Signed, Economic Reality

Blog post 1

I saw this meme circling on facebook and thought it would be an excellent place to start for Kyle’s Fyles. In one sentence we get two of the most false and destructive arguments we hear from those on the left. This post makes the argument that we have a consumer based economy, and that a raise in the minimum wage will stimulate that as it will put money in the hands of more workers.

Lets start with the consumer based economy myth. Today mainstream economist push that our economy is consumer driven. They claim that what causes an economy to grow is spending, especially on consumer goods. They often use the example of the great depression and claim that because the people could not buy anything the economy stayed bad for so long, and it was only FDR and his work and welfare programs saved us from this danger
produced by the free market.

People who make this claim always overlook the fact that you have to produce before you consume. You cannot have something that does not exist. This means that not everyone can always be spending all of their money on consumption because someone must be saving enough capital to build inventory to be sold to the consumers later.

The belief that we have a consumer driven economy also ignores how an economy grows. In order to grow an economy you need savings. When people save they can invest. Investment leads to improvements in quality of life for everyone. If you want to design a new drug to cure diabetes no one can consume the drugs until 10-20 years after it was thought of. Someone needs to have saved enough  wealth and be willing to lead it to other so they can spend 10-20 not producing, but on testing and development. If everyone spends everything, how can this happen?

This meme also says the minimum wage in nearly a decade. This is a lie. On a state a city level minimum wages have been raising all over the country.

Even if we did have a consumer driven economy raising the minimum wage will not help. Minimum wage laws leads to people losing jobs, more automation and less jobs being created. It also takes out more rungs at the bottom of the ladder making it harder for people to climb up. Remember the minimum wage makes it illegal for you to sell your labor for less than the minimum wage. With a minimum wage you have to convince an employer you can produce at least the minimum wage, at a $15 minimum wage its going to be hard for an employer to justify taking a chance on a 16 year old high school student.

Real wealth is created by innovation and investment. We need to save so other can borrow that money to research and develop new technologies that better everyone’s life.

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