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    The Will to Create

    Entries in private sector investment (3)


    Government spending vs private investment

    Chris Edwards at Cato makes some very important points regarding government spending as a form of "investment". As the public gains a better understanding of government spending, perhaps we'll move beyond superficial political games played in Washington to a more mature private sector economic awareness of what has to be done. Like most statist systems, ours has degenerated into cleverness, cronyism, propaganda and mediocrity. True vision, innovation and economic growth comes from the myriad supply and demand signals from private sector interaction released from the shackles of government intervention and central planning. Government intervention has misdirected capital to unproductive activity, and the private sector has to adjust to economic reality. A report today showed that savings are up, and this is a vital step in the economic re-adjustment. Once we can set stable rules of the game, estimate the costs of doing business, and stop the interventions which have investors frozen in uncertainty, long term investments by entrepreneurs in the private sector will begin and, slowly, employment will pick up.

    Along with limiting government and preventing destabilizing interventions, education must be released to choice, private funding and innovation to meet 21st century demands -- just as immigration issues have to be dealt with so that we easily retain foreign students in America and attract talent from around the world. The great middle class need for good paying jobs in relation to prices can come about by making America a place of low costs for businesses, stable laws and freedom from irrational regulations. If we do it right, America will become an investment magnet, and with improvements in efficiency and productivity, we could see slow deflation of prices which will only place us in a better position to attract investment. This requires an elimination of the Fed and the development of free market banking based on something solid and dependable, not the counterfeiting and inflation-production that takes place now.

    Private sector provision of assistance to the needy should also be a part of the transformation. Americans will eagerly give if they are confident in the future and the government system protecting their rights. Outside the needy, the majority of Americans can choose their own retirement and safety net plans from private insurance and saving/investment offerings. It's time to move past statist naysayers trying to prop up a dying system and who have demonized the private sector and free market principles, then take hold of our future and create it. It's time to move forward, not wait on the next government stimulus.


    And, about taxing those rich people

    Obama and the Left, and many who fall somewhere to the left of center, like Warreen Buffett and Bill Gates, are fond of saying the rich don't need the extra money they save from lower taxes, so, they say, the rich should pay more taxes -- some say up to 50% or 60%. It's true that the rich will not miss the money, but that isn't the point.

    The silliness of this argument is astounding, and Obama used it yet again today in his budget mish-mash, as if tax policy is designed for individuals. The point of not raising taxes on income over $250,000 is that it takes hundreds of billions out of the private sector so that government can misdirect the wealth and basically waste it. If this money is kept in the private sector, the rich people don't keep it under a mattress -- they save it or invest it, and even if it's saved, it's in a bank or financial institution where it can be loaned for economic purposes.

    The argument from the Left regarding rich individuals who don't need the money saved from lower taxes is a dishonest argument, and if it's not dishonest and intentional, then it's ignorant. If the rich who believe they should pay more taxes could somehow follow their added tax dollars through the black hole, within the seconds it would take for the money to be wasted, it might change their minds.


    The rich, new wealth and private investment

    The idea that wealthy individuals horde their wealth so that it leaves less for the rest of society is an old myth which doesn't seem to die. There's not a certain amount of wealth that's divided up. Wealth fluctuates and in a growing economy new wealth is created through production of goods and services -- when things of value are created. This means there is more wealth which is spead through the economy, because the producers don't snap their fingers to produce wealth -- they are dependent on labor and other businesses which benefit from the new wealth that's created.

    So, taking money from the rich to give to the poor can be counterproductive if the confiscation causes producers of wealth to stop producing new wealth. This is the situation we're in right now to a certain extent -- producers are producing, but not enough new wealth is being generated. Business people on the way up are missing in the economy and producers of wealth are not investing to the extent they would in a healthy, stable economy.

    When government takes money from wealthy producers, or borrows or prints leaving a bill to be paid, to stimulate the economy, they are simply saying they want to control investment. Government's rationalization for stimulating the economy is that the private investors are not investing. However, private investors are not investing because years of government interference in the economy has caused a high degree of uncertainty regarding the cost of doing business in the next 2-10 years as government interventions begin to have effects on the economy, like the healthcare bill and the financial reform bill, and the possibility of an energy bill. Government is proposing more intervention to resolve the problems caused by previous interventions, but this is a vicious cycle. The cycle has to be broken by allowing producers to keep what they earn, invest it in the economy and thereby create new wealth -- and more jobs, so that the prosperity is spread around. Government misdirects wealth by investing in an economy they don't understand - no one can possess enough information for this type of largescale, centrally planned investment -- it takes millions millions of transaction spread out among all the actors in an economy, and in the global ecoomy. Imagine a group of government officials understanding what is needed for such complex and numerous interactions on such a grand scale!

    Our nation has to get past the idea that private producers are the problem -- we need to get past class envy and hatred of wealth -- wealth is the energy which grows the economy and creates good-paying jobs and opportunities for entrepreneurs to start new enterprises.