Higher taxes divert to the government needed capital that would otherwise primarily become investment dollars. These investment dollars finance creative, sometimes risky, but ultimately economically beneficial new ventures. These new ventures create tomorrow's jobs.And that's what we need, jobs. It's the only thing everyone seems to agree about. We're poised to suffer a 15 month debate over who is more in favor of jobs. And sadly, we're all going to get sucked into the false pretense that jobs are created by policy and politicians instead of by creativity and . . .wait for it . . . risk-taking. Also known as balls.
But in today's environment, where is the shortage of capital, of investment dollars? Interest rates are extraordinarily low. You can't even pace inflation with a savings account or a bond or a money market fund. There's no capital shortage.
There's an excess of capital, in the hands of all the folks who have done very well. And it's all very risk averse. In that environment, it's hard to make a plausible argument that an upward tweak in the top bracket is going to kill job creation. There's almost no job creation to kill. What little exists is related directly to enterprises that can increase profits by adding labor. Investment capital is piling up, looking desperately for somewhere appealing to go.
What we need is creativity and balls. Instead we're beset by rigid, simplistic, outdated ideology and fear.
I agree with this in large part.
ReplyDeleteThe fallacy of the model that capital should be concentrated in the hands of a few -- a de facto aristocracy -- ignores the fact that such a class is inherently risk-averse, as you say.
When you've got a lot to lose, you're more likely to be very careful. Thus capital has been directed away from risk-taking ventures which could produce jobs, and concentrated in industries such as finance, specifically private equity, which seeks to buy out existing industrial enterprises, strip them of all burdensome costs (i.e. labor) and squeeze the short-term profitability out of them before unloading them.
The entrepreneurial class has been subsumed into a corporate class, and the subsequent re-concentration of wealth has exacerbated problems we see in our political economy.
This, combined with the irreversible realities of a global economy and a misunderstanding of why the US became so dominant in the first place explains why so many Americans buy into the misguided notion that lowering taxes on the wealthiest Americans will necessarily lead to domestic growth and domestic jobs.
It hasn't, and it won't. We're witnessing the predictable and logical outcome of Reaganomics (as well as Clintonian neoliberal economics).
The financial industry was deregulated, American industry was shipped overseas, black market labor imported to undercut wages of those jobs that couldn't be off-shored, and as a result the middle class has been besieged at both ends as well as from within.
Now they're being told to bear the brunt of our debt problem while the Republicans fight tooth and nail to prevent taxes on the rich from going up THREE PERCENT.
The US has a matured economy in which many exploitable opportunities have already been exploited, but if we continue to allow the middle class to be further hollowed out while the wealthy increase their concentration of capital through means of wealth-transference, the political dislocation will be severe and crises increasingly common.
I hated Reaganomics when I lived through it, but now I concede it did some good. The only part of the 2007 collapse that I view as inevitable is the popping of a greed bubble that nearly everyone eagerly participated in if they had half a chance. It was a conspiracy of both parties. No one on either side would take anyone like Peter Schiff seriously in the 2000's.
ReplyDeleteBut I think top bracket earners can afford 3% more on income above 250k. And coprorations can afford to pay more if we close loopholes to broaden the base and decrease the rate. That will allow uncle sam to capture somewhat higher revenues, and they'll be paid mostly by enterprises that made sweetheart deals for customized tax breaks.