**Note: As soon as I finished writing this I returned to the Tidestemmer site and noted that Gene had similar comments here from a few days ago. Bad timing! Sorry, Gene. Hopefully I compliment your work.
Hat tip to Gene Fama of Tidestemmer for the link here in the WSJ. The column articulates very well the folly of Obama's "rebuilding of the economy from the bottom up." Every time I'd hear that come out of his mouth during the campaign I'd just snicker. Those who own the capital - which is the investment needed to really stimulate the economy - are, unfortunately for Obama, at the top and react to tax rates (especially Capital Gains). If your tax policies eat into the bottom lines of those who own businesses, they are not going to just grab their ankles and pay the tax, operating as if the rates were the same as previously. They are going to adjust - lay off employees, scrap expansion plans and even damage consumer choice by slowing research and development. Businesses, as I have said time and time again, go into business for the bottom line. Long term tax policy has serious ramifications for economic health. Democrats like Obama, when it comes to tax policy, unfortunately, live in a static world that seems to lack the ability to grasp the long term effects of their decisions. If you live by static tax policy analysis, we all die by it.
I'm convinced the reason Democrats cling to this approach is because they are masters at manipulating populist ignorance - another thing I've repeated over and over on these pages(see my "One Final Thought" at the bottom of this post from May). The hated "trickle down" approach works, because, again, that's where the Capital is - up top. But to get there, most often requires hard work, delayed gratification, self sacrifice; everything but ease and expediency. Most people seem content to avoid that path or don't understand the path at all. So, since the people who aren't at the top are naturally larger in number, filled with envy based in ignorance, for Democrats they are a prime target for votes. So naturally, Barack Obama shows up promising to not only rebuild the economy, but to do it from the bottom up. Politically, in this environment, that is a winner. This is a fact that FDR's New Deal Architects like Rexford Tugwell were really dialed into. Despite the fact that the New Deal in retrospect did very little (arguably nothing) to help the US Economy during the Great Depression.
So Reidl's post at WSJ is appropriate. Rather than Keynesian plans that would provide artificial stimulus (short lived, if they take off at all), the best method to revive the economy is to let those who invest and grow business keep more of what they do so with - wealth that can be transfered into Capital and other investment. Is it popular? No. Does it work? Yes. All this talk about GOP strategy for the future has to have an ingredient of education of the electorate on this fact or people like Obama will continue to use the ignorance of Market Economy Basics to their advantage.
Lets start educating.
