Sunday, October 3, 2010

Government Economics in Three Easy Lessons

Many people think that if there is a government program (everything from welfare to the "Cash for Clunkers" rebates to Medicare and more), that somehow they are entitled to it. After all, if everyone else is getting "free" money from the government, they want theirs too. Here is how government economics really works, and you don't need an economics degree to understand this:
#1--The government does not make money. Read that sentence a couple of times. The government only collects money in the form of taxes from YOU and everyone else in this country.
#2--Every program, every rebate, every stimulus act, EVERYTHING the government spends money on is simply done by taking your tax money and everyone else's tax money and putting it into various pots. There is a Medicaid pot, there is a defense spending pot, there is a national parks pot, there is about a million other pots of money all appropriated by the government, but don't forget that all of this money is YOUR tax money. The government didn't earn any money to give to these programs, it simply took the money that you and everyone else paid in taxes and arranged it into these pots of money to fund various government spending programs.
#3--Now, when you sign up for a government program, when you use Medicare, when you participate in a stimulus program, when you ask "where is my check from the government??", it isn't "government" money you are getting. It is money from you, your family, your friends, your neighbors, and every other tax-paying person in the country that you are taking from.

Obviously that is an oversimplification of the process but it works for illustrative purposes. There are other things I didn't include--government borrowing (China appreciates our business a great deal), government investments, etc--however the point is the same. Every time you see the government giving free money and you see people who are partaking of these government programs, note that is is your money they are using. This is exactly why every time a new stimulus program is started or every time a government program is being used to fund a bridge in Alaska or some other boneheaded program, I cringe. This is my money they are using. If the government wrote up their budget like I write up my monthly family budget, I am certain it would look quite different. I don't want to help someone buy a car. A car is something each individual needs to plan and save for. I would give a bit to national parks, I would give more to defense spending because I feel that is one of the main responsibilities of the government, I would spend some to take care of the very old and the very sick. Obviously everyone has their own ideas about which things are important to spend money on and which things aren't, but the next time you are enticed by a government program, stop to think about whether or not you would spend your own money on it.

If you really want to be annoyed at the way your money is being spent, check out this article.


  1. Good, basic explanation, you hit all the high points.

  2. As the holder of an economics degree, that's about as simple as you can make it. Very on-point and, unfortunately, very true.

    Here's to hoping my law degree will help put some alteration to that process of governmental economics...

    or at least lessen the blow.