Us, Them, We and Your Money

Who's the chump here...?

POLITICS – whether local or national – is always a con game, writes Bill Bonner in his Diary of a Rogue Economist.

And the con generally increases with the scale.

The bigger the "we", the bigger the swindle.

Recall how "us versus them" is always a scam? People are unique, with thousands of different cultures...hairstyles, religions...hobbies and businesses...prejudices...trades...and financial interests.

Playing off one group against another merely allows another group – the one with the real power – to gain at the public's expense.

Policy proposals by Republicans and Democrats set off intense political firestorms – setting "us against them" – but they leave the real distribution of power and wealth untouched.

According to the theory, voters – through their elected representatives – share out the privileges and benefits of political power in a give-and-take, in which one group is the "us" and another the "them".

Then, by "political horse trading" the tension is resolved, a consensus reached, and "we the people" come out ahead. Democracy works!

There is enough truth to this to keep the theory alive. But the public rarely comes out ahead. Because the real horse trading takes place on a whole different level.

"We" get the nag; somebody else gets the thoroughbred.

Your correspondent is down here at the ranch in Gualfin, Argentina. Should he be included in the group of "ranchers"? But wait, no respectable group of cattlemen would have him.

For he is a rank amateur...a greenhorn in every respect...far more at home in front of a computer than on a horse.

And if he had to support himself from a cattle business, well, he'd eat a lot of rangy beef, and not much more.

And yet, there is a cattlemen's association, lobbying the Argentine legislature on behalf of "we" beef herders. But the "we" is false. The rules are laid down for the benefit of the big professionals on the flat pampas, not the struggling cowmen up in the hills.

We're required to vaccinate our cows against diseases that we don't have up here in the mountains. We're required to pay our cowhands as though they were unionized laborers.

In matters of hygiene, paperwork, and pricing – we are forced into practices that are completely inappropriate to an old-fashioned, open-range, mountain cattle business. To make matters worse, young kids – fresh out of college – who know even less than we do, are sent by the government to tell us what to do.

But that is the way it is for everything in public policy. Every individual is unique; every business is different; every "we" is a lie.

You can easily see how the "we" behind tax measures is a fraud. "We want equality," say the tax mongers. "We" will be better off if we sock it to the rich, they add.

Obviously, we won't all be better off. The only way they can redistribute wealth is by taking it away from the people to whom it was distributed in the first place. Some win. Some lose. There is no "we".

Tariffs are similar. They're supposed to help "bring back jobs". We all want more jobs, right?

But break down the "we" into its component parts. Imagine that a tariff actually did save a job in Milwaukee. What good would it do the guy in Medford or Memphis? He would gain nothing. Instead, he would have to pay higher prices (if the Milwaukee guy were competitive, there would be no need for a tariff).

Overall, millions of consumers pay more so that a few people gain higher incomes and profits.

All up and down the line, it's the same thing. One person wins. The other is a chump.

What then of stimulus measures? Surely "we" all benefit from a stronger economy, right? And surely we're all better off, thanks to the Fed's stimulus policies of the last 30 years, right?

But the feds can only "stimulate" one part of the economy by unstimulating another. They can lower interest rates, for example. But then, savers earn less. Stock market speculators earn more. They can buy bonds. But what about people who don't own bonds?

Wait, you say. The saver just has to get with the program. Nothing is stopping him from speculating on stocks and bonds, too.

But the typical wage earner has neither the time, the experience, nor the deep well of cynicism needed to compete with the pros. Imagine that millions of moms and pops took their savings and piled into the stock market. God help them! The sharks would eat their lunches and drive away in their pickup trucks.

Stocks would go up to even more absurd heights – while the real economy, where real goods and services are produced – would be as lame and limp as before.

And now that you mention it, the wage earner is doubly cheated. Not only does he earn nothing on his meager savings, he also suffers from the inflation that "stimulus'' measures cause.

He hasn't been able to keep up with it; his real income is down 5% over the last 40 years. And that's by the official figures. The real damage is worse.

Take our example of purchasing a common middle-class item: a Ford F-150.

In 1971, you could buy a new Ford F-150 for $2,500. At $4 an hour, it took 625 hours to buy the truck.

Today's model costs $30,000, and the average hourly wage is $26. So, the wage earner has to work for 1,154 hours to get a standard F-150. Put another way, he has to sell almost twice as much of his time to get a set of wheels.

Did "stimulus" policies help him? No...they hurt him.

All public policies are win-lose, in other words. The feds can only give something to one group by taking it away from another. Some win. Some lose. The "we" is a fraud.

But some people always win, don't they? Who?

We can see you squirming in your seat, Dear Reader...your hand in the air...eager to shout out the answer. But hold that thought...