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Basic Economic Reality 101

Basic Economic Reality 101

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Published by Doug Edelman
A basic primer in understanding the National Economy
A basic primer in understanding the National Economy

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Published by: Doug Edelman on May 16, 2011
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Basic Economic Reality 101
In 1992, Bill Clinton won the White House by focusing on the simplest of messages;
"It'sthe Economy, Stupid!" 
 Today, the nation's malaise is, in largest measure, a function of,
"It's the Stupid Economy!" 
 Unfortunately, the voting public is woefully unaware of basic economic principles andrealities and so they keep allowing the politicians (who are RESPONSIBLE for thateconomic ignorance ± by design!) to keep making policies that ensconce the politiciansin perpetual power at the expense (LITERALLY) of the productive segment of the votingpopulace ± and creating a permanently dependent underclass voting bloc whichempowers them.Therefore, secure in the belief that an
educated 
voter is a
Conservative
 
voter, I presentthe following lesson!The political Left in America depends on your ignorance of the fallacy of 2 popular myths which they perpetuate and promote. The first of these is the "Zero Sum Game".In this myth, the idea is that there is a fixed amount of wealth. In order for one person toget more, someone else must get less. If someone has "too much", it deprivessomeone else of the opportunity to have "enough". This is the basis on which the Leftpromotes class warfare!The Left fans the flames of class envy and resentment at every opportunity. The recentShirley Sherrod incident again highlighted this ± and most folk never even noticed it!!In the "complete" tape wherein her "redemption" from racism took place« she replacedracial conflict with class warfare! In her words, it became the
"Haves VERSUS theHave Nots".
The fact is that the American Economy is NOT a zero sum game. Wealth is CREATEDwhenever a new product or service of value is created. Whenever innovation creates aproduct or improves a process, or efficiency is improved through technology, theeconomy
grows
.
Growth
of the economy is an indicator of economic health. Every few months, lipservice is given to this fact when the news makes passing reference that "the economygrew at a modest 2.1%..." or some such statement. But sadly, few actually understandwhat that means.
 
Put simply, the "pie" of the economy is not a fixed size. If the pie gets bigger, your slicegets bigger, even if you take the same "share" of the pie! This is a variation onReagan's theme that "a rising tide lifts all boats".This pie analogy works not only for the individual citizens, but for government as well.They don't need to take a bigger 
 portion
of the pie to get a bigger slice ± if they canencourage the growth in the
size
of the pie! And this brings me to the second myth:
Tax cuts do not reduce revenues! They increase them! 
This is a non-disputable fact, and it has worked
every time
it's been tried ± from Bush toReagan to Kennedy and others!Why would this be?It couldn't be true if the first myth about the zero sum game were true! Cutting tax rateswould necessarily cut revenue dollars! BUT« cutting tax rates has behavioral effectson the drivers of the economy ± small businesses take risks that generate profits.Lenders loosen credit ± allowing these businesses to expand. Jobs are created. Moreproductive workers join the workforce and pay taxes. Salaries grow, along with their resultant taxes. The economy itself grows ± and the government's smaller share of abigger pie results in a bigger slice!The Left does not talk about
revenues
when it talks about tax cuts. It talks about
deficits! 
Under Reagan, for example ± his tax cuts
doubled 
federal revenues! Still, allyou hear from the Left about Regan's tax cuts are the "Reagan Deficits".Remember, until the Gingrich Revolution of 1994, when power shifted to theRepublicans in the House, Congress had been solidly in the hands of the Democratmajority for over 50 years! And
spending 
is not done by the President ± it's done byCongress! The President
 proposes
a budget ± but the House writes and passes it!Without a line-item veto ± the President has only 2 choices: Sign what they give him ±or Veto the entire budget of the United States. In Regan's case, he proposed fiscallyresponsible budgets. Do you remember the response of the Tip O'Neal led House of Representatives? Does the term "dead on arrival" ring a bell?Despite Reagan's tax cut created windfall of doubled revenues to the Federal Treasury,the Democrat controlled Congress ran up huge deficits.How is that possible? Simple! For every dollar in new revenues the tax cuts generated,the Congress spent over $1.80!!Imagine if you are making $50,000 a year, but have acquired significant debt, and youare currently spending on the order of $60,000 a year ± going deeper in debt every
 
year. Now suppose you land your dream job and are earning $100,000 a year. Wheredo you suppose you'll be in a decade if, instead of putting this windfall toward payingdown your debt, you increase your lifestyle by buying a bigger home, fancy cars, jointhe "club" etc ± and start spending $120,000 a year? Not in a good place, I'd venture tosay! Well, Congress is like that! Deficits are not a function of tax cuts. They are not afunction of revenue. They are a function of SPENDING.The American People must become educated on economic realities. We must begin tounderstand big numbers. A MILLION is 1000 Thousand. It is 10,000 $100 bills. It'll fit in a briefcase. A BILLION is 1000 Million. If you stack 12 shipping pallets 7 feet high with $100 bills,you'll have a Billion dollars. It took 87 Billion dollars to run 2 wars for a year back beforethe Bush/Kerry election ± remember? Kerry choked on this number ± voting for itbefore voting against it! Remember that number. We'll refer to it again. A TRILLION is 1000 Billion. This is also a 1,000,000 Million. (Imagine one MILLIONbriefcases, with a Million dollars in each!) This is how much we're adding to our debteach year under the Obama Administration.Federal programs never cost what we're told they'll cost. The $787 Billion bailout (9times the cost of that $87 Billion annual war!) is now $3.7 TRILLION! (42.5 times that$87 Billion war!) Kerry choked on $87 Billion, but the American people are supposed toswallow a bailout 42.5 times that size! Americans must also understand economic terms:Revenue: The amount of tax money actually collected.Deficit: The amount spent over the amount of revenue.Debt: The sum total shortfall between our spending and our revenue.Our ANNUAL deficit presently is around a Trillion Dollars. Our Debt is over $13 Trillion.What does that mean?First off, with approximately 250 million people in the USA, each BILLION represents$4.00 per person. That doesn't sound like much until you realize that $13 Trillion debtis $13,000 Billion x $4 per billion = $52,000 debt PER PERSON in the USA.Realize that in the 232 years before Obama took office, our nation had acquired a sumtotal debt of around 11 Trillion. Obama added another 2 Trillion in under 2 years!

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