How Risk-Taking by the Wealthy Helps the Middle Class
5th March 2016
Considering debt, it should be said up front that realistically all government spending is debt. Governments can only spend to the extent that they extract resources from the real economy first, at which point debt amounts to an accounting abstraction. A focus on debt misses the real barrier to economic growth, which is government spending itself. As the late Robert Bartley put it in his classic book on the Reagan economic revival, The Seven Fat Years, “The deficit is not a meaningless figure, only a grossly overrated one.” Government spending is the true tax signaling resource consumption by politicians lacking market discipline. The unseen with the spending is all the experimentation (and yes, voluminous failure) that is never pursued by market-driven entrepreneurs (cancer cures, transportation innovations, technology advances that would render the internet dated) thanks to government existing as a size consumer of always limited resources.
There is no such thing as ‘federal money’, ‘state money’, ‘city money’, or any other kind of government money. It’s all TAXPAYER MONEY, taken from you with the gunman visible in the background.
The rich, for being rich, have money to lose. That’s why much lower tax rates on wealth that is earned or inherited are so crucial to the economic well-being of everyone else. Precisely because the rich are flush with funds, they can take risks on the dynamic companies of tomorrow that are tautologically necessary for the prosperity that Anderson would like. Adam Smith was very clear that investment migrates away from economies that are stationary, and if the tax-cut focus is on the middle class, a more stationary economy will be ours. Such an economy will do little for the typical American whom Anderson would like to aid.
History is once again very clear here. Since the rich have money to lose, they alone can pursue the intrepid investments that make the typical American much better off. Indeed, it was J.P. Morgan who took a flyer on Thomas Edison’s light bulb despite the protests of his father, it was Howard Hughes who brought a pile of inherited money to California in order to fund the aviation boom, families with names like Rockefeller, Vanderbilt and Phipps were the initial money behind the venture capital explosion out in Silicon Valley, PayPal co-founder Thiel was the money behind Facebook, and then Amazon founder Jeff Bezos was a pioneer investor in both Google and Uber.