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View Diary: I am the 2% (92 comments)

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  •  And one other thing... (9+ / 0-)

    Investing money creates fewer jobs than spending money.  That's why taxing the rich and giving the money directly to the poor increases GDP.  I don't have the numbers in front of me, but reducing taxes on the rich increases GDP by something like 40 or 60 cents per dollar, while putting the money towards unemployment benefits increases it by something like $1.40, with middle class tax cuts being in between.

    Why is this?  Supply and demand.  Demand goes up, companies grow to meet the demand, seeking financing as needed.  Making investment cheaper makes it easier for companies to grow, and may slightly affect the rate at which they choose do so, but what works much better is knowing that there's more demand in their existing markets, not knowing they have extra money to look for new markets.

    More intuitively, you give a rich man a dollar, and odds are he buys some stock with it.  That stock was most likely not newly issued stock, but stock bought from another investor.  Basically your money goes into making that stock worth more money, which the guy who sole it uses to buy yet more stock.

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