Posted on 02/16/2014 3:31:12 PM PST by workerbee
Stay with this one. It is good (makes sense).
It's a slow day in the small town of Pumphandle and the streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night. As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
(Stay with this..... and pay attention)
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything. At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves.
No one produced anything. No one earned anything. However, the whole town now thinks that they are out of debt and there is a false atmosphere of optimism and glee.
And that, my friends, is how a "government stimulus package" works!
Good one!
Cute, but it is not how government stimulus works, and anyone who has taken accounting 101 would know that each of those individuals had $100 credit and $100 debit on their books, with a net asset of zero before the stranger came ito town. After the stranger left, everyone had zero credit and zero debit, with the same zero net asset.
bttt
True. Now everyone is now debt free, have established credit worthiness, and they are all still broke.
Assuming all these tax payers are in the 25% tax bracket
The butchet, pig farmer, co op owner, prostitute and hotel owner each owe $25 now to the IRS
the government just made $125 for doing nothing
Wrong. With the "government stimulus package", the $100.00 bill is taken from the taxpayer and laid on the hotel desk. And the taxpayer never sees it again.
The only problem is that all of those transactions, with the possible exception of the prostitute, would have been taxed by local, state and federal governments reducing the $100 each time the bill changed hands.
The government would then borrow $17 trillion more dollars and everyone is still in debt!
“And the taxpayer never sees it again.”
the taxpayer will see it another form called pork’
Well, that’s just great...
except -
The hotel owner is now $100 poorer because he suddenly has neither the cash, nor the outstanding receivable.
Great one. I got to remember that.
Another problem: if anyone in town owes $100 to China, that $100 bill is GONE.
No, he will not see his $100.00 again, it's gone.
As for pork barrel spending, even in it's hay day, it represented no more than 1-1.5% of total tax revenues. The taxpayer was seeing a penny in pork for every dollar the government took from him.
Winner
There's no free lunch everybody. In this case, the hotel owner got screwed and he didn't even get to enjoy the services of the prostitute.
Thank you. I was about to say something similar.
Emailed it on. Thanx!!
Really no different than Bob owing Bill $100, and Bill owing Bob $100. They swap notes and presto, no debt. The $100 in this scenario serves the same function, but so too would a reversal of order in services provided.
The hotel owner is not $100.00 poorer. Remember, he settled his debt to the butcher.
Not eally. In most cases that $100 revenues was offset by an accounts payable - meaning that it produced zero taxable income.
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