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Barstool Economics
My Email | David R. Kamerschen, Ph.D.

Posted on 10/14/2008 9:30:53 PM PDT by 5thGenTexan

BAR STOOL ECONOMICS

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 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 fifth man. '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

TOPICS: Humor
KEYWORDS:
Not sure if the attributed author is real or not, but I received it and thought it was funny enough to pass along.

Maybe it could help one of your Dem friends get it.

1 posted on 10/14/2008 9:30:53 PM PDT by 5thGenTexan

Someone make a cartoon. People ignore numbers.

2 posted on 10/14/2008 9:42:11 PM PDT by CE2949BB (McCain/Palin 08)

To: 5thGenTexan
Well the guy there quoting is a real person, just not sure if its him or not.

http://www.terry.uga.edu/profiles/?person_id=435
3 posted on 10/14/2008 9:43:16 PM PDT by Little_shoe ("For Sailor MEN in Battle fair since fighting days of old have earned the right.to the blue and gold)

To: 5thGenTexan
I think Sen. McCain has to make this argument to win. Running away from "tax cuts for the rich" just makes a Republican look like what the Democrats claim he is, a protector (for lord knows what reason) of the wealthy.

Sadly, after all their years in Washington, I don't think McCain or the president understand this simple analogy. They both want the bartender to "stimulate" the drinks somehow.

4 posted on 10/14/2008 10:07:53 PM PDT by SupplySider

To: 5thGenTexan

nice simple and straight to the point.

5 posted on 10/14/2008 10:56:43 PM PDT by Irishguy (How do ya LIKE THOSE APPLES!!!!)

To: 5thGenTexan

how many of those tenth men are simply going to retire now instead of go back to paying more than 50% of their income in taxes? Why bother to go support the system which punishes you for working? Just ask that plumber!

6 posted on 10/14/2008 11:08:43 PM PDT by bpjam (FREE Sarah Palin!!! FREE Sarah Palin!!!)

To: 5thGenTexan
7 posted on 10/14/2008 11:13:50 PM PDT by stormer

To: 5thGenTexan
Here's my Alternate Ending for 2008:

…'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I got' '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!'

Just then, the new, young Bartender strolled up, and exclaimed “You know, guys, you’re absolutely right! I can help you out… Yes I can!” And with a smile, explained how his great plan can bring them the change they need.

The new bartender assured them that, even though the bar is losing money fast, and the new leather barstools, signs and beer supply haven’t been totally paid for yet, their bar bill will remain at \$80.

Since the seventh, eighth, ninth and tenth men are now considered rich, (after all, they’ve been selfishly enjoying most of that \$20 savings anyway!), their portion of the bill will return to what they were charged before… “perhaps even higher” he added, “its only fair. However,” he added, “if they promise to only order my special brew – Universal Lite Green Beer – they may get special rebate coupons for bar tab discounts next year!” he proclaimed. “My plan will provide an additional \$20 in revenue! This will give the first four, and the fifth man much needed “Beer Relief”.

“Halleluiah!!” the 5 men rejoiced in unison.

And so it was:
The fifth man, like the first four, still paid nothing (100% savings), AND each received \$4.00.
The sixth now paid \$4 instead of \$3 (Well, we needed to do that to help the fifth man).
The seventh now paid \$7 instead of \$5.
The eighth now paid \$12 instead of \$9.
The ninth now paid \$18 instead of \$14.
The tenth now paid \$59 instead of \$49.

“See, when you spread the wealth around, its good for everybody,” explained the new bartender.

The next night the tenth man didn't show up for drinks so the nine sat down and had beers without him. Since there would now be a shortfall, the bartender adjusted the tabs for the sixth, seventh, eighth and ninth men, and eventually, had to ask the fifth man to contribute too.

Gradually, the men paying the tab could not afford the increased price of beer and one by one stopped going to the bar.

Finally, only the first four men showed up at the bar.

They were shocked to find the bar closed, the doors locked and a sign over the door read ‘Under new Management - “Mao’s Dragon Buffet”.