if republicans become dominant

[lemur]

Republicans claim that progressive cuts in spending will result in more jobs and a better economy. What kinds of jobs could be expected to emerge from tax-cuts, though? Is it that businesses and prosperous individuals are going to hire more people to do more things? What kind of things would you expect people to do with additional income if they had less taxes to pay? Also, is there a way for already successful businesses and workers to take on new work and money without having to hire others? As such, is it maybe possible that the gap between employed and unemployed income and spending could actually grow due to tax and spending cuts?

[Realitycheck]

Republicans claim that progressive cuts in spending will result in more jobs and a better economy. What kinds of jobs could be expected to emerge from tax-cuts, though? Is it that businesses and prosperous individuals are going to hire more people to do more things? What kind of things would you expect people to do with additional income if they had less taxes to pay? Also, is there a way for already successful businesses and workers to take on new work and money without having to hire others? As such, is it maybe possible that the gap between employed and unemployed income and spending could actually grow due to tax and spending cuts?

 

The general consensus among Republicans is that if the wealthy don't have to pay as much taxes, then that money is freed up to hire more people. However, taxes are practically at the lowest they have ever been and look where we are with unemployment. Government spending is actually a way to stimulate the economy and jobs because somebody has to do this work.

 

Tax cuts are supposed to stimulate consumers to spend more money, as evidenced in the trivial stimulus bills. The more free money people have, the more they will spend.

 

The basic moral of the story is that the government should not spend more than it taxes, but everybody has their interests to represent to the tune of 14 trillion dollars.

Edited May 9, 2011 by Realitycheck

[Marat]

Republicans make an odd assumption -- but one necessary for their political clients, the wealthy -- that the only way to stimulate the economy and increase the available jobs is by handing over more money to the rich by tax cuts and other benefits. But of course, the economy could equally well be stimulated from below, by directly increasing the demand among the poor and the lower middle class by increased welfare and entitlement programs, which would also induce the wealthy to invest more money in production of consumer goods, thus employing more people. But whichever end of the social spectrum you stimulate -- the poor at the bottom or the rich at the top -- some of the stimulus money will always stick to the hands of those who first receive it, and the Republicans want it to stick in the hands of the rich, not the poor.

 

Also, no one wants to notice that depressions, like those in 1929 and 2008, coincide with extremely lopsided wealth distributions. The rich can only preserve their excess wealth by investing it productively, but the capacity of investments to generate a good return is contingent on the poor and the middle class having sufficient disposable income to buy the goods being produced, which they don't have in times of extreme maldistribution of wealth. The warning signs were already evident in the U.S. economy prior to the 2008 crash, since return on capital investment was steadily declining due to consumer wealth falling, which in turn was the result of the triumph of capitalism from the previous 30 years of right-wing policies, which caused real wages to stagnate and union membership to collapse. The maldistribution of wealth generated a further problem when the rich started packing their excess wealth into exotic and extremely risky paper investments, such as insurance schemes on market performance, which weren't adequately supported by real assets. When these flimsy structures, called into existence to absorb the massive overinlfation of spare capital in the hands of the wealthy, collapsed as they had to, since they were entirely artificial investments, the crash of 2008 was inevitable.

 

When anyone tells you that we have to increase the rewards for the rich or they won't invest to create any new jobs, ask him why the stock market always falls on news of higher employment and rises on news of lower employment. The whole goal of capital is to reduce wages as much as possible in order to increase profits, and once the minimum wage was introduced, the only way to accomplish this was to reduce the number of people employed.

[swansont]

When anyone tells you that we have to increase the rewards for the rich or they won't invest to create any new jobs, ask him why the stock market always falls on news of higher employment and rises on news of lower employment. The whole goal of capital is to reduce wages as much as possible in order to increase profits, and once the minimum wage was introduced, the only way to accomplish this was to reduce the number of people employed.

 

Surely you have mis-stated something here. The stock market sank quite dramatically with lower employment in 2008-09, and has risen once job creation had resumed.

 

As for the rest, we have pretty good data over the last decade that having money does not create jobs and a tax cut for the rich does not create jobs. Net job creation under Bush was basically zero, and the amount of money held by corporations has been at an all-time high the last few years. Where are the jobs? The two are recently anti-correlated. The jobs started to return when demand returned.

