Thursday, 2 April 2009

Letters to Kevin

I'm not going to actually put pen to paper, because I don't want to waste the time of some poor, overworked underling in the Office of Prime Muncher. However, here is the gist of what I would say:

Dear Kev and Woin

I am writing to you to tell you how I am spending your cash giveaways.

Or not, as the case may be.

You see, our family has received $3,000 in cash handouts to date. That's nice. We've added that lot to the other pile that we already have in the bank. For we are savers, rather than debt-strapped got-to-have-the-latest-toy-now consumers. We have no intention of spending the money that you loaned us, or blowing the rest of our savings in an orgy of Chinese-made tat and Italian loafers.

For you did not really "give" us any money at all. In effect, it is a loan. You have handed out more money than you collected from us last year, and the difference had to be made up by borrowing it on the open market. You took that borrowed money and then loaned it to us - although you happened to call it a gift. I call it a loan.

Because the day will come when it has to be paid back. With interest.

And since you have handed that money over to both those that pay tax and those that don't, you have in fact saddled us taxpayers with a requirement to pay back much more in the future than we have received.

Let me explain.

Assume a country with 100 residents, of whom 50 pay tax, and the other 50 live off the sweat of the former. You give all 100 residents a $100 gift, regardless of whether they have contributed to the government's coffers in their lives or not.

In order to hand out that money, you had to borrow $10,000.

A few years later, the bank comes calling, and you have to pay it back. After say 5 years with interest rates running at 5%, you now have to pay back $12,763.

How do you raise that money?

By taxing the taxpayers even harder of course, since they are the only ones with any income or assets. But you only have 50 taxpayers, so their share of the repayments comes to $255 each.

So you can see what I am saving the money you "gave" us. In the example above, you would have given us $100, and then expected us to pay back $255 further down the road. Some "gift".

We are not stupid. We can work out what is going to happen.

Not only do I have to save the $3,000 that you have given us, but I know that I need to put away at least that amount again in order to meet my future increased tax obligations. In other words, all you have stimulated me to do is to cut my consumption and save even more, because you are going to screw me over in the future. With interest. I will not only have to pay my share back, but I will also have to pay for the bludgers that contribute nothing to your coffers. And to cap it off, with the next round of handouts to drunks, gamblers and the indolent, you are going to give those that earn nothing a wad of $900 and those that earn a decent living only $250.

And who do you think will be paying that lot back? The high earners of course. In the case of the next "stimulus package", if you "give" me only $250, I know that I will have to put away at least $2,000 in order to meet the future obligations that you have lumped us with.

If you ask me, that is a pretty funny way to stimulate the economy. Funny as in ha-ha, I just cut my leg off.

Yours with no sincerity at all


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