I always liked my Aunt Maggie. Married to my Uncle Tony, she was of German decent, blond and blue eyed. She was one of my favorites in the family. When I was around five or six years old she would often call me to translate for her when the conversations between the other adults went “international.”
I can remember one gathering in particular. The adults were sitting in the living room discussing world events, politics and legal disputes. As the conversation became increasingly heated, less and less English was used, until finally the discussion continued full bore in the native tongue.
“Michael come here,” my Aunt Maggie called patting the side of her thigh.
So hearing her call, I reluctantly left the kids playing in the other room and went into the living room and leaned against the couch next to her. As the lively conversation continued, I gave her the play by play translation:
|#$*&&%$@*&^%#*#$%||Didn’t you go see the lawyer?|
|$%#@(*&^%#W@)||Of course but it didn’t do any good|
|%^$#@*^*()(*%$@%&||Because he’s a son of a b……|
The smack came out of nowhere and before I knew it I was being hauled into the kitchen for a lengthy lecture by one of the other aunts.
I still maintain my innocence to this day.
I am very thankful, however, that the aunts were not economists, for if they were, I would still be suffering from the ordeal up until today.
If we take a closer look at many of the recent economic policies, one common denominator emerges; namely the punishing of the innocent. This may sound strange to many, as these policies are typically sold to the public as helping “those who need it most” or “averting financial calamity” or some other such rubbish.
Let’s take a quick rundown of some policies and the people they punish:
|Economic Policy||Innocent Party Being Punished|
|TARP (Bank Bailout)||Regional banks that did not participate in securitizing fraudulent mortgages|
|HAMP (Homeowner Bailout)||People who told the truth on mortgage applications and did not take on more debt than they could afford|
|Artificially Low Interest Rates||People that save money|
|Greek Bail Out||Fiscally Responsible Germans|
|Unemployment benefits lasting 1.5 years||Small businesses|
Where is a country going when it punishes, the prudent, the responsible and the productive? How long will the productive choose to remain so? What is the incentive for the non-productive to become productive?
Personally, I think it’s very dangerous for a country to make smart people into jackasses, for at some point the wise and prudent will make the logical choice and simply join the unproductive.
This reminds us of an apocryphal story that was sent to us by a dear friend. The story illustrates this point perfectly. It goes something like this:
The professor then said, “OK, we will have an experiment in this class on socialism”. All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A. After the first test, the grades were averaged and everyone got a B.
The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D!
No one was happy. When the 3rd test rolled around, the average was an F.
The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when the reward is taken away, no one will try or want to succeed.
At any rate after my scathing reprimand in the kitchen was over, I went back to playing with the kids in the other room. After the adult conversation was over, Aunt Maggie took me by the hand, smiled and said it wasn’t my fault. She also promised to make me some of her famous lasagna.
Boy, I sure wish “Uncle Sam” was more like Aunt Maggie.
Until next week,
Michael Bechara, CPA
Granite Consulting Group Inc.