moneyFYI
Financial Freedom Is Merely Organized Common Sense
No One Party Can Govern All Of The Time
As a politician, once you know that fact you can attempt the next best thing. Govern most of the time. That goal is an easy one because you do not have to be competent to implement it. There is a trick of course. You need to choose the times when you do not govern.
I should point out that this argument does not make sense in countries where the primary objective is to govern effectively. I believe there may be one of these still existing. The rest have gone to the dark side and governance has been replaced by politics. A poor trade.
Suppose there are two parties. With more parties, what follows is still true but the discussion is confusing.
In our confined discussion model, Party A is incompetent and Party B is not. By reason of their incompetence, Party A will govern most of the time.
I hear the cries of “WHY?”
It is simple really, incompetent parties do things and spend money politically rather than economically or socially. They do not recognize limits to how they can and should be involved. Evil may have a limit, but goodness has none.
Competent governments are more disciplined.
Incompetence gets votes because voters seem to get things for nothing. While I am not opposed to getting things, I recognize that it is impossible for everyone to have everything they want. Well-meaning cannot work forever. Recall that in the real world, a decision to have one thing automatically is a decision to not have something else instead. You, personally, can only use resources once because your resources are limited. Governments have more ways to get the money so can give both things for a lot longer than you or I. But, not forever.
As the result of their profligacy, the government of Party A must eventually raise revenue (taxes) to balance the budget. That is unpleasant for the voters, so in the short to intermediate run they borrow instead. The deficit is merely the amount they overspent this year. Deficits become ordinary and people seem not to notice. A never discussed and unpleasant reality is that a dollar the government borrows today is a dollar they must collect in tax some day in the future. Plus interest of course.
Eventually Party A cannot continue to spend and then to tax and/or borrow. Time to leave office. A smart Party A will leave just before they must reign in spending.
Their adversary, Party B, will win the election, partly because the people understand the limits, at least a little, and partly because Party A does not want to win. After all, who wants to be in the building as the roof falls in.
Party B will be in power when the consequences of Party A’s waste becomes obvious and they will be blamed for the problems because they are the government today. People seem to not notice that the effect of government policy takes years to become apparent.
Being competent, Party B will cut unneeded spending, and attempt to rationalize the budget. They will diminish the people’s expectation of government largesse, promote growth and hope for higher tax revenues. Eventually things turn around, the budget balances, and prospects for the future are exciting.
Time for Party A to reappear.
They can promise things again because there is a likely supply of money. Party B will be seen to have been the source of the pain and to be uncaring ogres and fiscal fascists for fixing it. Not a particularly desirable platform. Reason never sells. Party A wins and will get credit for the resurgence. They will govern until the roof again begins to creak.
And the cycle repeats.
What I have outlined above, as incredible as it sounds, is the good case. What we have now is worse. There are zero competent parties.
In no longer matters much who wins. People want more than they can have and the government will do little about changing that. No reason they should. A large share of the people do not recognize the problem or are too wedded to the handouts. Their votes won’t change anything. They get apparently free things.
It is disturbing. Consider this; more than one in five thinks the government has their own money. They have missed the fact that the government’s money is the people’s money.
As long as the people are not competent voters and as long as the parties value politics over governance, the result is both inevitable and unpleasant.
In homage to Herb Stein’s Law. “A thing that cannot go on forever, will stop.”
Corollary to the law – Usually catastrophically.
Be prepared.
You might find this interesting. Incentive Traps
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com
Follow on Twitter @DonShaughnessy
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