MM2S008: Season 1, Episode 8
By: Ken Boone “He is led by an invisible hand to promote an end to which was no part his intention.” – Adam Smith (Father of Modern Economics) Congress just passed, and President Biden just signed a $1.9 trillion Covid Relief package designed to stamp out the virus and put us back on a strong economic footing. So why isn’t everybody happy? It’s been a little over a month since we last got together, and I sure missed you guys. Instead of putting out new episodes weekly or bi-weekly, I’ll let the news cycle as well as my news feed tell me when it’s time to strap on the mic! At least for the time being. It's been one year since the Coronavirus was declared a pandemic. A year since we had a hundred more questions than answers concerning the virus. Despite the ham-handed pressure from the White House (Amateurs!), the World Health Organization declared COVID-19 a pandemic. And the world took notice! Then: Cases = around 600. Deaths = weren’t definitively reporting because the diagnoses weren’t clear. It’s just going to magically disappear. I’m putting VP Mike Pence in charge of a task for, while I name myself a “Wartime President”. Now: Cases = over 29 million. Deaths = over 529 thousand Americans! But now, we can see a light at the end of the tunnel! The professionals are back in charge, and they have a plan. And part of the plan is to under-promise and over-deliver. I like that because that strategy allows us to set reasonable expectations. So, let’s discuss just one component of the plan. With just the votes of Democratic lawmakers In the House and Senate, President Biden was able to sign his $1.9 trillion Covid Relief Bill into law, which is now the American Rescue Plan! As the Administration says: no one will get everything they want, everybody gets something the desperately need! So, what’s in the plan?
So, why are they still fighting us? Can’t figure that one out. Some of the more inelegant objections has nothing to do with the bill or the benefits of it. They talk about “Cancel Culture”, and how we’re forcing the Estate of Dr. Seuss to pull 6 of his children’s books from shelves. Nice try – his estate did that on their own. In fact, Dr. Seuss himself occasionally rewrote sections of his books that he found offensive. And since he is no longer with us to do the rewrites, the estate felt that should just pull those volumes off the shelves. Like I previously said, the bill was passed without any Republican votes in favor of it! Not only that, but our Republican colleagues are already railing against the new law… before the ink even dried on the President’s signature.
What the hell are they trying to pull. I’ll try to explain it, but first I need to take a quick break! The more intelligent arguments from the other side (and I use air quotes around the word “intelligent”), reference a concept known as “The Invisible Hand Theory”. It is the guiding principle of all things relating to Small Government, Supply-Side Economics, as well as Trickle-Down Economics. I studied Economics in college, so I’m all to familiar with this theory, and it’s use and misuse among legislators. And since I just love talking about economic theory, but rarely get the chance, I’m going to just dive right in! The Invisible Hand Theory: The Invisible Hand is an economic concept that was first introduced by Adam Smith in The Theory of Moral Sentiments, written in 1759. The Invisible Hand is a metaphor describing the unintended greater social benefits and public good brought about by individuals acting in their own self-interests. Investopedia.com Definition: The invisible hand is a metaphor for the unseen forces that move the free market economy. Through individual self-interest and freedom of production as well as consumption, the best interest of society, as a whole, are fulfilled. Example: The Invisible Hand of the market creates predictable economic systems such as supply and demand, because humans are relatively predictable in their behavior. For example, you predict that when you go to the supermarket there will be eggs and milk for sale. Masterclass.com Is it a good thing? The invisible hand can lead to an efficient outcome – if there are no external costs/benefits. But if there are significant externalities – e.g., pollution costs, then the free market can lead to over-production of goods with these external costs. This theory isn’t really an automated process. It’s not as natural as the Sun rising in the East and setting in the West. It does need to have responsible humans at the controls. Or at least with a human hand on the release valve! However, for decades, fiscal conservatives (a misnomer that I blast a hole in on another episode) have been using the “Invisible Hand Theory” to justify transferring wealth to the – you guessed it – the Wealthy. I’m not saying the legislative advocates have bad intentions, but they’re bestowing the riches on entities that are inherently selfish! “It’s not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Adam Smith In simple terms, the above say to themselves I need to sell this steak, this beer, or this bread to be able to sustain me and my family. When things become skewed through supply and demand changes, for example, the government should wisely step in to move things back to equilibrium. An example of the theory being used for good: “As against the ‘Invisible Hand’ of Adam Smith, there seems to be a visible hand of politicians whose objective is to have the kind of society that is caring and humane.” Pierre Trudeau (Former Prime Minister of Canada) An example of the theory being used to condone personal greed: “The Invisible Hand of the market always moves faster and better than the heavy hand of government.” Mitt Romney (Republican Senator from Utah) “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” Milton Friedman (1976 Nobel Prize in Economics) Supply-side economics is an economic theory that postulates tax cuts for the wealthy result in increased savings and investment capacity for them that trickle down to the overall economy. ... The three pillars of supply-side economics are tax policy, regulatory policy, and monetary policy.
And then there are the cynics. Cutting marginal tax rates can be perceived as primarily beneficial to the wealthy, which some see as politically rather than economically motivated. “In economy, the Invisible Hand is a set of wealthy men. It’s the puppeteer who’s in charge behind the curtain.” Toba Beta (Indonesian Author) “The specific set of foolish ideas that has laid claim to the name “supply side economics” is a crank doctrine that would have had little influence if it did not appeal to the prejudices of editors and wealthy men.” “Economic theory is mostly just a collection of stories”. Paul Krugman (2008 Nobel Prize in Economics) What’s the moral of this story? Believe what you need to believe to sleep well at night. Simply put, if you’re cool with the $1.9 Trillion Covid Relief Bill that was passed with only Democratic votes and signed by a Democratic president, cash the $1,400 check! Don’t spend it all in one place! And get ready for Infrastructure Week, Biden-Harris Edition! If you are opposed to the Relief Bill, that was opposed by all of the Republicans in the Senate as well as the House of Representatives, send the check back! The Theory of the Invisible Hand is noble in the abstract. But it must be administered by men and women of compassion and decency for it not to become a crude Money Grab! Today's Quote: That invisible hand of Adam Smith seems to offer an extended middle finger to an awful lot of people. George Carlin
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About the HostKenneth E. Boone, Sr. is a writer, podcaster, music lover, sports enthusiast, and retired accountant. Archives
May 2024
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