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Economic fallacies

Economic Fallacies 101: Government Does Not Create More Jobs Through "Stimulus" Debt Spending

Saturday, February 07, 2009
by Mike Adams, the Health Ranger
Editor of NaturalNews.com (See all articles...)
Tags: economic fallacies, health news, Natural News


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(NaturalNews) While Congress has passed an $800+ billion economic stimulus plan, almost everybody in America seems caught up in a common economic fallacy: The idea that Government can "create" jobs through debt spending.

Government spending of debt money does not result in any net creation of jobs at all. It only confiscates wealth from private citizens and forces them to pay for centrally-planned jobs that the real economy usually neither needs nor benefits from.

Consider three people living in an island, running their own tiny economy. Bob, Sarah and Charlie are all farmers who grow their own food, making an honest living by working 8 hours a day to create the food, clothing and shelter they need to survive.

One day, Charlie decides he wants to be the Governor of the island. He tells Bob and Sarah that as Governor, he'll bring wealth and prosperity to them both. Initially, that sounds good, so Bob and Sarah agree to elect him Governor.

Then it turns out that the Governor is busy governing things on the island (i.e. deciding what everybody else should do), so he has no time to grow his own food. So he initiates a 50% tax on the productivity of Bob and Sarah, confiscating their food, clothing and resources in order to provide those items to himself without actually having to work for them. (This is a key function of government: To confiscate wealth from those who really work and redistribute it to those who pretend to work.)

Now, Bob and Sarah each have a choice: They can either work twice as much in order to pay their tax and still have enough to survive, or they can quit working altogether and hope to get aid from the government.

Sarah decides to work twice as much, so she starts working 16 hours a day, earning enough to pay the taxes to the Governor while still having some remaining food to feed herself and her family. Bob, on the other hand, decides he doesn't want to work 16 hours a day and would rather do nothing and apply to the Governor for "public assistance."

So now on this island of three people, where each of the three people used to work to feed themselves, only one person is working (Sarah), and the other two are living off the wealth that's being confiscated from her efforts.

One day Charlie, the Governor, says he has a solution! He says he will write a series of IOUs to Sarah in exchange for an extra portion of her food and other belongings. Using that currency borrowed from Sarah, he says he will "create a new job" for Bob and "end unemployment on the island."

Sarah reluctantly agrees and turns over the fruits of her labor to the Governor, who injvents a job for Bob. "Bob," he says, "We need to build a bridge across this island!" And with the wave of his hand, he puts Bob to work creating a bridge (that nobody needs) while getting paid by wealth that has been confiscated from the only person on the island still working (Sarah).

So now we have ONE person actually doing productive work, a second person living off the confiscated wealth of that person (the Governor), and a third person working a useless job that's now paid for by the first person as well. This means we have ONE person supporting THREE. And while the island is at "full employment," two out of three people are actually doing jobs that don't materially contribute to the wealth and abundance of island's residents.

And the best part? Guess who gets to work even more to pay back the IOUs that the Governor traded with Sarah? Well Sarah, of course, because those IOUs are public debt paid back by taxpayers.

The problem on this little island is NOT that insufficient money is being spent on an economic stimulus program; the problem is that the island suffers from too many bureaucrats and too much debt spending. The solution? Fire the Governor and the government worker, shrink the size of government and get everybody back to working their own gardens, growing their own food and supporting their own families. Productivity on the island would triple, and people would have to get back to doing honest, productive work instead of living like parasites off the efforts of taxpayers.

Government jobs are created with confiscated wealth

Although greatly simplified, this little scenario demonstrates the ridiculousness of anyone who believes government can "create" jobs. Government creates no net increase in jobs through debt spending. It only confiscates wealth from those who are willing to work and justifies its own wealth confiscation efforts by pretending to offer solutions to the very people it is stealing from.

In some cases, this is justifiably important: You need schoolteachers, bridges, and roads to run a successful society. Cops and firemen, court judges, and international delegates are necessary, too. But remember this: 85% of government money is spent on just three things: War, Disease and Debt. That's where most of your tax dollars actually go (see corrected figures below). Only about 15% of the money you send Uncle Sam goes to pay for anything useful. Most of it is just wasted away by a government that believes its debt problem can be solved by more debt spending.

Total U.S. Federal Budget for 2008: $2.9 trillion

If you look at where U.S. government spending actually goes, more than 85% is spent on these three things:

1) WAR: Department of Defense ($481.4 billion) + War on Terror ($145.2 billion) + Dept. of Veterans Affairs ($39.4 billion) = $666 billion

2) DISEASE: Medicare ($386 billion) + Medicaid ($209 billion) = $595 billion

3) DEBT: Debt to the people: Social Security ($608 billion), Welfare ($324 billion) and Interest on National Debt ($261 billion) = $1,193 billion

Combined spending on War, Disease and Debt: $2,454 billion ($2.5 trillion), which is 85% of the total expenditures by the federal government.

