Ummmm. What do you think that saving and investing are?
Surely the rich guy isn't saving by stashing the money under his mattress, or he wouldn't have gotten rich in the first place.
Perhaps he's putting the money in the bank, in which case it's going to be used to underwrite someone's mortgage, or something like that.
Perhaps he's investing it in the stock market. But support of equities means that he's financing business, which is just another way of saying that he's helping to create jobs.
someone who is just scraping by having more money is more likely to result in them spending that money right now
Assuming that's true, what comes of it. I picture that person going out and buying a nice new HDTV from Sony, and much of that money going to Japan rather than sticking around in America.
Obviously I've picked my examples to tilt in one direction. But it ought to illustrate that what many people seem to believe is obvious common sense is far from that, and perhaps even, counter-intuitively, turns out the opposite.
After the IPO (and other secondary offerings), "the market" usually doesn't drive a corporation's funding. Companies can make some small out of money from releasing new stock, but not counting things like bond issuances (ie, borrowing from people or banks), they don't benefit from people playing the market.
That HDTV was probably built in China, not Japan. Even so, a lot of that money stays behind, in the distribution and retail channel. Someone's got to drive the trucks from the ports to the stores, for example.
Perhaps Krugman is simplifying for those of us who don't have degrees in economics, but he's suggested multiple times that rich people who "save" their money somehow take that capital out of circulation.
- Taking actions that result in rich people having more money is more likely to result in them saving or investing it, and not in them going out and spending it right now.
- Taking actions that result in someone who is just scraping by having more money is more likely to result in them spending that money right now.
If the goal is to get the economy moving again, I tend to think the latter solution is a better one in this instance.
Also, public works are a great thing to spend on - we're going to have to do it eventually, labor is really cheap right now, and it's better to fix before it breaks and more people die because of broken gas lines or collapsing bridges....