[lemur]

Marat, my point with this thread wasn't to stimulate criticism of trickle-down economics, which anyone who is familiar with left-economic critique well knows. My point is that when you hear claims that tax-cuts will result in job-creation, you have to wonder what people will suddenly start spending more money on with their increased budgets. Will they take an extra vacation? If so, does that mean more jobs in hospitality, hotel housekeeping, food service, and tourism? Will they buy new furniture and stimulate more jobs in the furniture industry? Whatever the case, I think people should be asking themselves if those are the jobs they want or can get. If not, you have to ask about the second level of trickle-down, i.e. what do people who work in hospitality, restaurants, hotels, the furniture industry, and tourism want to spend THEIR additional income on? I.e. the question is whether people are desperate enough for jobs yet to support fiscal stimulus that creates a job for them that they don't want to do. And perhaps the more pointed question is whether the economy will continue to push people until they are willing to accept such jobs and serve those who have managed to maintain their economic position through recession?

Edited May 10, 2011 by lemur

[CaptainPanic]

The only way you can create jobs is if you spend your tax money wisely.

 

Every dollar spent by the government must somehow generate more than that dollar for the economy.

All basic infrastructure is a good example. A highway costs a billion... but all the transportation is essential, and enables the economy to make multiple billions.

 

So, the real question is not how much tax you are gonna have - but what you spend it on.

[Marat]

The essential problem is that all the market inducements for consumers to spend their money on one thing or another are disconnected from the most general needs of the economy. If the economy would produce most jobs if people bought cars, but public transportation is priced more attractively than car ownership, then people will put their spare cash into public transport. If the costs of buying gasoline to power motorized transport are lower than using electric power, then people will buy gas-powered cars even if there is a hidden cost in this choice to the environment which makes gas ultimately cost-ineffective compared to electric power. The way the economy is presently structured, the pricing mechanism for things doesn't reflect the real cost-benefit of purchases, to the environment, to employment, to community safety, to national security, etc. You might call it the 'reverse invisible hand phenomenon,' in which the sum total of individual inducements to buy, to sell, and to price things yields irrational choices for the net good of the society.

 

But if you start setting prices according to some general, political notions of the common good, that is a step toward socialism which the Republicans wouldn't like. "Get the government off the people's backs," said Reagan in 1980, and that ideology has been predominant in America ever since.

[lemur]

Every dollar spent by the government must somehow generate more than that dollar for the economy.

All basic infrastructure is a good example. A highway costs a billion... but all the transportation is essential, and enables the economy to make multiple billions.

Well, think about it. If the government funds a road-building project, a lot of people get paid. Then if those people spend their pay, the people they pay it to get paid. Then if those people spend it, more people get paid, etc. GDP is caused by the rate of spending.

 

The problem is making all those spent-dollars result in productivity that actually makes people's lives better and more valuable. You can spend loads of money widening highways and roads and cranking out cars to drive on them and gas to put in the cars, but the question is whether people are going to feel economically satisfied when they're spending all their time driving around everywhere all the time.

 

Anyway, the point of the thread is what people will spend money on if taxes are cut and what kinds of jobs will get created as a result of what the money is being spent on? It's just like asking what kind of jobs will get created when the govt. spends money; only instead of the government doing the spending, it will be corporations and other tax-payers. So the question is what will those tax-payers spend tax-cuts on and what kinds of jobs will it create (or not)?

Edited May 10, 2011 by lemur

[dragonstar57]

let's face it the point of hiring more workers is to make more money (ergo they are tacking more money out of the economy than they give) ans as soon as they have as much money as they want they can just fire all their workers and move to Hawaii

[swansont]

Anyway, the point of the thread is what people will spend money on if taxes are cut and what kinds of jobs will get created as a result of what the money is being spent on? It's just like asking what kind of jobs will get created when the govt. spends money; only instead of the government doing the spending, it will be corporations and other tax-payers. So the question is what will those tax-payers spend tax-cuts on and what kinds of jobs will it create (or not)?

 

This raises the question of what pent-up demand is there among the higher-income population that will be satisfied by a tax cut. Are they really holding back on getting a new smartphone or gaming console, and wouldn't get one if they paid more in taxes? Is there any evidence that the Bush tax cuts caused people to buy e.g. cars more often?

 

Of course, one must also look at another aspect of this: the income tax level is a bit of a misdirection when it comes to the top incomes/levels of wealth. Those people often make a tidy sum from capital gains, which currently maxes out at 15% for long-term gains. Also true for qualified dividends.

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

 

They also don't pay social security over ~$110k of income, so their overall marginal tax rate actually drops at that point. But payroll taxes are often left out of the discussion when fighting tax increases on upper-level incomes, or when discussing how much people pay in taxes.

