People Don't Seem To Understand How The Economy Works

Americans like a lot of sensible economic ideas. They support a raising of the minimum wage to at least $10.10 an hour. They oppose benefit cuts to Social Security (and most would like to see those benefits enhanced). They oppose abolishing Medicare or repealing Obamacare. They support a small increase in taxes for the rich, and want corporations to be made to pay their share of income taxes. They support a realistic job creation program, and oppose the exporting of good American jobs. And they believe the government should enact policies that would reduce the wealth/income inequality in the United States.

Those are all good things. But every now and then something comes along that makes me think that most Americans don't really understand how our economy (or any capitalist economy) works. And one of those things is the new Rasmussen Poll -- taken on January 27th and 28th of a random national sample of 800 likely voters, with a margin of error of 3.5 points.

In that survey (whose results are in the chart above), about 54% of all adults think an across-the-board cut for all government programs would be a good thing. They seem to have accepted the Republican argument that cutting the budget would be a good thing for the economy -- that "austerity" is the way to get a sluggish economy moving again.

There is one thing wrong with that argument. That's not the way our economy works (or the way any regulated capitalist economy works). Cutting government programs actually shrinks the economy by taking money out of it. Cutting government spending would actually hurt everyone in this country. It would hurt businesses because a huge number of people would have less money to spend in those businesses. It would hurt workers because when sales go down for business, wages are stagnated and those businesses will lay off more workers. And it would hurt consumers, because businesses would have to raise prices to cover the drop in sales.

The truth is that in a recession, or an economy still trying to recover from a recession, shrinking the economy by cutting government programs is the worst thing you can do. The economy needs to be expanded, even if that means more government spending. This would give the masses more money to spend, and that increased spending would create more demand for the goods/services of businesses, which would create more jobs to service that increased demand (and keep prices from rising since business sales are profits are up).

Some of you may be saying at this point -- wouldn't that increase the budget deficit and national debt? Only in the short term. The increase in jobs and profits would actually increase government revenues and, over the long term, would pay down that deficit and debt -- and a small increase in taxes on the rich (and making corporations pay their taxes) would help pay down the deficit and debt even faster. We don't need to make government cuts to decrease the deficit and debt.

Don't accept the Republican lie that budget cuts are needed. They aren't really interested in paying the deficit and debt down. They are the ones that created the current deficit (remember, Bill Clinton left office with a budget surplus -- which the Republicans instantly turned into a huge deficit with tax cuts for the rich and two unnecessary wars). Republicans just want those cuts so they can give the rich even more tax cuts -- and they don't really care what it does to the economy or struggling Americans.