Category: economics


I honestly watch John Boehner every time he defends not taxing the richest Americans to see if I can find a valid reason why this is so. I have yet to hear it. The only argument I hear is that taxing the richest people will kill jobs created by the “job-creators.” This is nonsense.

First this is because there is one thing that humans do that is¬†logical but doesn’t help the economy: we save money.

It doesn’t take an economics degree to know that the circulation of money stimulates the economy.

So, unless all CEOs are constantly on the brink of bankruptcy because they are perfectly hiring the maximum number of workers to maintain a maximal production level, taxing them will not affect the economy, it will simply reduce the money that goes into their savings accounts.

Further, what do you think would happen in the conundrum of a large company being taxed at a rate that made them choose between going into the red temporarily and growing the company by hiring the number of workers required or staying in the black and letting the company stagnate because it doesn’t have enough workers? If you have any sense, you would take the hit and go into the red because the competition, which is dealing with the same taxes, might try to grow their company larger than yours. Therefore, intelligent CEOs would still take a hit to grow their company, so long as the increased taxes were reasonable (which Obama’s suggestions are).

I admit that this argument that taxation reduces hiring does actually apply to small- and medium-sized companies because many of these companies are actually often in jeopardy of going bankrupt with or without additional taxation. However, we rarely see a company the size of Walmart go bankrupt by minor disruptions in its business.

So, in short, since a CEO is always going to try to maximize their company’s growth, this argument that taxation on the wealthiest Americans will kill jobs doesn’t hold water.

Many people worry about how much money their country “gives away” to other countries through foreign aid.

Why do we throw away our money like this?

In short, it is not throwing away money.

After World War II Europe and Japan were decimated and America arose as the predominant superpower (Russia being somewhat further behind); mostly due to the war-time economic boom (building munitions and vehicles) and the fact that the only part of their landmass that was damaged was Pearl Harbor.

So, an economic layman might think, why not just sit back as the superpower and enjoy the benefits? The problem is that international trade is a necessity in the modern world. The days of mercantilism were over and America needed countries to provide cheap products and raw materials to trade.

The Marshall Plan was perhaps one of the greatest economic decisions by the White House. The amount of money “wasted” was in the tens of billions. Yet, this was not charity.

The end result of the Marshall Plan was the creation of the greatest economies in Europe and Asia: Germany and Japan, respectively. People know that products from Japan are now top or near top quality; however, people forget that products from Japan were at one time very cheap and not the greatest quality. As a country develops, it can acquire more technology and invest more in research and development and thus improve the quality of its products. This has happened with both Germany and Japan since WWII.

After the Korean War, the same situation happened. I remember reading a book about Korean history, and I can’t remember the exact numbers, but I remember the comparison of how much money was pumped into South Korea yearly, because it was shocking. The amount of money given to South Korea after the Korean war yearly was almost as much as was invested in the entire American South yearly. I was blown away by that figure, but I suppose that the American economists had the foresight to realize that this was a good investment. Accordingly, the South Korean “miracle” was created (heavy quotes because pumping that much money into such a small and, at that time, poor country and having incredible results is not exactly a miracle as much as an obvious result).

Now, there are other ways that America spends its foreign aid too. Countries such as Pakistan and Egypt receive foreign aid, but this is not an investment in their development, per se. It is an investment in their stability and cooperation with the United States (although, granted, they are not always cooperative). This foreign aid, then, is a kind of diplomacy which is necessary for a country that is the global hegemon to invest in. Also, keep in mind that this amount of foreign aid pales in comparison to the aforementioned foreign aid contributions to Japan, Germany or Korea.

Is there a reason that powerful governments don’t emphasize this point more clearly? Probably. What sounds better: your country is donating money to help another country or that your country is giving money to another country not because it cares about that country but in its own self interest to create and maintain trading partners? Of course the former sounds nicer, and it is the assumption by most people; however, it is just not true.

So, is foreign aid a waste of money? Only if you think investing in the future is a waste of money.


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