The biggest difference between the Democrats and the Republicans in economic policy is the difference in emphasis between production and consumption.
Congress is considering another series of ‘stimulation’ packages designed to deliver money into the hands of consumers. They believe they will spend the money and it will stimulate further economic growth. During the last stimulation package Hillary Clinton stated that the money should be given to poor people because they will spend it, while the rich would save or invest the money.
One reason the poor are poor is because they will not save. Hillary’s comment was insulting, but the idea that the Congress can control the economy and stimulate by just throwing the money around is inherently arrogant and false.
First of all to give the money to one person they must take it from someone else. So the net spending gain is zero. To finance this with debt, which is what they do, they must add interest which will eventually draw money from the economy when it needs to be repaid.
Secondly a stimulus package is a very short term solution to a long term problem. No one will tool up for a single shot of money because they know it will not be repeated. I will not stock an item that one customer bought one time.
Growing the economy requires a consistent growth of spending power that will not come from junkie like financial fixes from Congress. It will come from increasing production. This requires capital forming policies that encourage the free flow of capital and risk.
This means low capital gains taxes and low corporate taxes. The Republicans believe that stimulating production, buying machinery and assets that increase employment and production will stimulate new jobs that provide the steady flow of consumption that further stimulates the economy. The Democrats deride this contemptuously as ‘trickle down economics.’ I just call it economic reality; especially in a world where the competition for capital does not stop at our borders.
The Democrats in Congress engaged in the class warfare economic model deride capital formation policies as ‘give a ways’ to the rich, but unless this risk is rewarded we will see less of it.
If the boat is sinking it doesn’t make any difference which end sprung the leak.