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Would be Watcher

Location: Canada
Member Since: Sat May 17, 2008
Subj: Re: I'm not an economist at all...
Posted: Fri Mar 12, 2010 at 06:41:52 pm EST (Viewed 776 times)
Reply Subj: Re: I'm not an economist at all...
Posted: Fri Mar 12, 2010 at 07:41:01 am EST (Viewed 740 times)

    You obviously knows a lot more about economy than I do so I'll take the opportunity to expand my basic knowledge. However, I still have some problem understanding how rich people investing would solve the problem in the long way. I mean, generally, when you invest, you expect a return on your investment right? So all things being equal wouldn't it benefit the rich much more than it does anybody else since they are the one who can invest while the poor can't?

I think you are taking two different problems (1. unequal wealth distribution and 2. positive economic growth) and trying to come up with one solution. Or you just think that I'm coming up with one solution here.

Everything you say is right from a basic standpoint. Cutting the taxes for the rich does benefit them. Which allows them to invest, allows the economy to grow, which allows the poor to have jobs. So when the economy is bad, you generally want to cut taxes on the rich so they can invest, and even cut taxes on the poor if applicable just to survive. Government don't want to cut taxes on the rich when times are bad simply because they still need money. Rich people have the most money, so it's easy to justify taking the money from them.

But at some point, unequal wealth distribution does become a problem. The rich keep getting richer, the poor keep getting poorer. So the solution is that raise taxes on the rich when the economy is good. You take the money from the rich and give to the poor in various ways (social programs, scholarships, governmental programs, low interest loans, etc).

So coming up with the solution is relatively easy once you take all of that into consideration. The government just has to constantly change taxes depending on the current economic climate. But the government and politicians don't want to reduce taxes during bad times (cause the government still needs their money), and they don't want to increase taxes during the good times (cause politicians that increase taxes generally have a hard time getting re-elected).

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