Unlike conservatives, I'm in favor of economic growth

Last updated on: August 16, 2011 at 11:09 am by Fred Clark

Unlike conservatives, I'm in favor of economic growth 2011-08-16T11:09:52-04:00 Fred Clark

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A handful of items worth repeating, and worth following the links to read in full:

Nobel laureate Peter Diamond:

Infrastructure spending is not a vehicle for dealing with a normal recession. But once you recognize this recovery will be slow, you realize this is a time when we should be doing major spending on infrastructure. And a lot of the infrastructure investments are stuff we’re going to have to deal with eventually, so doing it now doesn’t actually add to the trend debt problem, and doing it now means we’re doing it with otherwise unused resources, both in terms of labor and capital, so that makes it cheaper for the economy.

Warren Buffett: “Stop Coddling the Super-Rich“

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Joel N. Shurkin: “Clean Energy Is Booming and Creating Jobs“

Clean energy is now creating more jobs for the energy produced than coal or natural gas, and solar energy is the fastest growing industry in the United States, according to industry and academic sources.

Solar energy alone employed 93,502 American jobs in 2010 and could grow from 25,000-50,000 this year, economy willing. Solar also is producing more jobs than any other energy source, and could generate four million jobs by 2030. Fifty percent of solar firms expect to be adding jobs this year in the teeth of the recession.

The Economist’s Democracy in America blog:

Substantively, the economy needs the government to spend more right now. Here’s what I’ve heard from CEOs and investment-firm research directors this past week: the S&P downgrade, while meaningless in direct terms, implies there will be greater pressure on American politicians to reduce deficits by cutting spending. … That is going to be negative for global growth and raises the likelihood of stagnation or a double-dip recession in developed markets. Hence plummeting equity values and a likely substantial hit to corporate profits, especially financial-sector profits, in the second half of the year. Obviously, that means substantially lower tax receipts (wiping out some of the intended deficit-cutting effects). And stagnation will exacerbate consumers’ continuing unwillingness to spend, as well as prolonging companies’ rational preference for sitting on cash rather than expanding and hiring new workers.

The silver lining is that companies’ and other investors’ desire to sit on cash is driving down the US government’s cost of borrowing to chthonic depths unplumbed by exchequers of yore. … The government can save huge amounts of money by speeding up needed expenditures now, on infrastructure and other things, rather than waiting until later, since the government is paying negative after-inflation interest rates.

And the Bureau of Economic Advisers’ huge downward revision of GDP growth statistics for the past three years makes it clear that the 2009 stimulus bill (ARRA) was highly effective … careful analysis by Daniel Wilson for the San Francisco Fed finds there were about 3.7 million more jobs in the economy in March 2011 than there would have been without the ARRA.

Nouriel Roubini: “Is Capitalism Doomed?“

The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment.

It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.

Over time, advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy. The alternative is – like in the 1930s – unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.

Steven Pearlstein: “Blame for financial mess starts with the corporate lobby“

Want to know who is to blame, Mr. Big Shot Chief Executive? Just look in the mirror because the culprit is staring you in the face. …

You helped create the monsters that are rampaging through the political and economic countryside, wreaking havoc and sucking the lifeblood out of the global economy. …

… Over the past decade you financed and supported the growth of a radical right-wing cabal that has now taken over the Republican Party and repeatedly made a hostage of the U.S. government.

When it started out all you really wanted was to push back against a few meddlesome regulators or shave a point or two off your tax rate, but you were concerned it would look like special-interest rent-seeking. So when the Washington lobbyists came up with the clever idea of launching a campaign against over-regulation and over-taxation, you threw in some money, backed some candidates and financed a few lawsuits.

The more successful it was, however, the more you put in — hundreds of millions of the shareholders’ dollars. …

Somewhere along the way, however, this effort took on a life of its own. What started as a reasonable attempt at political rebalancing turned into a jihad against all regulation, all taxes and all government, waged by right-wing zealots who want to privatize the public schools that educate your workers, cut back on the basic research on which your products are based, shut down the regulatory agencies that protect you from unscrupulous competitors and privatize the public infrastructure that transports your supplies and your finished goods. For them, this isn’t just a tactic to brush back government. It’s a holy war to destroy it — and one that is now out of your control.

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