Some People Will Say I Am Being Unfair About This
Mish Shedlock recently posted an article stating the obvious – ‘living wage’ and ‘guaranteed income’ schemes cannot work. That this is not obvious to a significant percentage of the population is pretty scary.
Damn education system again!
Let us quickly review why that cannot work. The simple answer is because there is not enough money – but due to political dishonesty that obvious answer becomes convoluted and many people will dissemble on this topic for their own selfish reasons. The method by which those who wish to obfuscate will claim it can work is via more debt. Simple truth. To review, the United States Federal government official ‘on the books’ debt is $20 trillion. The unofficial ‘off the books’ but actual debt is north of $210 trillion. The advocates of guaranteed income wish to add trillions more to this debt, even though no rational person believes we can pay what we already owe. How would the United States manage to fund this program? In the short term via the Federal Reserve issuing more credit. More credit equals more debt and in order to pay the debt with interest it requires ever more grotesque market distortions that will result in ever less employment and even more wealth inequality that will result in ever more people needing assistance that will result in ever more government programs that will result in ever more Federal debt.
Wash rinse repeat.
Many of the people who support these types of programs see them as a cure to economic ills and injustice. Some people are patently dishonest on the matter but most people just believe they are being compassionate. The initial problem here is that the people that are simply trying to be compassionate generally have no idea how any of it is funded and beyond that have no idea how the current monetary regime operates. Consequently they have no idea that what they are proposing will generate poverty and misery and wealth inequality. The second problem is a cultural phenomena has taken hold on the political and social Left that effectively claims that anyone who bothers to point out the obvious effect of these policies – that the net result is simply a massive wealth transfer to the 1% – is a tool of Wall Street and the corporations and such and that they are to be hated and denounced.
I understand that the topic of monetary policy makes peoples eyes roll and that understanding monetary policy appears to be the most boring way that someone could spend their time. I understand most people have little interest in understanding monetary policy, and that because it appears complicated, convoluted and boring makes it the perfect mechanism for wealth transfers to the 1%. That the wealth transfers to the 1% can be covered in a facade of compassion makes it ideal. The very wealthiest fund these social program theories because they make the 1% wealthier and nearly everyone else poorer. The truth.
That socialism and wealth transfer programs enrich the few at the expense of the many has always been true in each and every situation where it has been put into practice. Even in the earliest days of the Soviet Union the politburo members travelled in Rolls-Royce’s while millions starved in the Ukraine. Now people scoff and say “But the Soviets were evil!” Ok, how about Cuba where the overwhelming majority exist on less than $100 a month but those at the top party on yachts and indulge every material luxury imaginable? Cuba, where those at the top travel to Europe for medical care while bragging on how effective the ‘free’ Cuban healthcare system delivers healthcare? Still not convinced? How about Venezuela where items as basic as toilet paper differentiate the masses from the elite? We will not even talk about the Sandinista genocide of the Miskito Indians and Bernie Sanders rationalization of why that was necessary to advance Nicaraguan socialism.
The latest absurdity that socialist point to is Denmark – a country that itself claims it is not socialist and beyond that is a monarchy! Even in the ‘successful’ example of Denmark wealth inequality exceeds that of the United States. Oh by the way – Denmark recently announced they will be slashing their social spending by more than half – so there is that as well.
In other words – there are no successful happy examples socialism.
I understand that some people will say I am being unfair about this – but all I am doing is pointing out what Bernie Sanders has claimed were the ‘successful’ examples of socialism over the past fifty years.
Due to temporary monetary and fiscal gimmicks we allow ourselves to continue the fantasies that the debt does not matter. The corollary fantasies are that we can adopt programs that will balloon the debt ever farther beyond what we already owe and will someday default on.
Sometimes societies just collectively go insane.