The Economy For Dummies
… and the Republican Tea Party

Our economy consists of many different things, Labor, Capital, Manufacturing, Distribution, Consumption of Goods and Services. All of these are driven by Supply and Demand and Needs and Wants

Supply

The goods and services that businesses produce and sell to consumers and other businesses.

Demand

The demand from consumers to buy goods and services. Manufacturer produce goods and service to supply demand.

Needs

The three basic Needs are Shelter, Food and Clothing, everything else is a Want. You may want a mansion, but a trailer can be a shelter. You may want steak and lobster to eat, but tuna fish and macaroni and cheese is enough. You may want designer clothes, but Walmart stores offer adequate clothing to cover your needs.

Wants

Wants are everything you want, but don't need to survive. You want a big screen TV, but don't need one. You want a luxury car, but there is public transportation.

Three specific groups are what drive the economy.

Consumers

The people who buy the goods and services based on our needs and wants.

Business

The people who produce (manufacturing), distribute (distributing), and sell (retail / resellers) the goods and services to the consumers

Government

The people who on a State and Federal level, regulate business (FDA, EPA, OSHA etc) and are responsible for creating and maintaining most of the country's infrastructure (roads, bridges and parks), services (police, fire, FEMA) and protection (CIA, TSA, Military)

Now that you have the basic information, and might even remember some of the terms from your economics classes, let's take a look at how they work together and what happens when things go wrong.

Consumers are what drive the economy. As long as consumers are buying, business will be producing to meet the demand. If consumers don't buy goods and services, then everything starts to slow down and backs up the system.

Over 15 million Americans became unemployed and once they became unemployed, they only bought what the needed and not so much of what they wanted. Demand dropped and as demand dropped, supply backed up.

Supply backs at up retail and resellers first. Stores are overstocked, so they have sales to help move product. Once that product moves, they do not reorder as much product as they had before. So now product is backing up at distributors, many of which will unload product anyway they can and in turn, not order as much from the manufacturer.

As business demand drops, many businesses lay off or fire employees as they don't need as many to run their business. Payroll is one of any businesses largest expenses. Reducing payroll increases the bottom line without adding any additional revenue. Raw materials used for production also slow down as manufacturers cut back. If General Motors cuts back or went under, it affects the businesses that supply the plastics, lights, wiring, hoses, tires, electronics and everything else that goes into a vehicle today. This ripple effect is the same no matter what who the manufacturer is.

Employees are also consumers and once they join the ranks of the unemployed, the cycle continues to worsen. Some smaller businesses go out of business as larger businesses hold tight on their capital assets and cut spending and jobs. Businesses are consumers too as they buy equipment and supplies from other businesses.

With consumers not spending and businesses not spending that last hope to keep the economy moving is government. Except our government is broken too. It is filled the corrupt politicians both in office and running for office, who are clueless about the "Big Picture". Over the years, since the late '70's early '80's, greed has taken over and our republic is no longer a democracy as it became a plutocracy.

Today we are a government of the rich people, by the rich people, for the rich people and the rich shall not perish from the earth, but our middle and lower class of people are. Our politicians are bought and paid for by large corporations that make sure that said politicians do what is best for the corporations and not for the masses. How else do multi billion companies like General Electric pay no taxes and get away with it? Who do you think wrote the tax laws and why?

Over 15 million Americans became unemployed and when their unemployment benefits were exhausted they stopped paying taxes and their former employers paid less taxes because they had less employees. Taxes are the government's main source of Revenue. In addition to taking in fewer taxes, Congress lowered what taxes the government was taking in by giving tax cuts. In fact many people in Congress took a pledge to not raise taxes on anybody, especially the wealthiest Americans or they would not get elected to office in the first place. Then just to make it that much worse with our country taking in less tax revenue, we decided to spend more money than we were taking in on wars, bailouts and stimulus that raised our deficit to over 14 trillion dollars.

It's like a Chess game. You don't get to Checkmate in one move, you need to plan a series of moves involving Pawns, Knights, Bishops and Rooks in order to be able to get to Check and then Checkmate. Our government lost focus on the moves needed to win and we are now lost and trying to regroup as we scramble our Pawns, Knights, Bishops and Rooks all over the board.

Our Congress fought for two years against "Obamacare" and they continue today to fight to repeal it. The Affordable Care Act (Obamacare) has provided insurance to millions people who could not get insurance and covers preventive care which can help keep people from severe illness. Yet, I don't recall as vigorous a fight from Congress about the wars that cost us billions of dollars and several thousands of lives of our sons and daughters. Then we bailed out Wall Street with TARP after they dropped our economy into the worst Recession since The Great Depression.

Many, many years ago, government knew what to do and put in place a system of rules and regulations to do it. Over the past generation or two, our government weakened and repealed a lot of those rules and regulations as we deregulated many of our industries. In turn these industries could now do things they could not do before and were blinded by greed without concern for any repercussions.

Old-Age, Survivors, and Disability Insurance (OASDI), now called Social Securty is broken because our government allowed it to be taken advantage of. It was NEVER meant to be the only source for retiremnet income, it was only meant as a base, a suppliment. Americans were expected to save a portion of their income. Over the years the cost of living went up, but income of the middle class did not go up enough to cover it so we did not save as much as we needed to and many have become dependant on Social Security to live.

Over the years our politicians decided to "borrow" from the Social Security account from time to time to pay for other things. They could not help themselves, as it was a huge pile of money and just too tempting for them to leave alone. Over the years millions if not billions have been borrowed from it, but never repaid. To make it even easier to steal, (I mean borrow) politicians got the Social Security account moved from it's own account into the General Account. Now our politicians talk about "fixing" Social Security but not about repaying what is owed to it, which would actually fix it.

In the game of Chess with the exception of the Knight, you cannot move any of your other pieces until you have moved some Pawns out of the way. Once you know the moves to make, how the pieces move and interact, then you can focus on winning the game. Our problem is our politicians do not know how to play the game, so most of us end up losing.

EMAIL||FLAG THIS POST