Yes, There Is Such Thing As A Free Lunch

[Dovahkiin]

I'm sure this will make some heads turn. Try reading it before you shout out the usual partisan nonsense.
Yes, There Is Such Thing As A Free Lunch

With the presidential campaign season in full swing, a number of hopefuls have made a point of specifying the monetary cost of various government programs. Some have done so in the context of how they will finance their own ideas while others have used the opportunity to argue that we can’t afford to pay for the programs we already have in place. In both cases, however, they are missing a fundamental point: at the national level, money is not the issue, resources are.
“We can’t afford to continue to fund Social Security,” they are saying that we lack sufficient winning tickets to hand out to seniors. Okay, print some more. If that’s the only problem, then solving it is trivial (notwithstanding any politics). On the other hand, if we lack the ability to produce sufficient goods and services for both the working and the retired, then we’re screwed. Our ability to support Social Security depends on productivity and not how much money we have. If the latter becomes an issue, it can be solved overnight; the former cannot (for a longer explanation of these issues as related to Social Security see: Why Social Security Cannot Go Bankrupt).

In summary, it is quite natural and logical to focus on money as the binding constraint at the individual level but it is illogical to view it as such at the macro level. A constraint does exist (i.e., resources), however, and so it is still possible for a candidate to be correct regarding our ability or inability to sustain a particular program. The specifics could obviously vary, but as a general rule one can say the following about that:

1. If the economy is at full employment, then we cannot afford to add new activities (in either the private or public sector) without subtracting from others. There is no such thing as a free lunch.
2. If the economy is at less-than-full employment, then it is possible that we may be able to add new activities (in either the private or public sector) without subtracting elsewhere. There is such thing as a free lunch.
   In the midst of World War Two, U.S. unemployment stood at 1.9%, which is as close to full employment as we can realistically expect to get. Under those circumstances, it was impossible to do more in one area without doing less elsewhere. Back in 2010, however, we had almost 15 million Americans involuntarily unemployed (corresponding to an overall rate of 9.6%). Industrial capacity utilization that same year was estimated to be 74%. There were plenty of free lunches to be had.
   
   And yet, because people (including politicians) mistakenly view money as a binding constraint even at the macro level, situations like 2010 are exactly when they think “we can’t afford this.” They interpret the decline in revenue caused by the low level of economic activity in the same way that they would a downturn in their personal finances. But the exact opposite is true! In actuality, high levels of unemployment create free lunches galore and exactly when we need them. We can, should, and must do more rather than less under those circumstances.
   
3. The latest unemployment figures suggest that there are almost eight million Americans out of work (5% of the workforce). Adding in underemployment and discouraged workers puts this substantially higher (almost 10% of the workforce). The situation in Europe is far worse. Logically, this should tell us that governments have tremendous leeway to create programs that can put these individuals to work and, at the same time, stimulate the private sector and restore sales and profits. However, because this is not how it is understood, the worldwide slump is leading governments to reduce, rather than increase, their level of economic activity (aka austerity). They don’t think they have enough winning raffle tickets to do what really needs to be done. This is totally illogical and is having catastrophic consequences economically, socially, and politically.
   
   There are plenty of free lunches to be had, but we are leaving people to starve. There is no justification for it. None whatsoever.

 

[Dovahkiin]

I expect, from what I've seen of this site, posts like this: "PEOPLE WHO DON'T WORK HARD NEED TO DO BETTER. I DON'T CARE ABOUT HAVING AN ACTUAL DISCUSSION." will soon appear. How exciting.

 

[Damaged Eagle]

You can keep believing that however... When you say it's a your human right to be feed and no one puts a plate of food in your hands because you didn't work even though you were capable of doing so it's also your human right to starve.

*****SMILE*****