Anyone who has ever debated the economy with conservatives knows that it's a tough slog. Anyone who argues with them online has heard all the usual silly conservative retorts: "You're just jealous!" "Get a job!" "Get out into the real world!!"
What I find so amazing in all of this is their constant assertion that only they, only conservatives, really understand the economy, when it's absolutely clear that they don't. Not in the slightest. Especially in the most essential sense of how capital formation happens, where it happens, and what that means.
To the conservative, there are actually two economies, the public and the private. The first one is not real, and it's where our tax dollars go to die. They apparently disappear off the face of the earth, and no capital formation happens. In the other, the real economy, money is magically transformed into something that multiplies itself, so that everyone wins, no one loses, and capital formation can happen without it actually coming from somewhere else. It's never "other people's money" to begin with in the private sector. Only in the public. Wizards are everywhere. Harry Potter wannabes unite!!
This belief drives their hatred of government. At least the part of government that spends money to help others not already stupid rich. To them, government wastes money that the private sector would not waste, and it can't create "wealth" or jobs or anything else. It's a separate eco-system, with no ties to the real eco-system, the private sector.
Of course, capital formation occurs essentially in the same way in both realms, because there aren't two economies -- there is only one. In the public sector, individual taxpayers send money to DC, and it's organized and used to provide goods and services in turn. The private sector does the same, exact thing. Businesses accumulate capital from various sources, including banks, investors, consumers, and the government, in order to provide goods and services. The vast majority of money comes from the same exact place: individual American citizens. It comes from somewhere else!! And that always entails a transfer of dollars from here to there, a loss and a gain from here to there.
The public sector accumulates capital to provide goods and services without seeking profit. The private sector accumulates capital to provide goods and services for a profit. The only real difference is the for-profit or non-profit part, and what goods and services are created. The money flows throughout the same economy, and it comes from the same place.
So, why is all of this important? Because as long as enough conservatives actually see government as a black hole, and the private sector as a land of magic and unicorns, we will never be able to reason with them and come close to an effective use of government on behalf of the people. We will continue to see the transfer of wealth from the bottom and the middle to the top, without cessation, and that will in turn make the top even more powerful and likely to accelerate the process.
The above is just a brief overview of a fundamental misunderstanding. There are a 1001 other things to discuss, like capitalism's inherent need to create inequality, its natural conflict with Nature, its internal contradictions that inevitably make it bounce from one crisis to the next, and its endless need for bailouts. But as long as the left can't even make the case for one economic ecosystem, we are unlikely to be able to move on to the real source of our troubles:
Of course, there is a difference between conservatives who run the show, and those who follow the leader. I suspect that conservatives who run the show aren't blinded by their ideology enough to really believe we have two economies. Many of them, no doubt, became quite wealthy due to government contracts, R & D, loan guarantees, etc, and certainly must see how money flows throughout the system without stopping for a passport check.
One of the major features of capitalism, of course, is its disregard for national or internal boundaries. Labor doesn't have the same advantages, hence the growing gap.
A good article on the subject of corporate power totally disregarding national boundaries is this recent bit from Noam Chomsky:
1:02 PM PT: Wanted to add: The above is why conservatives think cutting government spending is such a good thing, and won't hurt the economy. They actually believe a government cut means a private sector gain. Of course, given the fact that the private sector is sitting on trillions already, without putting it to productive use, no such gain is going to occur. A cut in government spending is a cut in total spending, for the entire economy, public and private.
Spending is spending. What matters in a capitalist economy is capital formation in the service of productive use. With trillions idle, government spending is not taking anything away from productive use created in the private sector. And with so much sitting idle, government must spend far more than it is now to make up for that. It's one economy and one team. Thinking of it as opposing teams is killing us.