If you've never been interested in how the economy
works as long as you were given a decent paycheck every week, but now find
yourself bewildered by all the talk about the bailout, and the protest that's generated
by it, there is an article you can look at that might clarify some things for
you.
The article came under the title: “Why Congress's
Trillion-Dollar Coronavirus Bailouts Will Shackle the US Economy,” and the
subtitle: “Like the New Deal, every additional billion dollars in stimulus and
bailout spending will further delay the economic recovery we all want and
need.” It was written by Blaine Conzatti and published on March 18, 2020 in The
Federalist.
I must caution at the outset that the assertion you
see in the title to the effect that the bailout is that of the Congress alone,
does not reflect the thinking of the writer, but screams the intellectual
dishonesty of the editors who chose that title. Here is what Blaine Conzatti
actually wrote: “The White House and congressional lawmakers have proposed
packages with a running price tag of more than $1.3 trillion”.
But why did the editors of The Federalist choose to
distort a piece submitted by their own contributor? They did because even
though Conzatti sits at the right-center of the spectrum, the editors wanted to
make his piece sound more to the right than it is, and with that protest the
government's decision to give out money to the poor and middle class rather
that give it to the rich.
The core of Conzatti's argument rests on the
relationship that brings together the money supply, the debt and inflation.
Although anyone that's familiar with these matters, will have no trouble
understanding what the writer is saying, other “laymen” may not. I shall
therefore try to unpack the subject in a way that will make it easier to
understand. And the best way I know how to do that, is to tell a fictitious
story. So here it goes:
You work on the floor of a machine shop with three
other employees. All of you have been faithful to the owner, and he has been
good to you. He is old now, and has decided to retire. His children are lawyers
and doctors, and will have nothing to do with their father's machine shop. He
wants to give you the company but each of you has a dream of your own, and
prefers to take some of the equipment to start your own business rather than
stay together as a group.
The old man says he is okay with that but the
distribution of the equipment will have to be done the right way. And so, he
proposes that you gather in the conference room later in the day. You get
there, sit around the table and listen to the man. He says the equipment in the
shop is worth one million dollars, and you'll get all of it. But each of you
will have to earn his share by participating in a short contest.
He says he also has one million dollars in cash, which
he'll give to his children. But he'll pretend that he brought the money here to
facilitate playing the contest with you guys. To start the game, he gives each
of you 40,000 dollars for a total of 160,000 dollars. He says if you all agree,
you can say that the equipment is worth this much and stop here. Accordingly,
each of you will buy a 25% share of the equipment, and there will be no
contest.
However, you'll all have the right to tell why you
deserve to get more money, thus buy more than 25% of the equipment by telling
what great project you have in mind. With that, the contest begins, and
everyone describes the project he has in mind. Listening to the other three,
you can tell that unlike you, they have a clear idea of what they want to do.
You believe you had a weak presentation, and feel that you're going to lag
behind money wise.
And sure enough, the old man says he'll give you only
40,000 dollars and give each of the others 80,000 dollars. If you all agree to
stop here, a quick calculation reveals that a total of 440,000 dollars have
been handed out, of which you only received 80,000 dollars. So, if you quit
here, your share of the equipment will have dropped from 25% to 18.2%.
You all agree to go another round, and the old man
asks that you describe the kind of philanthropy you'll be doing when you become
very rich. You tell your stories and the old man decides to give you 50,000
dollars, give two of the others 100,000 dollars each, and give the third
200,000 dollars. This means that a total of 890,000 dollars have been handed
out of which you only received 130,000 dollars or 14.6%. You go one more round
and only one of the others gets the remaining 110,000 dollars. Your share drops
to 13%.
What does that say? It says that even if you got more
money after each round, the fact that someone else got more than you, has
resulted in that you got a smaller share of what's distributed. If this were a
real-life situation, it would mean that raise or no raise, the fact that others
were getting paid millions of dollars when they pretended to work, and millions
more as severance pay when they were booted out for misbehaving, made you
poorer.
It is therefore the expression of a legitimate concern
and not that of jealousy to protest the big sums of money which are handed out
to others.