Just because it bears repeating: Demand creates jobs not the rich

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No jobs created here...

CCC - Civilian Conservation Corps
CWA - Civil Works Administration
PWA - Public Works Administration
TVA - Tennessee Valley Authority
WPA - Works Progress Administration

 

Funny, I don't remember the Second Great Depression. Did I miss it?

 

I've been discussing this article with some friends, and one point that I think it missed is that the need to increase demand is a need for RIGHT NOW. Too often, I get the sense from both sides that they seem to believe there is actually some permanent perfect number for tax rates and spending. I think that's wrong - the tax rates and government spending should always be in flux depending on the current situation.

There have been times in the past (and may be again in the future) where taxes on businesses and the investor class were too high and limited their ability to meet demand. In such times, that's when you look to lower taxes that are disproportionately paid by businesses and investors.

But that's not the situation we're seeing. Businesses and investors are stashing the extra money they've received, while the middle class is struggling just to pay bills. And you can't blame their struggles on taxes. As it's been pointed out, we've seen a huge increase in job productivity over the past 30 years, yet there has been no accompanying increase in earnings. I realize much of this productivity is tied to introduction of the computer and that many tasks that used to be more difficult are now much simpler. Still, if people are more productive, it would seem that there should be at least some increase in wages as well. But that hasn't happened and the buying power of the middle class - the engine that drives our economy - has weakened.

In an ideal world, the private sector would fix this. Businesses would take the money sitting in their accounts and use it to either increase wages and/or to improve benefits that lower household costs. But it's been 30 years and it hasn't happened at all. At some point, conservatives are going to have to recognize that the "free market" isn't going to cure this problem, and that's why there is a need for government intervention to get more money into the hands of the middle class.

That being said, one of my friends correctly pointed out that the intention of higher taxation and the actual result are often two different things. Unless our representatives can utilize the tax revenue correctly, it won't make any difference what the tax rates are. There's always going to be some waste in any legislation - it's an inevitable by-product of our government and its mechanisms for preventing a tyranny of the majority - and we can't let our fear of a little waste paralyze us into doing nothing.

But is it possible for our current crop of representatives to pass any legislation with just a "little waste?" The more I think about it, the more I'm not so sure.

 

In an ideal world, the private sector would fix this.

In a globalized capitalistic system why would they? With instantaneous communications, as needed supply chains and containerized shipping, workers are competing worldwide against each other. The quality of life for the American worker will trend to the worldwide average where there are no social security guarantees or health and safety standards. If you have capital and a job you can let workers bid on how much debasement they can survive with and pocket the profit.

 

Ideally, business recognizes that their product needs a consumer, and the middle class of America still remains the greatest purchaser of goods worldwide. So to enable the purchase of their product, they pay their worker enough to afford the product. But I agree that isn't happening, and isn't likely to happen. With so much riding on short term profits, no CEO is going to risk his job on a long term strategy that initially reduces the profit. And the similar myopia of many investors is going to make them equally hesitant to give their money to a company that increases salaries of its workforce.

That's why I think you have to have the government intervene, and create incentives for companies to pay higher salaries. But there is the danger that the government won't create the right incentives, and might even create ones that have a 180-degree opposite effect.

Going back to my first post, maybe this is all an inevitable consequence of a consumer society and there's nothing to be done to avoid these kinds of inequities and short-term thinking.

 

Fixing bridges should not be part of a stimulus, it should be something the govt does regularly.

 

This. I really don't think corporations follow the free market model in the US, mainly because there is a lack of short term repercussions for upper management. In a true free market, those responsible for bankrupting a company, for short term gains, should be fully indebted to the company's creditors. Current government protections provides a buffer for personal loss which encourages risky corporate behavior. I agree there should be some risk protection to encourage growth and investing. However, the trade-off should be a minimal social contract with it's employees welfare in mind. Something in lines of unions should have a representative on the board of members.

If I were a CEO, who cares if the company goes down a decade later if I can make 10 million in a year and get fired.

On the other had, if you want your company to remain private, with all it's upper officers taking every financial risk, including the possibility of losing home, pensions, personal possessions, being sued for whatever... by all means, do whatever you want.

When talking about a truly free market, we should look at the people in the corporation and not the corporation entity.

 

'Cutting taxes on the wealthy creates jobs you cannot argue with that fact.'

Yes, they both create "jobs". Do we need to go into debt to build pointless roads and bridges? Roads and bridges should not be built just to give someone a job. They should be built because they are needed. Going into debt because something is needed is completely different than going into debt just to give someone a job.

Giving tax breaks to the wealthy creates some legit jobs. But its just not worth the cost of going into debt.

 

I think there is a general consensus that the US transportation infrastructure is in dire need of repair or updating. But disregarding that, creating jobs through road and bridge projects will mean fewer unemployed people, thus lowering the strain on social service budgets and increasing the number of people paying taxes. To put it ultra simplistically, if spending X amount on public works projects leads to a Y increase in tax revenue and Y is greater than X, then the public works project is worth the money. And that doesn't even take into account the added economic benefits of good roads and bridges.

As I've said, there's probably been times when giving the wealthy tax breaks would create jobs. But in the current climate of low demand, it won't - the wealthy already have enough money to cover the cost of adding jobs, but the low demand has similarly decreased the need for adding jobs. So actually, you can argue with that "fact."

 

Yes, yes we can. We have. Where were you, watching Fox?

http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10?op=1

 

Answer the question though - does the government create jobs when it hires people to do a job, like fix a bridge?

It's a simple question. Whether you call it a stimulus or regular is irrelelvant.

 

The Republican Party drastically cut taxes for their patrons, the rich. Now they are fighting tooth and nail to keep those drastically low tax rates for their patrons, the rich. Meanwhile, the middle class shrinks and their income after inflation is either stagnant, or shrinking, while the rich revel in the largess handed them by George W. Bush and the Republicans in Congress. Those are facts, not fantasy. Why is there any debate about it?