The government doesn't need to take money away from the rich, the rich need to release it back into the economy in the form of better wages for workers. We seem to be caught in a vicious circle...businesses are hanging on to cash because there is no demand, workers are not creating demand because they are trying to pay down debt or aren't making any money at all because they are out of work.
Maybe the rich don't care...demand is increasing in emerging markets, so they don't care if the U.S. and Europe's markets become moribund.
Your analysis is correct.
Why do you believe it is that government spending ($5 trillion, so far!) has failed to get our economy moving forward again?
Spending-stimulus advocates claim that Congress can "inject" new money into the economy, increasing demand and therefore production. This raises the obvious question:
From where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another.
We both know Congress cannot create new purchasing power out of thin air. If it funds new spending with taxes, it is simply redistributing existing purchasing power from the private sector to the government sector (while decreasing incentives by the private sector to produce income and output).
If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If they borrow the money from foreigners, the balance of payments will adjust by equally raising net imports, leaving total demand and output unchanged.
Every dollar Congress spends must first come from somewhere else.
For example, many lawmakers claim that every $1 billion in highway stimulus can create 47,576 new construction jobs.
But Congress must first borrow that $1 billion from the private economy, which will then lose at least as many jobs. Highway spending simply transfers jobs and income from one part of the economy to another. As Heritage Foundation economist Ronald Utt has explained, "The only way that $1 billion of new highway spending can create 47,576 new jobs is if the $1 billion appears out of nowhere as if it were manna from heaven."
This statement has been confirmed by the Department of Transportation and the General Accounting Office (since renamed the Government Accountability Office), yet lawmakers continue to base policy on this economic fallacy.
What the Democrats fail to understand and most conservatives have always understood is removing water from one end of a swimming pool (the economy) and pouring it in the other end will not raise the overall water level. Similarly, taking dollars from one part of the economy and distributing it to another part of the economy will not expand the economy.
