Earnings-Based Consumption
We cannot spend our way to good economic health, even in the short run. We have to produce.
John Stiglitz, Chief Economist of the World Bank from 1997 - 2002 took callers on CSPAN this morning, one of which was a democrat who suggested (paraphrasing), "With the economic downturn and the tax payers being the problem, with the bad mortgages and such, why not just give every American one million dollars? Then people would spend money, helping businesses, and letting people keep their houses and jobs."
Why stop at one million?? Why not 10? How about 100 million? We'd all be set for life.
I'm all for consumption as a important part of market health. However, the problem with consumption based on money given versus money earned is that, when given, you have no skin in the game. No risk taken. This changes everything. If you lose it all because of a bad decision, oh well.
With money earned, you have a vested interest in not seeing it disappear. With money earned, you do your best to get the maximum value you can for every penny. This kind of incentive works. Money-given based consumption eventually reduces productivity to point of total dependency. This is socialism and, as history shows, has a strong track record for destroying markets.
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