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Two big economic principles you didn't know you believe in

You may not know you believe these two simple principles of a strong economy
You may not know you believe these two simple principles of a strong economy

Many Americans are woefully uninformed about their own beliefs when it comes to politics and economics. Yes, you read that right. Many Americans don't know what they support and what they oppose. This idea was dramatically illustrated during the height of the legal battle over the Affordable Care Act, also known as Obamacare. In September of 2013, a CNN poll revealed that nearly half of the respondents opposed Obamacare, while under 40% opposed the Affordable Care Act. (In case you were part of this poll, they're the same thing.)

Certainly some of this is due to the FOXification of the electorate. Recent studies have concluded that somewhere around 18% of the information on FOX News is accurate, so we shouldn't be surprised that people are confused. (MSNBC viewers shouldn't get on too high a horse, as their network only rated 31% true.) There's more to it than misinformation, though. We've lost our way on the basics of things like how an economy runs, how insurance works, and the distinction between national debt and the national deficit. Without understanding the foundations that should have been hammered home in middle and high school, it's foolish to expect the average voter to sift through all the rhetoric.

Even for people who follow politics closely, it's sometimes easy to lose the plot. It's certainly beyond the scope of a blog post to fix it all in one fell swoop, but here are two issues that frame almost every other debate, and the surprisingly simple logic of what you actually believe about them... whether you believe it or not.

You Believe in Raising Wages and Lowering Workloads.

Most of us probably agree that the rich have enough, but you may not know that you support raising wages for practically everybody else -- not just minimum wage workers. And I'm not even going to show you any graphs or figures. Those arguments don't work, and it's simpler without them to understand why you believe.

First, let's talk about customer service. We're talking about what you get when you buy something from a company -- not just at the department store, but in a very broad context. From waiters to kitchen staff to managers. From secretaries to nurses to surgeons. From the salesman to the repair tech to the support staff. When you buy something, you are receiving customer service in a broad sense of the word.

Now, which do you like better: to wait in long queues, to be helped by people who've already helped a hundred people in the last hour, or to walk right up to the desk and spend as much time as you need to get exactly what you want, exactly the way you want it?

Unless you're weird, you prefer the latter. Now that that's established, let's talk about how to get it. You can't bend the laws of space and time, so here's the first thing you've got to do. Lower the workloads and increase the staff. Rather than have one salesperson attending to a dozen people, you want four salespeople each with three. You want fewer students per classroom, with teachers who are happy and vibrant at their job. You want more lines open at the grocery store. All of these things not only make your life easier, but create jobs. And we all want more jobs, right?

Of course, lowering the workload means higher labor costs, since you have to have more workers to do the same amount of work. So costs are going to go up. The thing is, it's important to remember that unless you are very rich, your wages are going to go up, too. So you'll have more money than you do now. Also, it's important to remember that production dilutes labor costs. In other words, prices don't go up as much as wages, unless the company is trying to screw over its customers. If you are paying two people $20/hr to make 50 widgets an hour, and the widgets cost consumers $25 each, you can pay four people $22/hr to make 25 widgets an hour, and the cost of a widget will only go up by 2% to maintain the same profit margin. Do the math yourself. It's not difficult.

Let's put that into simple numbers. In our example, a 10% wage increase and doubling the staff would result in a 2% price increase. Of course, it's a little bit more complicated than that. New staff requires training, matching contributions on some taxes, and so forth, but it should be clear from this tiny bit of math that corporations are lying to us on a grand scale when they predict terrible inflation with modest wage increases.

This effect generally becomes bigger as we move down the pay scale. In other words, those making the lowest wages are asked to do the most work for their pay. They are given high quotas, few sick days, and are generally shown no leniency if they're not living up to the expectations. When we do the actual math, we discover that we have quite a bit of wiggle room in the places that matter a lot to each of us -- customer service lines, restaurant workers, service technicians, airline employees, police, teachers, and a hundred other people whose jobs effect us daily.

And remember... unless you're super-rich, you'll be getting a pay raise, too.

You Believe in Big Government Programs (with a caveat).

"Big Government" is possibly the nastiest phrase in American politics. Whether you're left, right, or blithely uninvolved, you're not going to advocate Big Government. We all hate Big Government.

Only... we really do like Big Government. The problem is that we let other people insinuate, obfuscate, and otherwise confuse us about what the term actually means. When we hear it, we think of 1984 and Big Brother, snooping and nannying and dictating and generally being an oppressive force in our lives. Certainly, we don't want that. But that's not really what we're talking about. We're talking about money spent on government programs. We're talking about Medicaid and Social Security and Veterans Benefits and Food Stamps. "Big Government," in this context, means spending very large amounts of money on really big programs. There are three reasons why we all support Big Government. (And by "all," I mean both conservatives and liberals.)

1. They are inherently efficient, and get the job done better than small government.

Dollar for dollar, nothing is as efficient as a universal government program. If you think about it, it's quite simple. Suppose we have a program to give $100 in food stamps to only people who meet a list of 10 criteria. First, we need an office to take applications, staffed with secretaries to answer the phones, social workers to sort the applications, a human resources department, a grievance department, managers over each department, and managers over the managers. Each of these workers takes a big chunk out of the total money available, so that either we have to (a) raise taxes to maintain benefit levels, or (b) reduce the amount we give to recipients.

