“Have you lost your mind? Is that it? … I leave for work, and you take a complete leave of your senses?” – Darryl, Thelma & Louise
Over the past few weeks Congress has been debating budget cuts for 2011 and beyond. The budget deficit for this year is forecast to be somewhere in the neighborhood of $1.4 trillion. Republicans and Democrats are debating whether to cut $6 billion or $60 billion – Naturally I have thoughts on the subject. First, let’s begin with a simple view of economy (because it will be useful when we get to budget rhetoric).
Suppose I have $300,000 in my pocket (or perhaps a bag), and I decide that I want to buy a new house. I go buy some land and hire a contractor who draws up plans, buys material, hires workers, and builds me a house. At the end, I hand him my bag of money and he gives me the house.
Has wealth been generated? Undoubtedly – there is now a house where there was not before. Am I richer? No. I have traded one asset (cash) for another (house). I’m no better or worse off (other than the fact that my wife very much likes the new house which has a big back yard where the kids can play and be out of her hair for a while – let’s call that a plus for me.) So who is wealthier since wealth has been created? Well, it’s the workers. They traded their time and skills for my money. (Yes, the people who owned the resources are perhaps a little better off, but like me they have traded one asset for another.)
I say this to simply note that it is production that creates wealth. That’s it. Productivity matters. (It is not directly spending that drives the economy – it is production. To the extent that spending causes production, then fine, but it is the production that matters.)
This brings me to Dietrich Bonhoeffer. I’m currently reading Life Together (and a number of other books that I can’t seem to finish in a reasonable time frame). In discussing a day in the life of Christians, Bonhoeffer spends a decent chunk of time discussing work, noting that “after the first morning hour [to which Bonhoeffer ascribes prayer and reading] the Christian’s life until evening belongs to work.” He later makes notes which speak interestingly to the purpose of work and the nature of compensation (and who doesn’t like compensation?): “In work the Christian allows himself to be limited by the task, and thus for him the work becomes a remedy against the indolence and sloth of the flesh.” Later notes, “The scriptures say ‘If a man will not work, neither let him eat’ and thus make the receiving of bread strictly dependent upon working for it. But the scriptures do not say anything about any claim the working person has upon God for the bread. The work is commanded, indeed, but the bread is God’s free and gracious gift.”
To this we say first, that work is indeed commanded. Sloth and laziness are not to be tolerated in the life of the Christian. God put us here for a reason and it was not to sit around on our back-sides all day doing nothing. (No, we are not strictly beasts of burden either.)
In regards to compensation, Bonhoeffer makes clear that we ought to be working (that is producing) regardless of receiving compensation. Now, that is not to say that compensation is bad, or that we should have no care for it. If you care for clothing and feeding your family, putting a roof overhead, and aiding the poor and needy around you, you certainly will give some thought to compensation. However, the notion that we only work for compensation has to go by the wayside. We work for the Lord (see Col 3:23).
This has fairly far-reaching implications, particularly in a country where unemployment is in the 9% range. If you’re out of work – then you ought to be working. Yes, look for a job that will pay, but don’t stop working. Build a patio, fix the neighbor’s fence, volunteer at a charitable organization – do something. You’ll be happier and you’ll be more productive. (My understanding is that people who are working, even without being compensated, are much more likely to find a paying job than those who are simply out of work. I’ll try to dig up the study.)
As for the economy, remember that it is productivity that matters. I’ve said before that if we want to grow the economy by 5% this year then all that is needed is for each of us to produce 5% more. So go produce 5% more today. I know, you’re already running at full tilt. And yet it seems there is always something more we can do to improve efficiency. Each one can think it over for themselves.
So, what does any of this have to do with Thelma & Louise? Glad you asked. As Congress debated budget cuts last week, federal reserve chairman Ben Bernanke injected his opinion. Ben expressed concern, as have others, that making budget cuts that are too deep will harm the nascent “recovery” in the economy, and that addressing the budget is something that should be done – “But I think it would be most effective if we did that over a timeframe of 5 or 10 years and not try to do everything immediately.”
(If you see the outright absurdity of these comments, then you can probably stop reading – I’m not going to deal with anything but the obvious in the next few words.)
First, remember that it is productivity that matters. The notion that deficit spending is an economic benefit is Keynesian foolishness. Spending what you don’t have is no more than consuming what you have not produced. The notion that more deficit spending will bring economic benefit is tantamount to saying “we need to consume more so that we will be more productive.” It fundamentally reverses causality – first you produce then you consume. Bernanke and his Keynesian clowns believe that production and consumption are correlated (and they typically are) – and if we just increase one the other will follow (and consumption is much easier to increase). (Yes, I know that government spending impacts economic activity – but that impact generally corrupts the free market and ultimately brings no lasting benefit.)
Furthermore, I scratch my head as to the notion of cutting $60 billion out of a $1.4 trillion deficit is “doing everything at once.” No, cutting $1.4 trillion would be doing everything at once.
To this end, we note the wisdom of Thelma and Louise. Go big, or go home.
I often feel like Harvey Keitel’s character, who desperately wanted to rescue Thelma and Louise from a cycle of events that was spiraling out of control and may not have completely been their fault. He wanted to restore them to normalcy and help them wipe the slate clean. He watched in horror as they drove the car off the cliff in a glorious flight toward their ultimate destruction.
But, alas, they had it right. Cars don’t fly. It makes absolutely zero sense to drive a car off a cliff slowly. You’ll die just the same, it will probably hurt more, and you will not have a spectacular finish. If you’re going to go, go big.
Cutting $60 billion out of a $1.4 trillion deficit (4.28%) is just easing the foot off the accelerator a bit. Guys, either take your foot of the accelerator (i.e. cut $500 billion to show us you mean business) or peg it to the floor. Anything in between is meaningless. We’re going off the cliff just the same, and I’d rather go big.