What Would Happen Without Welfare?

Begin a thought process with me. Let's just look at medicare and medicaid. In 2010, the US government spent $793 billion on these programs. There is a lot more than medicare and medicaid to welfare, but let's just look at this. Now, imagine that instead of the government taking that money from business and people and giving it away that the money instead was left in the hands of those to whom it belongs. What then?

First and foremost, to be sure, many people would be left without health insurance. Even as the extremist libertarian that I am, I can admit that this is a bad thing. All other things being equal, people having health insurance is much better than them not having health insurance. Fortunately for libertarians, though, all other things are not equal in this case. We have to remember that money. What does this other money do? What is its purpose?

The extra money will either be spent or invested. The spent money increases profit margins and the increased investment provides the capital with which to furnish new jobs. So the people who have lost health insurance can now find new jobs because of that capital now being freed up.

But is this alternate scenario worthwhile? Is it better that the money is providing jobs instead of just directly going to pay for health insurance? From the point of view of the person who was taxed, the situation is much better, because now he is getting more for his money. From the point of view of the person who was getting the health insurance, he is now getting the money for insurance plus some spending money for himself. His situation is improved because of the change.

Yes, it is a simplistic analysis, but what do you think of it? Is this a worthwhile idea?

Did Cash for Clunkers Work?

A microcosm of the Keynesian idea of stimulating aggregate demand would have to be Cash for Clunkers. Here was an industry which experienced a tremendous crash because of the recession. The Keynesian cure would be to give people money to buy new cars. With this new demand, the auto industry would start making new cars, providing jobs, and those jobs would create demand in other industries, and so on and so on. It is the multiplier effect. Spending money prompts production prompts more spending. It is a net negative.

Of course, as with most Keynesian economic theories, it is seriously flawed. Keynesians do not understand capital markets. When a business experiences new demand, there is pressure to expand. That expansion, however, does not come from profit alone. Businesses must borrow money to meet the new demand. It would take too long to wait for profit to fund the expansion. This is where investment enters in. However, recall today that much of our capital is being used up by government. So even though interest rates are low, commodity prices are spiking. We cannot ignore scarcity; there is only so much capital to go around. Government is using all of that capital on its stimulus programs.

So in our current economic situation, what would happen when you try to stimulate demand? If it is too expensive for businesses to expand, the only result can be higher prices. This is where the example of cash for clunkers comes in. Look at what happened to the price of used cars as a result of the programs. But there was some growth in the auto industry as a result, but that has crawled to just 0.4% in the 2nd quarter.

But people might say that the benefits in this case outweigh the negatives. But alas, I did not discuss all of the negatives. The Broken Window Fallacy states that when money is spent on one thing, it is necessarily not spent on something else. Opportunity cost is a very real issue. So because consumption was driven in the auto industry, growth in other industries was necessarily stifled. These other industries, where consumers were actually demanding growth, must now comparatively shrink as compared to the situation we would have been in. We are worse off as a result since the products we demand are not produced as they can and should be. Is government intervention saving our economy? Not likely.

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Did Ron Paul Win the Debate?

Townhall says it was Michelle Bachmann and Mitt Romney.

Fox Nation Readers say it was Michelle Bachmann.

GOP Insiders say that Ron Paul has no chance.

But according to applause at the debate itself, Ron Paul won.

Notice a separation between the elite and the public? And this is all without even mentioning the fact that the popular opinion polls show Paul as the clear winner.