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Saturday, January 08, 2005

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Hermano Lejano

Detractors will certainly say that the $12 trillion generated as a result of the tax cut will stay in fat cats' pockets. And they miss the point because they simply do not understand economics.

Even if those $12 trillion were concentrated in the top 1% of the population, it would find its way back to the economy. That 1% of the population will spend, save, and invest, leading to revenues for companies which in turn leads to paychecks for their employees. An increase in capital leads to reductions in interest rates as well as new job generation. These lead, in turn, to increased investment and employment.

My point is that the $12 trillion do not stay in the pockets of fat cats. In a free market economy, it finds its way back to the economy itself and to the individual players (both companies and individuals) that make it up.

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