Trickle-down in Jungleland
Funny how common events often come clustered. In last week’s column, “Down in Jungleland,” I wrote about a conversation I had with a local official about social welfare. Just a few days later, I wound up talking with a different conservative—a blood relative, no less—about a different sort of safety net.
The second man in question is one of my cousins, Ben Wasserman, a low-key 32-year-old who’s lived virtually his entire life in Marin County. His parents are progressives, and he inhabits a condo in a Democratic hotbed, so his political persuasion is somewhat surprising … or, then again, maybe not. He has the luxury of naïveté.
Don’t get the wrong idea—I love him, and I respect his right to his views, so when we get together, I refrain from debate. I respond to Rush-sounding remarks with ribbing, either hyperbole (“Here’s how to save Social Security: euthanasia!”) or condescension (“Ben, you are just so precious!”).
But Sunday, encouraged by my aunt, I got into it with him over the economic stimulus.
Ben laments the $1 trillion the federal government is spending to offset the recession: that is, $787 billion in the American Recovery and Reinvestment Act, several hundred billion more in bailouts. He prefers tax cuts—the old trickle-down approach to economic growth, as opposed to what he anticipates turning into “trickle-up poverty.”
He asked, non-rhetorically, if I really believe it’s better for the government to infuse money into the economy rather than to encourage businesses to invest in expansion.
My resolute “yes” seemed to stun him.
The stimulus package may be a quick fix, and a costly one, but it will have lasting impact—namely infrastructure improvements. Bridges in danger of collapse? They’ll get repaired. Roads in disrepair? They’ll get refortified. Buses out of date? They’ll get retrofitted or replaced. The list goes on.
This isn’t a make-busy program that plucks people from the unemployment rolls for meaningless jobs. Their work will make a difference and create a ripple effect—certainly larger and more local than the $1 trillion spent on Iraq.
As far as investment goes, the president’s push for green energy holds more promise for a better future than banking on McDonald’s opening more restaurants or Proctor & Gamble coming out with an adult diaper line to rival Depends … even with corporate tax breaks.
Lower taxation doesn’t guarantee investment.
First off, investment requires cash or a willing lender; that’s different than potentially paying out less, depending on how the balance sheet reads, and then possibly deciding to hire more people or acquire new assets.
But there’s a bigger matter. The capitalist nature is not to be satisfied with the success that comes from providing a necessary product or service. That’s just a means to the end: increased earnings, greater profit margin, higher stock prices. Expansion can be a byproduct; often, cost-cutting and contraction are byproducts. We’ve learned the hard way that spreadsheet shuffling is a big sector in the U.S. economy.
Americans tout the “free market,” but as I wrote last week, we don’t practice pure capitalism. Government intercedes in many ways—mediation, regulation and, notably now, mitigation—to safeguard citizens from Darwinian pitfalls. I’m glad for this safety net, which I trust a lot more than the hope of magnanimity from self-interested speculators.