own private business -- at least for a short while.

I say a short while because there are now more people knocking at doors than there are people like Joe. And if Joe is no longer getting a decent return for his labor, since a sizeable portion of it is being legally taken by the fellow who comes knocking at his door, then Joe will likely feel that there is no longer an incentive for him to continue to produce wealth, since he gets to keep less and less of it.

This is why economist Donald Grimes from the University of Michigan called our current economy's predicament an "unsustainable trend." What I suspect Mr. Grimes meant is that the country cannot continue to follow this path much longer without there being some rather serious repercussions. But you don't have to be a renowned economist to figure that out.

Oddly enough, you can be a Democrat and still completely miss the point...much like Paul Van de Water from the Obama-friendly Center on Budget and Policy Priorities, who examined the same trend, and declared that the system was "working as it should".

But then again, Mr. Van de Water may be right. A particular system may be working as it should. The question is: Is it a good system?