Vail Daily letter: Wrong premises
August 9, 2010
I am responding to the column by Mr. Sirota arguing that low taxes are prolonging the recession. Perhaps Mr. Sirota should take a quick course in economics to avoid making such false conclusions.
First, Mr. Sirota makes the inference that the economic growth of post-World War II USA was a result of higher marginal tax rate policies. This is a classic example of fallacy of false cause, meaning to mistake what is not the cause of an event as its real cause.
There were two main drivers of growth in America after World War II.
First, industrial capacity was at an all-time high due to demand for goods and services driven by millions of soldiers returning home with money to spend.
Second, innovations in manufacturing developed during the war spawned productivity gains. In other words, more goods could be produced for less.
Mr. Sirota then references Brazil with a similar statement by Hillary Clinton. She infers that Brazil’s tremendous economic growth over the past decade was correlated to their high income tax policies. Politicians are not economists, so it is understandable that she would make this ridiculous comment.
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Upon closer study, it can be realized that Brazil’s growth is related to its status as a commodity-rich country. The Brazilians are selling what China is buying: oil, sugar, lumber and minerals.
Mr. Sirota, please take note that the wealthiest 2 percent of individuals in this country account for 15-20 percent of our total GDP consumption.
Taxing this demographic more severely means that money which would otherwise have been spent in the economy or invested in new enterprises is instead wasted by the government.
I challenge the government’s ability to allocate resources fairly and efficiently. The pork-laden $862 billion stimulus plan is a case and point.
Private capital and private enterprise create jobs and are the most efficient means to insure capital flows to the most productive use.
I urge you to ask the large majority of entrepreneurs in this country about where they received their capital for their businesses. I have a hunch that “the federal government” will not be the answer.
As for the course on economics, perhaps a little Adam Smith would be a good place to start.