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economics

September 25, 2008

Talk!Last week I added a poll to this site and asked where you buy the majority of your books. The results really surprised me. As of this moment Amazon has a clear lead with 55% of the votes. That means that half of us buy the majority of our books from Amazon instead of the local Christian bookstore or one of the many online Christian retailers. There are almost three times more votes for online retailers as brick-and-mortar retailers. While I’ll grant that this poll is far from scientific, it does show a clear trend (and one that makes sense of the fact that so many Christian bookstores are closing their doors).

In the comments, of which there are currently 89, many people indicated that Christians should do better than Amazon—that we should go out of our way to support Christian-owned businesses (see, for example, this one or this one).

I thought this was worth thinking and talking about and would love to hear some feedback. Do you think Christians should go out of their way to support Christian-owned businesses? Is this a moral imperative? Or should Christians feel free to shop wherever is most convenient or wherever offers the best prices? What is our obligation to other Christians in such matters?

May 01, 2008

The Economic Stimulus Payment is on its way. In the coming weeks Americans will be receiving a check, courtesy of the government. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. This is going to be quite the windfall for many families.

John Piper recently wrote a short blog post he entitled Economic Stimulus Payment & Christ in which he encouraged Christians “to be radically creative and hedonistic” with this money. “Before the check comes dream of some person or ministry which might make much of Christ because you treasured him above your next home project. The reason God created money and enabled us to earn it is so that we could show by the way we use it that money is not our treasure, Christ is. That’s why the checks are coming. So we can make Christ look great.”

Because I live in Canada, the fifty-first state of the Union, I will not be receiving this payment. However, I did have a question about it. I began to wonder, as have others, whether Christians are in some way morally obligated to spend this money (thus stimulating the economy) or whether they can legitimately give it to one ministry or another or perhaps use it to pay down some high interest credit card debt. And that opened up a few other questions. I turned to David Kotter, whom you may know as the Executive Director of The Council on Biblical Manhood and Womanhood and a regular contributor to the CBMW Blog. Before turning to ministry and accepting his current position David taught economics and contributed to Wayne Grudem’s Business for the Glory of God (and this followed a stint as a finance manager for Ford Motor Company). He seemed an ideal candidate to answer a few questions about the intersection of theology and economics.

So I offer this primarily to my American readers (which is most of you, really) and hope it benefits you.

What is the purpose of the Economic Stimulus Package?

The Economic Stimulus Act of 2008 is primarily intended to remedy slower growth and address short-term economic uncertainties by allowing “Americans to keep more of their money to stimulate consumer spending,” according to the White House fact sheet. The assumption is that most citizens receiving a rebate check will spend it quickly on domestic goods and services. Since every purchase funds a paycheck for someone else, the hope is that the suppliers will in turn spend part of their added income on yet more products, and so on and so forth until there is a multiplied boost to the U.S. economy.

While not explicitly stated, this law also seems to be designed to give a boost to presidential and congressional approval ratings. When economic storm clouds are on the horizon in an election year, it is helpful for politicians to be able to point to something that they have done to help. Few things improve the mood of voters like receiving an check in the mail.

Is this a workable solution to an economic problem? Or is this merely a means to a very short-term rally?

Unfortunately, this stimulus plan fits the scenario of “robbing Peter to pay Paul.” A tax rebate is just the return of money that was previously taken from someone’s paycheck. While people receiving the checks may spend more, the workers who are funding the checks will certainly spend less. Even if the money is borrowed, it is borrowed from someone who won’t be spending. This offsetting effect is why Milton Friedman was fond of saying, “There’s no such thing as a free lunch.”

To use an everyday example, the price of corn has dramatically increased, and farmers have spent their growing profits on updated tractors, better hybrid seeds and other farm goods. On the other hand, people paying higher prices for food have less money to spend on other goods. The stimulus in spending in the agricultural sector is exactly offset by lower consumer spending in other parts of the economy. No free lunch here, nor with the tax rebate.

Nevertheless, there may be a small boost or short-term rally as money is taken from people who are more likely to save and given to others who are more likely to spend. According to the Internal Revenue Service, 97% of all federal income tax receipts were paid by half of the taxpayers with adjusted gross incomes above the $30,881 median in 2005. The other half of the taxpayers accounted for only 3% of tax receipts, and in fact 42 million paid no taxes or received net payments from the government in the form of funded tax credits. Under the Economic Stimulus Act, the people who paid little or no taxes will all receive maximum payments (not actually “rebates”). Higher earning taxpayers who tend to save more and pay the vast majority of income taxes will not receive a tax rebate.

In short, many people will receive a rebate from someone else’s taxes, and that makes it easier to spend more.

The government has earmarked this money specifically so Americans can pump the money back into the U.S. economy. The governments wants its citizens to spend this money and to spend it fast! Do you feel that there is a moral obligation to obey their wishes by spending this money?

The Stimulus Act does not explicitly require consumer spending with the checks, so Christians are not morally obligated to spend money quickly in order to be “subject to the governing authorities” (Romans 13:1).

But the law does rely on what the Wall Street Journal calls “The Splurge Urge.” People are more likely to spend newly found money, like an unexpected bonus or one-time tax credit, than they are to splurge with a hard-earned paycheck. For this reason, when the checks arrive Christians should avoid undue excitement and especially pray for self-control. Jesus specifically cautions, “Take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions” (Luke 12:15).

Is there a possibility that believers could negate some possible good that the government is anticipating?

Christians are sojourners and exiles in this world (1 Peter 2:11). Therefore it should not be a surprise to anyone that we do not fit into the mainstream of the national economy. Our values are fundamentally different and we are accountable to God for our financial decisions. Paying off debts and saving money is wise stewardship but not the best for the aggregate economy in the short term. Sending money from a stimulus check to a missionary overseas definitely will not boost the domestic economy in the way the government hopes, but it is still pleasing to God.

Over the long term, however, Christians generally make outstanding economic citizens who “work heartily, as for the Lord and not for men” (Colossians 3:23), subdue creation in their daily jobs, avoid lavish spending, give generously and save diligently. The overall economy would improve dramatically if everyone used the tool of money in biblical ways.

How should Christians think biblically about these economic stimulus payments?

For many Christians, they are actually being entrusted by God with the earnings of someone else. For other believers, this is simply the return of their own money and should be treated like any other financial stewardship. All of the typical considerations for wise stewardship should apply as believers give, save, and spend this money.

Hopefully, many believers are already living with a “wartime” mindset and are spending less than they earn. This stimulus check is simply more resources to be used for Kingdom work. John Piper was exactly correct in encouraging believers to use these rebate checks, and all other money of which they are stewards, to make much of Christ. Piper says,

Nobody in the world will see you spend your money on yourself and conclude that Christ is your treasure. They will assume you are just like them, no matter how loudly you thank God for this boon. It doesn’t mean you shouldn’t spend it on yourself (the way we do with most of what we earn). But everything we do can look different from the world — eat, pay utilities, fill up the car, wear clothes (even thrift store clothes). And yes, we hope (somehow) that spending on ourselves in some way contributes to our being more Christ-exalting people.

As Christian voters, we should not be fooled by fiscal maneuvers that take money from one group of people and give it to another in the name of boosting the overall economy. The economy only grows if more goods and services are produced, not when money is transferred from one person to another.

Finally, we can be grateful that economic stimulus plans are restricted to this world. The One who spoke the universe into existence and owns the cattle on a thousand hills does not need a plan to boost the domestic prosperity of heaven. Jesus Christ is the ultimate treasure whose glory will infinitely outshine any pleasure we might receive from a rebate check.