Sunday, November 7, 2010

Cutting Government Spending Is Good But Insufficient. Growing the Pie is Essential

I found this article insightful (see link) regarding Obama's understanding of our economy. The key to future prosperity for all is growth, and capitalism's risk/reward incentive system only works if those who take the risks get to keep enough of the rewards to provide incentive. Obama seems to have an instinct that tells him what enough is, and when enough is enough Obama will have the State confiscate the rest. Really. Check out the article. It is a quick and interesting read.

Massive redistribution leads to reduced risk taking which leads to reduce growth. We should reduce excessive spending, but we cannot cut our way to prosperity. We need to constrain spending AND grow the pie.



1 comment:

Baxter said...

Hags -

I agree with your comments regarding the key to future prosperity as well as the effects of massive redistribution. I suspect that President Obama does as well.

You and Victor Davis Hanson seem ready to believe the worst about our elected leader. VDH - as is his way - makes subjective observations and then treats them as fact. Ultimately, it is a bunch of hooey cloaked in academic prose.

What confiscation has Obama proposed? He advocates a 20% capital gains tax - The lowest rate in the post war era, save for a few of the Bush years. He has not advocated raising the marginal rates higher than under the very successful (and budget balancing) Clinton years.

We agree. We need to constrain spending AND grow the pie. We also need sufficient revenue to pay for the programs that the American people want and pay down the debt. That means significantly higher taxes, be it through energy, VAT, higher AMT, or reductions in loopholes and credits. Like the president, I wouldn't go any higher than proposed with the top marginal rate or capital gains for the very reasons that you mentioned.

Hags - would you support more taxes as described if they were part of a "Grand Compromise" materially constraining spending and the growth of government? What is the highest priority - the lowest tax rates in the western world or fiscal rectitude and a balanced budget?