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The Rich Have Plenty to Give, but Forget Deficits
What do rich people do with money? They make the best use of it they can, and in times of high growth and strong confidence they take risks and – if they are good and lucky – reap the rewards.
But the situation is different when the outlook is bleak and when real estate (especially) will be cheaper next year than today. Under these conditions, money is safe and gains value even at zero interest. So the idle balances pile up in banks and in low-risk assets like Treasury debt.
Taxing the wealthy would put idle balances to use. But deficits are not a concern as long as unemployment is high.
Taxing the rich drains those balances and gives the Treasury a revenue flow that cuts the budget deficit. The economic effect of this is nearly nil; both the private and public sectors spend almost exactly what they would have otherwise. GDP and jobs are therefore the same. The reduced deficit cannot reduce interest rates, since they are already near zero. It is a cosmetic gesture that should appeal only to “deficit hawks” – but for some reason it doesn't. I can't imagine why not.