Saturday, October 9, 2010

The Big Lie

I could not believe what she said, or that she could be either that stupid, or that dishonest. Nancy Pelosi, House Speaker, said food stamps and unemployment give the biggest bang for the buck; that every dollar we give out in that way will come back as $1.79.

I have a degree in economics. I have run the numbers every way possible, and Pelosi's statement doesn't even begin to hold water - or make any sense at all. She claims that money goes to companies who then have to hire people to meet the increased demand.

First, there is no indication food stamps or unemployment increases demand enough to force any company to hire more employees. But even assuming it does, here is the great flaw in her "thinking" (I use the term "thinking" in a very loose sense when referring to Pelosi).

The average business has a profit margin of 4-20%. Most run at the low end. Assuming a profit margin of even 10% on average, it would require $300,000 in subsidies like food stamps to provide a company with just $30,000 profit - enough to pay for an employee. But it gets worse. A company cannot use all its profits for hiring because, in order to increase production they must aslso increase costs, like the cost of inventory on goods needed to produce their product. So, in order to pay a new employee $30,000, the company would have to collect closer to $1.2 million dollars worth of subsidies like food stamps.

$1.2 million spent to create one $30,000 job. And since most Americans earning $30,000 pay ZERO taxes, none of that money makes it back to the Treasury.

Again, I have tried running the numbers in every possible light and could find no way to make a spent dollar come out to $1.79. Except one...

When money is given, free, to lower income people, it earns their support. By Democrats increasing the amount of food stamps and unemployment, they increase the number of people who are indebted to them, and will vote for them to insure the money keeps coming. This is the ONLY scenario in which a spent dollar earns a profit in votes and power for Democrats.

That said, on the other hand a dollar invested rather than spent can, indeed, result in $1.79 return. Investing money is the ONLY way to make it grow. Hence, if those dollars were given to small businesses (which employ 97% of all employees), the money could be used directly for growth, which means hiring. After all, the only reason for selling shares of a business to investors is to provide growth capital.

The figures do not lie. I wish I could say the same for people like Speaker Pelosi.

Ms Pelosi, if there is a way to turn $1.00 of taxpayer money into $1.79, perhaps you should pass a law that forces the U.S. Treasury to use the method. We could then pay off our debt and deficits in no time at all.

Now, I'm sure there will be those who will claim I am advocating putting an end to entitlements, but there is nothing in this post that says I am against food stamps or unemployment. I am not. But I am against giving so much, for so long to people who COULD be caring for themselves but just do not want to. Fully 70% of all government entitlements are wasted; given not to the needy, but to the clueless and useless.

The government needs to put "welfare" back into local hands, and the federal governments only role should be to make sure all localities are doing the job. Local communities know who is needy and who is just lazy. By cutting even 50% of the waste, we can do much more to help those who really need it while saving taxpayer money. Instead of giving $100 to needy Joe and $100 to lazy Mike, we could give $150 to needy Joe and put $50 back into the Treasury. Lazy Mike can fend for himself.

Frankly, I am tired of giving my hard-earned money to drug-dealers, drunks and child molesters simply because they "qualify" using "income guidelines". Instead of using income guidelines, we need to start using more sensible methods of determining need, such as physical ability, mental ability and/or unforeseen personal crisis (short term only).

Everyone else can and should fend for themselves. Except for the severely impaired mentioned above, everyone can earn a living. Nothing stops a poor person from getting a job of some sort, or if that is not possible, to give themselves a job by hiring out. Be the local handyman. Do baking or housekeeping for busy people. Do shopping for busy people. Mow lawns. Everyone can do something.

When the steelworker's union killed the company I was working for in '72 I could have collected unemployment and food stamps. Instead, I grabbed my wife's ballpoint paints and painted T-shirts. It paid the bills, along with some metal detecting on the side. And again in '76 when I got laid off at my newest job, I supported my family by starting a small business that connected local college students with residents who needed work done - I would send Don over to put up Mrs. Murray's storm windows, and Margie would go over to babysit for the Davisons. My "Work For Education" company provided a lot of cash in commissions, without me having to work very hard at all. After all, instead of earning 100% of one income I was earning 10% of 50 incomes.

The point is this - if someone is incapable of supporting themselves due to causes not within their control, help them. Everyone else needs to help themselves or pay the consequences - if they get desperate enough, they will work. Even homeless drunks go "canning", picking up aluminum cans and cashing them in so they could buy their next bottle of MD 20/20.

The short take - Pelosi and other liberals care nothing about helping the poor. All they want to do is stay in power, and are using the disadvantaged for that purpose. They are simply buying gratitude - and votes. It's time to take the politics out of charity and to do more to help those who truly are needy.


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