[lemur]

This raises the question of what pent-up demand is there among the higher-income population that will be satisfied by a tax cut. Are they really holding back on getting a new smartphone or gaming console, and wouldn't get one if they paid more in taxes? Is there any evidence that the Bush tax cuts caused people to buy e.g. cars more often?

I agree. It makes more sense for wealthy individuals to save rather than increase spending. HOWEVER, corporate taxes will also decrease, I think, so the question will be whether they will expand with the extra money and, if so, will such expansion result in more jobs or just more hours for existing employees?

[swansont]

I agree. It makes more sense for wealthy individuals to save rather than increase spending. HOWEVER, corporate taxes will also decrease, I think, so the question will be whether they will expand with the extra money and, if so, will such expansion result in more jobs or just more hours for existing employees?

 

Big companies have had a record amount of cash these past few years, during a time of very high unemployment. One of the proposals of the stimulus package was an elimination of payroll tax contributions by businesses, and there was a general complaint by business owners that it would not induce them to hire anyone. So the answer would seem to be no. Access to capital does not, by itself, cause expansion.

[lemur]

Big companies have had a record amount of cash these past few years, during a time of very high unemployment. One of the proposals of the stimulus package was an elimination of payroll tax contributions by businesses, and there was a general complaint by business owners that it would not induce them to hire anyone. So the answer would seem to be no. Access to capital does not, by itself, cause expansion.

I think the government just has to fold and tell the people that private capital has total control over revenue and income and the only means they have to survive is to appease some private money source, if they can find one. It would be nice if the government could provide some source of self-sustainment for people in the mean-time, but what happens if they don't?

[Marat]

Capitalism is like a jelly-fish, the more you squeeze it in one direction to get the result from it that you want, the more it expands into another direction to escape your efforts to control it. If you tax businesses more to generate more resources to answer the welfare needs of the population, then businesses just reduce wages, hire fewer workers, or increase the price of the commodities they produce to ensure that their own profits will never be diminished to supply basic human needs for the population. If you tax businesses even more, they just leave for some Third World destination and employ the local labor force for $0.10 an hour rather than $10 an hour, and wind up making even more money, now that the various Globalization Treaties have made the world safe for capitalism so trade tariffs are no longer in their way. If you give businesses various economic benefits to stimulate job creation, then the businesses might still decide not to create any new jobs but just invest the economic gains abroad, increase dividends to shareholders, or boost executive bonuses.

 

Ultimately, the only way to limit the power of capitalism is to displace it, letting it control a smaller share of the economy by nationalizing various industries to ensure that they serve the public good rather than private greed. Imagine if, during the financial crisis of 2008, the government had used it powers to buy up the large banks at fair compensation (consistent with the 14th Amendment). The major banks could have been bought quite cheaply, since they were on the verge of insolvency, so their true value was very low. Then the government could have made the banks do exactly what it wanted them to do, which was to loan money to small businesses and to exercise forebearance on mortgage foreclosures to get the economy going again and avoid acts of inhumanity. But since they did not nationalize the banks, but instead just invested in them with government funds, the banks, in jelly-fish fashion, just did what they wanted, and refused to lend to small businesses, continued to foreclose on mortgages, and soon paid out huge bonuses to executives and large dividends to shareholders once again.

[Realitycheck]

Look at what constituted the 2008 collapse - the issuance of a rash of bad loans to overly poor quality creditors, a bubble of poor investments in unregulated derivatives and swaps, and an auto market frozen due to obsoletion. The world wasn't saved by giving everybody a free ride, but by instituting reforms and responsibility. Most of the TARP program is now paid back, now we have regulation overseeing advanced, obscure investments, and we are actually starting to see a market in green cars rather than just dreaming about it, complete with green muscle cars which go 0 to 60 in 3 seconds. Who says that giveaways are the answer to everything? Responsibility and common sense go hand in hand.

Edited May 12, 2011 by Realitycheck

[lemur]

Capitalism is like a jelly-fish, the more you squeeze it in one direction to get the result from it that you want, the more it expands into another direction to escape your efforts to control it. If you tax businesses more to generate more resources to answer the welfare needs of the population, then businesses just reduce wages, hire fewer workers, or increase the price of the commodities they produce to ensure that their own profits will never be diminished to supply basic human needs for the population. If you tax businesses even more, they just leave for some Third World destination and employ the local labor force for $0.10 an hour rather than $10 an hour, and wind up making even more money, now that the various Globalization Treaties have made the world safe for capitalism so trade tariffs are no longer in their way. If you give businesses various economic benefits to stimulate job creation, then the businesses might still decide not to create any new jobs but just invest the economic gains abroad, increase dividends to shareholders, or boost executive bonuses.

