After 34 years and counting since I graduated from college, I have most definitely forgotten much, much more than I remember. However, there are always a few turning points in college; that one experience that sticks with you through time.
One of my more memorable lessons while attending the
Macro economics, to summarize crudely, is where you put the supply side and demand side of micro economics together to model a pseudo free enterprise economy such as that of the
During the early 1970s, there was a lot of talk among economists and policymakers about replacing welfare programs and other social assistance programs with a Negative Income Tax. The theory was simple enough. Eliminate all these complex programs with burdensome regulatory structures and replace them with an income tax policy that actually paid money to people who fall below a prescribed income level. The further below the set income level you fall the more the government would pay. The Negative Income Tax is in essence the next level of income redistribution after a progressive income tax structure. As I understand Senator Obama’s proposed tax plan, he would apply a Negative Income Tax policy on top of the progressive income tax structure that currently exists.
Back in my college days when I was in Macro Economics, we had available to us a sophisticated computer model of the
At this time in my life, I hold close to what Winston Churchill said, “If you are young and not liberal, you have no heart. If you are old and not conservative, you have no mind.” Back then as a self-confessing liberal, I set very generous parameters for my Negative Income Tax Policy, plugged them into the computer and sat back to await the results.
Of course, I expected Utopia. What I got instead was a very poignant lesson on the facts of economic life. Very soon after the policy went into effect, my economy experienced an increase in inflation and a drop in productivity. As time went on, the inflation began to spiral out of control. That last inflation rate I recall was in the neighborhood of 1200%! In the end, the computer spit out a punch card with a sobering message to this effect, “The incentive to work is so low that the workers have all revolted, your economy has collapsed, and your country is in revolt.” Seriously, according to the computer, I had precipitated the failure of our economy and revolution!
I laughed at the time. It was all a just a what-if game, no harm, no fowl. The difference now, and the reason I recall this lesson in economics, is that we have a candidate for President who is proposing a Negative Income Tax. I fear for our economy and our country because that computer message 34 plus years ago may have been more prophetic than I ever thought it would be.