#114 The Fiscal Financial Fake

the christian economist dave arnott

#114 The Fiscal Financial Fake

The Government has thrown another financial fake to the poor.  This time, they increased child tax credits, then removed the spending power of the poor, via inflation. 


Another possible title for today’s podcast could be “The Government giveth, and the Government taketh away.  In this case, they gave families an increased child tax credit, but that cause inflation that wiped out the spending power of the money the families received.  

A Wall Street Journal article from December 26 is about whether a larger child allowance reduces child poverty.  It reads, The larger allowance’s effect on poverty has been overstated because the benefit as structured crushes the incentive to work. Traditionally someone needed $2,500 in income to claim the child credit, which became more generous as a person earned more to encourage advancement. This is an extremely modest amount of income, and Democrats torpedoed this threshold for the sole purpose of sending large checks to people who don’t work.”  

OK, I will deal with the “People who don’t work” section of that quote in a little bit.  First, the idea of how the poor should be cared for.   Every reasonable person born since William Wilberforce, agrees that the poor should be cared for.  The only question is “how?”  Christian Economists generally like to quote scripture about taking care of widows and orphans from James 1:27 which clearly states the role belongs to the church.  Non-Christian economists favor government care of the poor.  


All Money Comes from Capitalist Ventures

I get a little frustrated with folks who say, “Well, the church used to be able to do it, but now it’s gotten too expensive for the church.”  That’s usually entoned about healthcare.  But the economics answer is something like this: The money is somewhere.  Which reminds me of the fund-raising technique where the pastor says, “There is plenty of money in this church.  It’s just in the wrong pockets!”  Actually, that’s a pretty good economics statement.  The person who says that the church can’t afford to pay for healthcare is simply putting more trust in the government’s ability to forcefully extract the money from citizens, than trust in the church to raise the money via free-will donations.  See, that’s how economists think.  If 17% of the US economy is going to be spent on healthcare, it can go through a couple of different pockets – church or government in our analysis here.  But the initial source is the production of value by people in a free-market economy.  In another recent podcast #105 titled The Free Market Feeds the Poor.  I made the point that only capitalist exchanges create profit that can be expunged by the government.  Today, I’m simply extending that point forward in the transaction exchange, to say that you can pay for healthcare via the church or the government, but it still comes out of the same pocket.  

The Wall Street Journal article I am quoting today, goes on to point out that any reduction in poverty caused by increasing child care credits is consumed by the current inflation that reduces the buying power of the poor.  This is the same game we’ve seen many times before.  The government increases giving to the poor, but that causes inflation, which harms the poor.  That’s only the fiscal part of the equation.  Milton Friedman said that inflation is always a monetary problem.  At 7.5%, the highest inflation in 40 years has been caused by both fiscal and monetary policy.  The government’s fiscal policy of giving away money in an attempt to recover from the covid pandemic has sent more dollars chasing fewer goods.  While the Fed’s monetary policy of increasing the money supply while keeping real interest rates at zero for months on end, has also sent more dollars chasing fewer goods.  I did a more complete analysis of inflation in podcast #101 Inflating inflation.  


We are Called to Help, not to Give

The book titled When Helping Hurts by Corbett and Fikkert explains that often, Christian charity harms those it intends to help.  My summary statement is, “We are called to help, not necessarily to give.”  Or to put a finer point on it: There are a variety of things that we might give, in addition to only money.  

The video series Poverty Cure and Poverty Inc by the Acton Institute, states that it’s easy to have a heart for the poor, but having a head for the poor takes more thought.  The videos provide many good examples of how helping hurts, that I won’t repeat today.  For those who simply state, “I am commanded to help, without question,” I admire your heart, but I question your head.  Giving has hurt many people.  As Christian Economists, we need to figure out how to fashion our giving into helping, not hurting. 


Work is Good

Now I will return to that earlier statement about giving to people who don’t work.  In a recent article, a woman was quoted as saying, “My mother was on welfare.  I am on welfare.  I pray to God that my children will be on welfare.”  Why didn’t she pray that God would provide for her as the scripture dictates in James 1:27?  That is, by the church.  The government has no scriptural role to take care of those in poverty.  Strange that she knows she should pray to God, but she’s praying for the opposite of what God states should be provided. 