And yet no one ever lobbies those governments to allow labor migration from high unemployment economies.

 

Ultimately, the only way to limit the power of capitalism is to displace it, letting it control a smaller share of the economy by nationalizing various industries to ensure that they serve the public good rather than private greed. Imagine if, during the financial crisis of 2008, the government had used it powers to buy up the large banks at fair compensation (consistent with the 14th Amendment). The major banks could have been bought quite cheaply, since they were on the verge of insolvency, so their true value was very low. Then the government could have made the banks do exactly what it wanted them to do, which was to loan money to small businesses and to exercise forebearance on mortgage foreclosures to get the economy going again and avoid acts of inhumanity. But since they did not nationalize the banks, but instead just invested in them with government funds, the banks, in jelly-fish fashion, just did what they wanted, and refused to lend to small businesses, continued to foreclose on mortgages, and soon paid out huge bonuses to executives and large dividends to shareholders once again.

Nationalizing businesses is just a means of using governmental institutions to make capitalism more imperative. Instead of allowing people the choice to pay for health care or not, you make them. It is mandatory economic participation. I would like to see government create more freedom for people to live without choosing to support aspects of capitalism they don't want to. If people don't want to use banks, there should still be a way from them to get property to live in, no? If they don't want to pay for expensive health care, they should be able to access low cost medical information/advice for basic care. Anyway, this is getting into a competition of political assertions, but the issue is what effect cutting taxes will in fact have on everyday economics. What will people do and how will they get money and how much - and what will happen to various prices?

 

 

 

[Marat]

If you go back to the foundational works of modern political theory, such as those by Hobbes and Locke, the basic understanding is that there can be less freedom resulting from more disorder, rather than the other way around, as your comment seems to presuppose. Thus if all citizens were compelled to pool their resources together to fund out of income tax payments a public healthcare system in which all medical expenses were covered without user fees by the government, there would be some loss of freedom since everyone would have to pay slightly higher taxes. But there would be an enormous gain in freedom as well, since people would not have to fear their entire family having to go bankrupt because of the catastrophic illness of one family member; unfortunate inidividuals struck down by a catastrophic illness would not have to confront economic stresses at the same time; healthcare costs would fall because the monopoly power of government could drive the prices of healthcare suppliers lower by negotiating as a unified force against them, and this in turn would increase the freedom of all from the burden of health expenses.

 

So for a small net loss of freedom in having to pay higher taxes, there would be a huge net gain in freedom from the terror of catastrophic medical expenses, which now haunts everyone except the super-wealthy. The same principle follows from forcing people to pay higher taxes for crime control, since for this small initial loss of freedom in higher taxes there is a larger net benefit in the freedom from fear of crime; increased taxes for public highways represent a loss of freedom to produce a much larger gain in freedom to travel efficiently, etc.

 

The interesting thing is that if you talk to Danes, who pay a huge tax rate compared to Americans, the first thing they praise about their country is its greater freedom, since government subsidies mean that it costs next to nothing to go to university, healthcare costs are low, maternity leave is long and generous, disability leave is also easy to get, social housing is readily available to answer personal crises, unemployment payments are generous, etc., so everyone is free of the threats and financial limitations which make life a perpetual terror in the U.S. for everyone who is not wealthy.

[lemur]

The interesting thing is that if you talk to Danes, who pay a huge tax rate compared to Americans, the first thing they praise about their country is its greater freedom, since government subsidies mean that it costs next to nothing to go to university, healthcare costs are low, maternity leave is long and generous, disability leave is also easy to get, social housing is readily available to answer personal crises, unemployment payments are generous, etc., so everyone is free of the threats and financial limitations which make life a perpetual terror in the U.S. for everyone who is not wealthy.

If you look at US culture since colonialism, you could say there are competing views about whether "the American dream" is the dream of the pilgrims who sailed on the Mayflower to set up their own grass-roots economy independent of others or whether it is the dream of exploiting the land and labor to produce loads of goods to sell globally and make loads of money. Obviously the media tells us that the American dream is to make lots of money and be rich, because that is what drives global capitalism. However, the republican party began as a "back to basics" party that wanted to redistribute land so that people could go back to yeoman farming instead of relying on slave-cultivated cash-crops like cotton.

