Ben Olson: An economic primer

By BEN OLSON/for The Herald  —  Free market economist Milton Friedman said that there are 4 ways to spend money:

1. You can spend your own money on yourself. When you’re doing this, you’re careful what you spend your money on, and you always try to get the most for your money.

2  You can spend your money on someone else. When you’re spending your money on others, you’re careful not to spend too much.

3  You can spend someone else’s money on yourself. You’re careful to get good things for the money, but not so concerned about getting the best bang for your buck.

4  You can spend other people’s money on other people. This is what is done by governments at all levels. It tends to be inefficient and, as a result, contentious.

 

In our society, we get free reign to spend our money on whatever our little hearts desire. We can spend wisely or foolishly, or a little of both. We are ultimately responsible for the debts we rack up. Maxing out the credit cards renders them useless to buy more stuff, and expensive, paying interest on the balance every month. Our federal government has been spending money like a person with credit card debt for a long time now. In 2023, The U.S. government spent 6.13 Trillion dollars, 1.70 Trillion more than it received in revenues. This is not an anomaly- this is how it goes every year. Paying interest on debt accounts for 13% of federal spending. This can’t end well.

 

(writers note: This is what 1 Trillion dollars looks like written out with all the zeros- 1,000,000,000,000. A trillion dollars is approximately $3,000 for every man, woman and child in America. According to Statistica Research Department, in 2022 less than 60% of American households paid any Federal taxes. The national debt recently topped $35 Trillion. Your share is $105,000. How many dependents do you have? Would you like to pay in a lump sum or in installments?)

 

The Democratic Party has always believed that the government should be taking care of the people’s needs and that taxing and spending are necessary. The Republicans say that the government should be smaller and that corporations and the richest people in human history should get tax cuts. Regardless of rhetoric, whichever party is in charge continues to spend more money than the previous year. The reality is that the federal government spends about 25% more every year than they’re willing to tax the American people. How can they do this? A hearty mixture of borrowing more money, printing more money and kicking the can down the road.

 

States, such as Oregon, and municipalities like Oakridge are constrained by a different reality. They have budgets to be balanced, and don’t have the convenience of being able to print their own money. Major projects require bond issues. To entice people to buy the bonds, there needs to be a belief that those bonds will be worth something when they come due. There is always a struggle, when working with limited funds, as to whether the money should be spent on flowers at the parks or filling the potholes in the streets. These are the hard choices that our elected officials have to make in Milton Friedman’s 4th way of spending money.

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