The S.C. Legislature is in a battle over if we are going to make any real progress in fixing our infrastructure in our state. There is a wider debate on how to become truly prosperous with opportunity for all.
The “Conservative Solution” is to cut spending, taxes, regulations and government, and not raise the minimum wage. Get government out of the way and personal responsibility and the free market will create prosperity for all. Some seem to believe government is bad and cannot do anything right.
The “Liberal Solution” is to invest in infrastructure, health, education, public safety, research, clean energy and community development, and to raise the minimum wage. These folks believe it takes proactive government to create the environment for the people and business to thrive.
A while back, both parties voted to support our basic investments. Today, the GOP is about cutting everything. To many voters, the debate may just sound like he-said she-said.
A few basic macroeconomic and social behavioral principles show how our economy works and makes it easy to understand the difference between good and bad economic policies.
The size of the economy is related to how fast money cycles through the economy. If we want to grow the economy, we just have to do more of what speeds up and less of what slows money in the economy.
There are a couple of related social behavioral principles that everybody understands. One is, if we do not have much money and we get some more, we tend to spend it quickly. We have immediate needs! On the other hand, if we have a lot of money, we tend to become risk averse as we do not want to lose our money and we have few immediate needs so we purchase and invest slowly.
Trickle-down economics has never worked. People and businesses with money are risk averse. Businesses execute business plans when expected to be successful which is when there are customers with money. In a 70 percent consumer based economy, we-the-people are the job creators by spending money which then triggers business spending, hiring and investment.
Obviously, we-the-people benefit from our basic investments, but businesses also need these basic investments to exist and especially thrive. Neither businesses nor the people can make these investments individually, but we pay for these critical investments through our local, state and federal taxes. This is us investing in ourselves, our communities, our state and our nation.
The “Conservative Solution” is code for cutting our basic investments in our communities, South Carolina and our country. What this really means is you can have great health care, education and so on if you can afford it.
In the past, Democrats and many Republicans understood the importance of our basic investments. We built the interstate highway system after WWII when we were broke and it paid off huge for taxpayers for many years to come. Imagine what our state and country would be today if we had not invested in infrastructure, education, health, research, community safety and the like. We would be like Third World countries which have two-thirds of their populations in poverty.
We can cut our way to a Third World economy, but if we want to be the country we should expect to be in the 21st century, we must invest in ourselves. And Americans are great investments! Sure there are some takers from the poor to the rich, but mostly Americans are hardworking, creative and determined.
Cuts to our basic investments kill more tax revenue than they save. However, our basic investments ultimately pay for themselves by creating more tax revenues than cost. Even a little higher taxes to jump start the investments, especially coming from the top of the economy, creates further opportunities for all including the rich. We all have a vested interest in a healthy economy. Our basic investments create opportunities in all our communities, from the poor to the rich, and from small to large businesses.
Without a strong commitment to our basic investments, our kids will truly be worse off than their parents.
Currently, there is a proposal to increase the gas tax by a modest 12 cents allowing us to fix S.C. roads over 10 years. This is only a few dollars per month for most of us and out of state drivers would also significantly contribute to rebuilding our roads. Many Republicans in the legislature and the governor want to offset this with a S.C. income tax cut which will substantially benefit the wealthy while taking money out of the general fund. The result will be further program cuts in education, public safety and community development. The wealthy will generally not put tax cuts benefiting them back in the S.C. economy and what they do put back will be done slowly. This means less money spent and cycling through our economy thereby having a shrinking effect and killing more tax revenues.
Our basic investments create more customers with money, more tax revenues, and put free enterprise on steroids. We need to call on our legislature and the governor to increase our investments in public education, infrastructure and our communities.
(Karl Smith is the father of a son with autism, a Columbia small business owner and political activist. His column is being made available by the S.C. News Exchange to the Chronicle-Independent, Camden, S.C. Email Smith at email@example.com.)