Leaning Against the Privileged Place of Investments

Readers shouldn't be surprised to hear that I'm largely in agreement with Peter Ferrara's "Obama's Accelerating Downward Spiral for America," but he happens to voice one bit of center-right common wisdom with which I have growing disagreement:

There is no secret or magic as to how to turn around these declining incomes.  Increased investment in business expansion and start ups increases demand for labor, which drives up wages.  That investment buys new tools and capital equipment for workers, making them more productive, which provides the cash flow to increase wages.

Increasing investment results from reducing the tax rates on investment, which enables investors to keep a higher percentage of what they produce, increasing incentives for investment.

My resistance to this suggestion — notwithstanding Ferrara's positioning of it as a statement of the obvious — has three sides.

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