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Economic Stimulus Package Parable and Fable

02/12/2009

stimulusplanWhen I was young, I used to read Aesops’ fables. They are wonderful stories with lessons in each one. When I read the bible, Jesus also explains the principles of the Kingdom of Heaven in parables. So here is my attempt at putting together a simple story about the $800+ stimulus package.

Background and Characters – Years ago, there were 2 families, the Sams’ and the Lees’. Papa and Mama Sam worked hard through their working lives and provided for their 3 kids, Paris, Tommy and Ginger. At the age of 60, Papa and Mama Sam decided to stop working. They had worked hard for their entire lives and felt they deserved a break. They did not save a lot when they were working, so they made an arrangement with Paris, Tommy and Ginger, who were now adults.

They said, ” since we did such a great job bringing you up as good citizens and kids, you owe us something. Every month, we would like to take 10% of your income so that we can live comfortably and also in case we need to see the doctor. The 3 kids thought that this was a little outrageous since wasn’t it the duty of every parent to bring up their kids well? But so as not to start any squabble, they all agreed to give 10% of their paychecks to support their parents.

Over at their neighbors the Lees’, the Lees did not retire when they were 60. Instead, they still continued to work. Their 3 kids, Chin, Wee and Qing were all adults already and working. Because they were working, the Lees’ did not impose on their kids. But instead, they continued to provide for themselves. Their 3 kids also helped out financially if there is any need.

Life at Work – When the 3 Sams and 3 Lees entered the workforce as adults, they carried the same habits as their high school days. The Sams bought themselves nice designer clothes and stuff. The Lees were frugal. They got some basic clothes from sale and Sears and LandsEnd. They all share a rented apartment so they do not have to pay too much on rent.

The 3 Sams continued their party days from high school. After work, they like have dinner at hip restaurants and frequently partied every night at the night clubs. The Lees’ cooked at their shared rented apartment and just watched TV at night.

Sams discover Wonder Drug – Meanwhile, at around the corner where the Sam’s worked, there was a drug peddler called Jose. Jose showed the Sams’ his new wonderdrug at the night club. This drug was so potent that you could dance all night and still get to work the next morning. In fact, the drug also made you more alert at work!

The Sams started getting hooked on this new wonder drug. They would party all night, eat out everyday, sleep late. But they found they could still be alert and even more productive at work! Soon, all of Sam’s friends and the whole town were hooked on this wonder drug. More and more nightclubs sprung up because everyone was out partying till the early morning.

The Lee’s however, were as boring as ever, They stilled cooked their dinners at home. However, they saw what was going on in the night club scene and felt that there were opportunities. They started a company that made wine glasses. They figured that since more nightclubs were opening, selling wine glasses would be a good business.

And true enough, their wine glass business prospered as more night clubs opened. The Lee’s were working harder than usual. Demand for their wine glasses was simply booming. But being cautious as they were, they set aside 15% of their earnings aside in a rainy day fund.

Addicted to Wonder Drug – The Sam’s found out that as time went on, they needed more drugs to get the same “high” effect. So rather than taking one pill a day, they started taking 2 a day. So things were fine now. However, Jose now was making more money because he was selling more drugs!

However, for the Sams and all others who were now addicted to this wonder drug, things weren’t as great as they seem. Because they now had to pay more for drugs, they found out that they did not have any money left to pay for them. Their pay checks went to supporting their parents, dinners, drinks at the club and off course the wonder drug.

So they decided to borrow from the Lee’s. The Lee’s obliged. After all, they were neighbors. They weren’t best of friends but the relationship was cordial.

Wonder Drugs at work – Meanwhile at work, the Sams and others on drugs were really doing well. The wonder drug freed their minds and they were getting at things like advertising and marketing. With the drug working wonders on their minds, they became better accountants, thinking up of schemes to lower taxes! Attorneys who were on this wonder drug also became more eloquent in their arguments. Soon, the whole town wanted to do these “services type” jobs. Why slog so hard when with the wonder drug, you could be more creative and excel.

Soon, nobody wanted to be clerks and do any grunt work. There was another family who lived further down the street. They were the Krishnas. The Krishnas saw an opportunity amid the fiasco created by wonder drug phenomenon. The Krishnas created a company to do the work that the Sams and their friends did not want to do. Soon, all clerical, telephone support functions were taken over by the Krishnas.

That was not a problem for the Sams or their friends. The Wonder Drug was great and everyone was having a great time partying at night.

Papa and Mama Sam having problems – Soon however, Papa and Mama Sam were having some health problems. The money that their kids were giving them were not enough. Food prices were also going up because of all the great demand from all the new restaurants that were opening up near the night clubs. Papa and Mama Sam realize that they did not have enough money to live on. After talking about this, they decided that they definitely did not want to work. Instead, they decided to borrow money from Senior Lees (their neighbor).

The Lees obliged since it was not a big amount. The Sams have also been good neighbors. They also realize that the success of their kids Wine Glass company was in part due to all the partying of the Sams’ kids!

10 pills a day – As time went on, the Sams’ and their friends are taking more of the wonder drug a day. Their body had got used to the effects of the pills. They were now taking 10 pills a day to get the same effect that they used to get.

One day, Paris collapsed on the dance floor at the night club that she was partying. Everyone was concerned. The ambulance was called. Paris was in the hospital for a few days. Her siblings and friends thought it was due to fatigue. “Oh, Paris will be back dancing pretty soon” was what every one said.

