Tuesday, July 20, 2010

Tamny: Macroeconomics v. Income Equality

We were wondering if we ought to provide Gentle Readers with yet more explanation as to why taxing the rich because they're just too rich is an unhelpful idea for the rest of us.

But this morning, we have an actual economist to do so.

John Tamny of RealClearMarkets does it pretty well and very clearly. Any and all who find economic questions puzzling ought to imbibe all of Tamny's potion and so realize that the only alternative to having a few fabulously wealthy people is for everyone to be a lot poorer than they would be otherwise.

We will add but one observation. Stipulating everything Tamny says, one may well argue that high-end wealth damages society in certain noneconomic ways and so must be curbed. These effects of wealth concentration have to do with the moral and ethical failings of the wealthy and the way that their wealth amplifies those moral failings.

The question then comes, Who are the philosopher-kings, angelic in their motives, who will appropriately seize the wealth and decide what fine things to do with it, things unsullied by the evils of the evil rich? If they work for the government, we think we don't need to finish our sentence. Our Niebuhrian view of human nature forbids us to entertain the notion that the world's problems are solved when the Right People are put in charge.

And we will add a warning. We are grimly sure that this message, one that the wealthy presumably have a vested interest in promulgating, isn't going to take hold soon. The reality is that a majority of politicians in power presently have a vested interest in aggravating resentment against the rich and will do so for the foreseeable future. Cut-off-your-nose-to-spite-your-face populism is not going to disappear, even when a noseless Republic looks in the mirror.

PS: Goldman Sachs' quarterly profits are down 83% from a year ago. We feel more equal already. But not more prosperous or confident. Thin gruel, that.

PPS: Niall Ferguson at the Financial Times (motto: Printed on Pink Paper for a Reason) is saying the same thing, albeit less clearly and from different historical data (the failure of deficit spending in peacetime to do anything but spark inflation in countries like Argentina and Venezuela). So the Ferguson solution to stimulus is not to tax-and-redistribute but

the kind of policy regime-change Prof Sargent identified 30 years ago, and which the Thatcher and Reagan governments successfully implemented. Then, as today, the choice was not between stimulus and austerity. It was between policies that boost private-sector confidence and those that kill it.

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