Monday, March 28, 2011

Why Nobel Prizes Are Clearly Worthless

Here are some samples of the sort of brilliant thinking that gets you a Nobel Memorial Prize in Economic Sciences and gets you a job in the Clinton White House. From the estimable Joseph Stiglitz, pontificating from the ivory tower on the proposed deficit reduction plan put forth by the Bowles-Simpson committee….

Years of underinvestment in the public sector—in infrastructure, education and technology—mean that there are ample high-return opportunities. Tax revenues generated by the higher short- and long-term growth will more than pay the low interest costs, implying significant reductions in deficits. Any firm that could borrow at terms similar to those available to the U.S., and with such high return projects, would be foolish to pass up the opportunity. ....
With a quarter of all U.S. income going to the upper 1 percent, and America’s middle class actually facing lower incomes than a decade ago, there is only one way to raise more taxes: Tax the top.

A quick glossary for you. “Underinvestment” means not enough government deficit spending. “Tax the top” means even more taxes on the people who already pay the lion’s share of taxes and who are the ones who invest and create private sector jobs. So here is the solution: Spend more money that we don’t have Raise taxes on the very people we need to invest in growth Brilliant!

The deficit doesn’t matter to Mr. Stiglitz, even though even someone with a high school education understands that when we spend trillions more than we bring in, we have a serious spending problem. Taxing the top? That makes sense in what way? It takes away the incentive for people who are already rich to invest their money. If I have millions of dollars socked away, I will leave that money in the most tax favorable investment I can find unless the potential gains – taxes is greater than the risk I have to take. The problem with people like Mr. Stiglitz is that they exist in a world of theory and not in the real world where incentives and behavior matter. People who are rich got that way by being fairly smart believe it or not. Raise taxes and they will find ways to shield their money. The reality is that, neat theories and charts aside, raising taxes on the wealthy does not raise tax revenue.

All of this also presupposes a basic misunderstanding of wealth and money. To people on the far Left, every bit of wealth is the property of the Federal government. The only question is how much of your wealth the government will permit you to keep. It is a fundamentally flawed system that assumes that the fruits of your labor are by default the property of the nation unless the tax laws permit you to keep a portion of it. If we want to see real growth in the economy (which will lead to higher tax revenues by the way), we need to stop borrowing money, stop deficit spending and start leaving more money in the private sector to invest and create jobs. Real jobs, not made up jobs funded by taxes and borrowed money.

The greatest threat to our long-term prosperity revolves around the deficit. Period. With around $50,000 per person in debt already (and another $10,000,000,000,000 in new Obama-Debt over the next decade), we are at a precarious precipice. Our continued government spending at current levels is predicated on our ability to borrow money just to keep the government running from year to year (and creditors willingness to keep buying our debt). We are adding another trillion and a half to the national debt this year alone. As I mentioned, we are going to add almost ten trillion in new debt in the next ten years. As the Heritage Foundation pointed out: That is more debt than the federal government accumulated from 1789 to 2010 combined. That should give even the boys in the ivory tower pause.

We all knew that the Obama Presidency was going to be a milestone in history. Who knew that he was going to set new records for deficit spending, not for being the first black President? If he gets his advice from people like Joseph Stiglitz, let’s hope that House Republicans can keep new spending at bay long enough to oust Obama from office and send the Democratic Senate majority out with him before these people bankrupt America.
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