Saturday, November 01, 2008

disconnected message

As I wrote earlier this week, I was busy working with my 5th grade son on an economic view of this year's Presidential election. I think I'll get a good grade on the project; my son, of course, will get the credit. (Parents of grade-school kids will probably get the humor in that comment)

Anyhow, one of the features of the project was the explanation--on a fifth grade level--of trickle-down economics. Doing my best to make sure the presentation was "balanced", I stressed to my son that the economic theory of trickle-down requires that the wealthy "act" in a certain way in order to have substantial economic might flow down the chain. Since it is not guaranteed that the wealthy act in any interest except to make more money, I say to my son, sometimes incentives for the wealthy to continue producing does not evolve into "buying power" for the lower earners.

Did he understand it? Absolutely, and here's how I know:

As I was explaining Obama's plan to my son--stressing that the burden for taxes will fall mostly on the wealthy and on big business--he quickly told me that it won't work. I asked him "how do you know?" Response: "well, if you tell me that the rich act only in the interest of making more money, why would they just do nothing about paying more taxes?"

And I, so overwhelmed with pride, almost cried!

If I'm not mistaken, the argument against trickle-down is that the rich act in their own interests, not in the interest of the country. I find that unpursuasive for any number of reasons, but for now let's just use that line of reasoning and apply it to the economic world under a President Obama.

Why would the "selfish" wealthy continue producing at the previous level when there are no incentives in it?

Clearly it won't be "patriotism", as Sen. Biden has asked of them. Remember: these people, in the lefty's mind, don't act in the economic interests of the country. That's why trickle-down doesn't work, remember?

Obama's plan calls for everything--EVERYTHING--to stay the exact same in the economic world for 8 years in order to pay off his budget in 2017. That means that all these businesses will just accept the higher tax without sharing any of that pain with the consumer or with their employees. . .for EIGHT YEARS. That means that all these wealthy people--many of whom could probably retire comfortably right now--will just accept less financial return for their time WHILE STILL PRODUCING THE SAME AMOUNT OF WORK. . .for EIGHT YEARS.

IF these are people and organizations that truly act only in their economic self-interest, then something's going to give. Whether it be early retirement by wealthy earners, wage freezes or job cuts (or even just moving off-shore with the jobs, tax penalties be damned!) by big corporations, increased prices for everybody, or just less production because it isn't worth the extra effort, the wealthy WILL make adjustments to keep their bottom line at a certain level. Isn't that what the left tells us?

And WHEN those adjustments hit the market, everybody gets screwed.

So I'm left with a question: If Obama's plan only works if the wealthy show more "patriotism" and less "selfishness", then why is that plan any better than trickle-down economics? Wouldn't trickle-down work if the wealthy were less interested in themselves than in the greater good?

But here's the bigger question: which system will more likely find the wealthy doing what they're "supposed" to do?

Trickle-down, where the wealthy still have incentives to make money?

Or Obama's plan, in which the wealthy have less incentive to create wealth and definitely less opportunity to use it?

If I was rich, I'd think the answer is pretty clear. And that's the disconnect of Obama's economic policies.


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