Stunting Consumer Spending

This is just an idea but if economic theory holds true and that when people recieve tax rebates or cuts but know they are not permanent, they usually do not change how they act. People only spend more when they know their income increased. This may have something to do with the Presidential Business Cycle.

Who spends money at a larger fraction? The rich. They spend more money because they have more money to spend it is simple. Even if you put trickle down economics aside, but realize that noone buys luxury goods as much as the rich and that those who make the luxury goods are most of the time not rich. This would bring you to the conclusion that trickle down is possible.

With Obama calling for more taxes on the rich and having an early lead in this race, does that make the rich save their money? I know that if I knew for sure that someone was coming to seal my money tomorrow, I would save today.

Now from Obama’s point of view, if he does this and the economy stagnates or recesses then he wins. He can be ushered in as the fixer. If he does this and the economy does well then he loses. The incentive is for Democrats to always say “Tax the rich!” and then say “The Economy Stupid!” Of course, one must keep in mind is it possible for a Presidental rhetoric to change the economy? Wall-Streeters would say yes. What do you say?

~PCCapitalist

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Published in: on August 10, 2008 at 2:46 pm  Comments (1)  
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One CommentLeave a comment

  1. I enjoyed reading this blog, good work!


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