Politicians have mastered the art of Rewarding bad behavior and penalizing good behavior. The mortgage crisis is only one of several examples. No matter how well intentioned a policy, legislation, or regulation may be (or appear) it will create larger problems if it rewards bad behavior, poor decision making, and failure.
One glaring example is welfare.
- Welfare rewards people for not working and for raising kids in a single parent family
- The bottom 20% of income earners have the fewest number of full-time workers
- Much of the money and resources for this group come in the form of government aid (which is not calculated into income figures)
- When workers in this group work full-time jobs and acquire marketable skills they move up the economic ladder
- By not working and remaining on government assistance they remain at the bottom of the economic ladder
- The poverty rate of married blacks are as low as those of all other married couples
- The poverty rate among single mothers of any ethnic group is always much higher than those of married couples
- Since welfare benefits are lower for two parent families (since one of them probably works) the setup affectively rewards single parent households and discriminates against two parent households
The net affect being more kids raised in single parent homes with the resulting increase in low academic achievement, increased crime, generational poverty, etc. Because welfare creates rewards for families that make far from optimal decisions, government assistance worsens the very problems it was intended to solve.
As an interesting note, millions of immigrants (legal and illegal) have come to this country over the last several decades and overcome language barriers, cultural barriers, and economic barriers yet still manage to avoid generational poverty. I suspect this is in large part due to the fact that there is very little government assistance holding them back.
A better solution would be to implement a system that rewards couples and helps them gain marketable skills so they can better provide for their families and begin their journey up the economic ladder. Rewarding personal responsibility rather than bad judgement would go a long way to eliminating the need for welfare in our country.
We can’t emphasize these two items enough:
Policies that reward poor judgment will create more bad judgment!
Intentions aren’t the most important aspect of policy – results are!
This website will explore many other examples of how the government creates and fuels bad results by creating perverse incentives through seemingly beneficial programs, legislation, regulation, etc.
Expectations are the fuel for chronic inflation. Basically put, when people begin to expect certain conditions such as inflation, recession, unemployment, etc. they tend to change their behavior to bring about or extend the problem they expect.
Politicians and the media play the creation of expectations fiddle like a rare Stradivarius. They use fear to motivate and expand their constituency. Most often these fears are groundless or greatly exaggerated. A great example of this is global warming. The late Michael Crichton’s book “State of Fear” lays out this collusion of media and fear hyping in his fast paced yet thought provoking thriller http://www.crichton-official.com/books-stateoffear.html. Although a work of fiction, Crichton effectively uses real data and logic to break down the man-made global warming argument and point out the close ties between research and a media desperate for new fears to sell news. We recommend you read the Logic sections of this site then read the book. After that, read the websites dedicated to attacking the veracity of this book and determine for yourself who makes the better logical arguments. Despite statements that the case is “closed” more scientists are coming out every year to debunk the “closed debate” of man made global warming. See our page analyzing whether the argument for Global Warming is logical.
Increase taxes on what you want less of and decrease taxes for what you want more of is the main idea behind Taxation as a policy and fiscal tool. The reason higher business taxes and income taxes increase unemployment is because they are effectively taxes on the job providers. The reason politicians call it “Taxing the Rich” is because if they called it “Taxing the Job Providers” people may become suspicious. Calling it by its result rather than its intention allows folks to see past the class warfare rhetoric. The “rich” usually get that way by providing jobs that employ the middle class and working class. Fixing the economy from the bottom up is doomed to failure because the poor do not provide jobs they simply spend money – much of which came from taxpayers in the first place. The money taken from the “rich” in taxes would otherwise be spent providing jobs and helping the “poor” become self-sufficient.
Take a minute to step back and ask yourself, “Is the money I earn from work mine first and the government gets to take some or is it the government’s money and I get to keep some for myself?” In other words – is the government supposed to benefit from my money or am I supposed to benefit from the government’s money? If you believe the money is yours then you are not in living in poverty, or if you are you will not stay there long. If you believe the money is the governments then you are either destined to live below the poverty line or you are a politician.
Is Government Spending effective? The government doesn’t produce a profit – it takes money (in the forms of taxes, fees, charges, licensing, etc.). The government doesn’t create jobs – it moves them. When the government spends less than they receive they have a surplus (this is rare). When they spend more than they receive they have to borrow the money (this is common). Borrowed money has to be repaid with interest as anyone who has ever had a loan or credit card can attest. Government has historically spent money very inefficiently since they are spending other peoples money for the “benefit” of other people. When not spending money inefficiently on regular expenditures Congress spends money inefficiently on special interests, campaign donors, and constituents in order to finance their next campaign and have the opportunity to spend even more money inefficiently. Then we get to pay more taxes so that they can pay interest on the borrowed money they spent inefficiently. How cooooool is that?!
Income & Greed
Is your Income among the highest in the land or are you an Average Joe? Have you ever made more than your boss? Would you do your boss’ job for your current pay? Be honest now! Every job and every person in the private job sector has an income opportunity that matches their skill set and their value to a company or clientele. That includes everyone from the entry level worker earning minimum wage to the highest paid CEO’s, athletes, and entertainers. If an employee or entrepreneur does not add value to a company or clientele they will not be employed long (at least at the same salary).
We hope these sections give you a better understanding of economic issues. We also hope you are starting to see through the smokescreens that politicians try to hide behind.