the thing many fail to grasp — is that money does not get eaten by those receiving “benefits.” it is spent at business like any other money, and contributes to upholding those businesses.
the amount that the government relegates to go into the economy via benefits or programs, is a direct IV into the economy — keeping things afloat that might otherwise sink.
you can’t just go in and start removing programs, saying that it will “save the country money.” that is a false perception, and you must also take into account the businesses supported by that money. and then, also, the wages for workers, supported by that money — that money that no-count low down leaches spend as a direct IV into the economy.
and this is the big part of it … the majority of benefits given out in social security and other programs such as food stamps and lunch programs … that money gets spent. it rarely goes into bank accounts, for someone to sit on so that they can feel secure.
whereas the money earned as wages from jobs, often goes partly into bank accounts or savings. but even that money, is then lent to others — and it all goes round and round.
so my point is, that the bigger picture is not like the smaller picture. just because when YOU spend money, it goes AWAY from you, never to be seen again — does NOT happen in the bigger picture. in the bigger picture, when a government spends money — it goes to the next, and the next, and the next.
so when a government decides to cut funding — that entire chain collapses.
so when school lunches are cut, for instance. that reduces the money to those providing lunch to the schools. how much is debatable. some parents might pony up — but then the money they use to buy their child lunch — does not get spent on new clothes. so the clothing manufacturer sees a loss. or it doesn’t get spent on video games …. the list is endless, though since widespread is not going to show a large change, just reduces consumer spending in general.
but if the majority of parents do not pony up, and school lunches are just not served. that industry goes down. so the truck drivers, bringing supplies to the schools — are cut back. the food manufacturers find markets elsewhere, but that takes time — also there might not be a market for some of the items. fresh fruit that was going to the schools — ends up sold at discount to applesauce manufacturing.
point is, that the bigger picture for cutting government spending does NOT fit into your little picture. the picture that if you quit spending money on clothes, you then get to afford going out to lunch. in the government picture, you quit spending money on clothes, and the restaurant closes, so you can’t go out to lunch, anyway.
one thing to always remember, in economics, is that it’s not about you. the rules that govern your personal economics and understandings about money, do NOT APPLY to the larger collective nature of government spending. it’s not a debatable thing. they just don’t apply.
you don’t increase profit for a country by cutting how much money it spends. that only lowers the draw on funds, and IF it is not also matched with a drop in taxes — has no positive impact whatsoever.
now — with the lowering of taxes only on the wealthy. that is cutting programs for the poor, so that taxes can be less for the rich. but what usually happens, is the tax cutting amount is never as much as the reduction in government funding. and of course, the need for that stems from government borrowing, to add that assist into the economy. kind of like giving a star athlete performance enhancing drugs. you might not need it, but let’s borrow as much as we can to pump it up, just in case.
so does cutting the funding, automatically cut the amount of borrowing? no. the loans are paid with the taxes. the taxes (volume) go up with the borrowed money influx to the economy (more people working, more people taxed). then the more taxes then go to the loan and back into funding programs. if the funded programs are cut, and more money is available …….. where does it go? to new programs, generally. and it might go into paying on the deficit, on the loans to our country. but the pattern is not to reduce, it is to borrow as much as you possibly can. ends up being like a revolving line of credit — exactly like the low wage earner that gets a payday loan for two hundred dollars, then has to pay it the next month, and since they are now out two hundred dollars- they have to borrow two hundred dollars again just to break even. if they want to continue the increase in spending, they have to borrow $300 the next month. and $400 the next month, etc.
so that is kind of why there is a deficit. it is only bad, if the amount borrowed and put into the economy (like with school lunches) — shows less return than the amount owed on interest. something like that. in other words, the extra tax revenue generated by the punch in the arm to the economy — mean there is money left over after paying the deficit. which is then re-borrowed for more — to punch the economy in the arm again. something like that. even if not revolving, the process of deficit increase above interest rates means additional borrowing is going on. the concept of having NO deficit — like we did with President Clinton — was that the economy was well enough for incoming tax revenue to pay that off, but then having a decrease in government borrowing rather increase, meant that less money was available to put back into the economy from people’s taxes.