On the other hand, a universal program is quite simple. Send $100 in food stamps to everybody. No bureaucracy to speak of, and nearly all of the funding goes to recipients instead of people whose job is to find ways to say "no." Real world numbers back this principle up. Yes, programs like Social Security are very expensive in total dollars, but in terms of bang for the buck, nothing beats them. As an easy example, even though Social Security is suffering from a lack of equal taxes from the high income bracket, it has still managed to reduce the elderly poverty rate better than any other anti-poverty program in America. If you are in favor of less money going to government waste, then you are in favor of universal programs.

2. Smaller programs increase fraud.

We all hate fraud, right? Insurance fraud, food stamp fraud, unemployment fraud. We want to eliminate fraud as cheaply and completely as possible. Well, nothing does that better than Big Government -- universal programs. In all of the examples I just gave, what's the most common fraud? Getting benefits to which you are not entitled. You're not eligible for food stamps or unemployment insurance, but you're getting it anyway. That's fraud.

What if everyone is entitled to these benefits? Obviously, fraud becomes nearly a non-existent thing. It's hard to even think about how to defraud such a system. This is especially powerful in the health insurance area. Conservative media is keen to report the billions of dollars we lose each year catching and prosecuting fraud, and then recouping money (which is seldom possible). They are not nearly as happy to report the simple solution of turning those billions into benefits. If everyone has their healthcare costs paid by the government, healthcare fraud goes away almost entirely.

3. Universal Programs benefit the private sector.

America was founded on capitalism, and it's a fool's errand to talk of socializing beyond necessities. Conservatives naturally want to give as much favor to the private sector as possible, and try to gut government programs in favor of for-profit companies. We've seen them advocate vouchers for nearly every government program, from education to healthcare. The thing is, this view is myopic because it ignores the most vital component for sustainable economic growth -- a vibrant and growing middle class.

This part is a little complicated, but it's worth hanging in for the whole thing. When we talk about necessities -- food, clothing, shelter, education, and healthcare -- we're talking about things that people spend money on first. If they don't have enough money for necessities, they look to the government to provide them. Regardless, when they run out of money for necessities, they stop spending money on everything else.

Okay... so let's start with the people who don't have enough. If we leave them without enough, they continue to spend nothing, and eventually, they end up in the emergency room, on the public dime. This is the least efficient way to care for the sick, dollar for dollar. If, on the other hand, we give them enough, we have two avenues of doing so -- small government or big government. Big government is most efficient, so that means the lowest tax burden per American per recipient. (Hold on. I promise I know what you're thinking, and I'll get to it in a minute.) Low tax burdens are one of the biggest talking points for conservatives. Liberals will also be happy to pay less if the job is getting done.

Once we establish that universal systems are the most effective way of getting people necessities, we're left with more people having everything they need for fewer tax dollars. So... what happens with the money they make after that? They spend it on other things -- in the private sector. Cars, toys, computers, gourmet salad dressing, stuffed animals, trips to Las Vegas, polarized sunglasses, and a hundred other things made by innovators in the private sector.

What happens when more money starts flowing into the private sector? Jobs are created. What happens when jobs are created? Fewer people need government programs. What happens when fewer people need government programs? Tax burdens are reduced. What happens when tax burdens are reduced? People and corporations both have more money to spend. What happens when people have more money to spend?

See how the cycle works? The idea is to spend money as efficiently as possible to help people in need and give them the health, education, and freedom they need to get a job that... remember the first thing you believe in... pays enough to have money left over. Once that happens, the private sector booms. Oh... and remember this: When we talk about the private sector providing benefits instead of the government, we're including profit in the model, which cannot help but make it more expensive. More expensive means less efficient, which means it takes more money to get people out of poverty, which means they take longer to start spending on luxury items.

In short, eliminating "Big Government" in areas like healthcare and food actually creates the stagnation that keeps people in need of Big Government. So, a minute ago I said I knew what you were thinking. You were thinking, "Yeah, but if you pay for benefits for everyone, it's a lot more expensive than paying for just a few." That's true in the abstract, but I've just illustrated that you're not paying for everybody, and universal programs actually serve to reduce their own caseload when run properly. Reducing red tape and getting people out of poverty is far more efficient than increasing red tape and missing people who would love to be out of poverty but don't qualify.


Here's where everything comes together. Supporters of capitalism seem to have forgotten that there are two ways to create profit: squeezing every bit of profit out of a few sales, or reducing profit over far more sales. You may not realize it, but in supporting both Big Government and wage increases across the board, you support the increased stability and profitability of private companies.

In recent years, there's been a sharp drop in "middle class" profitability because the middle class is shrinking. Restaurants like Olive Garden and Red Lobster are finding themselves with fewer and fewer customers, and are faced with reducing service or "restructuring." The answer to this problem is to expand the middle class and make sure there's plenty of extra money to spend on going out to dinner and other non-necessities. To expand the middle class, you need two things -- a way out of poverty and a mechanism for staying out of poverty. Dollar for dollar, nothing reduces poverty better than universal government programs -- Big Government. Once people are out of poverty, nothing sustains small business more than increased wages.

This two-pronged approach to fixing America's economy surely isn't the whole story, but it is certainly a strong foundation. We can nitpick about a great many things, but if we are true to the facts, we must recognize that there are bipartisan solutions to the concerns of both liberals and conservatives. The trick is to stop listening to talking points and return to the basics.

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