Jim DeMint’s appearance on the Kudlow radio show Saturday night* was very good. He pointed out that 60% of investment capital comes from the top 3% of income earners, those earning $200,000 or more. To me this explains why the Democrats have been unable to gain any traction in their efforts to repeal the Bush Tax Cuts.
The confused message of the electorate is because they want the 2003 investment tax cuts but don’t want the 2001 rate cuts and the huge deficits that came along with them. Our unsophisticated political divide right now is not offering the right solution. The Democrats propose raising income tax rates (which people want) but also raising investment tax rates to almost 40% (which would kill the economy and which people don’t want.)
Essentially the Republicans are hobbled by their lingering Keynesianism which led them to do Bush’s 2001 income tax rate cuts. The 2003 investment tax cuts were the real drivers of growth, but are coupled in the public’s mind with the ineffective 2001 cuts.
In addition, it’s very difficult to argue against payroll tax cuts when you are still out there defending income tax cuts as “putting money into people’s pockets so they will spend it.”
The Democrats, by demanding the end of the Bush Tax Cuts, are targeting the 60% of investment capital that is the mother’s milk of growth in this country. Every wage-earner and salaried employee needs that investment capital to get a higher wage, even if he never makes an investment in his life, although I have continually advocated for targeting the median wage at $250,000 as a method of restoring the middle class to America.
*I have no life.
Most everyone that has looked at it has determined that people and corporations with money are sitting on money. They are not investing it. Why? For an eminently Keynesian reason: lack of demand. And thus, applying another eminently Keynesian argument, we have lack of business activity.
The model DeMint and other lunatics of the far Right offer is mostly incoherent.
Oh and ask Ludlow where he’s hiding that steep inflation of his. He’s been predicting it for a while.
Kudlow has been worrying about inflation steadily since at least then.
The dollar has been weakening since the early 2000s. The weak dollar builds the inflation in, then it’s up to the economy to bid up prices. As in the inflation of the 1970s, it will take years for all prices to catch up to the new value of the dollar.
Measurements of overall inflation don’t catch up until the economy recovers. This is why real wages didn’t catch up from the monetary experiments of the 1970s until the late 90s.
If the Democrats really want this to be their policy, really want to smash the working man again, then I hope they are properly opposed.
will help exports. Explain why that is bad.
Unless, of course, you’re relying on the strong dollar to help with your purchases of bottles of Montrachet, Chateau Yquem and Saint Estephe.
As for the rest, your second paragraph makes no sense at all.
That may move more widgets, but the exports are cheaper because the money paid to the export workers isn’t worth as much. Once the export workers can bid up their wages, the exports cost just as much as they did before the devaluation. Of course you could just suppress the workers so they can never bid up the wages, and tax the workers harder so they can never build up capital. That’s good for the owners of the export/import companies, I’ll concede that.
The way I understand investment is to put money in the stock market (in which I have little faith as an indicator of what’s important in the economy) and let it sit there and grow without the help of your blood, sweat, and tears. If anything any gains therefrom should be taxed more than income you earn by actually working. I understand that people need to save for retirement and I’m not saying don’t invest, but it is spending money as an individual and hiring people that help the job market.
Buying new issues of stocks, under normal economic conditions, puts more capital into companies and enables them to expand and hire.
Nor is all investment in the stock market.
The old example was the guy with the backhoe making more than the guy with the shovel.
I was talking about stock market investments by those who otherwise aren’t connected to the company. Certainly it makes sense to invest in one’s own business in order to make that business better and therefore presumably more competitive. BTW, the President has proposed tax credits for those businesses looking to invest along the lines of your backhoe example, which I think is a good thing, but alas the GOP has opposed that too because the idea came from Obama.
I’ll take the over.