Source: http://en.wikipedia.org/wiki/United_States_f...

Now, Obama wants to write out $800+ billion in new IOUs and use that money to "stimulate" the economy. This is equivalent to confiscating about $5,000 from each and every taxpayer in America today (depending on the number of taxpayers you use for the calculation). It's the equivalent of saying to Sarah that she needs to turn over all her garden food for the next two months in order to "stimulate" the island economy. And how will that economy be stimulated? By giving that food to people who believe they are entitled to more abundance than Sarah without actually having to work for it. Before long, Bob will be riding in a private limo and flying in a private jet, complaining to the Governor that his industry of bridge building provides 1/3 of the jobs of the entire economy, and he needs more money or the island economy will collapse!

I'm not sure America can survive much more of this debt-spending "stimulus." The U.S. economy has, in large part, become illusory, propped up by yet more bailout money being spent to create the illusion of meaningful jobs. The idea of saving money has been abandoned in favor of endless spending at both the consumer level and the national level. If this philosophy does not change, the financial outcome will be disastrous.

America needs more savings, not more spending. It needs to get the government off people's backs, not create even more government to centrally plan yet more "stimulus" programs paid for by confiscating wealth from the fast-shrinking pool of people still working private-sector jobs in America today.

One thing's for sure: The people in Washington D.C. need to read Economics In One Lesson by Henry Hazlitt: http://www.amazon.com/Economics-One-Lesson-S...

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About the author:Mike Adams (aka the "Health Ranger") is a best selling author (#1 best selling science book on Amazon.com) and a globally recognized scientific researcher in clean foods. He serves as the founding editor of NaturalNews.com and the lab science director of an internationally accredited (ISO 17025) analytical laboratory known as CWC Labs. There, he was awarded a Certificate of Excellence for achieving extremely high accuracy in the analysis of toxic elements in unknown water samples using ICP-MS instrumentation. Adams is also highly proficient in running liquid chromatography, ion chromatography and mass spectrometry time-of-flight analytical instrumentation.

Adams is a person of color whose ancestors include Africans and Native American Indians. He's also of Native American heritage, which he credits as inspiring his "Health Ranger" passion for protecting life and nature against the destruction caused by chemicals, heavy metals and other forms of pollution.

Adams is the founder and publisher of the open source science journal Natural Science Journal, the author of numerous peer-reviewed science papers published by the journal, and the author of the world's first book that published ICP-MS heavy metals analysis results for foods, dietary supplements, pet food, spices and fast food. The book is entitled Food Forensics and is published by BenBella Books.

In his laboratory research, Adams has made numerous food safety breakthroughs such as revealing rice protein products imported from Asia to be contaminated with toxic heavy metals like lead, cadmium and tungsten. Adams was the first food science researcher to document high levels of tungsten in superfoods. He also discovered over 11 ppm lead in imported mangosteen powder, and led an industry-wide voluntary agreement to limit heavy metals in rice protein products.

In addition to his lab work, Adams is also the (non-paid) executive director of the non-profit Consumer Wellness Center (CWC), an organization that redirects 100% of its donations receipts to grant programs that teach children and women how to grow their own food or vastly improve their nutrition. Through the non-profit CWC, Adams also launched Nutrition Rescue, a program that donates essential vitamins to people in need. Click here to see some of the CWC success stories.

With a background in science and software technology, Adams is the original founder of the email newsletter technology company known as Arial Software. Using his technical experience combined with his love for natural health, Adams developed and deployed the content management system currently driving NaturalNews.com. He also engineered the high-level statistical algorithms that power SCIENCE.naturalnews.com, a massive research resource featuring over 10 million scientific studies.

Adams is well known for his incredibly popular consumer activism video blowing the lid on fake blueberries used throughout the food supply. He has also exposed "strange fibers" found in Chicken McNuggets, fake academic credentials of so-called health "gurus," dangerous "detox" products imported as battery acid and sold for oral consumption, fake acai berry scams, the California raw milk raids, the vaccine research fraud revealed by industry whistleblowers and many other topics.

Adams has also helped defend the rights of home gardeners and protect the medical freedom rights of parents. Adams is widely recognized to have made a remarkable global impact on issues like GMOs, vaccines, nutrition therapies, human consciousness.

In addition to his activism, Adams is an accomplished musician who has released over a dozen popular songs covering a variety of activism topics.

Click here to read a more detailed bio on Mike Adams, the Health Ranger, at HealthRanger.com.

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