Farnan, on Friday, March 3rd, 2006, 10:26 AM, said:
I'm not following you here. As an initial matter, i'm not all that certain what level of wealth redistribution you're talking about. Welfare, Social Security, Medicare, Medicaid, Pork funding, etc.--some of which are favored by either side of the isle involve a form of "redistribution of wealth" whereby money is taken from those who have it and used to pay for services/etc. that are not otherwise viable under a true free-market system. In other words, this country actively redistributes wealth--and it isn't just democrats who are doing it. Is inflation running out of control? Are our stock markets without shareholders?
I think it's more than obvious that the post I was replying to supports income redistribution past safety-net programs, and I never said I even supported those.
That being said, your economic analysis doesn't really hold up. The increased buying power of those who gain in the wealth shift is offset by lowered buying power of those who lose the wealth. And seeing as that those who benefit purchase different types of services with their gain (basic living expenses like food, shelter, etc.) -- you cannot assume that the very industry that is losing wealth is negatively impacted at all, let alone to the point that they cannot meet production demand. Not to mention it ignores the industries that benefit from the new purchasers who could not survive without the wealth redistribution.I'm all for looking at the macro and micro economic impact of any public policy, but i don't see any validity to your argument.
If you can draw a graph, you'll see. The curve will become flatter, as demand will rise but supply will fall (falling supply isn't a "negative", it just "is"). The more the distribution of income and the increase of purchasing power on the demand side, the less on the supply side (assuming the increase comes from income redistribution and no other mitigating factors, like int'l trade, apply).Thus, less growth will occur because supply/demand will be near equilibrium, and something else in the market basket will have to change in order to enhance growth (see, the European Union economies).Now that we've talked about the econ, I find it also interesting that you've made a freudian slip in the sociological aspect of this problem. You said that those receiving more income will spend it (on needs/wants is debatable). I believe "they" will NOT, however, invest it, and they MAY save some as well. If all the income that is redistributed is spent/saved, you will not see growth coming from this redistribution, especially if it cripples the supply side. That's why tax cuts slanted toward only the lower-middle class will only make China richer, not the US.