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Monday, July 5, 2010

"Stimulus" in Pelosi's Dictionary

This is the beginning of a series of blogs I will do about definitions of terms within the Democratic Party. For starters, I'll discuss the word "stimulus."

At about the 2:40 mark in this video, House Speaker Nancy Pelosi dives into an argument that unemployment benefits are economic stimulus. For people who are not lost in the fog of the far left, these statements have become somewhat of a joke recently.

This comes as no surprise though, coming from someone who argued that contraception is an economic stimulus. It seems everything Pelosi likes is economic stimulus!

What Pelosi does here, is the same thing Democrats have been doing for a while, namely, testing the waters to see how much they can get away with. The effort here is to base the U.S. economy in imaginary economic principles. So here, I discuss some real economics.

In the real world, a strong economy is built on every individual's productive capacity, i.e. our ability to add value to society. "Value," in this context, is measured by people's willingness to trade money for the activity. This can be through exchanging money for goods, such as making boards of wood into cabinets, or services, such as making corporate management boards into more efficient managers. Like anything else, sometimes value is added by investment; but sometimes value is added by divestment. In other words, my law firm may add value by adding another lawyer...or possibly by firing a few.

Unemployment benefits merely move money from point A to B, with substantial overhead (i.e. a kickback to public sector labor). There are benefits and detriments, and for honest progressives, the argument is that the detriments are worth it...not that detriments are actually benefits! The benefits are that you minimize the costs of switching to more productive work. The detriment, is that people who are already productive, have to give up some of their fruits to accomplish this.

But more generally with unemployment, the incentives are exactly the opposite of perfect (where working is rewarded, and not working is detrimental). First, unemployment takes the fruits out of the hands of people who produce value. It then distributes that value to those who are not producing, with a large chunk going to bureaucratic overhead.

Bureaucratic overhead is little more than a drain on society, and should be reduced as much as possible. As for those who are not producing (i.e. the unemployed) we should be benevolent, but careful and prudent. The goal is to ease their transition into productive roles--as opposed to helping people maintain counter-productive roles. This is not meant as an insult, but common-sense.

There is an economic principle called diminishing returns. Too much help is counter-productive. If someone is drowning and 20 people swim to save that person, not only to you fail in finding a solution, you also create a bigger problem.

Hence, the Democratic Party. If someone is unemployed "by no fault of their own," then we all benefit if something is done to keep them from drowning, because of the moral issue, and also as they come ashore they will produce for us all.

Democrats like to feed off emotions. We all hate that feeling we get when someone needs help, and we cannot do anything. Democrats virtual party slogan is "we cannot just sit by and do nothing; something is better than nothing." It may feel good, but not only is this simple statement patently absurd, but it is also dangerous, as illustrated above. Often, less is more.

Welfare benefits can never strike this balance perfectly. Although its often justified, the accusations of greed that Pelosi so gratuitously doles upon corporate America, should sometimes be reserved for scammers and bums who inevitably will take advantage of a welfare system. Most of us know somebody who will work hard just to get welfare hard in fact, that they would make great small business people if they would redirect their efforts in that direction.

It is no insult to say that people respond to the incentives created for them. And it is no surprise to anyone, that all politicians use welfare as political badminton, as a result of their own political incentives. Democrats would have you believe that they are compassionate, and Republicans are cruel and heartless. For Pelosi, it is a mere distractions that her characterizations ignore what Republicans have done for unemployment, and the specific reasons why Senators like Sen. Bunning obstructed specific unemployment legislation. But beyond that, what's more compassionate: spending recklessly in the name of compassion, or disciplining compassion so that it is not wasted?

The unemployment system should focus on minimizing transition costs for legitimately honest working people; while minimizing overhead and weeding out the bums and scammers. Undisciplined strokes of compassion with others people's money, are neither virtuous, nor admirable acts.

We have a right to earn an honest living, through voluntary exchanges--not a right to other people's money, by force of government. The former is a God-given right. The latter is a luxury.

If Pelosi is so compassionate, why doesn't she forego her disproportionately lavish travel expenses, such as her private government jet and her office rental in San Fransisco (the rent of which recently shot from $6,000 a month to $18,000 a month). I imagine some unemployed people could use that money.

These are merely the academic responses to Pelosi's absurdity. Absurdity that is, in my view, unbecoming a Speaker of the U.S. House of Representatives. The real motive for Democrats is to take credit for sending checks to as many people as possible, in an effort to gain political favor.

Newt Gingrich has proposed conditioning unemployment benefits on enrollment and good standing at either school, or some volunteer work at an organization, such as a church or non-profit. I wonder how heartless Democrats would find such a proposal?


Ian said...

Up until the 54th second in the video, she almost sounds like a Conservative promoting the benefits of the private sector (job creation, etc.). Then, she goes back to the Pelosi I love to hate.

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