Friday, March 21, 2008

Spend wisely email speaks volumes, but for wrong reasons

Got an email forwarded to me today. You may have seen it:

Just about says it all..............

Spend wisely........... How to use the rebate.

As you may have heard the Bush Administration said each and every one of us would now get a nice rebate.

If we spend that money at Wal-Mart, all the money will go to
China. If we spend it on gasoline it will all go to the Arabs, if we
purchase a computer it will all go to India, if we purchase fruit and
vegetables it will all go to Mexico, Honduras, and Guatemala, if we
purchase a good car it will all go to Japan, if we purchase useless crap
it will all go to Taiwan and none of it will help the American

We need to keep that money here in America, so the only way to
keep that money here at home is to buy prostitutes, beer and visit
Indian casinos, since those are the only businesses still in the US.

Realizing this is just a funny viral email, I get the joke. OK, mildly amusing.

Unfortunately quips like this play well in e-mail forwards -- or populist stump speeches of some politicians -- in America these days. Thanks for that is due to the pathetic amount of basic economics (or common sense) that our citizens are exposed to these days through television news, most newspapers, and the majority of elementary, secondary and even post-secondary liberal arts educational institutions.

It is America’s bumper sticker mentality that often comes back to bite us. So let's use our amusing little email above as a "teachable moment." How many Americans of voting age can (or might be willing) to think this through? Where they even exposed to this in school?

It is true that a portion of the money you spend at your local Wal-Mart (or the Toyota dealership, or the Radio Shack, etc.) DOES INDEED go to recoup Wal-Mart's cost of purchasing the goods -- whatever they may be and wherever they were made.

However, a goodly portion goes to pay the salaries of the LOCAL Wal-Mart employees (or Toyota salesmen or mechanics, or Radio Shack salespeople, etc.) who checked you out, stocked the shelves, cleaned the building or managed the operation.

Those Wal-Mart employees pay income taxes, and probably local property taxes (if they own a home with their families) because they probably live in that area near the Wal-Mart. After paying taxes, those good local Wal-Mart people spend what’s left of their salaries on living expenses, and perhaps some for recreation, investing, saving for schooling or donating as they see fit.

Some of the purchase goes toward the Wal-Mart’s heating, lighting, air conditioning and water bills that are charged to them by American energy utilities (who pay corporate taxes) and who have Americans working for them near the power plant. The power company employees also pay income taxes and spend or save what’s left on living expenses, recreation, investing, saving for schooling or donating as they see fit. Some of that also goes to investors (like 401-Ks of individuals like you or me or grandparents, or mutual funds, or even wise union pension funds) as a return on their gamble to invest money on the power company in hopes for a return on that investment. Profits on which they will pay taxes again (sooner or later).

Some of the Wal-Mart money also goes to pay local (and perhaps state) business taxes, local property taxes on the land where the Wal-Mart sits, and for things like garbage collection, to locally based crew of refuse collection workers who must live in or around the Wal-Mart’s general area. These people do the same as the employees above when they get paid.

Some of the money goes to the LOCAL newspaper or radio station or TV station, to advertise all the great stuff you can get at Wal-Mart (for such a very low price). Those local media then pay similar business taxes as above, and pay their local employees who similarly spend as the people mentioned above. Plus, because of Wal-Mart’s advertising (and that from other tax-paying businesses), you are able to hear, read or watch – in most cases – a local weather report, or news report, or programming that you enjoy and that adds value to your daily life.

Not to mention the VERY happy union longshoremen being paid exhorbanent amounts for working the import docks in California, the Gulf Coast, Virginia, Baltimore or New York/New Jersey -- or the domestic union railhandlers and independent, private carrier or Teamster truck drivers who move Wal-Mart's goods to markets like yours.

Whatever’s left goes to the company’s headquarters (in Arkansas) where Wal-Mart employs a lot of people (who do similarly as above), spends a lot on national advertising, and pays lots of taxes (as above).

[Editor's Note: This was once called, "Trickle Down Economics" but since the capitalists and economists on the editorial page of the NY Times pooh-poohed this theory, we get little pearls of wisdom like the witty email that started off this rant.]

Regardless, all of the above activity happens this so that you can:

  • shop in a pleasing, clean, comfortable, well-lit environment
  • choose between several alternatives of varying attributes (variety) for most everything on your shopping list
  • find them in good quantity (rarely any scarcity or shortages; if so, you get a rain check)
  • shop when YOU want to shop (at 2 a.m. or lunchtime or 11 p.m.)
  • and buy it at such a low price.

The e-mail's original author didn't seem to think his rebate would amount to much.

(The worst part of the rebate is we (US Treasury) has to borrow against ourselves to provide it.) That being said, anyone who doesn’t want their $600 or $1,200 rebate in May can send theirs on to me. I’ll take it.

Might even go shopping at Wal-Mart.