Jonathan Alter of Newsweek takes President Bush to task this week for dropping the ball in his efforts to fight poverty in the year since Hurricane Katrina.
Other elements of Alter’s argument are debatable, but he shows his complete lack of understanding of economics in the following passage:
The House in June passed a steep reduction of the estate tax (so as to apply only to couples leaving more than $10 million to their heirs) that would cost the Treasury three quarters of a trillion dollars over the next decade. Last time I checked, that was real money.
Yes, Mr. Alter, that is real money — money that will flow throughout the economy because of its use in the private sector.
Waste that three quarters of a trillion in handouts tied to a government program, and the poor for whom you feel such compassion will still be poor; they’ll also be more dependent on the government that’s stifling the free market that generated the money in the first place.
Alter displays his ignorance again while talking about efforts to tie the estate tax cut to a minimum wage increase.
The idea was to get credit for giving crumbs to the working poor?but only if the superrich receive hundreds of billions of dollars. Fortunately, the bill failed. Unfortunately, other tax cuts for the wealthy keep moving through the system, ballooning the deficit and drying up money for everything else.
Deficit spending can be a big concern, and the motivation for supporting a minimum wage hike is purely political (since such a hike offers no benefit to the working poor).
But Alter seems to forget the implications for the economy when the “superrich receive hundreds of billions of dollars.” What do they do with all that money? They might spend it, which means they’re buying goods and services from people who’ll need to hire more workers to meet the demand. That means more jobs.
Or the “superrich” might save or invest the money. That means more capital for new and expanding businesses, which will use some of that money to hire more workers. Once again, more jobs.
If Alter is really worried about “drying up money for everything else,” he should focus on steps the government can take to ensure the money keeps flowing in the economy: low marginal tax rates, lower regulatory burdens, simple laws that business owners and entrepreneurs can understand.
