Kidz Korner is a relatively new feature here on The Reformed Broker where I explain complex financial issues to kids from the neighborhood in a simple, straightforward way.
Little Timmy Johnson: Hey Mister TRB, can I ask you a question?
The Reformed Broker: You just did…
Timmy: Oh. Sorry, can I ask you another one?
TRB: You just did again. Just kidding, son, ask away.
Timmy: Well, it’s like this, see. My teacher was saying that President Obama is gonna save the economy with something called “Stimulus“, but then she said that we have to pay for the, umm, stimulus by giving the government more taxes. How does that work?
TRB: Very simple, it doesn’t work. They are calling it stimulus but, in fact, it is just a redistribution of the remaining money we have left.
TRB: Your question was exactly right. The government is giving away money by taking our money. Then they are going to tell us that they need even more of our money back to pay for what they gave out.
Timmy: I still don’t understand…
TRB: OK, let’s say you and your friends want to get a new game for your Nintendo Wii, but you don’t have any money. You are told by your parents that you can have your new game, but in order to pay for the cost of the game, you have to unplug the Wii console itself from the electrical outlet in one week. So now you have the new game, but because of the future cost, you will barely be able to enjoy it.
Timmy: That kinda sucks, Mister.
TRB: It gets worse. The stimulus bill itself is meant to revive the economy and encourage hiring, but most of the items in the bill have absolutely nothing to do with the economy and won’t lead to any hiring other than for road gang jobs that even prisoners would gripe at having to do.
This would be like your parents giving you a Playstation or an XBox game for your Nintendo system. So now, you’ll be paying the cost in the near-future by having to unplug the Wii plus you got the wrong game for your troubles anyway.
Timmy: So why are they doing that?
TRB: Two reasons – First, when people are in trouble, they get desperate and do crazy things without thinking them through.
Second, whenever a new president takes over during troubled times, he gets to use the trouble that was created under the last president as an excuse to cram his own ideas down peoples’ throats like your mommy crams broccoli down your throat. That’s why he is using the stimulus plan to take money from people he doesn’t like and give it to people he does like.
Timmy: So then at least the people he likes are going to get some stimulizing, right?
TRB: Yeah, no. Because the people Obama likes, union workers for example, are only going to get short-term help, like that burst of energy you get from eating a candy bar. But then they will lose their jobs and be in even worse shape, because the taxes that will be needed to pay for that short-term burst will hurt the companies they work for. His union friends will love his stimulus now and hate it when the bill comes due.
Timmy: So Obama’s the bad guy then?
TRB: No, well sort of. But the other guys are bad guys, too. Because they were so greedy and reckless that everything fell apart. And that’s why he and his friends are now in charge in the first place.
Timmy: Oh. So I guess my teacher isn’t wrong or right. Thanks for explaining that to me, TRB.
TRB: Don’t thank me yet. After all, it’s your generation that’s going to have to pay for my generation’s mistakes…so I guess I should be saying thank you to you!
Timmy: I see. I think I’m gonna go kick some windows out around the neighborhood with my friends. Who cares anymore?
TRB: Atta boy…just don’t get anything pierced.