The Underpants School of Economics

The Beloved Spouse has reminded me of one of our favorite South Park episodes. In it, the boys’ friend Tweak is unable to sleep at night because of the Underpants Gnomes, who creep into his drawers and steal his, well, drawers.

Stan and Kyle and Cartman follow the Underpants Gnomes to their secret lair. (I forget whether Kenny was dead yet.) After a brief discussion, the head gnome shares his plan for wealth with the boys:

1. Underpants

2. ???

3. Profit

This is eerily like how the Republicans want to get the economy running again:

1. Austerity

2. ???

3. Prosperity (at least for some)

The Beloved Spouse wondered what George Carlin would think of this. (What other blog delivers such a wealth of cultural references?) She thinks it might go something like this:

Scenario:

The Worker

Out-of-work man.

Unskilled, no formal training. Construction. Warehouse work.

Married. Four kids. Wife works at low end department store.

Does odd jobs to keep the family afloat.

Rents a house.

Our Government

Is in charge of big projects that benefit the entire country.

Has lots of infrastructure that needs repair or replacement.

Has lots of new projects that need doing.

The Idea

Government hires this man to work on a project.

Government pays him a decent wage.

The man now has money to pay his bills, and  can now afford to buy more things for his family.

The family can go to the dentist, buy new shoes, have a vacation, buy a better car, buy a washing machine and dryer, go to the movies, etc.

Every time a dollar goes into this man's pocket, he probably spends all of it.

Every dollar that he spends goes to buy stuff or services.

That creates demand for stuff and services

Manufacturers make more stuff when there's demand for more stuff.

Service industries expand their services when there's more demand for services.

That means more jobs for folks in manufacturing, sales, services, etc.

Bonus! Our country now has safer roads, bridges, schools, etc.

The Outcome

Profit

This is such an elegant and obvious solution it’s hard to see how it can be argued with, except on the grounds of intellectual dishonesty (Paul Ryan, Eric Cantor) or severe mental impairment (Rick Perry, Michele Bachman). Trickle-Down economics hasn’t worked, and it’s not going to. Reagan’s economic Rasputin, David Stockman, knew it wouldn’t work when he implemented it, and admitted as much after he was safely out of government service. Trickle-Down economics is like standing a pyramid on its head; inherently unstable and unreliable.

What we need is Percolate Up economics. Give the above construction worker with four kids some money and he’ll spend it right now, on food or housing or car repairs. Give that money to someone in the highest earning one percent and he’ll either bank it, or, if he does buy something like a car, it will be a BMW. I’m all for free trade, but Germans have their economy better under control than we do. They’ll be fine.

Instead of giving a few people a lot of money through tax cuts, give a little money to each of a lot of people. Every dollar you give them will bring between 1.5 and two dollars back as it works its way through the economy after he buys a washing machine that allows Sears to order more, which allows whoever makes Kenmores (it’s not Sears, you know) to hire more washing machine builders n who can then fix their leaky roofs and basements, thus putting some construction guys to work. And on and on.

As for the alleged deficit hawks who think only government spending adds to the debt and tax cuts are somehow revenue neutral, look at your own finances. A dollar spent is no more damaging to the bottom line than a dollar not taken in.

I’ll talk about job creators another day.