The Cloistered Acres
The Obama administration has once again pivoted to the economy in yet another attempt to distract Americans from the disaster that is the "Affordable" Care Act. This time, the economic message is wrapped in the rhetoric of income inequality, yet once again we confront the classic two-faced program of lauding equal opportunity but measuring equal outcomes. So let's get ahead of the news cycle and examine several fundamental economic ideas. These ideas never see the light of day because they are common sense and ultimately run contrary to the Obama administration's intended narrative.
An Economic Law of Gravity
First and foremost we need to recognize what amounts to an economic law of gravity: The consumer always pays! As many of the affluent are now finding out with ObamaCare, this is where the buck stops. It sounds simple and straightforward, like Herbert Stein's law that what can't go on forever, won't go on forever, however, like Stein's caveat, this simple, immutable economic precept is usually ignored. All costs of doing business are always passed on to the consumer whether those costs are salaries for more employees (perhaps required to satisfy government regulations), higher raw material costs, increases in corporate taxation, or raising the minimum wage for fast-food workers. The consumer always pays. This "law of gravity" always wins and in government parlance, the ultimate paying consumer is the taxpayer.
The Economic Pie
Progressives see the economic pie as finite and bounded. As a result, they conclude that governmental redistributive programs are required to manage that finite pie. What Progressives fail to realize is that the economic pie is unbounded and virtually infinite, and that it is Progressives' own redistributive policies that hobble economic development creating a self-fulfilling prophecy.
There are two components to this economic pie. The first is the two-sided coin of human nature and human activity. This has remained relatively constant over forty thousand years. Although we may have traded buffalo skins for Armani and Prada and caves for Westchester colonials, our basic needs are still food, clothing, and shelter. We have become so successful at doing this that our basic drive to bring some stability to an otherwise tenuous existence has morphed into an acquisition of luxury (even more Armanis and Pradas and a summer cave on Martha's Vineyard).
Likewise, we are always looking to do more with less. Coordinated hunter groups allowed for larger animals to be hunted, and it goes without saying that one buffalo killed by five cooperating men (a nascent corporation) could feed substantially more people than five rabbits from five independent hunters. This trend towards an economy of means has been a crucial fuel for human development.
The second component of the economic pie is the envelope in which we function. While human nature remains basically unchanged, the envelope in which we function is in constant flux as the result of our own influence on the world around us. Each change which we humans cause precipitates new opportunities, new potential for development and, in turn, new potential for additional change. As we leapfrog from change to change, we continually redefine the envelope in which we work. We continually jump beyond the limitations of any single system, and as we do we create new fields of inquiry and potential. Today in real-time processes, in current products and in new technologies we see what was the stuff of science fiction just a few decades earlier. The economic potential of these successive expansive envelopes is virtually without limit.
Consider that we morphed from a hunter-gathering existence to an agrarian society. Then at some point we saw the development from barter to portable monetized systems of exchange. Markets grew from mere locales to regions and eventually into nations. We created a society that no longer needed to follow the herds and eventually created a monetary system portable enough that it could follow the expanding markets.
Now, we are immersed in another equally fundamental change as we move from an industrialized economy to one based on the instantaneous transfer of information: the cyber-economy. This cyber-economy, just as those economies before it, ushers in an entirely new wealth of possibilities and entirely new possibilities of wealth. New products, new concepts, and continually new knowledge will surpass the limitations of the older system which it leaves in its wake.
Progressives, with economic policies based upon redistribution, simply refuse to acknowledge this. In their limited reality, growth itself is finite; the only way one can get ahead is if someone else doesn't, because success isn't seen as adding to the human experience but as subtracting from it ("You didn't build that, someone else did."). This is their "zero-sum game." Such economic theories based on redistribution hobble economies and repress growth. They become self-fulfilling prophecies as if to say: "See? We told you that the economic pie was finite!"
The Cloistered Acres
Consider standing in the middle of the undeveloped prairie with fertile and empty grassland as far as the eye can see -- and then some. Now, along come Progressives. They build a high wall around 100 acres (for your safety, of course, because they know best). From that point on, again for your safety, all agriculture and activity takes place within the area protected by that wall. Year after year the fields are tilled and the crops are harvested, and each year the yield per acre drops further and further. The government that created the problem by building the wall and limiting the land now calls for a government solution. The government must access expensive nitrogen-based fertilizer to revivify the land inside the wall. But because the government controls the fertilizer distribution (I'm forsaking the obvious joke here), it's government bureaucrats job to decide who gets any fertilizer at all and how much they get. How do government bureaucrats decide who gets what? Well they establish arbitrary rules about who is worthy. They institute programs for the distribution of fertilizer, and they keep some fertilizer in the governmental fertilizer reserve (which causes an artificial market shortage, thus raising the price of available fertilizer which benefits the very government selling it).
Even with all of this, the net amount of productive land inside the wall is still only 100 acres. While the bureaucrats trumpet their regulations designed to induce "fairness" to the market, that artificial 100-acre limitation creates an artificial cap on the amount that can ever be produced and creates the artificial and finite economic pie.
While regulators' claims of fairness imply equality, the "fair" results are anything but fair. A failed Solyndra arbitrarily gets hundreds of millions of dollars while going bankrupt, yet productive coal mines and coal-fired power plants are forced to shut down and lay off hard-working miners and staff . . . and electric rates skyrocket.
This brings us full circle to the economic law of gravity and hobbled Progressive economic practices. The consumer (the taxpayer) always foots the bill and the idea of knocking down the wall around the compound to take advantage of the boundless fertile prairie simply does not exist to those brought up thinking inside those cloistered acres.
The limitations created by progressive policies are presented as necessary due to a limited economy, but that limited economy is in fact the result of those self-same regulatory limitations which Progressives impose on an unlimited and boundless universe.
Anthony Benvin is a former university professor and has worked for over twenty-four years in the financial services industry.