Presidential Economics 101

Laissez-faire Economics

WRONG: Staples of laissez-faire economics since at least the 1930s: a belief that a sharp reduction – or in some cases, elimination – of taxes on incomes, large estates, capital gains, and dividends will encourage capital formation, higher savings rates, more business investment, and greater economic growth; a belief that government regulation inhibits and distorts the efficient working of the market; and a belief that government entitlement programs are inherently inefficient, breed dependency, and reduce individual responsibility, initiative, and choice. – Barack Obama

RIGHT: Laissez-faire was the term originally used by the Physiocrats.  They believed that only agriculture yielded wealth…The Statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. – The Economist Dictionary of Economics

Supply-Side Economics

WRONG: Supply-side economics, the theory that the more you cut taxes, the more the economy will grow, with the growth producing more tax revenue at lower rates than previously had been collected at higher ones. – Bill Clinton

RIGHT: Supply-side economics Anything that attempts to influence the supply of labor or the supply of goods.  Such policies could include: (a) cutting taxes to improve incentives (affecting people’s personal trade-off between going out to work and staying at home); (b) legislating heavily against monopoly in order to encourage free competition, low prices and incentives to be efficient; (c) diminishing the ability of trade unions to inhibit the workings of a free labor market; (d) restricting the growth of the money supply to control inflation, improve economic stability, and encourage investment; (e) increasing the mobility of labor, and (f) cutting the benefits available to those out of work to improve their incentive to take on work (the unemployment trap). – The Economist Dictionary of Economics

The Distribution of Income

WRONG: I think when you spread the wealth around, it’s good for everybody. – Barack Obama

RIGHT: Taxes are much less taxes on being wealthy than on becoming wealthy.  While they limit the use of the income from existing wealth, they impede even more strikingly – so far as they are effective – the accumulation of wealth. – Professor Milton Friedman

References

Barack Obama, The Audacity of Hope: Thoughts on Reclaiming the American Dream (New York: Crown Publishers, 2006), 147.

Graham Bannock, Ron Baxter, and Evan Davis, The Economist Dictionary of Economics, Fourth Edition (Princeton: Bloomberg Press, 2003), 221, 373-374.

Bill Clinton, My Life (New York: Knopf, 2004), 459.

“Joe the Plumber: A Transcript,” St. Petersburg Times, http://www.tampabay.com/news/perspective/article858299.ece.

Milton Friedman, Capitalism and Freedom, Fortieth Anniversary Edition (Chicago: University of Chicago Press, 2002), 173.

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