Re: Reject the Welfare/Warfare State

On Tue, Nov 9, 2010 at 2:12 PM, Peter T. Chattaway
<petert-LOVM4QxV+tDq6eQxt3vRmLDks+cytr/[email protected]> wrote:
> On Tue, 9 Nov 2010, [email protected] wrote:
>
>> > I mean, even lowering taxes on the rich obviously creates jobs. >
>> > Because the rich either spend that money (somebody has to make the > stuff
>> > they're buying) or they invest it (somebody works at the > companies they
>> > invest it).
>>
>> The economy will not improve if the rich are buying more...it needs the
>> rest of us to be buying more.  If only the rich by the new TVs, cars, etc,
>> the economy suffers.  It isn't the rich we need to worry about being able to
>> buy stuff-most of them are able to do so regardless of taxes.  It's the
>> people farther down the line.
>
> Yes... the people who *could* be hiring nannies or mechanics or plumbers or
> tutors or whatever, if only they weren't taxed so much.

I think that Thom was referring to the difference in effectiveness
between "trickle down" effects and "trickle up" effects.  While both
occur, sometimes one is more effective than the other for getting the
economy moving or for "rising the tide".

Generally speaking, if you give $1,000,000 to 100 families ($10K each)
below the poverty line, they're going to spend all or nearly all of
that money relatively quickly (i.e. put it back into the economy,
generating demand for more goods and services, creating new jobs).
Some percentage of them will even have some entrepreneurial spirit and
invest it in themselves; e.g. to kick-start a small business that was
previously beyond their means.

If you give $1,000,000 to 100 families ($10K each) who are already
making 1/4 million dollars per year or more, some non-trivial portion
of it will be saved or invested.  And there will be almost no
additional spending on things towards the bottom of Maslow's
Hierarchy; those needs have already been met.  And if they are
inclined to be entrepreneurial with their new $10K, then they're
*already* being entrepreneurial with their previous $250K.  10K is
unlikely to push them over some sort of threshold; certainly less
likely to do so than for those below the poverty line.

More investment by the wealthy isn't a bad thing... investments
usually lead to new jobs too, eventually.  But if you are trying to
circulate the most money through the system and create the most jobs
the quickest, it is far from obvious that providing/extending tax
breaks to the wealthiest or subsidies to corporations is the best way
to achieve that goal.  If we are trying to reduce the deficit by $1B,
it's reasonable to suggest that increasing the tax burden by $1B on
the wealthiest might be more effective than cutting $1B of social
services.

Of course, the devil is very much in the details.  And Lance's
observation that "a large number will be paying off debts with that
extra money (paying for the products already created and jobs already
worked and gone)" has been throwing a big wrench into our economic
recovery (and the would-be schemes and plans of those who would steer
it).  It's a wrench that had to be thrown eventually.  The piper must
be paid.

-- 
Nick

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