To the editor:
The law of supply and demand is not difficult to understand. If a resource is in short supply, its price goes up. That resource may be food, fuel, housing, labor, steel, cement, water or any number of things, including money.
Economists don’t speak of money; they speak of capital and capital markets. Capital is essential for the expansion of any business. Money is needed for new plant, new equipment or more labor. Interest rates are a barometer of capital demand.
When demand for capital is strong, bankers and other money dealers entice saving and prudent spending by raising interest rates. Current interest rates attest to the ample supply of capital. When interest rates are less than the rate of inflation, it is apparent the demand for capital is feeble.
Why would a business expand when customer demand is anemic? As Jack Welsh said on CNBC’s Closing Bell “Why would I increase employees when I have no customers?”
Our General Assembly, urged by lobbyists Woody Cozad and Americans for Prosperity as well as business self-interest groups, is advancing a constitutional amendment to increase capital formation.
Missouri lawmakers seem not to realize that it is consumers, not producers, who are the real job creators. Stimulating our economy through tax breaks for business owners is a fool’s errand. If the quest for campaign donations or future employment is their goal, then they are on the right trail.
If economic growth is the purpose of tax reduction, then lawmakers should direct their efforts toward the consuming public.