I’ll take some o’ that there “socialism” anyday!

25Oct10

My neighbors, you all need to vote very carefully. And here’s why:

Obama is the first president since Roosevelt to say “Wow — this is a huge problem. If we try to treat the symptoms we will a) fail, like always and b) pass this problem along to the next administration just as the last administration did to us (dig dig). So we need to back the eff up and fix the causes. It’s going to be slow, and it’s going to be expensive, but this is the hand we’ve been dealt.”

And after electing the man (on my part specifically because of that honesty) people are already whining about how long it’s taking: “But it should have been fixed by now — screw it, I’m voting for Jimmy McMillan*.” Oh, but the Republicans are cool with asking us to wait for supply-side economics to work. Because it’s done such a freaking great job in the past.

Here’s my take on the “trickle down” approach:

It. Doesn’t. Work.

Nothing has ever trickled down on me, and I’ll tell you why. Say you own one of those much-touted small businesses, maybe an auto repair shop. The economy has tanked, everyone is out of work, one in five households in the US is in foreclosure (this is true). Nobody has any money for routine maintenance, much less expensive repairs. Yes, it’s better financial planning to replace your brake pads before your rotors are exposed, but the point is pretty much moot if you don’t have, and can’t get, the money when the brake pads need to be done.

Now the ‘pubs tell you they’re going to give you a tax break. Do you say “Ooh, great, now I can hire another mechanic!” You most certainly do not — first of all, you probably need that money yourself, and second, the expense of another mechanic would be a terrible business decision right now because you have no work for that mechanic to do. Show me a small business that expands with no expectation of revenue and I’ll show you a “This Space For Rent” sign.

Ok, now imagine the other scenario, demand economics (or whatever it’s called). Say there’s an out-of-work freelancer (!) down the road from the repair shop. Nobody’s offering new contracts because businesses are sitting tight until what? Until the economy improves. So our freelancer has no money, and no she can’t go work at McDonalds or somewhere because a minimum-wage job pays nowhere near enough to cover the childcare she’d need to go to work, duh.

Somehow, whether by stimulus or something like the WPA, our freelancer gets some money (and no, I have no clue how exactly this happens. I’m not here to offer solutions, I’m just here to explain why everything else won’t work. I have a history of such genius: in my baby book, my mother wrote “when asked a question she can’t answer she spouts a stream of words that may or may not have anything to do with the question. A politician.” So, hey, if this writing thing doesn’t work out…)

OK: Freelancer. Money. Leaving aside the depressing fact that she’s probably going to use it to pay down her credit card balance (which is ridiculously high, thanks to the greedy sharks at the card companies, a topic for another time) or catch up on her many many overdue bills… she just might say to herself “Oh, sweet! Now I can have the rotors and pads replaced before the wheels fall off.” She brings her heap in to your repair shop, and that job means that you can pay down your bills — a bunch of people have come in with their stimulus checks, actually, so your repair shop is in the black for the month, believe it or not.

But that’s not enough. Say you get six, eight, even twenty jobs out of that stimulus. Very nice, but if you don’t know for sure that it’s going to continue, you’re not going to be writing up a new business plan anytime soon.

The WPA addressed that issue by giving people jobs rather than money. See, then the money doesn’t get treated like a windfall, paid all at once to only one business (or greedy shark tank). When you give people reliable sources of income, they start quite naturally behaving in economy-boosting ways, they get the brake job, buy flowers for Mom, maybe go ahead and take that tap class…the kind of widespread loosey-goosiness that builds up that most elusive of mob mentalities: confidence.

So let’s say folks are getting them some moola, and they’re bringing it to you. You might think “hey, looking good — if I put on another mechanic I can keep up.” Even if you hire this guy part time (meaning no health insurance, an incredibly expensive situation for the state by the way) that means that the mechanic has more money, so he might replace his leaking fridge or what have you. That’s how the WPA worked — the salary from one government job fed other businesses, which would then create new jobs to meet the new demand.

Now, wouldn’t you be thinking “hey, looking good” if you had that tax break and got the same amount? No you would not. Because as a good businessperson, you know very well that money in your pocket is NOT the same thing as money that comes in through your business.

I recognize that there is a theoretical argument to be made, but there’s also a theoretical argument to be made that if I had more money I would buy kale for my children. Theoretically that would make sense — it would be a great investment in their long-term health. But in reality it’s a poor use of my money because at my house, just as at your house, there is NO demand for kale.

In reality (which is where I like to play) no tax break is going to make a strapped business expand without some evidence that the demand is increasing. Especially when that business is already running on the rotors.

_______________________________________________________________

*http://www.youtube.com/watch?v=x4o-TeMHys0 — listen especially to the last clip, which is his response to the question “what about the other issues?” For the lazy boneses among us, I shall quote: “The Rent Is Too Damn High party figures, you want to marry a shoe? I’ll marry you.”

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4 Responses to “I’ll take some o’ that there “socialism” anyday!”

  1. 1 David Belson

    Replace your “break” pads? Really, Deb, as a graduate of Northeastern’s prestigious MTPW program, I expect more from you… 🙂

  2. 2 Janet

    Thanks for this. Keep em coming!

    • 3 Deborah Bancroft

      Thank you — feel free to forward in any way that might make me money.

  3. 4 Deborah Bancroft

    re: “break” pads — oh, I did not, did I….? Oh my God, I did.

    Thank you Mr. Belson!


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