Economics 101

by Kerry Thomas

March 4, 2004

It would seem that a little bit of basic economic education is sorely needed in parts of the electorate these days, especially among those who believe the plans the Democrats are putting forth will do anything to help the American economy.

Democrats, both here in Wisconsin and in Washington, are pushing a plan to increase the minimum wage. They say the minimum wage needs to be set at a level they call a "living wage." They never seem to define just exactly what that phrase means, but they want you to infer that, since Democrats are so compassionate and care so much about the little guy, it means a wage level that will support a "working family" (yet another vague undefined term). Forget the fact that about 75% of those working for the minimum wage are teens, part time workers, and those with few marketable job skills.

Employees are paid based on how productive they are to a business, according to their job skills. New employees, with few job skills, are not as valuable as more seasoned (read that productive) employees. As someone increases his productivity, he becomes more valuable to a business, and his wages rise accordingly.

Why is $5.25 not enough, but $6.25 is enough? Why not make the minimum wage $10/hour? Why not $20? Why don't we just pass a law that says everyone should make $50,000/year? No, wait, make it $100,000. Those who earn more than $100,000 will have the remainder of their salaries taxed at 100%, and we'll turn around and give the tax revenue from that to those who don't earn $100,000/year. In other words, from each according to his ability to pay, to each according to his needs, or wants.

Can anyone see a problem here? For those of you who realize that if this were the case, there would be no incentive for anyone to work hard enough to make more than $100,000. It shouldn't take long for that tax revenue stream (from the $100,000+ tax bracket) to dry up completely.

And when did it become a crime to be rich in America? Aren't we all trying to earn more? Keeping the greedy hand of a government bureaucrat out of your pocket just might help you keep more of what you earn for yourself.

Next. Liberal John Kerry wants to "roll back the Bush tax cuts.'' Why can't he just say he wants to raise taxes? He's hoping you aren't bright enough to figure out that rolling back a tax cut means raise your taxes. And if you think your taxes are too low, there is nothing stopping you from voluntarily paying more money to the government you love.

It needs to be said again that reducing marginal tax rates actually increases tax revenues to the government. Seems paradoxical to some, but it's happened that way whenever it's been tried here in America. Worked for Ronald Reagan. Worked for John Kennedy.

You see, what happens is that when people are allowed to keep more of what they earn for themselves, rather than being forced to pay it to the government, they have an incentive to work harder, and produce more. The economic pie gets bigger, and there's more to go around for everybody. Conversely, when you tax more of what somebody earns, there's less of an incentive to work that much harder. The economy shrinks. The pie gets smaller.

The best way to grow the economy in a capitalistic society is to lower taxes, reduce costly government regulations, and let the natural creativity and entrepreneurship of the American people go to work for itself. Let's see, is there a candidate in the Presidential race who's trying to do that? Hint. It's not the Democrats.