At the very least, the person on welfare violates one of the Ten Commandments of Economics that Sergiy Saydometov and I found in our recent book Biblical Economic Policy.  That rule is “work is good.”  She believes that work is NOT good, and drawing welfare IS good.  Actually, helping others is good for those who provide the help – through the church.  But taking help without working is not good for the person accepting the welfare payments. 

Back to the Wall Street Journal article, “The Biden crowd claims to be worried about child poverty but gives little thought to the incentive implications. Their real political goal is hooking more families on income transfers from government, no matter the consequences.”

Incentives matter.  There is a direct correlation between class attendance and grades.  So, a few times each semester, I will lock the door at 8:00 and award the students who showed up on time with a minor assignment that allows them to earn a few bonus points.  I’ve often asked them, “Should I reward attendance, or punish it?”  Seems like a rather simple question, but the Biden crowd referred to in the WSJ article believes we should PUNISH work, and REWARD sloth.  That’s not a good Christian economics policy.  One more citation, while I’m at it:  That’s why Ludwig Von Mises’ book was titled Human Action.  Because successful economics is about putting the incentives in the right places. 


Heart AND Head

Ginger and I visited the College of the Ozarks with our church group recently and had a wonderful brunch at their restaurant.  The College is called “The College of hard work,” because all students have jobs, and no student leaves with college debt.  We bought a collection of fruit jams and emblazoned on the box is the phrase, “Student made with head, hearts, and hands.”  Work is good, and every College of the Ozarks student lives out that mantra.  I like the paradigm: Mental, spiritual, physical, and that’s what they are saying by using the terms Head, Hearts, and Hands.  You see, at the College of the Ozarks, they have the ability to affect the WHOLE individual, not just one part.

Churches have many of the same advantages as the College of the Ozarks.  While government is pretty much limited to providing only financial help, the church can treat the entire person: Head, heart and hands, or mental, spiritual and physical.  Because the church knows the person intimately, the church is better able to diagnose all of those types of ailments, and provide the help that is needed.  Writing in A Human Economy in 1958 William Ropke states, “It is no use seeking salvation in institutions, programs, and projects. We can save ourselves only if man finds the way back to himself and to the firm shore of his own nature, assured value judgements, and binding faith.”  He’s right: Government does not offer salvation. 

Did government take over the job of Christians, helping the poor?  Or, did we lose our way?  I’m not an expert on that subject, so I will refer again to Corbett and Fikkert in their very good book, When Helping Hurts.  They blame the church, when they write, “While the rise of government programs may have exacerbated the church’s retreat, they were not the primary cause.  Theology matters, and the church needs to rediscover a Christ-centered, fully orbed perspective of the kingdom.”  


The Answer: Productivity

WSJ article again:  “Democrats want everyone to forget that some of the biggest recent reductions in child poverty occurred amid the healthy growth of the Trump years before the pandemic. The Pew Research Center in November 2020 reported that the share of American children in poverty reached a record low in the months before the pandemic.

Child poverty dropped to 14% of children under age 18 in 2019, down from 22% in 2010 not long after the Great Recession. In nine years, child poverty fell by nearly one-third among blacks and 40% among Hispanics. The eternal truth is that faster economic growth that creates jobs and raises incomes is by far the best anti-poverty program.


Policies that Promote Production is the title of my podcast #27.  That’s all that separates rich from poor nations.  It’s also, all that separates households.  Those who produce get rich, those who do not, get poor.  If you’re an American, you can thank God that you have the freedom to make choices that make you rich, or make you poor.  In Wealth, Poverty and Politics, Thomas Sowell writes that virtually everyone in poverty made one of the following choices: 1. Dropped out of high school.  2. Got pregnant before marriage.  3. Never held a job for 18 consecutive months.  That’s it.  Choices.  We have to wonder if Jesus’ brother James was writing rules today about how to care for widows and orphans, would he include those three criteria?


I will close with another reference from Corbett and Fikkert, “While God made the world “perfect” he left it “incomplete.  This means that while the world was created to be without defect, God called humans to interact with creation, to make possibilities into realities, and to be able to sustain ourselves via the fruits of our stewardship.”

The church is called to care for the poor, not the Government, who continually makes fiscal financial fakes.