Money

As a country we are spending a lot of money on a lot of things and as a result we end up having big bills to pay just like any other person who spends a lot of money. Now the government raises money in three different ways each influences the way we live and how much money we make and are worth. The first is raising taxes. Natural when the government needs to raise money it can do so by increasing taxes but it can't do so unlimitedly because taxes cause deadweight loss (a term we use in economics to represent the surplus lost that would have arisen if there was no tax). Another way the government can raise money is just by printing more money. This has a side effect though, because the new money doesn't necessarily represent any new value that is added to the economy it devalues all the other currency in circulation. This means the very dollar bill in your pocket is worth a little bit less and has less purchasing power. Critiques sometimes say this is stealing from the middle class. The third and final option that the government can use to raise money is by issuing bonds (an I.O.U). Basically taking out a loan from the public in promise to pay it all back with interest at a later period of time.

So why do I bring this up? Because recently this game of spending money and paying debt has gotten a lot more dangerous. The government is running itself into the ground with the current administration. The war is going to cost about $1.6 trillion, give or take a couple hundred billions, the dependency on government to provide relief and regulation is growing, and the growth of the economy has continue to fall behind the pace of the bigger countries currently developing, China and India most notably. And on top of all of this they want to start a national health care plan? China has been a big buyer of bonds and infrastructure in the U.S they currently own about 1 trillion dollars of our debt. If they called in right now all their debt it would cripple our economy. Basically the government is just getting too big. There are already too many departments and too many proposals that would increase government spending. We have to go back to the system of government when it was unadulterated, back to the founding fathers wisdom when they wrote the constitution. We have gone astray from most of their advice and I believe that we are losing our way. I fear one day we will falter and something bad will happen. Lincoln once said "America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves".

The founding fathers wrote nothing of a central bank when they wrote the constitution and how American should run. They backed the Gold Standard which would keep government spending in check. They understood that the manipulation of currency by an elite group of gentlemen who answer to only the joint economic committee would allow for some terrible human errors and took away from the capitalistic ideals. In fact the market crash of 1929 is a great example of poor policy on the central banks allowing for a depression in the economy. If you don't believe it then ask the current Head of the Federal Reserve Ben Bernanke, he will most certainly tell you (he has done much work on understanding the market crash of 1929).

We have to cut government spending and we have to do it as soon as possible. All these talks of centralized health care plan, and more government spending, and central banking system is far from what the founding father would have wanted. We are walking a tight rope and we must be careful before we confuse good intentions with poor policy.

Minimum Wage

Recently this semester in Microeconomics we have been learning about price floors. A price floor is a legal minimum at which a good or service can be sold for. Now price floors are okay until they become effective, that is, they become higher than what the equilibrium price and quantity would want. Now when price floors become effective you have a surplus.Minimum wage is a classic example of a price floor. When you set the minimum price at say 6 bucks an hour and the equilibrium is 5 bucks an hour then more people will want to work than there are jobs supplied at that rate, as a result you have a surplus and that surplus is known as unemployment.


Now our society is a free market economy. We have always advocated education because nobody really wants to work at the minimum wage. We all want nice cars, nice clothes, big houses, and lots of money to put our children through college when tuition becomes something around $80,000 a year. Given that costs will only continue to rise in everything that we purchase as consumers, do we really want to advocate a minimum wage, a safety net that gives citizens the comfort of falling back on when they choose to produce very little? It only causes more unemployment and a false sense of value. I mean really, do you see the reason behind a person earning an extra dollar for wrapping your hamburger just because they raise the minimum wage? No, and it only hurts consumers. I believe in placing proper value where it is merited. If someone chooses not to go to school, not to differentiate themselves, or not to increase their skill then they should be given a wage that is the correct value to their contribution to society.

Now I understand some of you will say that if you get rid of the minimum wage and give people a dollar an hour or two dollars an hour then you’re exploiting them. But like my economics teacher says “The only thing more tragic than an exploited worker is an unexploited worker”, they don’t have a job! You are artificially creating value and giving it to a person whose contribution to society is much less than that and as a result more people want to work at that minimum wage price and less businesses want to give out jobs at that minimum wage price and so you have increasing unemployment.

When we as a society encourage education and place heavy emphasis on it than what kind of effect does that have on our message when we always want to raise the minimum wage? “Little Johnny it’s important to get an education because it stimulates your mind and puts you in a better position to take advantage of all that society has to offer in a market economy but, even if you decide to drop out, it’s okay because we will continue to raise minimum wage so that you will have a safety net to fall back on”. Well it’s not okay because we live in a world where international trade is expanding, where we have to compete against more countries that have lower minimum wages, where automation of rule based tasks with machines are replacing unskilled labor, and outsourcing is a growing trend in American businesses. The reason to study hard and stay in school has never been stronger than it is today.We need to let go of minimum wage if we are to remain competitive domestically, internationally, and academically.Raise the minimum wage? Yeah right, I’ll stay in school thanks.

To protect freedom for the world?

Pakistan


Lately I have been keeping up with global and current events. As you may know President Musharraf has declared a state of emergency in Pakistan. He has suspended the constitution, forced media to close down, arrested many top officials, protestors, and lawyers, and pushed back Presidential Elections. Anyone who chooses to argue with his decision is arrested; anyone that pushes for him to step down is arrested. There is no system of check and balance in place right now. If you have even read a quick one paragraph column on what’s going on in Pakistan your probably thinking Musharraf is consuming too much power and is doing a great injustice, and your probably right.

I, for one, am outraged on what is going on and more importantly I am upset and confused as to why the US is doing very little. What it sounds like is Musharraf is on his way to be another Saddam Hussein. I understand that when President Bush wanted to go to war in Iraq he made a little speech that went something like this “This nation, in world war and in Cold War, has never permitted the brutal and lawless to set history's course. Now, as before, we will secure our nation, protect our freedom, and help others to find freedom of their own.” I see a little bit of inconsistency here. Pakistan is a real country that is being taken over by a President that is the army chief as well. This is a president who seized power in 1999, who declared a state of emergency a few days before the Supreme Court was to rule on the legitimacy of his presidency, and a man who refuses to abdicate any power at all. We fight a war for people who are not our own, and we sit back while our “ally’s” use tyranny to suppress others. That must be terrorism right there, an attack on freedom by Musharraf. This is idiotic…what do you guys think?