Via Glenn, comes the dumbest thing I’ve read in a while — and I’m paid to read dumb things all day long. Anyway, here’s one of the many reasons the economically-illiterate Gerald E. Scorse wants to eliminate Roth IRAs:
Then, too, Roths could be a drag on the U.S. economy. Since no withdrawals are required, assets can lie idle indefinitely.
For the last time, I want the idiot Keynesians to sit down, shut up and listen: You don’t get rich by spending money. Savings generate the investments necessary for wealth creation. And Roth IRAs encourage lots and lots of savings.
As for this “idle” business, it simply isn’t so. When a financial institution holds your savings, it does not stuff the money under a mattress and wait for you to come ask for some of it back. No, the bank loans the money out to people who will, it is hoped, use it for a little wealth creation. That ain’t idle.
And the loans aren’t made at some cheap dollar-for-dollar rate, either. To keep the math simple, let’s say a bank’s legal capitalization requirement is ten percent. That means, for every dollar you park in savings, the bank can lend ten. Nine dollars for wealth creation, created out of thin air. If you have a million bucks in your IRA — you wise devil — that’s ten million dollars for people to buy homes or start new businesses.
That’s your “multiplier effect,” right there. Washington doesn’t have one — you do.
Now let’s look at things from the other side. Every dollar you take out of savings does get spent and stimulate the economy — sure, yeah, great. But every dollar you take out of savings also sucks out nine dollars from the pool of capital available for wealth creation. Spend a million, and nine million dollars simply vanish.
But modern statists such as Scorse and the execrable Paul Krugman would rather get Washington’s filthy hands on your dollars because, well, they’re statists. That’s what they do.