Right now, asset prices are vulnerable to a crash. (Image from Slate.)
There’s too much loose money around. Stocks, homes, and Bitcoin are all overvalued. There isn’t enough investment drawing a return.
That’s the problem Joe Biden’s “tax-and-spend” plan is meant to cure. Most analysts are painting the argument as being between left and right. It’s really about assets vs. investment.
The money Biden wants to remove from those making over $400,000/year is money that is sitting on assets. The $200 billion Jeff Bezos fortune is assets. So are the fortunes of most rich people. It’s not money that’s doing anything, because there isn’t a big enough market for private goods and services.
Biden wants to invest that money in social goods. People are infrastructure too, my friend. In a technology economy, human capital is the gating factor to growth. The more highly trained, empowered, and motivated people you have, the more you can use cloud hardware and software to drive value.
If people get more education, if they’re free from worries about their parents, their kids, or their health, they will be creating more value in the economy. That means investment in people will be getting a return, just as if we were building roads or ports or building out broadband. This might not have been true generations ago. When resources dominated the economy, it was land and what was under it that drove value. When manufacturing dominated the economy, it was demand and willing hands that drove it.
Today our wealth is in the cloud. The Cloud Czars — Amazon, Apple, Microsoft, Facebook, and Google – have justified investor faith in them with huge quarters. They’re spreading their wings across the country, looking for talent. The President’s plan will get them that talent.
The economy is driven by investment getting a return. It’s not driven by assets sitting around. Money moving between buyers and sellers is what creates value. Asset values need to be reinvested, or they will be lost.
If rich people can invest assets back into this economy, even in social goods where all share the benefits, they will get a return. If we sit on financial assets, these fortunes will go to China, to India, or to Africa, where workers are young, scrappy, and hungry.
Rich people should be more in favor of the Biden plan than poor people. If they invest in people, the future will be so bright they’ll need shades.