Is it the long run or the short run? - Irwin Kellner - MarketWatch

Is it the long run or the short run? - Irwin Kellner - MarketWatch


The alternative to the above (tax and spend) is the Art Laffer view that when taxes are too high (or likely to be) and when the labor or regulatory element of economic activity becomes a drag on the returns to investment, risk and entrepreneurship, then those with the inclination and proclivity to enhance economic activity (i.e. to invest and create jobs) just don't do so.

Think of the farmer who knows most of his crop will be taken by some governmental body. He plants his seed and the crop will be taken. He's likely to be prudent and hold onto more of the crop he has left (and not plant).

Similarly, the policies at work today and particularly in Europe, discourage investment and job creation (taxes, labor policies, etc.) are too high. These aren't being changed in any meaningful way and Obama is arguing they are irrelevant.

Like a car caught in a snow drift, flooding the accelerator to try and move a car forward through a mass of snow does nothing more than flood the engine.

Those who know how to drive in snow (understand business and investment) know they should try and remove the snowdrift (unfavorable tax, regulatory, labor and entitlement, etc. polices) before trying to move forward. Others, who haven't a clue about business, flood their economic engines (print money and borrow) and there are always unpleasant consequences. The first of which in this case is low job creation (US) or a new recession (Europe).