Tuesday, July 19, 2011

A Juxtaposition of Economic Notions

Today's Cincinnati Enquirer, by design or accident, brings together two opinion pieces that couldn't contrast more.

At the top of the opinion page is "community voice" (translation: unpaid, one-time columnist) Robert W. Thurston, a history prof at Miami U. The upshot of Thurston's column is that we need for the government to tax the rich because (a) they're presently not spending their money; (b) except on wasteful luxuries; so (c) we need to take their money to employ more people in government.

Thurston thankfully concedes that making and selling tasteless toys for the rich does employ people. But he doesn't bother to ask whether, on balance, people spend their own money better than the government spends other people's money. We'll stipulate all the Philistine geegaws that Thurston cites and throw in the various bridges to nowhere and $3000 toilet seats and such, bought on our behalf by the best and brightest in DC. Comparing the best "investments" of Uncle Sugar to the worst waste of Uncle Pennybags only prolongs our getting the point so aptly made by Adam Smith and updated by Milton Friedman.

At the bottom of the page is the sublime Amity Shlaes, herself also an historian, but an historian of economics, and one who has found gainful employment outside academe. She reminds the impatient that the economic roar of the Roaring Twenties was fueled by the assiduous efforts of the Harding (!) and Coolidge (♥) administrations to control public expenditures, wait out economic adjustment and thereby answer the distressed call for more public benefits with more private prosperity.

But, our friend Dr. Thurston might rejoin, what are we to do about the two trillions on which America's (evil, stupid, tasteless) rich corporations are sitting on? The answer includes: (a) understand how a recent crisis of liquidity encourages businesses to hold cash; (b) wait for the malinvestment of the previous boom, especially in real estate, to dissipate; (c) in the meantime improve the business climate by assuring reasonable tax rates (unburdened by policies that politically favor this or that kind of business activity), sound currency, and reasonably limited government activity; so that (d) when promising investment opportunities arise, as they always do, businesses will be ready to risk their capital on them; (e) thereby raising productivity and producing real economic growth from which all will benefit.

By the way, did anyone happen to notice that the austere balancing of Ohio's budget has already improved its bond rating, without the concomitant falling of the sky?

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