We’ll never reach the “fiscal cliff” and it wouldn’t matter if we did
Of course it’s always the case that investment is what pushes labor forward, but the problem at the moment is that whether the capital gains rate is 15% or 20%, the dividend tax 15% or 39%, there’s very little incentive to invest. Indeed, investors are buying future dollar income streams when they commit capital, but with policy in favor of dollar devaluation, why commit capital to economy-enhancing ideas if any returns come back in dollars that have shrunken in value?
Tax cuts on income, investment returns and dividends are great, but they’re largely irrelevant at the moment. Worse, their wonders are being discredited by dollar destruction that began under George W. Bush, and that has continued under President Obama.
Back to the fiscal cliff, we’re never going to reach it given the incentives that drive politicians. That said, don’t buy all the hysteria about what’s over the cliff. Government spending reduces real growth, while tax cuts only work if they’re paired with a strong dollar. Both sides miss the point.