We must vote for those candidates of any party that reflect these values: hard work, self-determination, smaller government, fiscal responsibility and honesty. Look to the character of anyone you chose to support. Their past does matter if they haven't learned from it. Their personal life is as relevant as their public one. We must be able to trust those who will be advising and leading us on what our country must do next. -Glenn Beck

Wednesday, July 20, 2011

Something to Laugh About...

I just saw this video, and it made me laugh. The MSNBC host trying to stick it to the Republican congressman.

MSNBC To GOP Congressman: "Do You Have A Degree In Economics?"

Classy response from Rep. Brooks.

Does she have a degree in economics?

Thursday, July 14, 2011

The Key to the Economy: Netflix

I just finished reading the comments section of an article regarding the current budget talks about raising the debt ceiling, even though I know I should never do that.

There was comment after comment about big, rich Republicans that don't care about people on social security and Medicaid and how they are trying to protect their rich buddies in big oil. They trash the rich, and talk about wanting them paying their fair share of taxes (as if they weren't already paying the majority.) It would be interesting to know how many of the people posting don't pay a dime in income tax, and yet use the roads, schools, and the police. It would be interesting what they consider their own "fair share."

I don't have any rich buddies in big oil, but I am against tax increases, especially when the economy is hurting. Why? Netflix.

NETFLIX

Netflix announced on Tuesday that they were raising their prices. For some, the increase will be almost doubling the cost. For my family, our Netflix bill will go from $18 to $24. $6/month increase.

Yet, we are currently in the process of deciding whether to cancel our Netflix subscription or not. Thousands of people have complained and many have canceled their subscriptions. Netflix executives have admitted they plan to lose a percentage customers with the price increases.

Netflix might say, "But you make $30,000/year! You can afford a $6/month increase! That's only 0.2% of your income!" And in fact, a Netflix executive did say that in essence, saying that $6/month is the price of a latte (i.e. not a big deal.)

If you believe we should increase taxes on the rich, then you're obviously hanging onto that Netflix subscription without complaining, because a $72/year increase is a very small portion of your income. (To really be comparable to a tax increase on the rich, they ought to raise their prices 3% of your income. How about a $75/month increase for someone making $30,000?)

When you raise the price of something and hold the supply steady, demand will shift to meet that new price.

When you raise the taxes on business, the result is less business. Less jobs. More layoffs. Less income tax. More individuals on unemployment. Less producers. More consumers.

Many Netflix customers have talked about switching to Redbox. When American taxes are increased, businesses in America say, "Taxes are way lower in Ireland. Time to move."

If it holds true for Netflix, why would it not hold true for all business?

SMART BUSINESS

Netflix understands this. This increase has a purpose. They want to get out of the DVD business and move completely to streaming, and this is a step along the way. I read an interview with the CEO of Netflix who said if they were starting today, they would have skipped the DVDs and gone exclusively with streaming. It is obviously much cheaper to go that route as you remove all the costs associated with packaging, shipping, and employing individuals to handle those tasks.

In light of that, this move makes perfect sense. Netflix wants individuals to cancel their DVD subscription, which is suddenly not that great of a deal, and keep their streaming only subscription, whose price went from $7.99 to $7.99. That's right -- No increase in streaming only. You only pay more if you have a DVD plan.

Netflix is using the power of economics to modify behavior in order to meet their needs.

CONCLUSION

It is true that Republicans have issues with entitlement programs like Social Security and Medicaid that are broken and need to be reformed to function properly. These programs are a major reason for the debt problems. Too many people taking out for those paying in. But that has nothing to do with Republicans being so firm on not voting for any tax increases.

Republicans simply understand Netflix. They understand that raising the taxes on business is the worst possible thing you could do in a bad economy. Why would they vote for something that will stifle any potential growth?

And common sense says that you don't fix a debt problem by extending your credit line. That simply leads to more debt. The Republicans are like the spouse in a marriage that finally takes a stand and says, "Enough is enough -- We have to fix our budget problems."

So if raising our debt limit isn't going to solve the problem, and raising taxes is only going to cause more damage, the only possible solution is to reduce expenditures. I understand that there may be times, especially in times of war, where there is a need for government debt. There have been times in my personal budget where something unexpected came up, and it was nice to have a credit card available to get me through a month or two of some unexpected expenses.

But ultimately, it comes back to spending less than you bring in. One option would be to increase the amount you bring in, which is like the current Democrat strategy with raising taxes. That would be the same as Netflix saying, "I know how we can make more money -- Let's raise our prices!"

The only other option left is to reduce spending. Budgeting is painful. It means you can't buy everything you want. It means there are tough choices to be made, but if you are truly serious about balancing the budget, some things simply have to go. Maybe even Netflix.