Magic Economics via false promises

I recently read an article on facebook via the website libertarianism.com. The article is similarly named “False Promises and Uncertain Economic Truths.” The author is Aaron Ross Powell who has a JD from the University of Denver. His article explains that in short, the candidates are making false promises about the economy because no can truly predict or control the market. Of course, the one way to control an economy is state owned and run business and production. This method was used by the Soviet Union under Joseph Stalin. Stalin’s five year plans were supposed to help build Russia to a world power. Instead, his five year plans led to the largest class warfare and citizen deaths in world history. The other end of the spectrum can be seen in the early industrial revolution where children would often work 12 to 14 hour days without breaks, safety precautions and very little pay. The reality is that a market economy is one of the toughest things to predict. What is predictable is that the market will go up and go down.

In order to find meaning what today’s presidential candidates want to do with the economy, we must look at the past. Historically, the government has both intervened and not intervened. When the US was first starting out the Federal government was not as strong. The government was still figuring how to function. The Federal government didn’t start intervening until the early 20th century. The strategy of laissez-faire was used from the signing of the constitution until the 1929 stock market crash. This is not to say that the market had never crashed before 1929. It had crashed before but the changes in the economy is the key factor. For example, the idea of credit became quite popular during the 1920s. The concept of lay-away became all the rage. You could by a car and pay it off later. You could buy anything on the lay-away. This is basically like today’s credit card. The problem in 1929 was combination of factors but devaluation of money or inflation plus overuse of credit and investors selling off everything. This in turn caused banks to run out of money because there was no FDIC or insurance. Banks closed, and soon enough millions were out of jobs because companies went bankrupt.

In Powell’s article, he refers to two specific candidates Trump and Sanders. He also refers to America’s economy as modern. Once again, going back to history, the economy has gone through a series of stages. Usually there is three stages: Primary, Secondary and Tertiary. The primary stage consists of agriculture and subsistence farming and the like. The US went through this period mostly in the colonial days. However, agriculture still plays a lesser part of our economy. (Many of the crops like corn, wheat and others are now subsidized by the government) The secondary stage is manufacturing. This period runs from the early industrial revolution to around the 1940s. This is another stage that has declined over the past 70 years or so. The stage that the US economy currently engages in the most is Tertiary. Tertiary means services and that could mean anything from insurance to education. This stage (Tertiary) is considered to be a modern economy.

The average American usually supports a candidate from one of two parties. So let’s say you support either Trump or Sanders. (OR imagine your favorite candidate) Before we can examine if a candidate makes false promises, we have to examine what they plan to do to fix the economy. (If one could do such a thing) Surprisingly, I find that each candidate plan is same setup just different words. The most popular type of economic plan now a days is wealth re-distribution. Unfortunately, Robin Hood is a morally good fairy tale but it is not a good economic fix. So let’s look at both candidates, Trump and then Sanders’ economic plans straight from their websites. Usually taxes are the closest economic issue that every candidate will have something published on.

First Read: Donald Trump. Second Read: Bernie Sanders.

Ok so I have looked over each plan. Different parties but similar plans. Trump will cut taxes for the rich and corporations to bring business back to US along with his plan to improve trade relations with China. Trump also plans to simplify the tax brackets giving no taxes to the lower classes. Meanwhile Sanders will be paying for his plans by raising taxes, closing loopholes, and increasing social programs. You can argue about who’s plan is better or worse. But what’s important is that both candidates are trying too hard to make an economy work that just does not work like it used too.

I have problems with both plans. For Trump, my problem is that improving trade relations with China is next to impossible. For staters, the US and China are co-dependent. We need them just like they need us. The reason why they can manipulate currency is because they hold a large percent of our national debt. So there’s no leverage to make anything meaningful happen because China has the upper hand until we pay off our debt. Trump’s tax plan sounds alright but is typically conservative with tax cuts for the rich. He is just hurting the middle class and it will just continue the same problems as now. Now let’s look at Sanders. Sanders plan is just plain expensive. He wants to raise taxes on everyone. He going to have tax loopholes and wall street pay for most of his social programs. My problem with Sanders is his plans are cosmetic. The plan to raise minimum wage and tax the rich will surely backfire. Unfortunately you can’t just spend your way out of a shitty economy. I believe both Bush and Obama already have done that with little real success. The economy recovers naturally.

The one commonality between Sanders and Trump is on corporate taxes. They both want to eliminate loopholes and special interests. In the end, both plans look at the same problems. Politicians keep trying the same policies over and over again. Yet they wonder why nothing has changed in 30 years. Let’s remember that both Trump and Sanders are not establishment candidates. The goal of their campaigns is to run as Washington outsiders. However, I’ve look at the democratic candidates and republican candidates platforms. Sometimes I think they just re-worded and copied each other!

The false promise of prosperity because of these tax plans and promises of social programs is the real problem. Logically I can’t personally wrap my head around how either candidate will ever have any success in economics. The market economy is dependent on businesses making money. It usually works best when private competition is at its highest. The regulations to keep corruption, revolving door and monopolies is necessary. Something that candidates only pay lip service is the cutting of the federal government’s budget. Obviously, this isn’t an easy task. However, I have yet to see a solid plan for eliminating excess spending on the federal budget. I think the candidates especially from democratic and republican party under-estimate the importance of the federal budget and the national debt. The only candidate (Former as of last week) who has a strong voice and grip on this is Rand Paul.

I believe that in end, these plans only fix short term problems. The presidency is eight years. The new president could reverse these plans just as easy as they get put into place. The candidates don’t intend to mislead or make false promises. The American people are the fools for letting them. The point that Powell makes and the point that I want to extend is that before voting for a candidate make sure you know about the platform. Make sure your inform about how their economic policies might affect you. You have to look at the bigger picture. Be informed about what’s going with the markets and the world. For example, the recent downturn in the stock market is being caused by the dropping of the price of crude oil. The uncertainty of the world markets is another cause. You might see cheap gas prices as a good thing. (Everyone does!) However, just be aware that world is a place where cause and effect is the guiding rule. The economy isn’t magic and politicians might be tricks.

Thanks for reading!

 

 

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One thought on “Magic Economics via false promises

  1. Pingback: Voting Choices: Person or Policy? – Garrett's Experience's Blog

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