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Friday, April 3, 2015

What Makes More Sense To You?

After I posted earlier today about president Obama's disinterest in helping grow the economy, I got an email in which the writer complained that I ignored Obama's calls for higher taxes on the wealthy.  This move would reduce income inequality, or so the writer of the email claimed.  That got me to thinking.  I know that the email writer was being sincere, not sarcastic.  Nevertheless, I wonder how it is possible for a well educated person to actually believe this claim.  Let's consider two points:

1.  Raising taxes on anyone does not grow the economy.  All that happens is that money is taken away from the private sector (which produces wealth) and puts it in the government (which consumes wealth).  No economist would argue the contrary.

2.  There is a basic issue about how to reduce inequality.  Obama and his supporters always talk about taking money away from the wealthy.  Wouldn't it be better to increase the incomes of the middle and lower income groups instead?  After all, a typical middle income family gets no benefit is some millionaire has to pay higher taxes.  In fact, if the increases are significant, they could actually slow the economy and hurt the middle income folks further.  On the other hand, if the middle income family could get a 5% growth rate for its income, it would be much better off after a few years, no matter what happens to the wealthy group.  Rising incomes for all Americans can only happen if the economy is growing at a sufficient speed.  That is why we need pro-growth policies, the very policies about which Obama does not care.


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