 

To me it seems logical that Danes or anyone else whose economy has stabilized as a permanent beneficiary of global capitalism would create social welfare benefits to share the profits of capitalism relatively equally. After all, what benefit would Danes see in dismantling social welfare and having capitalism reduce people to mere survivalists? Yet that's exactly what the pilgrims did after living and working in Leiden subsisting in the trickle-down economy of the continental bourgeoisie.

 

So it may well be that global capitalism creates such vast levels of wealth that a large number of people can enjoy more freedom than they could if they were independent farmers, but I also don't think that global capitalism will produce these levels of social welfare benefits for everyone. So the question is whether you want to be part of a prosperous elite who has the privilege of being "free from worry" with regards to how to pay for extravagant levels of care and other other social benefits; or whether you want the people who serve your needs to be free.

 

Think about it. If everyone is entitled to health care, then doesn't that mean that a sufficient number of health care providers MUST work in health care? Likewise, if everyone is entitled to housing in good working condition, doesn't that mean that construction and maintenance workers MUST keep sufficient dwellings in good condition? It is easy to say that the wealthy will always have more money to extract as taxes to pay everyone for their labor, but what happens when the wealth run out of money to tax? Eventually, it's just going to be a government-induced set of cash-flows that require people to take care of each other in whatever way the government decides to mandate. What's more, people are going to resist the pressure the government puts on them to go to school and work in high-demand professions like healthcare, etc. when every desirable job comes with guaranteed health care, housing, etc.

 

Believe me, I would love it if people were responsible enough to consume frugally and contribute their labor to making sure that there are abundant goods and service for everyone but what I see is that everyone wants to be a high-paid manager and not a low-paid worker and that everyone has their sights set on a level of consumption that is above what would be sustainable if everyone was equal. So that means that there will have to be some mechanism that limits access to the middle-class, so why shouldn't that mechanism be the free market? What's more, if the free market makes the rich richer at the expense of the middle class, at least that puts more middle class people in the position that they put the poor in by raising living standards to levels that make poor people look idiotic. Poverty is only pathetic in a status-consumed bourgeoisie. In reality, poverty is just a dignified way to live and work for everything you have without having to lord over others to get it.

 

 

[dragonstar57]

capitalistic economies run on the 2 ideas that 1 people want to own their own things and 2 people want to be members of an elite ruling class and if that class is abolished it removes their dream. but people need to realize that our current form of capitalism is evil

we need to drop the fear of communism so we can serve the basic needs of our people.

the entire economy is going poorly companies should not be making record profits (just talking about the us)

[rigney]

capitalistic economies run on the 2 ideas that 1 people want to own their own things and 2 people want to be members of an elite ruling class and if that class is abolished it removes their dream. but people need to realize that our current form of capitalism is evil

we need to drop the fear of communism so we can serve the basic needs of our people.

the entire economy is going poorly companies should not be making record profits (just talking about the us)

 

If history serves up any rational understanding of our earth, there's no doubt "all animal and plant life" have lived a, feudal, serf, and fiefdom existance from the get go. We simply change the names from time to time. Without that concept, life in any form would soon die out. "No living thing", can continue to take, and not give somthing in return. Edited May 16, 2011 by rigney

[lemur]

capitalistic economies run on the 2 ideas that 1 people want to own their own things and 2 people want to be members of an elite ruling class and if that class is abolished it removes their dream. but people need to realize that our current form of capitalism is evil

we need to drop the fear of communism so we can serve the basic needs of our people.

the entire economy is going poorly companies should not be making record profits (just talking about the us)

You could also look at the "elite ruling class" desire as just another commodity used to exploit people for the gain of others. E.g. investors can be sold on the idea that they are captains of industry when in fact they may just be used as a source of investment capital for those really running the business. Similarly, workers use managers to take responsibility for their work so they they don't have to worry too much about doing so themselves. The profits, bonuses, high-salaries, etc. afforded to higher-ranking personnel may just be used as bait to lure people into positions where they can be used to take on the least desirable responsibilities while others in mid-level positions enjoy the relative irresponsibility that comes with anonymity as well as freedom from the most undesirable tasks. People manage to get everything they want with middle-level positions and when they've reached that point, they would often rather avoid the added responsibilities of being the ultimate authority held accountable to the public for everything that may occur at the hands of anyone else in the lower ranks.

 

This is a bit of a diversion from the thread, though, isn't it? Why is it so easy to go from discussing the specifics of economics to philosophizing about capitalism and economic systems overall? Is this something we are programmed to do by higher education? Could this be a topic for yet another thread?