The Truth

May 18th, 2012

Precisely. I’ve also been reading Thomas Frank’s Pity the Billionaire, which deals with the same topic from a different perspective.

The frustrating thing is, this should be so obvious, as obvious as the fact that the Laffer curve was full of crap. And yet millions, even a majority, buy into the bull.

Money naturally circulates upward; in order for an economy to work well, there must be some kind of mechanism to circulate the money back down. Conservatives think that jobs will perform this function all by themselves, even as they try to destroy unions, deny workers benefits, and otherwise minimize that precise flow downwards. In fact, a healthily progressive tax system and good working conditions are what create jobs and a prosperous economy.

The best way to stimulate the economy is to inject the money into the lower half of the economic cycle; injecting it into the upper half is counter-productive.

Taxing the rich is not only a good thing, it is a necessary thing. Government spending on infrastructure, education, and supporting the poorest among us is not just a good thing, it is a necessary thing. If you truly wish to have a robust economy.

But just as we still prosecute the same old drug war despite decades of studies telling us that decriminalization and treatment would be light-years better, we still bridle against the bloody obvious in economics.

We know it’s a fact that dollar for dollar, food stamps are the most effective stimulus mechanism, followed closely by unemployment benefits and infrastructure spending, and yet most of the nation seems to accept Republican whining about how that will destroy the economy.

It is just as solid a fact that dividend & capital tax gain tax cuts, corporate tax cuts, and the billionaire-slanted Bush tax cuts are among the absolute worst stimulators–and yet we somehow allow right-wingers to insist that these be given a priority.

We’ve tried it the Republican way for 30 years and we have nearly destroyed our economy. So now right-winger shrieks about how they have never gotten a chance and how liberals have ruined everything.

  1. kensensei
    May 18th, 2012 at 14:39 | #1

    Thanks for posting this, Luis.
    Hanauer, like Paul Krugman, is a voice of sanity in an insane world.

  2. Troy
    May 18th, 2012 at 15:16 | #2

    yes, this is pretty basic stuff but it’s pretty horrifying that our system has moved so far away from understanding all this.

    I would only add that I think progressive taxation is addressing the symptoms but not the root systematic imbalances.

    The more we “inject” into the bottom, the more parasitical rent-seekers can profit. This skimming can be especially seen in health care, finance, and real estate sectors.

    I’d like to think that if we taxed these particular economic rents punitively (plus also tax resource extraction) we’d have half the battle won against the rent-seekers.

    Another systemic imbalance is our $600B/yr+ trade deficit. That is also ripping money out of the paycheck economy and not putting it back.

    Fixing that too might get us 75% back to sanity.

    The housing boom/bubble of 2002-2007 and it’s $5T net mortgage debt take-on:

    was the cash “injection” back into the middle quintiles that got us out of the dotcom recession. Didn’t do us a lot of good in the end.

    At least Obama vs Romney will certainly be an interesting choice. If the American people fail this simple test, I can write them off with equanimity. Hello Japan (again!).

    Last night I scored 72 on a practice 1級 kanji test (with literally zero studying, LOL). Dec 2, 2012 is the test date, good timing I guess.

  3. Tim Kane
    May 19th, 2012 at 04:45 | #3

    I believe this is the intrinsic weakness built into the free market system that Marx was pointing out as the basis for the rest of his work.

    Capitalist, use capital, to capture more capital, to use to capture more. Capital is money. So they systematically take money out of the commercial economy (demand side) and put it in the supply side, where it is sequestered from the commercial side, and used only to take more out.

    Capitalist hire people only to gain more capital (ROI).

    And it is in pointing out this fundamental truth, that free market economics creates an economic black hole at the top of society, that caused capitalist to hate Marx.

    They’ve been pretty much able to ban Marx from polite debate, but this fundamental point, like gravity itself, won’t go away by dictate.

  4. Troy
    May 19th, 2012 at 12:39 | #4

    Tim, capital is more than money.

    In fact, money isn’t really much of a form of capital at all. Now, money qua money certainly supports labor while it produces wealth, but capital goes far beyond money.

    Capital wealth is ALL that assists the wealth-creating activities of the workforce.

    It can be found in land and natural opportunity. Oil and ores in the ground, insolation, soil quality, water, timber to be harvested.

    The infrastructure we’ve built to move ourselves and goods around.

    The machines and tools we use to increase our productivity.

    There’s also the human capital of knowledge:

    The smart capitalists seek ownership positions in areas with monopoly pricing power — and this is usually land and natural opportunities, but also infrastructure.

    And that’s where the Republicans’ “job creator” BS really falls down. The wealthiest don’t look to create jobs, they’re looking to capture monopoly rents.

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