How do you break a capital strike? [View All]

[Nuclear Unicorn]

When the rich feel taxes and regulations are too onerous they put their money in savings instruments. While that money gets invested, i.e. banks make home/business loans, it doesn't reach the economy as fast as payroll or direct investment or government programs. In capitalist speak it's called safe-harboring. The rich will tuck away their money until the economy rebounds or a more "favorable" political climate cycles into office. Naturally, the capitalists will tell you that as soon as you lower taxes/regulations the grip on the money will loosen.

Other economic theories call this a "capital strike." As a laborer might withihold his one asset, his labor, to strike against unfair conditions those who own the capital go on a capital strike to withhold their wealth from being used in "unfavorbale" conditions. But when captial strikes ensue wealth shrinks from the economy and it is those on the lowest runng of the ladder that suffer first as programs lose funding and menial jobs suffer layoffs. Captial strikes punish the politicians by hurting the broadest swathe of the electorate: the poor.What we call "Reaganomics" or "supply-side" is really an economic model that promotes and rewards capital strikes.

So how do we break capital strikes without giving into un reasonable demands?

The mechanism seems hard. You can't use income taxes because if the money is being "safe-harbored" it isn't being used to gain income. Ditto capital gains taxes. Taxing "wealth" i.e. assets/savings owned would be difficult, it seems, but I'm not 100% on all the details, so I'm asking:

How do we break the capital strike that threatens Obama's presidency because it is prolonging the Bush Recession?