Hillary Clinton's Economic Model Brings West Virginia to All 50 States
Listening to presidential nominees discuss their economic proposals is like watching children list what they want from Santa Claus. What children and politicians want, and what they'll actually get, is not the same.
Voters should be relieved. They should be simply because what Hillary Clinton and Donald Trump desire for the economy would generally be inimical to a prosperous economic outcome. The good news is that they won't get what they want judging by stock-market indices that discount the future, and that seem to be saying the next president won't be able to do much at all. Gridlock is good.
Hillary Clinton's wish list laid out in a recent advertisement includes the rich "finally paying their fair share." For someone who says she doesn't believe she's ever lied, Clinton is surely skillful at misspeaking, or not telling the truth. It's a waste of words at this point, but by any reasonable measure of federal and state tax revenues, the rich pay for the majority of government spending. Big time.
Thinking about all of this in terms of economic growth, an investment from the Getty Oil Trust made a near-bankrupt ESPN possible. Amazon founder Jeff Bezos was a major part of an early investor group behind Uber. PayPal founder Peter Thiel took a $500,000 flyer on Facebook at a time when seemingly no one else would. Silicon Valley itself, and all the jobs created there by technology businesses and the non-tech businesses clustered around them, was originally the investment creation of inherited wealth from rich families with names like Rockefeller.
Businesses form and jobs are created because someone delays consumption in favor of investment. How many of you readers have ever singularly ponied up the cash so that another individual could start a business? Probably not many. An individual or a family must have a lot of money in order to have enough to invest in the creation of a new commercial entity, which means it's generally the rich who back new ventures. If what's true is accepted, when Clinton promises to stimulate the economy by taxing away the very wealth that makes capital and business formation more likely, she's being very casual with the truth.
She's also "misspeaking" when she says fleecing the rich in order to create "good" jobs is what a Clinton administration will do. If we ignore the technical reality that says presidents can't spend our money as is (presidents propose expenditure, Congress actually consumes our wealth), to believe Clinton is to believe that Paul Ryan and Nancy Pelosi have magical investing and job creating abilities presently being obscured by tax rates on the rich that are not high enough. If Clinton is being truthful, once handed more of the wealth of the rich, Ryan and Pelosi will reveal an investment Midas touch set to put private investors like Warren Buffett to shame.
But that's not going to happen. If those in Congress were investment experts, they'd be earning millions and billions pursuing just that skill. Yet even that doesn't fully explain why empowering Washington to create jobs will not work.
The major reason it will fail is because as the businesses previously mentioned in this piece reveal, economic advance springs from surprise. On its founding ESPN was a joke. So were Uber and Facebook. Going back to the late 19th and early 20th century, the notion of a gasoline-powered car, or better yet an airplane, did not spring from the minds of rational thinkers. The personal computer was similarly seen as unnecessary to most allegedly wise minds in the 1970s. Stated simply, dreamers backed by investors with the capacity to lose a lot of money power economic growth. Applied to Congress, it can only direct wealth to what is already known. That's not the stuff of economic growth.
In that case, if readers want to develop a near-perfect sense of what Clinton's unfettered economic wish list would mean for economic growth, they need only drive the roads and cities of impoverished West Virginia. It's a monument to the very government spending Clinton says is necessary if prosperity is to be achieved. Billions have been spent for many decades by politicians with an eye on generating economic growth there, but they've achieved nothing of the sort. Money goes where it's treated well - always - at which point money spent by politicians in West Virginia invariably flows out of the state to the extent that anyone within prospers from government largess.
Just as the Federal Reserve can't increase credit in locales where economic activity doesn't rate it, neither can Congress. Clinton's proposal for greater growth will fail simply because money doesn't stay long where there's no return to be had on it. That's why money is plentiful in high-growth areas like Beverly Hills, Silicon Valley and New York's Manhattan, and it's similarly why it's scarce in Mississippi, West Virginia, and Baltimore, Maryland. Government spending can't alter this reality. When Clinton says she can, she's fibbing.
What at least has the potential to change what's true is more investment in search of risk, or once again, surprise. At present, parts of the U.S. that struggle economically are risky places to commit capital, but because they're risky they offer high potential reward to the intrepid investor willing to try what hasn't previously been thought of. Such investing promises lots of failure, and that's why the rich are so crucial to economic advancement in places where there's very little. They alone have the funds that they can put at risk precisely because they're wealthy. When politicians promise to tax away this wealth, they're promising to reduce the amount of money chasing the ideas of the future that, if successful, will generate enormous amounts of economic growth. Congress can't do this given the oft-repeated truth in this piece that Congress can only direct money toward what is known, and that for being known doesn't promise the high returns necessary for booming growth.
So if readers are curious to see what Hillary Clinton will achieve economically assuming she gets her way, they should again take a look at West Virginia. It's not a pretty sight. The good news, however, is that whether Trump or Clinton, neither will be able to do a fraction of what they promise. This redounds to us all simply because their proposed economic plans, like the Christmas wish lists of most children, thankfully have little to do with reality.