Wednesday, June 29, 2011

Saving Our Way to Prosperity

Yes. You Can.

- By: Larry Walker, Jr. -

According to Barack Obama, "We can’t simply cut our way to prosperity." Prior historical references: None. Upon hearing such an absurd statement, and being of the homo economicus persuasion, my first instinct is to define what it means to me, and then to determine whether it has any relevance in my life. If we are honest, we must each define what the word prosperity, or rich, means to us. Only after we have defined its meaning are we able to chart a course.

In the WikiHow.com article, “How to get rich,” there are seven steps, the first of which is to define the word “rich.” Obviously it means different things to different people. According to Obama, the word rich means making more than $250,000 per year. A more formal definition of prosperity is “to be fortunate or successful, especially in terms of one's finances.” For others it means achieving a certain level of prestige, or being able to afford a comfortable retirement, neither of which necessarily involves making $250,000 in a year. How would you define prosperity?

Homo Economicus

The term Homo economicus, or Economic human, is the concept in some economic theories of humans as rational and narrowly self-interested actors who have the ability to make judgments toward their subjectively defined ends. My definition is that men and women are primarily interested in making judgments which will improve their own economic condition. My goal is not to be a millionaire, although that would be nice. My goal is to be able to meet my obligations in life and to remain self-sufficient upon retirement.

In John Stuart Mill’s work on political economy, in the late nineteenth century, he further defined this economic man as “a being who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labor and physical self-denial with which they can be obtained.” I have to admit that my goal is also to get the most out of life with the least possible amount of labor, but that’s not exactly how it’s been working out. I work much too hard. What’s your goal?

Yes. You can.

Notice that Obama uses the words, “we and our”, as in, “We can’t simply cut our way to prosperity.” Exactly what does that mean? The last time I checked, "we" wasn’t responsible for paying my bills. Actually, you and I just might be able to cut our way into relative prosperity. But I don’t believe that the federal government can tax and spend us into a utopian paradise. If this were possible, wouldn't we already be there?

Returning to “How to Get Rich,” the 4th Step is entitled, Delay Gratification, under which we find the following guidance on the path to prosperity:

  1. Are you spending money on things that won't get you rich?

  2. Are you sticking with a job that doesn't make that much money to begin with?

  3. In order to get rich, you're going to have to give up some of the things you enjoy doing now, so that you can enjoy those things without restriction later. For example, you might like having free time, so you give yourself a few hours a day to do nothing. But if you were to invest those few hours into getting rich, you could work towards having 20 years of free time (24 hours a day!) with early retirement. What can you give up now in exchange for being rich later?

  • Cut expenses
  • Get a job that pays more or get a promotion
  • Downgrade or give up your car
  • Downgrade your apartment or house
  • Reallocate your spare time

Although there is an element of truth in the statement, "we can’t cut our way to prosperity", the fact is that you and I can, individually. The act of cutting, or reducing, my personal expenses causes me to save money. So to cut means the same as to save. By substituting the word 'cut' with 'save' in Obama’s original comment; what he is really saying to me is that, “We can’t simply save our way into prosperity.” Why, that’s preposterous! It’s as if he is implying that I should empty my emergency fund and retirement savings, spend it all today, and I will be magically ushered into prosperity. But if I did that, then I would be forced to borrow huge sums of money when ready to invest in furtherance of my dreams. But this won’t work out too well, especially since banks normally require a down payment.

The 5th Step in How to Get Rich is entitled, Save Money. It states, “You've heard the phrase "It takes money to make money." So start socking away the extra money you're making now that you've delayed gratification as outlined previously. After all, what's the point in giving up the stuff you like if you have a hole in your pocket? Start building a "get rich fund" at the bank. Always pay yourself first. This means before you go and blow your pay check on a new pair of shoes or a golf club you don't need, put money aside in to an account that you don't touch.” This makes much more sense to me than the idea of squandering my savings, as implied by Obama. So for me, yes, I can save my way into relative prosperity, and so can you. The federal government could do the same, after paying off its massive $14.4 trillion debt, that is. This ought to be Obama’s goal. Yes. You can.

No. Government Can't.

He jabbers on, "We need to do what’s necessary to grow our economy; create good, middle-class jobs; and make it possible for all Americans to pursue their dreams."

There he goes with that “our” stuff again. We need to do what's necessary to grow our economy. That sounds appealing, but fortunately my economy is not yours, and yours is not mine. My economy is comprised of my household, my family, my business customers, vendors, lenders, employees and other obligations. I don’t know where Obama is coming from, but there is one way that the federal government could help to grow my economy, and that would be to stop taking as much of my hard earned money in taxes. That would help quite a bit. If I didn't have to pay any taxes at all, my economy would be doing pretty well. Try that one on for size! If the government concentrated more on how to take less of my money, then my economy would improve, and so would yours. This simply requires cutting the size of government.

Next, he says that we need to create good, middle class jobs. What exactly is a good, middle class job? Does it require picking up a shovel? The idea of having a good, shovel-ready, middle class job doesn’t exactly mesh with prosperity, at least not in my book. Thanks but no thanks. I don’t really want a middle class job; I would rather have more freedom and prosperity. I don’t believe that group effort is required in job creation. I believe that one economic man can create many jobs. In fact, the true economic man is going to need a lot of help upon reaching his own prosperity. He’s going to need employees, suppliers, accountants, attorneys, financial planners, housekeepers, gardeners, service people, travel agents, retailers, restaurants, auto dealers, gas stations, chauffeurs, etc. It seems to me that Obama’s goal should be to inspire more economic men and women, and greater prosperity, rather than higher taxes, and more mundane, government-manufactured, temporary, shovel-ready, middle class jobs.

Finally, Obama says that we need to make it possible for all Americans to pursue their dreams. But all that’s required here is freedom. Are we not free? As long as I am free, I can do anything, and so can you. Nothing can stop me from pursuing my dreams, yet my dreams are not yours, and yours are not mine. Maybe your dream is to manufacture a product, while mine is to provide a good quality affordable service. Someone else’s dream might involve freeloading off of the toil of others. Just as the word prosperity means different things to different people, our dreams are not all the same. “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” The federal government didn’t give these rights to me, and it can’t take them away. You sir, cannot spend our way into life, liberty, and the pursuit of happiness, they are the gift of God.

The bottom line: Yes we can save our way to prosperity. That’s how it works in this Universe. It takes money, to make money. Here are a few more steps we can follow along the path to prosperity. Step 1: Cut discretionary government spending back to 1996 levels. Step 2: Force the federal government to start making principal payments against its debt. Step 3: Abolish every new governmental regulation established since January of 2009. Step 4: Get rid of Barack Obama and his queer notions about the economy.

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