Friday, July 10, 2009

Robert Reich: Fool

There are plenty of reasons for economic gloom, but Robert Reich gets it all wrong:
In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy.
"Recovery doesn't depend on investors" is like saying farming doesn't depend on farmers. Very simple question: The secret to capitalism is . . .?

CAPITAL! This is the one simple truth that the Left can never get their minds around. Other factors being equal, the firm with more capital wins. Of course, other factors are never perfectly equal, but in general, you can't make capitalism work without capital, and what the U.S. economy is currently experiencing is primarily a shortage of capital.

This is why the Keynesian "stimulus" is doomed to failure, because it does nothing to fix the capital shortage. Tax cuts would increase the capital supply, but Democrats are fanatically opposed to tax cuts, especially "tax cuts for the rich" or reductions in corporate taxes.

Unfortunately for their fanaticism, you're not going to increase the supply of capital very much by any other method, simply because (a) rich people have more money, and therefore cutting their taxes tends to produce more investment capital, and (b) the rich are not fools, and will not invest in U.S. companies hindered by high corporate taxes that put them at a competitive disadvantage in the world market.

The idiocy of people like Robert Reich -- whose politically motivated hatred of "the rich" blind them to the most basic facts of economics -- is a solid argument against voting for Democrats.

(Hat-tip: Memeorandum.)


  1. I am certainly not a Robert Reich-ch-ch-ch-ch-ch (as Rush calls him)fan, but it seems to me that confidence in the economy by both the investor and the consumer are needed in order to break this boat known as "Economic Recovery" from its resting place on a government-created reef.

    In a more serious vain and in the immortal words of Randy Newman, I emphasize that "short people have no reason to live."

  2. Right! Savings (capital), not spending, drives an economy.

    To make this point as simple as I can ... If you want to buy a Butterfinger and it costs $1, you first have to have the $1 (capital/savings).

    The government doesn't have any magic dust that can change this fundamental reality.

  3. Tax cuts don't increase capital (not right away); what they do is remove a tremendous disincentive to putting capital at risk.

    Americans are actually being very smart with their money right now. They are ridding themselves of debt and are saving at a much greater rate than they did while they were being defrauded about the value of their (made up out of thin air) money by Greenspan's Fed.

    Real savings are being hoarded. There is a tremendous amount of capital that could be put to work in an instant.

    But the government is putting its thumb on the risk/reward scale in numerous ways: (1) taxes are too high. Why risk your capital if you can't keep what you earn? (2) the money supply is even more grossly inflated than it was a year ago. Preserving what you have takes a lot of time and effort; time and effort that you can't put into making more. (3) Obama makes clear every day, in every way, that wealth (except his own) is evil. Why risk your capital to build success, only to be demonized (and likely prosecuted) by the federal government? (4) Over-regulation has created massive barriers to entry into most fields. In the 1920's and '30's, people literally started car companies by building a prototype in their own back yards. Try doing that today, even if you're a fully trained automotive engineer. Between the Federal Motor Vehicle Safety Standards and the emissions standards and the mileage standards and the OSHA standards and the . . . well, suffice it to say that only a private equity fund with many billions could afford to back an auto start up today.

    Capital is a function of real savings. It flows according to immutable laws of risk and reward. The government is upping the risk at the same time it lowers the reward. Result: people are hoarding capital or taking it offshore. Cut taxes, cut regulation, stop punishing success, and it will flood back into the U.S., because we have the most productive workers in the world.

  4. Ludicrous!

    Robert B. is not a fool.

    Robert B. is, of course, a dwarf.