Monday, December 06, 2010

Professionally Obtuse

Right now they are debating on extending or failing to extend the Bush Tax Cuts. Republicans want to extend them for everybody, but mostly the wealthy. Democrats want to extend them for the poor and the middle class, but let them expire on the wealthy. Republicans have made it clear that they will filibuster anything and everything until they get those taxcuts for the most wealthy extended. The problem for Republicans is that many Americans might not be impressed by them fighting so very hard for the most privileged among us. So naturally we have seen a string of articles arguing their case, like this effort from David Harsanyi.
Let's all pony up. Together.

After all, it wasn't only the rich who voted for those Republicans who took a budget surplus and turned it into a huge deficit. And it certainly wasn't only millionaires who voted for those Democrats who took that large debt and placed it on a trajectory that will have us measuring it in the sextillions.

Anyway, if tax cuts do not generate economic activity, as most liberals contend, why limit tax hikes to the rich? Being in the middle class does not guarantee that you're a productive citizen. (I can attest to that personally.) Surely, some in the middle class can afford to pay more.
That last bit is of course obtuse. Tax Cuts for people who already have plenty of disposable income may not help out much. The wealthy are likely to simply save the money, which doesn't grow the economy. Middle Class may save some of it, but are more likely to spend it, and the working poor will definately spend it (they don't have much choice). That's why tax cuts for the rich may not have the desired effect; that of injecting money into the economy, while tax cuts for the working poor and middle class will almost certainly go right back into the economy.

Harsanyi almost certainly understands the argument; but it's better being obtuse and pretending he doesn't.

1 comment:

Random Goblin said...

I'm not sure about the line about "the wealthy may simply save the money." I mean, they don't put it in a mattress or a big money silo, or bury it on a deserted island.

They invest their extra money, in everything from T-bills (i.e.m, investing in the government itself) to emerging economic markets (i.e., the economies of third world countries). And money invested is extremely good for the economy.

If you imagine that sales of goods and services alone fuel the economy, then sure, tax cuts for the wealthy are a bad idea because it's not going to go into retail sales at the same rate, proportionately, that that extra money in the hands of the poor and middle classes will.

But they do put pretty much all of it back into the economy. I'm not enough of an economist to know which is ultimately better, more investment or more consumption, but both are definitely good for the economy.