(Dan B. here…I think it is still appropriate as it is a lesson yet to be learned.)
by Divorced one like Bush (2009)
I think it’s time to reread the World Bank report on what creates wealth because it seems that the arguments against the stimulus are from a mind-set of very narrow thinking about what creates wealth. They all seem focused on what the World Bank report calls “Produced Capital”. Unfortunately, focusing on just that aspect of capital reduces our nation to growth based on 18% of our economic power. And, as far as I have understood the arguments for tax cuts, they are based on effecting this small aspect of what produces wealth in a developed economy like ours.
“The rest of the story is intangible capital. That encompasses raw labor; human capital, which includes the sum of a population’s knowledge and skills; and the level of trust in a society and the quality of its formal and informal institutions. Worldwide, the study finds, “natural capital accounts for 5 percent of total wealth, produced capital for 18 percent, and intangible capital 77 percent.”
You know what that is? Democratic traditional spending priorities.
“Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity,” the study concludes. According to Hamilton’s figures, the rule of law explains 57 percent of countries’ intangible capital. Education accounts for 36 percent.”
Get that? It means tax cuts are just stupid policy if the goal is to stimulate a developed economy as strongly as possible such that the stimulus creates lasting wealth. Is that not the complaint by the republicans and blue dogs, the lack of lasting wealth which means jobs as the stimulus is written? What the World Bank report means is, if you want the biggest bang for your greenback, you have to weigh the heavy side of the stimulus to invest in “human capital, which includes the sum of a population’s knowledge and skills; and the level of trust in a society and the quality of its formal and informal institutions.”
You have to load the stimulus to the 77% side and not the 23% side (natural 5% and produced capital 18%). That is 3.4 human capital to 1 natural/produced capital. That means education (all forms and subjects), support for the economically disadvantaged (welfare, medicaid), health care (medicare, national health payment reform, system IT), risk prevention and recovery (law, fire/rescue, FEMA), science (greening energy, environment) and the arts (art districts, museums) to suggest a few.