Monday, March 23, 2009

Second Grade Economy

I was talking with two second graders on the way to school this morning. One mentioned a few people he knows that have to work two jobs, and the following exchange took place:
Me: It's just a hard time for people right now.

D: It started right when Barack Obama became president. It must have been something he did.

A: Maybe Obama will make the bosses of companies pay less so they'll have more money to pay their employees.

Obviously the economy didn't start going down right when Obama came into office like D said. I wonder where kids get that stuff, though. Is it like a game of Operator, with news agencies not quite reporting everything properly, then parents not quite understanding what is reported on the news (or maybe they listen to Rush), then the kids don't quite understand what their parents say, and then other kids at recess don't quite understand what the other kids say, and then one of them talking to me blames the entire recession on Obama?

If only the fix could be as elegantly simple as proposed by A. Just lower taxes so everyone will have more. In theory it's a great idea. The problem is that the bigger government gets, the more we depend on it. Private enterprises can't compete with government subsidized programs, so they fail. Then when tax revenues dip, the government programs fail. So do we raise taxes to prop up government programs and further reduce the amount available for private spending? The opposite effect, at least in the short term, of lowering taxes means government programs will be cut, and although that leaves people with more of their own money, it takes time for private enterprises to grow back, and the poor who rely on government programs while not paying any taxes themselves simply see a cut in services with no more money to make up the difference.

There are no easy answers.

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