Today we had an article by one blogger wondering how a certain comic gets paid. In the comments, another blogger defended the comic with the following rationale.
I say if the point of tax cuts is to stimulate the economy, give them to the poor people. They know how to spend. Rich people will just put it in a mutual fund. That might help the rich people but it doesn't help the economy like a new TV or game system purchase will. Okay I should be nice and say a car repair and new clothes but you get the idea.
To be fair and honest, they got the first part right. The tax cuts (actually just rebates as they are not permanent) are to stimulate the economy. And that is where it ends for the batting average.
They know how to spend.
No they do not. That is why they are poor. Saying that poor people, driving a nice Lincoln, with a cell phone, TVs, DVDs, and Cable systems know how to spend is like saying that an alcoholic knows how to drink. They can spend (drink), but they do not know how, or they would not be poor, they would be lower middle class. This goes directly back to Brad's numerous articles on delayed gratification as a corner stone to getting ahead. They can spend, but they do not know how to spend.
Rich people will just put it in a mutual fund.
That is unfortunately a bad and incorrect stereotype, but one that is common among failed comics that cannot make an honest living any longer. While some of it may go to mutual funds (not a bad thing regardless of the intonation), most will be invested in what? Shocker that this is (and yes, going back to Brad's articles), they are going to invest it in ventures that do better than a mutual fund. They are going to invest it in hiring people to INCREASE their business and thus increase their wealth. They did not get wealthy (with the exceptions like Paris Hilton) by being stupid.
While not stated, this statement also perpetuates another myth. That somehow "rich" money does not go into the economy. That of course is only true if they stuff the money in a mattress. The truth is, even if put into a "mutual" fund, the money is going to go into the economy as either spending OR investment. It is all nice and good that someone is out there buying all the junk, but someone has to make it, and that takes money, and that comes from investments.
That might help the rich people but it doesn't help the economy like a new TV or game system purchase will.
This actually has a smidgen of truth to it, but in a backhanded way. Yes, the money will help the rich people, but why not? It is their money! But the latter half of the statement is of course a popular liberal myth, and totally false for 2 reasons. One, as mentioned above is investments. You cannot have an "economy" without them. The other is that the Rich tend to spend more wisely than do the poor, and spending helps the economy as well.
Okay I should be nice and say a car repair and new clothes but you get the idea.
Finally, the last statement. The problem with someone deciding what is the right purchase for everyone is that they are always wrong. This is not a theory or opinion, but a demonstrable fact (Eastern Block Economies circa pre 1989 anyone?). So whether one buys a car, or a TV is not the issue. Indeed, if the government was smart (an impossibility), they would try to address the issues of the falling economy by targeting the parts that are failing. Every sector is not in danger. Anyone seen mass layoffs at McDonald's? But parts are suffering badly - notably this time around, Housing. Which leads to another truism.
The rich get rich by buying low and selling high. IN other words, while the poor are buying whoppers with their money, the rich are going to be gobbling up depressed stocks, pumping money into where it is really needed the most! The housing market is suffering, but only a fool would think it is going under.
As a last thought, some would say "well, the government can see that, so they can do what the rich do!". And of course they would be wrong. In an ideal world, they could be right. But we live in a human world, not an ideal one. So while some IN the government may see how to best invest the money, they do not make the rules. And lobbyists and graft make sure that politicians (the ones making the rules) cant make the right decisions.
The decision is not ours. But the decision is obvious if illusive. Put more money into the hands of the poor (late disclaimer - this is not about all poor, just the chronically poor) to waste away, or to the rich to really give the economy a boost! And note the word "put". It was chosen with care. Not give - it is their money to begin with, but Put. Government "giving" money to the rich is like a thief "giving" you your car back after taking it for an abusing joy ride. Great guy that thief, right?