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Keeping Capitalism off the Endangered Species List

Another analogy explaining why Obama’s spread the wealth policies won’t work.

with 2 comments

I got this analogy in an email today. It is much better than the one I wrote earlier using a classroom example. It comes from a UGA Economics Professor. Here it is:
Suppose that every day, ten men go out for beer and the bill for All ten comes to $100.

If they paid their bill the way we pay our taxes, it would go Something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do. The ten men drank in the bar Every day and seemed quite happy with the arrangement, until one day, the Owner threw them a curve.

‘Since you are all such good customers, he said, I’m going to Reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we
pay our taxes so:

the First four men were unaffected. They would still drink for free.

But what about the other six men – the paying customers?

How could they divide the $20 windfall so that everyone would Get his ‘fair share?’

They realized that $20 divided by six is $3.33.

But if they Subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.!

And so:

The fifth man, like the first four, now paid nothing(100% Savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four Continued to drink for free. But once outside the restaurant, the men Began to compare their savings.

‘I only got a dollar out of the $20, ‘declared the sixth man.
He pointed to the tenth man, ‘but he got $10!’

‘Yeah, that’s right,’ exclaimed the fifthman. ‘I only saved a dollar, too.
It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he Get $10 back when I got only two? The wealthy get all the breaks!’*
‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get Anything at all. The system exploits the poor!’ & The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat Down and had beers without him. But when it came time to pay the Bill,they discovered something important. They
didn’t have enough Money between all of them for even half of the bill!

(The 10th man was originally paying $59 of $100, then $49 of $80)

And that, boys and girls, journalists and college professors, is how our Tax system works. The people who pay the highest taxes get the most benefit From a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start
drinking overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

For those who understand, no explanation is needed.
For those who do not understand, no explanation is


Remember, my liberal friends, that you were warned. I don’t want to hear any whining from any of you once your jobs are shipped overseas.


Written by preservetherepublic

October 29, 2008 at 12:41 am

2 Responses

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  1. I think a question people need to ask themselves is : “At what point does charity end and theft begin?” Or better yet: “Is it still charity if you take something by force and give it away to those you think are deserving?”

    A perfect scenario would be a modern day Robin Hood. If he were to rob banks and always give the money to sick kids and poor people; would that make it okay? Should the police then let him go? Obama’s tax and spread the wealth plan takes money by force and gives it to people who he feels deserve it more. It is a direct punishment for success. It is a zero-sum philosophy that does not exist. Meaning in order for you to be successful someone else had to fail, or if you are rich it must be because someone else is poor. Life is not zero-sum people. Wake up America!!


    November 14, 2008 at 7:17 pm

  2. Brilliant!


    December 30, 2008 at 9:52 pm

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