so going from the decrease in borrowing — to the increase of borrowing — is like the heroin addict that stops for just awhile, so that they can get more high on less heroin the next time.
the contrast creates a “lift.” so in the little picture, debt is always bad. being out of debt is good. but in the bigger picture, when it comes to government debt — it is not good OR bad. it is a mechanism used to adjust the function of the machine. the machine that is the cogs and wheels of the economy.
we all know the game of pick up sticks, right? you pull one stick out, while trying not to disturb any of the other sticks.
the interaction is complex, and really impossible to judge. don’t know until the stick is pulled, if you have managed to not make the pile move. but if you just leave it alone and don’t pull a stick — then you know it isn’t going to move.
so that’s kind of where it stands. and to those without education in economics — they think that cutting government spending means that they themselves are richer. or they think that government should ALWAYS cut spending, because gee, isn’t that what my wife is always telling me to do??? stop buying so many cups of coffee on your way to work!
but it’s not the same animal. cutting back doesn’t translate to good, like it might for the husband, who makes his wife happy that they can pay the electric bill.
cutting lunches for children, doesn’t help the government pay for its military. you would think it would. but it doesn’t come down that way. not in the bigger picture. the loss to providers of lunch foods — can translate to less tax revenue for the government. can even translate to workers placed ON a government program, which then just sucks the funding from somewhere else. and more often than not, in politics — any “savings” from a cut — goes into a pet project or new funding. so instead of paying the electric bill with the money you saved by not having coffee — your wife goes out and buys a new pair of shoes.
there is a critical state, where deficit must and should be reduced, and more paid toward the loan. but that doesn’t happen by cuts to government funding. it happens with more tax revenue. cuts to government funding, only reduce the flow of money into the economy and down the line that reduces the amount of taxes collected. and on that scale, the reduction of tax revenue would be GREATER than the amount saved from not funding something. that is because of the domino effect, when one business reduction or failure, effects another.
mostly, be aware that you have to learn an entirely different sort of economics when it comes to government spending, than you do for spending at home. it works differently, and many know that. but they still don’t understand that reducing government expenditure does not translate into an automatic better situation for the government. for the nation. every bit of expense is propping up different parts of the economy, channeling money into different businesses. you only know where it is going, by taking it away. and by then, it is too late.
onward and upward. too many punches in the arm with funding IV’s is not good. too much deficit that outpaces economic growth – is not good. but government spending and borrowing is not always bad. depends on how it is played, depends on what businesses benefit and how many individuals are better off or worse off.
that is why we have statistics, to give an indication on the health of the economy. and that is why you can’t just make up stats or change them at your will, like the president does — because those stats are what influence decisions. the tweaks to the economic machine that keep it going.
if the president doesn’t know or abide by the facts regarding the state of the economy — then where is he getting his decisions from?
pick up sticks. just pulling out whatever, to see what happens. because he doesn’t care what direction it goes, figures it is all going to hell anyway. and he’s asking members of the audience — “which stick should i pull??”
i mean, it’s fun and games for him. he likely won’t be the one on the street with no food. see????? so that kind of insanity needs to stop. because republicans will risk upsetting the apple cart if it means more profit for a friend or themselves — but they aren’t going to sit there hoping it topples.
and yet here we have the head of their party, the president — screaming out “what stick should i pull next?!!” and loving the reaction. who doesn’t know what the fallout entails, because is not interested in stability. stable countries are not easily manipulated. and i guess more importantly, stable countries are not manipulated so easily to make the rich richer.
panic and fear are a peddler’s best friend. trump hasn’t forgotten that. he knows who he is. you should, too.
the economy is a big picture. one that can’t be explained by examining your little one. one that must be given room, to include those on every inch of cause and effect. you study the pile, look at it from different angles — then pull the stick.
or for a more modern metaphor, you study the Jenga tower, look carefully for the one block you can remove. you don’t pull and pull blocks like mad, as if the goal of the game is to collect blocks. the goal of the game is to keep the tower standing as long as possible. if you crash it, you lose.