Tuesday, February 09, 2010

Lessons for Liberals, Part 1: Match Stick economics

I don't claim to be a business expert, but having reached mid-life, and having
watched and listened and read a bit on economics, I think I can say that I have
an "every man's" understanding of basic business principles.

Obama said during his campaign that his administration would "rebuild the economy
from the top down"; now he is focused on a "jobs" bill and setting up town hall
meetings to talk about "job creation". His multi-BILLION dollar "bail-outs" were
supposed to "stimulate" the economy, but nobody knows for sure what that even means,
let alone whether or not it "worked"... Most of that money cannot even be accounted
for, and the Banks -- who were supposed to "lend" it to small businesses -- are
steadfastly REFUSING to disclose what they did with the billions they received of
TAXPAYER dollars...

Spending our way out of a Recession is, to anyone who applies even a modest amount
of common sense, not only bad economic policy, but also serves to DEEPEN the
Debt sinkhole the country is already in. You don't keep digging...

All of this (and so much more of what Obama and his "progressive" pals are doing
with TAXPAYER money) is what I call "Match Stick Economics": Take a match
and strike it, and for a few seconds you have flame, and bright light, and the
appearance of getting a fire started. But of course it burns out, shortly,
and not only are you right back where you started from, but you now have FEWER
resources (one less match) for starting a REAL fire, one that could go on burning
and providing REAL warmth and comfort.

This is why economies are NOT built "from the top down", but rather from the Bottom
UP. It's so simple even a middle-schooler can understand it; here is a basic
evolution of how a successful business usually works:

Entrepreneur "Hank" gets an idea... He scrapes together some initial finances and
buys the first round of materials to make a few units of his idea (let's call them
"widgets")... He pitches his widgets to a few folks around him... They love Hank's
widgets and ask for more, and they tell their friends to buy some, too... Hank
starts working nights and weekends, cranking out widgets to fill his orders...
Soon he needs more capital to keep buying the materials he needs, so he borrows
money (lenders will eventually get their money back with interest, perhaps even a
stake in the company)... Armed with fresh capital, Hank buys twice as much material
and now gets his kids involved in the widget-production process... Soon Hank has
so many orders coming in that he has to hire another worker, who is paid wages plus
some very moderate benefits... Sales increase, and now Hank has to move his
operations from his garage to a low rent Commercial Real Estate location (maybe some
old warehouse)... Word of Hank's widgets spreads like wildfire, and before long,
Hank has 28 employees, a bigger space, better machines to triple his widget output,
and now he is focusing more of his time on book-keeping, advertising, and human
resources (even paying his wife now, as an employee, to help with these duties).

At some point, "Hank Enterprises" is incorporated, investors are calling Hank on a
fairly regular basis, and as Hank re-invests in his own business, borrows carefully
based on Growth projections, and adapts to changes in Demand, well, old Hank
begins to do very very well for himself: Not quite a "millionaire" yet, but well
on his way, and nearly FOUR DOZEN workers now know "Hank Enterprises" as the place
where they have a JOB.

THIS kind of economic strategy is BOTTOM-UP strategy, and thanks to
his hard work and success, Hank is one of several hundred million Americans whose
Tax dollars can actually HELP his State and the Federal government. He's helping
to build and maintain a REAL "fire", not just ignite a Match Stick for 3 seconds;
his is a fire that provides REAL warmth as long as he works hard, and plays it
smart, to maintain it and keep its embers glowing.

Now that Hank has earned his way into a certain Tax bracket, what in the world
SENSE would it make
for the State and especially the Fed to PUNISH Hank
by slapping him with outrageous Taxes? How in the world is it FAIR that
Hank's hard-earned Wealth should be ripped from his hands and redistributed to
other Americans via these massive Federal give-away programs?? Why should
HANK (who lives in Jersey) have to PAY for an appendectomy for an illegal immigrant
who sneaked across the border into Arizona??

Listen up Liberals and Socialists and "Progressives": When the government
PUNISHES the "Hanks" of the world with high Taxes, fees, fines, limits, regulations,
and redistribution of wealth, it KILLS economic growth
! You will never get a
Job from a POOR person! Giving multi-billion dollar "bail-outs" to a few, and
letting the Federal Reserve dictate the money supply, is BAD for Business and
therefore BAD for the economy. You don't build economies from the "top down", but
from the Bottom-UP, doing everything you can do to help the "Hanks" of the country
Thrive and Grow and Expand and HIRE MORE PEOPLE as a result.

The soak the rich, spend like there's no tomorrow States are in
REAL TROUBLE right now: California, Oregon, Florida, Arizona, Illinois, and many others
are experiencing Budget shortfalls that may land them in Bankruptcy within the year;
these same "economic" policies -- which Joe Biden called "the patriotic duty" of
wealthy Americans (to pay more Taxes) -- are the HALLMARK of the "progressive" and
liberal socialist ideologies... And they are KILLING Hank -- and the nation's
economy -- who will likely be forced to move his operations to Texas, leaving his
employees in Jersey JOBLESS.

Match Stick economics, pitched by an out-of-control government led by a highly
inexperienced president, will never save America. Only REAL, common-sense,
help-the-small-guy policies (which will, to a very great degree, mean government
gets out of Hank's WAY) will turn this Titanic around.

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