Economy for a Ten Year Old
Last evening my wife, oldest son, his two daughters and I were sitting in the living room at home (in Apple Valley, Minnesota) chatting. My granddaughters wanted for us to turn on the TV but I declined stating that it would be much better to talk than to watch some mindless program.
One thing led to another and somehow we started talking about the current state of the US economy. My two granddaughters asked what were we talking about. My son took the lead with an example, which might not be only good for a ten and an eight year old but for most Naive Americans including President Obama and his economic advisors.
Due to space limitations I am not going to go in detail on our two hour conversation / discussion / learning session. I am just going to provide a sample of it.
My son drew an analogy that each house in our neighborhood was a country. Our home was the USA. For sake of argument we had a million dollars is cash. Other homes represented different countries. Our neighbor to the left was assigned China. I was assigned the roll of president, my son was a car manufacturer (i.e., GM), my oldest granddaughter ran a business that manufactured car parts, and my youngest granddaughter was a physician. For some reason my wife just added her comments and opinions. She did not assume a roll in our economy. Perhaps she was representing the news.
In our example the car manufacturer used to purchase parts from the small business for about $100 (the example was aimed at kids). The car manufacturer would sell a car for $1,000. The money stayed (changed hands) in the country. My granddaughter could see the physician who would charge $20 per visit. With time all Naive Americans could purchase a car. Life was good. The kids followed up on the idea with some additional examples.
Now the greedy car manufacture (my son) came to me (the president representing politicians at large) and gave me money in the form of political contributions (perfectly legal but complete immoral) for me to allow the car manufacturer to get the cars from my neighbor (China). My granddaughter lost her job. She was not able to see the doctor when needed. In fact she did not have money for anything. My son (the car manufacturer) reduced the retail price of his cars from $1,000 down to $990. The difference was pocketed by bonuses and stockholder dividends. Cars were now cheaper but fewer people in our house (the USA) could buy them.
When my granddaughter needed a different doctor (a specialist) in a different house she was unable to afford it.
We then changed the scope by going back in time some fifty years. Things were different in our neighborhood (actually in the world). Our house (the USA) used to produce automobiles, people in our house and other houses in the neighborhood wanted to purchase our cars (and goods). Money was coming in (no deficit) to our house. Life was good.
After the exercise my granddaughter asked is the USA would ever be like it used to be. I answered as follows: “If things continue as they have been in the past fifty years, the answer is NO. We need radical changes at different levels for something like that to occur”.
Mr. Obama, could you please take a few minutes to explain this example to your economical advisors and in the near future on one of your economical addresses to the US could you explain how “our house” (representing the USA) would be able to produce goods and services desirable to the rest of “the neighborhood” (representing the world)?
Naive Americans are still waiting for the CHANGE you promised during your presidential campaign. Without additional sources of revenues none of your proposed programs including healthcare will be successful. They may be started but in a few years will be bankrupt like the rest of ideas proposed and executed by previous administrations. Do not forget that bureaucracy does not produce a cent. It costs billions of dollars a year. Without revenue there is no hope for our country.
Yours truly,
The Naive American
