Sunday, January 10, 2010

Cutting Back

The company I work for, like most companies, had a difficult 2009. Our revenues were down and so as a result, we had to reduce our staff some, be more frugal in our expenses, and be more selective in how we spent our money. Everyone had to make some sacrifices. We actually ended 2009 on a positive note and everyone is optimistic about 2010. Since we are in better control our expenses now and run more efficiently, as we hopefully grow our revenue in 2010, we should be more profitable and be in a better position to invest our surplus to help continue to grow the business.

On a personal note, everyone in the company took a salary reduction this year. As a family, we have had to learn to be more frugal in our expenses and more selective in how we spend our money. We survived and now as we enter 2010, we are in a better position financially since we run our household more efficiently.

Why is it that government never has to go through that? When their revenues are down, they end up spending more money which they borrow from future generations. Few in the government took a pay cut. Layoffs only happened on the local levels. As described above, having to cut back is not pleasant but as we go through it, we emerge in a stronger position. If government would make the hard choices and cut back when they don't have the money, it would be painful for some and the politicians would get complaints from many but in the end, it would make government run more efficiently. It is a natural process that works if allowed to be carried out.

Sunday, January 3, 2010

Seen and Not Seen

After taking the month of December off from blogging, I'm back in 2010. I read a great quote recently from Frederic Bastiat who wrote a number of essays on economics and politics in the mid-1800's. Here is the quote:

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

The State opens a road, builds a palace, straightens a street, cuts a canal, and so gives work to certain workmen - this is what is seen, but it deprives certain other workmen of work, and this is what is not seen.

When a government official spends on his own behalf one hundred sous more, this implies that a taxpayer spends on his own behalf one hundred sous less. But the spending of the government official is seen because it is done; while that of the taxpayer is not seen, because alas! he is prevented from doing it"

Our politicians are just that - politicians. They are not economists and as a result act like bad economists - only looking at what is seen. It is our responsibility as the people to let our politicians understand the unseen impacts of their policies on us. If we don't speak up, they will continue to implement short-sighted, politically motivated policies that will have many unforeseen consequences that continue to drag our economy down.

I got this quote from an excellent article by Lynn Harsh of the Evergreen Freedom Foundation. You can read the full article on page 3 of the following link:

Haute Counture Economics