Republicans’ Lust for Gold by Paul Krugman

It’s not too hard to understand why everyone seeking the Republican presidential nomination is proposing huge tax cuts for the rich. Just follow the money: Candidates in the G.O.P. primary draw the bulk of their financial support from a few dozen extremely wealthy families. Furthermore, decades of indoctrination have made an essentially religious faith in the virtues of high-end tax cuts — a faith impervious to evidence — a central part of Republican identity.

via Republicans’ Lust for Gold – The New York Times.

Once again, Krugman has hit the nail on the head.  A concise explanation for the Republican candidates for president, Trump included (you do know that he has spent little of his own money on his campaign, preferring to use large quantities of donated cash: at last count, he spent two million and his supporters spent twelve million on campaign expenses.)

Once again, there is no inflation and no rise in Social Security payments.  Borrowing money couldn’t be cheaper for the federal government, yet any stimulus– infrastructure spending such as rebuilding roads, bridges, and tunnels– is not even under consideration.  Federal spending is at a minimum because of the across the board ten percent cut that was forced upon the entire federal system, and the deficit has dropped again– for six years in a row– yet the Republicans are still claiming that Obama has been spending profligately.  Even federal employment has been reduced.

At this point, a tax cut would delay balancing the budget– some estimates say the Republican tax cuts would put a trillion dollar hole in our current accounts– yet have no stimulating effect on the economy.  The wealthy who would be the beneficiaries of these cuts are already sitting on trillions of dollars worth of unused capital.  The business world alone is estimated to be sitting on two trillion dollars in cash that is not being used to build factories or conduct research.  Personal wealth is difficult to calculate, but it is estimated that there are about 29,000 people in the world with more than 100 million dollars each.

The only way to create wealth in this country is to stimulate it by carefully targeted government spending.  To finance the spending, it is necessary to go where the money is: a progressive income tax with a top rate of 50% for people making more than a million dollars a year, and a business tax calculated to attack the unused capital hoarded by large profitable companies.

The spending must be tilted towards employment of individuals who otherwise would be unemployed or underemployed.  Training is obviously a part of this employment but must be limited to usable skills such as arithmetic and computer programming.  Infrastructure repair and development is an obvious target for spending, and mass transit such as high speed trains are a part of this.  Addition of solar and wind power units can be a doubly profitable venture: employing people to install and producing energy afterwards.

The model for this type of economic stimulus should be World War II, except that in the war we build weapons and in this stimulus, we will build infrastructure.  The principle is the same: the weapons were destroyed, thus paradoxically creating wealth for their builders.  In this case, building things will serve the same purpose: creating wealth for their builders.

A moderate degree of stimulus spending, and a moderate tax increase will serve to create significant growth in GDP.  At the same time, we will get bridges, tunnels, and railroads to be proud of.  We will also get bragging rights for proving the greedy Republicans wrong about spending.