If we just put people to work, we can energize the economy. Therefore, investing money into doing exactly that is what we need. Our president’s proposed $447 billion dollars stimulus, as well as his prior $900 billion one, are offered as positive alternatives to create those jobs.

Unfortunately, things do not work that way. After all, from where comes such wealth anyway? It comes from the people themselves. Since the 1950s what we have seen is that each time the Federal government increases its spending, our GDP declines in about two years. For every 1% increase in government spending we lose about $4,000 in GDP per person.

What stimulates an economy to grow more? It is not government spending sustained by tax increases on “the wealthy.” In effect, on average, the government takes in about 18% of revenues from taxation regardless of the tax rate imposed. Both when tax rates where about 70% and when they were lowered to 34%, the government took in about the same 18%. However, lower tax rates generated increased economic activity, thus substantially growing the size of the GDP. Eighteen percent of a larger economic pie is more money than 18% of a smaller economic pie. As increasing taxes incentivizes a smaller economic pie, the same 18% is not worth it.

That is why the Administration is incorrect on the economic answer but can see a great political advantage as the immediate result of wealth confiscation may produce greater rewards. Regrettably, just give it some time and the inverse effect will show. Yes, if you take me off guard you may get a good chunk of my money from my pocket but next time I’ll move my money elsewhere.

It seems to me that the idea of “putting people to work” is based on imposing an artificial answer into a systemic process. It assumes that the movement of resources to accomplish the task of greater economic output is like the changes we may force into a machine. By concentrating power and intelligence we can create a more efficient machine and bypass the systemic processes of an organism.

In an organism, we discover the reality of inherent processes. By understanding and respecting them we may be able to achieve better results. If we  let the intrinsic immunity and healing processes work, or find healing agents that may work with, instead of altering, the system’s processes, the results will be much better.

Instead, we have given a given machine maker a task that he cannot accomplish: the task of finding a mechanical process that can substitute a systemic one. “Putting people to work” sounds great and some people may benefit from such largesse in the short run. More often than not, the mechanical intervention does not alter the system in such a way that it recovers its natural vitality. It reacts for a moment in a way that seems to work, only to react again later in search to recover its own natural constitution.

It is in effect not a problem of intelligence in building an efficient machine but of the wisdom and humility that a higher mind needs to understand its own limitations.

 

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