Eye on the Pie and Opinion and Economy

MARCUS: Don't learn economics from announcers

January 2, 2010

Before you arrived, she stood up to put on her coat.

“I can’t stand you anymore,” she said. “You distort reality and transform it into a perverse fiction made of silly putty.”

“That’s Silly Putty,” I said. “Crayola owns the trademark and I don’t think fiction, as usually conceived, can be made of Silly Putty.”

“That’s so sick,” she exploded, “so typical of your usual wordplay to avoid facing the issues.”

“No,” I said firmly, “it is the kindest way I can respond to your misunderstanding of how our economy works. Let’s review what just happened.

“You said government taxes take money out of the economy and therefore away from businesses and households. That is either persistent ignorance at best or an irresponsible lie at worst.”

“You’re calling me a liar,” she said, piercing me with flaming eyes.

“If you thought about it,” I said, “you would see the error of that thinking, no matter how often it is repeated. If you pay a dollar in taxes, what do governments do with it?”

“That’s easy,” she said. “Governments spend every dollar they can get.”

“And how do they spend it?” I asked and proceeded to answer my own question. “They buy goods and services from the private sector, from businesses and households. And they also hire people directly to work for government, people who spend their wages in the private economy.”

“Yes,” she admitted, “but I’ve always heard that government spending is not as productive as private spending. Government, Paul Harvey used to say, doesn’t create wealth.”

“Exactly,” I snapped back, “you and millions learned economics from Paul Harvey and other radio-TV personalities. Government spending is just like business spending. Both hire labor and both buy supplies from the private sector. Some government spending goes for services with immediate benefits, like snow and garbage removal; other government spending is for long-term investments like education and sewers.”

“Well,” she said, “that makes some sense, but what about all that government spending on unnecessary things?”

“What is more unnecessary,” I said, “than most of the things we bought this past holiday season?”

“But that was our own money,” she protested. “We have every right to spend our own money as we want.”

“You have that right,” I agreed, “but that does not mean you made the right choices. Instead of that extra box of toys for your nieces and nephews, you could have donated the money to the public library for books that could be enjoyed by all the boys and girls of this town.”

“That’s socialism,” she shrieked.

“No,” I responded vigorously, “that is good citizenship as promoted by religious people worldwide. That is thinking and acting beyond your own circle of friends and family.”

“But the library is supported by taxes,” she said. “Why should I give them more money when they already have my money?”

“Because,” I said patiently, “you don’t support the library or most government services with adequate taxes for them to do the job we expect of them.”

“Well,” she pouted, “now we’re on ground I understand. Do you see how many people work in the library? Certainly they could do with fewer employees. They need to cut the fat.”

I waited a moment before saying, “You don’t know what those employees do. Take a few hours to visit any government office and find out what the workers do. Then talk to me about ‘fat’.

“And,” I probably should not have said, “let’s go to your place of work to see how many of your private-sector employees are loafing, useless leeches. Maybe a good analyst would define you as ‘expendable fat.’”

That’s when she left and you came in.•

__________

Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.

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