Reaganomics 2.0

A funny thing happened this week while reading the WSJ. I saw the clarification of that was wrong with Reaganomics 1.0. This came in the form of a series of articles about how Scotland was using tax cuts to stimulate the economy - with one small adjustment (called Reaganomics 2.0) - that educating people was also required.

Tax cuts are fantastic for stimulation of an economy - it opens up capital to be spent on other areas of R&D or other forms of development. No problem there. But the problem arises quickly as to who will drive this expansion?

We need educated people to force this economy along as it does not occur because of tax cuts. The right-ish view is that tax cuts offer the salve alone. SO NOT TRUE. Someone has to run this company and others have to implement the new initiatives.

So I have always wondered, how can one have tax cuts and growth? The tax cut, in and of itself, does not educate anyone. The reduction in revenues to the state only allows additional allocations to the company. But who will work to push this capital investment forward and how will we pay for this?

Education costs money. Alot of money. And most is wasted on those that will never drive the economy. But Reaganomics 1.0 assumed that these educated people would come from....anyone? Oh, property taxes that fund local education at the secondary level...but this level of education never drives the "knowledge economy" forward. It is higher education that does....and funded at the Federal level.

So I find it odd that the WSJ lauds Scotland for the dual approach - tax cuts are great. But how do you fund the people who will drive the economy forward? If the right-ish culture likes to spend lavishly on the defense of the country (the largest entitlement program in America) then ought it not also include the knowledge based curricula?

Much hay has been made of the re-jiggering of the Reagan philosophy...but to make anything of value requires some investment. Capitalism rests upon this axiom. To make money you must spend some capital.

Tax cuts are fine. No problem there. But you must also have the workforce to implement the capital to some productive end. Herein lies the rub. Tax monies, for all their waste (and it is alot in alot of different areas), do provide a value to our economy - they sink capital into the promising future of training people to do something. And to bring value to the American economy, those trained people need to be able to do something more than be literate. They need to synthesize novel ideas into products.

Three cheers for tax cuts. But those cuts must be taken in the broader view of how our economy is structured. If you are not willing to invest in the building blocks, then how can you expect the economy to be driven forward? Education costs money. Period.

I'm glad to see that Reaganomics 1.0 has learned this painfully obvious lesson and progressed to the more elightened 2.0 version. Learning, while widely viewed as wasteful, is a necessary opportunity cost. If you don't learn the people, which people will push us forward?

I'll just venture that it is not outsorcing....while this may work in the short term view of Wall Street, it weakens our country. Education is a valuable waste of money. If that were not true, then why is the government spending so much on basic research? Cut taxes, sure - but don't cut them to satisfy short term gains in earnings for long term losses to other countries. If Scotland sees this, ought not we?