Glove Slap! default v Daily Kos on Economics part 1 Posted on Tuesday, April 14 @ 04:33:01 EDT
Topic: Politics General
Feeling rather intellectual today, I decided to look around for general statements on how Democrats believe liberal economic policy will promote the economy. It is my opinion that the philosophy behind liberal economic policy stems from favoring fairness over prosperity and so it was unsurprising to me that I did not find many substantive arguments able to frame liberal economic policy as having the ability promote economic growth better than conservative economic policy. One of the better statements I did find was posted on the Daily Kos from an apparently noted author named Michael Alexander who has a Ph. D. in chemical engineering.
There is much to respond to in this article and as I do not have the time to devote to completing this in one sitting I will be posting my response in sections. Alexander’s original post will be colored blue and my responses will be written in red. And so without further ado, here is part 1 of me single-handedly taking on this accomplished liberal intellectual using simple common sense and basic economics in a mano-a-mano debate.
Both parties are capitalist parties.
You will get no argument from me here, although technically both parties are also socialist parties as well. But the debate is over what degree of control the government should have over the market, and clearly one party advocates a much larger degree of control that borders on socialism at best and is at worst straight out of the socialist manifesto.
Both agree that the primary engine of prosperity is economic growth, defined as the accumulation of capital. They differ on their notions of what is capital.
I would go further and say that the engine of prosperity is freedom. A private person cannot accumulate capital without the right to own private property. Therefore, the larger the government, the more difficult it is to accumulate capital and therefore become more prosperous. Even governmental agencies we can mostly agree upon hinder economic growth to a certain degree. For example, if someone produces a new pain medication, in order to sell it he must first submit it to approval by the FDA. While this is a practical measure intended to ensure public safety, it is inevitable that some products that would be beneficial to society will not be approved. When this happens, the inventors, investors and producers of the new pain medication may find that they have completely wasted their time and money. In this scenario that has undoubtedly occurred in reality, there is no resulting economic growth and it is quite likely that the investment loss precludes it’s inventors from further innovation possibilities; people will be less likely to invest in the inventor’s future ventures.
Republicans believe that capital is wealth.
Let me simply repeat what is generally taught in economics 101:
For economists, capital (or capital goods) includes all manufactured aids used in producing consumer goods and services. Included are all factory, storage, transportation, and distribution facilities, as well as tools and machinery. Economists refer to the purchase of capital goods as investment.
…Note that the term “capital” as used by economists refers not to money but to tools, machinery, and other productive equipment. Because money produces nothing, economists do not include it as an economic resource. Money (or money capital or financial capital) is simply a means for purchasing capital goods.
-- Economics 17th Ed. By Campbell McConnell and Stanley Brue
This means economic growth = accumulation of private wealth. Not necessarily, but I digress. Hence, their favorite economic nostrum is tax cuts on the wealthy (the investing class).
Allow me to clarify; Republican’s favorite economic nostrum is not “tax cuts on the wealthy” but rather tax cuts for everyone. Liberals refer to these types of tax cuts as “tax cuts on the wealthy” as a spin tactic meant to magnify the fact that those who pay more taxes will benefit more from a tax cut. In other words, everyone gets to keep more of what they earn. If you earn a lot money, you get to keep more of the money you earned, if you earn less money, an across-the-board tax cut will have less of an effect on you because you already pay little to no taxes. Keep in mind here that in our current tax scheme the bottom 50% of wage earners pay approximately 3% of the total tax pie. Stated another way, the top 50% of wage earners in the United States pay almost all of the taxes. Conservatives believe that the state has no right to steal from the rich and give to the poor in order to promote what liberals call, “economic fairness”. Furthermore, if history is any guide, wealth redistribution stifles competition and innovation by unfairly promoting those who are less productive and therefore inhibits economic growth and prosperity overall. Allowing everyone to keep what they have earned is not only just but promotes economic growth by allowing the productive to reinvest their earnings in future ventures. It also allows the less productive to benefit by giving them the ability to purchase the products of the productive in a low-cost market in which prices are driven down by competition.
In particular, they argue for low or even zero taxes on investment income. The deficits these create...
On the contrary, lower taxes on investment allow more people to make more investments at a lower cost which causes economic growth and actually increases even government income. Even Barack Obama will not argue against this point.
This is a crucial point as this stance makes clear the rather insidious liberal opinion that economic fairness is favorable to economic prosperity. It is at least Barack Obama’s view that it is better to cause the government and the general economy to become less prosperous by increasing the capital gains tax because it helps to lower those who make more money down closer to the level of those who make less money. In other words, if he cannot take from the rich and give to the poor, he would rather simply take from the rich in order to push them down closer to the economic level of the poor. Essentially this view postulates that it is favorable that everyone be miserable than to allow some to be unfairly less miserable than others.
