Aquanomics?

“A rising tide lifts all boats.”  —President Barack Obama

OK, the President didn’t invent that saying, it’s older than he is. But even though he didn’t build that old saw, he used it as a metaphor for how his policies of economic stimulus and wealth redistribution would benefit the middle class and the nation as a whole. I am no fan of those policies, and I find that particular verbiage to be very instructive about the way that the President thinks. So let’s examine it.

I don’t claim to possess any mastery of grand economic theory, but I do know something about tides. My 20+ years in the United States Navy were mostly spent studying, practicing, and teaching the art and science of marine navigation. Anyone in that profession will quickly learn that a knowledge of tidal forces is essential, and a failure to take them into account can lead to disaster. So, on that authority, I will state with complete certainty that the old saying “A rising tide lifts all boats” is absolutely false.

Simple fact of life #1: Whenever the tide rises somewhere, it falls somewhere else.

The only way to lift all boats would be to create more water, just as the only way to lift everyone’s economic status would be to create more wealth. But, of course, tides don’t make water. They are caused by the gravitational pull of the moon, and , to a lesser degree, the sun, which draw the water toward them, making the water level rise slightly. This rise is negligible in the middle of the ocean, but as the high water nears land, it piles up along the shore, which sets up currents that flow into bays and harbors, sometimes generating a significant rise in water level. So sure, a rising tide will lift all boats in that particular harbor. But since the total amount of water hasn’t changed, as the boats in that harbor are lifted from the bottom, boats in another harbor on the other side of the world are settling into the mud. And as the Earth turns, so does the tide, lowering the boats that were raised; raising the boats that were lowered. Tides don’t really raise water level, they temporarily redistribute it.

So what does this have to do with the tides of economic activity or the flood of money being printed by the Federal Reserve? Well, there is something that the President and folks of his ilk seem to be unable to grasp.

Simple fact of life #2: Money is not wealth, it is a medium of exchange. Wealth is the things that money can buy.

Increasing the amount of dollars in circulation does nothing to increase the amount of wealth (goods and services that people are willing to pay for) that is available. Money serves as the foundation of the economy, sort of like the bed of a lake. Printing more of it would be about as effective as trying to get more water into the lake by dumping rocks into it. The level of the lake might appear to be higher, but at the bottom, there will still be the same number of places to run your boat aground. A deeper lake requires more water; a deeper economy requires more wealth.

Also, there are many on the President’s crew who believe that redistributing money will somehow create more wealth. As presidential advisor Valerie Jarrett said some time back, “People who receive that unemployment check go out and spend it and help stimulate the economy, so that’s healthy as well.” It seems to me that this is like trying to make our lake bigger by digging the sand from the shore and letting the water flow outward (spreading the wealth?). Still the same amount of water, even though the lake looks larger. But what are the other consequences of our excavation? By making the lake appear bigger, we have increased its surface area, thereby speeding the rate at which the water evaporates, and actually making the lake smaller. Remember, real wealth is constantly being both produced and consumed. When people consume more wealth than they produce, the economy will shrink. In the big picture, giving hand-outs or make-work jobs does more harm than good.

So what to do about those people whose water glass is empty? Very few of us are so heartless as to not want their thirst quenched. And there are certainly many among us that feel that it is unfair that a few can spend the summer lounging in their huge backyard swimming pool, while most of us make do with a Slip-and-Slide. But remember, the vast majority of those with “excessive” wealth have it because they were able to do something special to earn it. And the poor, whether or not through their own fault, were unable to do so. Sure, I wonder why throwing a basketball through a hoop, or reciting lines into a camera, is more valuable than driving a truck, but that’s what people are willing to pay for. That’s the economy. And that brings us to:

Simple fact of life #3: Wealth cannot be given to someone who didn’t earn it without taking it from someone who did.

What obviously needs to happen is that more people must have the opportunity to create wealth. How to make that happen? Do you really believe that our federal government has the answer? To illustrate the way the feds think, let me try one more all-wet metaphor.

Suppose that tidal forces have caused a sandbar to form at the entrance to San Diego Bay, and there is not enough water trickling into the bay to wash it away, so ships can no longer get in or out of the harbor. Some clownfish in Washington will probably say “Hey, there’s plenty of water in Galveston Bay. Let’s build a huge aqueduct to San Diego.” Well, I guess this would work, but is it really the best solution? It would, like most federal programs, be ridiculously expensive. And a lot of the water would evaporate as it passed through the deserts of New Mexico and Arizona, just as your tax dollars evaporate in the deserts of bureaucracy and corruption. How about we just dredge the sandbar?

The United States has plenty of oil, and getting it out of the ground will create many real jobs which will produce real wealth. But regulations make it impossible for this to happen. Instead, the government pumps your money into the aqueduct of “green energy,” where it just evaporates. How about we dredge the sandbar of regulations.

And hey, if you’re one of the 17 people who still believe Al Gore, (oh wait, Al bought a 9 million dollar mansion on the Santa Barbara beach, and sold his TV network to the oil sheiks, so I guess Al Gore doesn’t even believe Al Gore — make that 16 people) we can melt those polar icecaps, create more water, and actually lift all boats.

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