The Private Equity for Families Blog

If You Give a Politician a Printing Press?

Laura Numeroff writes really popular children’s’ books. She is famous for her series on animals: “If You Give A Moose A Muffin”, “If You Give A Mouse A Cookie”, “If You Give A Pig A Pancake”, and many others. These are fun books for kids because of alliteration and constant action. Most importantly, at bedtime, they are quick reads and, if you fall asleep, the kids can usually finish the books without you.

Each has the same theme. The animal is never satisfied with your act of kindness. He or she just wants more: “If you give a pig a pancake, he will want syrup.” Most of the books end with the animals in charge of the house dispensing havoc and disorder. You hope your child or grandchild gets the idea that being a selfish pig is a bad way to live.

The same sort of great expectations are now a fixture of our political promised land:

  • If you give unemployment benefits to a steelworker, she will want universal healthcare;
  • If you give payroll protection to a factory worker, he will want his college loans forgiven;
  • If you give Guaranteed Minimum Income to a retiree, she will want a CPI escalator.

These promises are now gaining mainstream acceptance because they are being mislabeled as “stimulus” in the time of coronavirus. While a crisis is always too tempting for a politician to waste, this justification is voodoo economics and utter hogwash.

It Is an Election Year

 If you give a pig a pancake and you don’t make it conditional on how the benefit is spent, you do absolutely nothing for increasing gross domestic product, job creation, or the welfare of the nation as a whole. You are just giving a Republican or Democrat a printing press so he or she can get elected.

When the CARES Act sends $1,200 checks to middle and lower class citizens it is not creating stimulus it is just printing money. Stimulus happens when there is an incentive like “use it or lose it”, to spend that money on goods and services. Having the stock market go up, or having the recipient put it in a savings account, while both desirable, do nothing for GDP. They only benefit a small cohort of already wealthy capitalists. In many cases the response to the pandemic is not meant to stimulate anything other than a mail-in ballot in November.

This begs the question of when the real stimulus will start? A big part of the CARES ACT is conditional loan forgiveness for employers to keep a workforce in place. While not directly incenting employee behavior, a job pays the rent, the grocery bill and utilities. Keeping businesses open and ready for a quick recovery is good for GDP.

Here are some popular political programs already in place or part of national political discussion that will not do anything for GDP because they are not tied to spending on things like autos, rent, health insurance, travel, dining, entertainment or home improvements:

Unemployment Benefits   many states have programs that incent unemployed not to return to work. I am not aware of any program that dictates how the benefit must be spent. The presumption is these benefits will be spent on the necessities with immediate impact on GDP. I wonder whether someone who works for his pay is more likely to participate in the consumer rebound than a recipient of unemployment?

Student Loan Forgiveness – I am not aware of any carrot or stick in any forgiveness proposal that predicates student loan forgiveness on a commensurate investment in America. Without a quid pro quo, forgiving student loans will not do anything for pandemic recovery.

Bailouts For States and Municipalities – as the Federal Reserve begins to buy bonds from states and municipalities with such poor credit they cannot access traditional debt markets, I wonder what behavior this incents other than continuing reckless management by existing leadership.

Guaranteed Minimum Income There is a growing drumbeat for an unconditional, annual subsistence payment like you find in many European countries.

A Printing Press For Politicians

Laura Numeroff may have a new career writing economics books for adults:

If you give a politician a printing press he will want:

  • paper, ink and engraved currency plates to print money;
  • shovel-ready projects to spend money;
  • his or her name on those projects; 
  • a pay raise;
  • guaranteed national income for his or her supporters;
  • and free pancakes and syrup for his or her fundraisers.

When I asked my eight-year-old grandson what he thought the message of Laura Numeroff’s books were to children, he blinked a few times and then stated confidently; “THEY ALWAYS WANT MORE”.


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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records Founder and chairman of CapitalWorks, he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CapitalWorks or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.

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