Hospital reports came back a few days later saying that Paris had suffered an overdose and that taking 10 wonder drugs a day was simply unsustainable. She would be out for a few months to recuperate. News of this shocked everyone, because everyone else was also taking 10 wonder drugs a day. Soon, everyone realized that they cannot be partying all night and taking 10 pills a day. They slowly cut down on their wonder drugs – 10 to 9 to 8 to 7….. But as they cut down on their wonder drugs, everyone realized that they could not party all night and still go to work the next day.

Soon night clubs were empty. Restaurants and diners who set up shop close to the night clubs were also having much less customers. One by one, night clubs began to close. Restaurants closed too. Workers who worked for them were laid off.

Papa and Mama Sam also facing a crisis – Back home Papa and Mama Sam were also facing a crisis. Their 3 kids are in rehab. They are out of work because they are on medical leave. So Papa and Mama Sam have no money to live on. Mama Sam has also just returned from her medical check up and was told she had a condition that needed expensive treatment. They had no money. They did not save any. They were then forced to approach the Lee’s again.

Meanwhile, the Lee’s kids business suffered as a result of night clubs closing down as well. They were less wine glasses to sell to as they were less night clubs and restaurants. And yet, the Sam’s were approaching both themselves and their parents for money. The Lee’s have always been frugal and saved for the rainy day. They have always lent their money to the Sam’s to earn interest and also because the Sam’s lived next door. They would never run away? Or would they? The Lee’s began to feel really uneasy about lending to the Sam’s but knew that if they don’t lend the money, they may not even be paid back on their existing loans to them!

Everyone has the same problem – However, it turns out that everyone has the same problem and issues. All of Sam’s friends also have to pay 10% of their income to support their parents. Now, with everyone sick and not able to work as long, every senior citizen is getting less money for their daily living. It also turns out that the Lee’s having been lending money to all of Sam’s friends as well!

Uncle Bill – the new leader – Every one soon realized that they had a major problem in hand. They decided to choose a wise person among them to help solve the problem. They decided on a very charismatic community leader (let’s call him Uncle Bill). Uncle Bill had no economic experience. He had always worked in the non-profits area. But he was an optimist and a real cheer leader. He brought every one hope.

Diagnosis – Uncle Bill thinks the real problem is that right now, there is nobody on the dance floor. He thinks that the key is that we need to get people dancing again. As long as there were people dancing, the night clubs were in business and restaurants will be filled.

To get people dancing again, Uncle Bill decided that he needed to give the people more pills. If he could get them at least to the dance floor again, things will improve. So he decided to take the money he borrowed from the Lee’s and more pills to give everyone. Right now, everyone was suffering from withdrawal symptoms. If only, they took a couple of pills, they will feel much better. So one day, Uncle Bill forced everyone to take two pills of the wonder drug.

But everyone did not want to return to the dance floor. They were feeling dizzy. Each time they got out of bed, they would puke again. They was just too much toxic in their bodies.

Many people were also out of jobs because of the night club and restaurant closures. Uncle Bill decided that he “MUST” get them back to work. He decided to pass a bill to build more roads and more energy efficient street lamps by the night clubs. But where could Uncle Bill get the money to pay these workers. He decided that there was only one way. He approached the Lee’s and the Krishnas’ for more money.

The Lee’s and the Krishnas were getting frustrated. They realized that their business customer was not credit worthy. But yet, they could not pull the rug from under them (at least not yet). So they decided to lend them money but with higher interest rates.

Switching Directions – The Lee’s and Krishnas business have suffered. But fortunately for them, they had savings and they could survive this period. Rather than selling wine glasses to the night clubs, they decided to convert them into toy factories and began selling to the Krishnas. The Krishnas also being helping the Lee company with outsourcing.

More sick folks – Meanwhile, the senior citizens (Sam and friends) are all getting sick and need medical treatment. Their kids are all sick too and are providing no money. They have to borrow even more money from the Lee’s and the Krishnas. Everyone is hoping that the Lee’s and Krishnas’ will continue to be generous and lend to them.

Lee’s get Fed Up with the Sams – But while some workers were now building roads, the senior citizens expenses continued to rise because they were going to the hospital more. They were late on their bills. They had to borrow more from the Lee’s and Krishna’s again.

Finally, the Lee’s and Krishnas have had it. Though they were getting paid by the Sam’s and their friends, they realize that the Sam’s were borrowing money for hospital bills! Why lend to some old folks that may soon die and not repay their bills. They knew that their kids gave 10% of their income to them. But they could see that the kids were either building roads (which did not pay much), or themselves were in debt.

The Lee’s made a painful decision. They did not want to lend the Sam’s and their friends anymore. They would take a hit in their savings account. But they were now trading more with Krishnas anyway that it did not matter.

Broke – sell your house on the cheap – The Sam’s and their friends realize that they were broke now and had no choice. They had to sell their belongings simply to live. The looked into reverse mortgage and decided to do just that so that they can at least live in their homes. But nobody could even do that with them because nobody had money! So humbly they turned to the Lee’s and Krishnas’ again. This time the Lee’s and the Krishna’s low balled the Sam’s. They agreed on doing a reverse mortgage with Sam and also their many friends (who now have to sell their property to raise cash). The Lee’s got a bargain price and at the end, they will end up owning all of Sam’s and their friends’ properties free and clear someday.

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