| | Greetings, all.
My apologies for not responding for a long time. I have been extremely busy in the past months and have been able to attend to my online correspondences only sporadically. I will try to answer some comments here:
Mr. Zantonavitch: In general, I assume everything socio-economic freedom produces and decides is right (minus the ineluctable, individual human errors). So it makes no difference to me, and is none of my business, whether some free agent "saves" his money or "spends" it. Both even seem like "investment" to me, altho' maybe someone can correct me. All that seems to matter in the save/spend choice is whether the actor does this freely (and hopefully rationally and insightfully). Such liberal economic behavior quickly raises his wealth, and ultimately raises the wealth of all.
Mr. Stolyarov: I agree that there is nothing wrong, in principle, with consumption per se-- if freely chosen by autonomous agents for the purpose of increasing their actual quality of life and happiness. Indeed, the purpose of every economic good-- even a capital good far removed from the actual consumer-- is to eventually bring about consumption of some kind. The purpose of so-called investment goods is to bring about increased consumption at a later time at the cost of less consumption sooner. Some kinds of investment also need to occur at a regular basis simply to replace capital goods that have deteriorated (such as worn-out machinery or depleted inventories). If one's old capital stock is not replaced, then future productive capacity (be it for an individual or an entire economy) will decline.
It is possible, however, to distinguish between wise and unwise consumption and investment given the assumption that every rational individual wishes to maintain at least his present standard of living:
1) It is unwise to consume so much and invest so little that one cannot maintain one's standard of living into the future.
2) It is unwise to invest so much and consume so little that one's present standard of living seriously suffers as a result. (I.e., becoming malnourished as a result of a desire to save the vast majority of one's earnings is general not a good idea).
This is not to say that anyone should be compelled to abstain from unwise consumption or investment; left to their own devices, individuals learn to make the above distinctions by themselves at an amazing pace. They will suffer, deservedly, if they do not-- not by the agency of other men, but by the nature of reality itself.
That said, people getting tax rebates and either saving or spending the money engage in neither unwise consumption nor unwise investment. My purpose in writing this article was to defend investment of tax rebates against the accusation that it is inherently bad-- something you and I will certainly agree that it is not. If the taxpayers decide instead to use their money to consume more-- it is unlikely that this will harmfully affect them, unless particular ones are in massive debt or the equivalent. I do not criticize such decisions to consume; I merely point out that they will not lead to the same growth of consumption capacity in the future than investing the money would. Whether specific individuals wish to increase their future capacity to consume is their decision entirely; I can imagine instances where certain people would be perfectly content with their present living standards, and justifiably so.
Mr. Zantonavitch: What is the pro-freedom, pro-wealth value of the government paying its bills and reducing the deficit and even (mirabile dictu) building up a surplus (investment ) vs. the ubiquitous and loathsome advocacy of mindless tax cuts which nitwit conservatives and libertarians always seem to champion? I certainly think paying down government debt is more sound economically and more pro-freedom than tax cuts, and yet I've NEVER heard an Objectivist, libertarian, or Austrian/Chicagoan argue this. I hope I'm wrong, but there might be a terrible lacuna in liberal politico-economic theory here.
Mr. Stolyarov: I, too, would support a balanced budget in an ideal world, but one thing that I categorically refuse to sanction in bringing it about is any increase in taxes of whatever form or degree. Tax increases tend not to work to balance budgets, because government spending tends to increase to fill the amount of money which short-sighted politicians can access in any time period. If taxes are raised in an attempt to reduce the deficit, spending will rise in proportion to the tax increase, while the deficit will either increase or remain the same. Tax cuts-- or so it is thought in some circles-- are intended to "starve the beast" by denying politicians the very ability to expand spending beyond a certain scope. Sure, the government can borrow some money to spend beyond its means, but it cannot borrow beyond a certain point; the purpose of a tax cut is to constantly pull that point downward and thus stimulate a reduction in spending. Mr. Baker also makes good points regarding a tax cut's ability to generate government revenue. There is a well-known model of this in supply-side economics: the Laffer Curve, which shows how overall government tax revenues only increase to a certain point as the tax rate increases, and then tend to decrease after that-- largely because the taxes generate deadweight economic losses, discourage productive activities, and motivate people to move their money from more productive sectors to less economically efficient "tax shelters."
That said, however, tax cuts are far from the best way of alleviating the deficit-- and they only work if they are dramatic enough to actually strain the government's spending capacity. Spending cuts would be far more important and more effective-- but they are also far more politically difficult. Lowering taxes is politically popular and immediately visible to the populace, whereas the people seldom notice obscure government programs which take a million here, a million there, and tend to benefit highly concentrated special interests that strongly lobby for them. The only way a serious spending cut can occur is if politicians of principle implement it for the very sake of limiting government and promoting its fiscal responsibility. Alas, such politicians have been virtually absent in the mainstream political arena today.
If I had any control over this, I would focus on spending cuts as a priority and use any surplus tax revenue to repay the national debt. At the least, I would make sure that-- to accompany any tax cut-- a larger spending cut was instituted. But, again, that is for a world more perfect than ours-- perhaps a world that can be attained in the future...
Mr. Setzer: It makes no sense whatsoever to accumulate a pile of gold for its own sake while one lives like a pauper and dies in obscurity with not even a will to bequeath the gold to someone or some cause one values.
Mr. Stolyarov: Such a person would definitely partake in unwise investment under my definition-- investment which serves to purpose to anyone and undermines the very end it is meant ultimately to accomplish. I think no rational investor would want to live like the pauper you describe.
I am
G. Stolyarov II
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