Monday, November 29, 2010

How can Fareed Zakaria write "It is not that the stimulus did not work" if all that spending didn't accomplish its objective, (per Zakaria), "to get the private sector spending again"?

Me thinks Zakaria confuses 'spending' with 'stimulus'... the federal government certainly did the first, it hasn't accomplished the second.

And while I'm at it, let me add Martin Feldstein to the list of people who just don't get it, for his (in my view) silly argument that the government can raise taxes "without reducing the incentive to work, to save or to expand businesses".. just as long as it isn't 'tax rates' that are being raised.

Increasing taxes sucks money out of the private sector... and this is true no matter what form the tax hike takes or on who the taxes increases are levied. And while people are motivated in large part by the percentage of their income they get to keep 'after taxes', the amount of income they get in the first place is largely determined by the amount of money circulating in the private sector. Suck enough money out of the economy and those whose pockets hold less money are going to be less willing and able to spend and save... those who own businesses are going to be less willing and able to expand their businesses. Put another way, getting to keep 100% of every dollar of income isn't much of a boost if there is less of the revenue that feeds the bottom line.