The marketing campaign that made everyone fear deficits was a brilliant one. Politicians have been using that fear to fake economic policies ever since then, to the detriment of everyone. One of the favorite comparisons out there regarding the budget of any country is the one to the household budget. Different candidates wax poetic about the importance of living within one’s means and how the same rules must apply to a country and so forth and so on.
The idea of living within one’s means is one that often gets trotted out to “teach” poor people not to be poor, under the mistaken belief that the poverty is the fault of the people living within it.
Like any person actually living in poverty will tell you, it’s not really about not spending money you don’t have, but making sure that such expenses pay dividends. No one lives within their means, except for the very poor. For everyone else, there are credit cards, mortgages, financing, and so forth. All of which are examples of spending more than you make.
It’s the very poor, who don’t qualify for those loans, people on disability, on welfare, homeless people, who live entirely within their means because they don’t have the privilege of not doing that. Where the problem arises is that “within their means” does not equate to “while having the basic necessities needed for survival”.
When you spend more than you earn, what determines whether or not it was a worthy over-expenditure is what you do with it. If you are borrowing money to buy something that loses value over time or costs you money over time, then that’s an irresponsible use of money that isn’t yours. If however, you invest that money wisely, then in time that money comes back to you. That is the premise behind financing things such as homes.
What often gets overlooked is that sometimes a money draining expense can yield dividends in time saved. Take a car for example. On the surface, purchasing a car is a money sink. The car depreciates in value the moment you drive off the lot and costs you money in gas, parking, and maintenance. Where the car becomes a valuable expense is when it pays dividends in time saved, and access granted. A car in allows you to go to further stores, or buy in bulk in a way that bus use prevents. A car allows someone with a disability to get more done with less effort, which means they generally get more done. A car may open up opportunities for employment or advancement. All of which in turn results in more money.
The money spent by the government are investments. The conservatives prefer to invest in large corporations on the theory that if they make more money, they will share the wealth by creating more jobs. This theory, the trickle-down theory, has been systematically proven to be ineffective since it’s implementation, both in Canada and the US. This is because this theory approached the economy from a skewed perspective. In their model, the source of wealth is the top of the pyramid: the CEOs and Investors. In reality, a market economy derives its funds from the titular market. In order to thrive, Capitalism requires a strong middle class with disposable income.
Conservative and Right-Wing Ideology thinks that a strong middle class comes from jobs, the reality is that a strong middle class exists only when it is supported by a foundation of social safety nets and programs. Why is that?
It has to do with what people are spending their money on. Strong social programs, like socialized medicine, like socialized dentistry, like public education, like infrastructure like highways and road care, all of these benefit the middle class as much as it benefits those of us who are struggling.
Think of it this way. Imagine that after all of your bills, groceries, etc are paid, you are left with $500. In an economy with strong social programs, you don’t have to worry about saving that money in order to pay for your dental plan coming up. You can get your flu vaccine without having to worry about paying for it, so you don’t miss work from being sick. Your medication is covered, and you don’t have to worry about paying for your child to go to school. You can afford to use that money to put into investments and long term retirement savings, both of which benefit the economy. You can use that money to get a slightly better car, a slightly better tv, or computer, or go out to a show, or spend that money in some other way. All of these are examples of stimulating the economy. All of these actions result in more job creation as factories and companies compete to make you spend money on their product rather than someone else’s, as more stores open up, as more restaurants have a chance at thriving.
On the other hand, without those social programs, that money instead goes to paying for those expenses. Yes, this money still finds its way to the government in the form of income tax, but significantly less that would otherwise. This also utterly fails at job creation, and as procedures become more effective, results in a decline of jobs over time. Since it means that fewer jobs become a good source of reliable income, the market stagnates as new generation’s bottleneck in those careers. In other words, exactly what we’ve seen happen in the last several years.
The reason for this is simple. When you cut the takes for large corporations, the corporation might save money, but the only people who see that money will be those who benefit from the final profits. Usually a very small number limited to direct investors, board members, owners, and CEOs. However, the amount of product that the company can afford to make and store compared to the rate at which they are staying remains the same, or if the economy is in a downturn, that number may significantly decline. Despite saving money through taxes, not having a market for their product means that they lose money by making their product. This means downsizing. If you have an honest corporate owner, a tax cut might allow them to delay layoffs temporarily, but eventually it will catch up even with them.
So what is a government to do? Perversely this is an example of when the old adage “you have to spend money to make money” rings the truest. In a recession, the best thing a government can do is perversely, SPEND MORE MONEY. Why? Because it is the surest way to make sure that the economy takes a turn for the better. Provided of course, you are spending money on the right investments.
One of the favourite expenditures of the conservative right wing ideology is the Army. To some extent this is not unwise, the army is one of the most reliable sources of employment usually. However, in order to sustain a large military, you begin to require war. The problem with that is that even while military employment might increase job availability, way drains the budget faster than anything else. This means that it is a bad investment. The benefit is less than the outgoing expense.
Programs like the socialization of medicine actually result not just in better public health, but actually stimulate the economy. More people being able to go to the doctor means a need for more doctors, more hospitals, more lab techs, more janitors, builders, food service providers, and so forth and so forth. In other words, more people having access to healthcare produces a ridiculous amount of jobs.
But wouldn’t we have to raise taxes?
Yes, probably. But here is a secret that really shouldn’t be one: taxes save you money! The reason taxes in Canada now, and in the US for a long time, are so annoying and burdensome, is because rather than being returned to us in the form of services (WHICH IS WHAT IS SUPPOSED TO BE DONE WITH THEM) the money is used to fund large corporate tax cuts. In other words, the government is taking your money and literally giving it to your boss, who then give a portion of it back to politicians to make sure that those politicians get elected and can give them more money. Nice little scam they have going there isn’t it?
If that money was instead put into social programs, the money paid in taxes would be returned to you twenty times over.
It’s not about deficit or surplus. A deficit, if used wisely is like buying a house in a buyer’s market and selling it in a seller’s market, and using a mortgage to do so. A surplus in a recession is like being excited about having found $5 in your pocket when you are starving and the only food around costs $10.
It’s the difference between giving 100 people $1000 to spent, and giving a million people $10 to spend, when you make $1 off each transaction.
We can’t afford to let politicians keep lying to us to us. We can no longer afford their fraudulent lifestyles.