Larry Kudlow The War on Investment

http://www.futureofcapitalism.com/2010/08/larry-kudlow-the-war-on-investment

Larry Kudlow has a new column about the effects of what he calls "the coming tax bomb" and "Washington's war on investment":

the position of the Democratic party in power in Washington is that transfer payments (taxing and borrowing from Peter to pay Paul) are good for growth, and that investment is bad....

The great flaw in the thinking of the Democrats is that they are ignorant of the economic power of saving and investment. Saving is a good thing. Stocks, bonds, bank deposits, money-market funds, commercial paper, venture capital, private equity, real estate partnerships -- all that saving is channeled into business investment. And whether that capital goes into new start-ups or small businesses or large firms, it finances the kind of new investment in plants and equipment and software and buildings that ultimately creates jobs and family incomes. And that, in turn, spurs consumption.

But pulling out just one dollar from the private sector and rechanneling it through the government as a transfer to someone else creates nothing. At best it's a safety net. At worst it may damage private-business activity and actually reduce employment.

He says Senators Lieberman and Bayh are on board with extending the Bush tax cuts for upper-income earners: "Bayh and Lieberman often refer to the John Kennedy tax cuts that lowered marginal rates across-the-board for successful earners and businesses. They correctly worry about small-business job creation in this process. And they have moved from the demand-side of today's Democratic party over to the supply-side of the John Kennedy era."

by Ira Stoll  |  Aug 6, 2010 at 8:53 am Related Topics:  Politics, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list