Saturday, July 14, 2012

Re : Wealth and Income

As a followup to my previous comment about President Obama's confusion of wealth and income, here is an excerpt from a recent Thomas Sowell (NRO) column.

Anyone who wants to study the tricks of propaganda has a rich source of examples in the statements of President Barack Obama. On Monday, July 9, for example, he said that Republicans “believe that prosperity comes from the top down, so that if we spend trillions more on tax cuts for the wealthiest Americans, that that will somehow unleash jobs and economic growth.”

Let us begin with the word “spend.” Is the government “spending” money on people whenever it does not tax them as much as it can? Such convoluted reasoning would never pass muster if the mainstream media were not so determined to see no evil, hear no evil, and speak no evil when it comes to Barack Obama.

Ironically, actual spending by the Obama administration for the benefit of its political allies, such as the teachers’ unions, is called not spending but “investment.” You can say anything if you have your own private language.

But let’s go back to the notion of “spending” money on “the wealthiest Americans.” The people he is talking about are not the wealthiest Americans. Income is not wealth — and the whole tax controversy is about income taxes. Wealth is what you have accumulated, and wealth is not taxed, except when you die and the government collects an inheritance tax from your heirs.

People over 65 years of age have far more wealth — but lower incomes — than people in their thirties and forties. If Obama wants to talk about raising income taxes, let him talk about it, but claiming that he wants to tax “the wealthiest Americans” is a lie and an emotional distraction for propaganda purposes.

Sowell goes on to rebut the rest of Obama's statement - his fictitious claim about Republicans and "top down prosperity". It's amazing so much nonsense can be crammed into one sentence.

As an aside - The president would do well to read Sowell's economics primer, Basic Economics, which is about as readable a book as one with that title could be. Unlike Sowell's other books which are rich with footnotes and references, there are none here. Also missing are complex mathematical formulations. There is only one table in the book, that illustrating the concept of Comparative Advantage in trade. Sowell clearly wrote Basic Economics for the lay public. He could have titled it The Economy For Dummies, as he had readers like Obama, (and me) in mind.
To define economics, Sowell uses one proposed by the British economist, Lionel Robbins - "Economics is the study of the use of scarce resources which have alternative uses". (A personal preference - I would substitute the words "limited" for "scarce" and "multiple" for "alternative"). Sowell repeats this definition literally dozens of times throughout the book as he points out the complex ramifications of almost every economic policy decision. The Law of Unintended Consequences, unfamiliar to the left, is a powerful force in the world.
Though meant as a teaching book, Basic Economics is not devoid of an ideological slant. This is a very good thing. A reader can see why playwright, screenwriter, and director David Mamet (a recent convert to conservatism) has called Sowell our greatest living philosopher.
Read up, Mr. President.

As a further aside - Mamet's conversion was not some mild equivocation of his former position. He has turned hard against the left. This is clearly demonstrated in his book The Secret Knowledge, an elaboration of his Village Voice essay, Why I Am No Longer a Brain-Dead Liberal.

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