Restoring Common Household Wisdom

It’s hard to do anything but cringe when supposedly intelligent elected representatives and assorted ‘experts’ take to the air to tell us how important it is to extend unemployment benefits because….as announced by Nancy Pelosi and White House spokesman Austin Goolsby (among others)…”unemployment benefits grow the economy”.

As with the New York Times’ obtuse report on the aborted Portland terrorist bombing, there is an initial reaction of anger to such idiocy—on the assumption that Pelosi and others are intelligent enough to know better, but are willing to spout lies and deceitful talking points to advance a political agenda. But the real despair sets in if you consider the possibility that Pelosi really doesn’t know better—that she is able to find so-called educated ‘experts’ who feed her this nonsense, and then she dutifully believes it and repeats it.

Most people have an intrinsic acceptance of the common sense premise that if some action or decision doesn’t make any sense at the individual or household level, its national parallel won’t make any sense either. But somehow the process of education and general elitism causes a suspension of common sense, and a willing acceptance of completely cockamamie notions so long as acceptance wins you favor and attaboys from the right people.

Unemployment benefits do not grow the economy. They are transfers from the taxpayers’ pocket to the unemployed’s pocket. Nothing new is created or ‘grown’ by this transfer. The unemployed might spend the money faster and on different items than the taxpayer who gave it to him, but there is no net increase in economic activity. If there were, then logic would suggest that everyone should be unemployed because then there would be an entire economy growing through the spending of the largest possible amount of unemployment benefits. This is patently ludicrous.

This is of a piece with the same Pelosi-type nonsense as applied to the ‘minimum wage’. A rise in the minimum wage is always trumpeted as a virtuous act of compassion. If so, then why ever stop at $8 or $9 or $10 per hour? Why not $100 per hour? Why not $1,000? Why don’t we pass a law that everyone is paid $1M every day? Then everyone would be rich and there would be no more problems. This, too, is ludicrous, yet we have allegedly intelligent people who allow some feel-good concept of compassion to override what their common sense is telling them about both of these fallacies.

The basic problem, again, is the thought of government as god—or more specifically in this case, as some sort of independent and unlimited piggy bank from which gifts and goodies can be handed out whenever society is enlightened enough to see that ‘compassion’ requires it. But government is not independent; it is nothing and has nothing except what the people allow it to have. It essentially has what the taxpayers’ send to it and what lenders loan to it (which is also based ultimately on the lender’s assessment of the taxpayers’ ability to pay it back). There fundamentally is no separate, independently generated government ‘stash’ (yes, governments can print money, but that is obviously the exact opposite of real substance-creation; it is fraud).

Our solution is to return to the household wisdom rule. If the idea would not work in your own house-as-government, it won’t work for the country.

Take Mom, Dad and the four kids. There is a family budget of income and expense and a family savings account. All six family members work and earn money; all of the money is necessary to pay the household expenses. But then one of the kids is laid off. The loss of his income hurts the family budget; there is less money to pay family expenses. So the kid turns to Mom and Dad—the household-as-government—and is given an ‘unemployment benefit’ to help him get by for awhile.

Where does this benefit come from? It can only come from three sources, which in reality are just two. The first is the family savings account. Drawing down on the family savings account by definition depletes it; it does not add to it. And even if the kid spends his unemployment benefit, he’s not spending anything he wasn’t spending before he was laid off—so there couldn’t possibly be an increase in economic activity as a result. The only sure thing is that the family’s savings account has been reduced—a measure of economic decline, not progress.

The second source for paying the unemployment benefit would be if the family borrowed the necessary money from the bank. But why would a bank make a new loan of money to a family where one of the family’s sources of income (and therefore a source to repay the loan) had just ceased? The bank might make the smallest possible loan for the shortest possible period if it thought likely that the unemployed kid would find a new job quickly; otherwise, the bank wouldn’t make a loan that is not likely to be repaid—that’s how banks go broke. So the second source is hardly a source at all.

The third source for paying the unemployment benefit is the family’s neighbors. But if the neighbor takes money out of his own pocket and gives it to the unemployed kid, then again, there hasn’t been any increase in economic activity. It’s just a money transfer or, as the socialist would call it, a redistribution of wealth.

It’s disturbing when some Americans over time are duped into believing the government and its resources exist independently of ‘we the people’. But scales are in the process of falling off a lot of American eyes right now (Glenn Beck’s book and movie, “Broke”, is helping tremendously), and the transparently nonsensical thinking of liberal demagogues is being seen for what it is.

A restoration of common does-it-work-in-the-household wisdom would do a great deal for the restoration of America.

Paul Gable

December 4, 2010