Obama’s “Spread the Wealth” Plan to Grow the Economy
[Guest post by DRJ]
Tom Brokaw interviewed Barack Obama yesterday on Meet The Press and this is the first of two posts on excerpts from that interview.
Obama stated his top economic priority is a short-term stimulus package. He also recast his “spread the wealth” message (first elicited by Joe the Plumber) as a “more balanced” tax code, and reiterated that redistribution from rich to poor is the best way to grow the economy:
“I think the important principle, because sometimes when we start talking about taxes, and I say I want a more balanced tax code, people think, well, that’s class warfare. No. It turns out that our economy grows best when the benefits of the economy are most widely spread. And that has been true historically.”
Is this true? On the one hand, it seems to me that a wealthy person is more likely than a poor person to have “extra” money available to invest in research or business, actions that create jobs and help the economy grow. On the other hand, on a percentage basis, poor people spend more of their funds on consumption and consumption is important to keep the economy afloat.
Consumption isn’t all good, though. Over-consumption or living beyond one’s means has drawbacks on a personal and macro level as evidenced by the increase in bankruptcies, mortgage foreclosures and credit card debt, not to mention today’s economic turmoil. It seems consumers realize the pitfalls of over-consumption and perhaps that explains why most of the 2001 stimulus checks ended up in savings. Data suggests the same savings trend occurred with the 2008 stimulus checks.
Will the same thing happen to Obama’s planned stimulus program? It might, and the same may be true with redistributed tax proceeds. Alternatively, if the money is spent instead of saved, it seems likely it will go toward paying down existing debt (especially credit card debt) or purchasing goods already on the shelves. These savings and expenditures may help keep the economy afloat but it’s hard to see how they will create a significant number of jobs and help the economy grow.
It makes us all feel better to share with people who need help but in my experience that may not translate into helping the economy grow. I want an economy that will grow jobs for the future and not just tread water. Which one will Obama’s plan do?
— DRJ
What will they call the “Works Progress Administration” this time around?
I would remind everyone that prior to the start down this road lined with Henry Paulson’s good intentions, Cong. Jeb Hensarling of TX proposed a recovery program that would not require the spending of one-red-cent of taxpayer funds:
Another Drew (e451ab) — 12/8/2008 @ 12:22 pmSuspend the Corporate Income, and Capital Gains Taxes for a period of time (I believe he said two years) to encourage those with capital to invest it.
It would also encourage the market to sort out the MBS mess, by rewarding risk taking. As long as everyone just stands on the side-lines, nothing will be fixed, and the problem will just continue to fester – sort of like what happened for the decade following the Crash through endless series of governmental interventions into the economy that mostly caused perverse results.
I don’t think Obama will force/encourage/allow people to pay down their debt. On the contrary, the bailouts are designed to trickle down to those who don’t pay their debts, and the bankruptcy rules will be lessened, meaning those who have debt will be “allowed” to let their debts disappear.
Then again, the economy will not grow, because those who have done it right will cut back on their spending, so that they don’t create any more debt for themselves, debt they will choose to pay, rather than let expire.
It’s coming….change you can believe in….
reff (b996d9) — 12/8/2008 @ 12:30 pmThe problem with the Liberals’ idea of income redistribution is that they think it is government’s job to force redistribution, instead of the individual deciding to share his excess.
PCD (7fe637) — 12/8/2008 @ 12:35 pmEvery time I stop in a Starbucks, now, I demand some liberal buy my coffee, as they seem so keen on spreading the wealth around.
JD (059bab) — 12/8/2008 @ 12:37 pm“What will they call the “Works Progress Administration” this time around?”
AD – Isn’t the current proposal the “Make Work Administration?”
Why not free up energy exploration the way McCain wanted, include ANWR too, and create private sector jobs, not just public sector funded positions. The Democrats seemed temporarily, if deceitfully, in favor of increased energy exploration while the price of energy was higher.
daleyrocks (5d22c0) — 12/8/2008 @ 12:53 pmSpreading the wealth works great in Cuba, Vietnam, North Korea, the South Side of Chicago and other liberal paradises.
Perfect Sense (9d1b08) — 12/8/2008 @ 12:54 pmComment by daleyrocks — 12/8/2008 @ 12:53 pm
Congress can’t let the market deal with this problem, as they wouldn’t have any control of the process, and they have way too many dead-wood friends/relatives/supporters that they have to find “meaningful/gainful” employment for.
Just as the Big-3 long ago transmogrified themselves into benefit providers who just so happen to produce vehicles on the side, Congress has become a jobs program that coincidently deals (usually poorly) with matters of public policy.
Another Drew (e451ab) — 12/8/2008 @ 1:09 pmOne thing you didn’t mention is that Obama said more than once that he didn’t want to spend money where the country didn’t get a good return on it’s investment, something I’ve never heard a politico say before regarding bailouts. Of course, the devil’s in the details.
Suspend the Corporate Income, and Capital Gains Taxes for a period of time
I’m assuming that you’re going for a big laugh here, as this Congress and President would rather curl up and die before considering either prospect, no matter how worthwhile.
Dmac (e30284) — 12/8/2008 @ 2:00 pmComment by Dmac — 12/8/2008 @ 2:00 pm
Their obtuseness over tax policy and how it relates to economic growth just confirms that they are first and foremost disciples of authoritarinism and socialism.
If Obama reinstitutes the New Deal, he will only ensure that the 21st Century will have its’ own version of The Great Depression.
GWB & BHO will be our versions of HH & FDR.
As has been amptly documented, the Crash and the Depression were not caused by a lack of governmental control and regulation, but an overabundance of it.
It is easily forgotten, usually because it is hardly ever mentioned, that one of the threats to the economy that precipitated the Crash of Oct ’29, was the introduction of Smoot-Hawley in the House or Representatives in the Summer of ’29.
Hoover’s interventions following the Crash, exacerbating the problem, along with the following passage and signage of S-H, simply drove the world into the Great Depression, that FDR’s many interventions prolonged and deepened until the advent of war “saved” all of us.
Remember, the DJIA of September, 1929, was not reattained until 1954!
Another Drew (e451ab) — 12/8/2008 @ 2:24 pmI agree with Hensarling, Another Drew. It would make the bailout predictable and fair, even to those who have been financially responsible–which is exactly what the economic program lacks at this time.
Patricia (94c68d) — 12/8/2008 @ 3:25 pm“Bailing” the car companies only means that they will continue to flood their dealerships with cars nobody will buy. The only way we can fix this is radical, worked in 1940 and then again big time in 1942-45. The government itself must buy surplus production and dump it in the ocean if that is what it will take. Workers must be able to buy the things they produce and paying them to work will work. I have a long post here based on a piece about the late John Maynard Keynes in Forbes. Before WWII we built fighter planes for England and Russia sent them to those places for no charge (we even paid the shipping), knowing the Nazis would destroy at least 75% of the stuff and we’d never be paid back. It was called “Lend Lease” and like it or not it gave the economy the first real shot in the arm since 1929. The boom after WWII was based on war production of stuff that was used one time and then destroyed and had to be replaced.
howard432 (cc8b85) — 12/8/2008 @ 6:58 pmSpreading-the-Wealth ===> Strong-Economy
Cart ===> Horse
nuff said
Gesundheit (47b0b8) — 12/9/2008 @ 12:11 pm