#114 The Fiscal Financial Fake

#114 The Fiscal Financial Fake The Government has thrown another financial fake to the poor.  This time, they increased child tax credits, then removed the spending power of the poor, via inflation.    Another possible title for today’s podcast could be “The Government giveth, and the Government taketh away.  In this case, they gave families an increased child tax credit, but that cause inflation that wiped out the spending power of the money the families received.   A Wall Street Journal article from December 26 is about whether a larger child allowance reduces child poverty.  It reads, “The larger allowance’s effect on poverty has been overstated because the benefit as structured crushes the incentive to work. Traditionally someone needed $2,500 in income to claim the child credit, which became more generous as a person earned more to encourage advancement. This is an extremely modest amount of income, and Democrats torpedoed this threshold for the sole purpose of sending large checks to people who don’t work.”   OK, I will deal with the “People who don’t work” section of that quote in a little bit.  First, the idea of how the poor should be cared for.   Every reasonable person born since William Wilberforce, agrees that the poor should be cared for.  The only question is “how?”  Christian Economists generally like to quote scripture about taking care of widows and orphans from James 1:27 which clearly states the role belongs to the church.  Non-Christian economists favor government care of the poor.     All Money Comes from Capitalist Ventures I get a little frustrated with folks who say, “Well, the church used to be able to do it, but now it’s gotten too expensive for the church.”  That’s usually entoned about healthcare.  But the economics answer is something like this: The money is somewhere.  Which reminds me of the fund-raising technique where the pastor says, “There is plenty of money in this church.  It’s just in the wrong pockets!”  Actually, that’s a pretty good economics statement.  The person who says that the church can’t afford to pay for healthcare is simply putting more trust in the government’s ability to forcefully extract the money from citizens, than trust in the church to raise the money via free-will donations.  See, that’s how economists think.  If 17% of the US economy is going to be spent on healthcare, it can go through a couple of different pockets – church or government in our analysis here.  But the initial source is the production of value by people in a free-market economy.  In another recent podcast #105 titled The Free Market Feeds the Poor.  I made the point that only capitalist exchanges create profit that can be expunged by the government.  Today, I’m simply extending that point forward in the transaction exchange, to say that you can pay for healthcare via the church or the government, but it still comes out of the same pocket.   The Wall Street Journal article I am quoting today, goes on to point out that any reduction in poverty caused by increasing child care credits is consumed by the current inflation that reduces the buying power of the poor.  This is the same game we’ve seen many times before.  The government increases giving to the poor, but that causes inflation, which harms the poor.  That’s only the fiscal part of the equation.