I recently got into a debate with a conservative friend and found some things really striking. Basically, I argued that the uber-rich do not create as many jobs as they think.
He proposed that demand is fine, because otherwise why else would businesses be profiting so well? It must be the consumers.
But profit is revenue - cost. Personally, I feel it’s because demand is suffering. When the recession hit, lots of people were laid off and businesses started taking operations overseas to limit costs. This massive cost-cutting meant larger profits for those who were still lucky enough to be working.
I asked him why he felt businesses should be given additional tax advantages when wages are at all-time lows and employment is in the tanker. Businesses are already enjoying low tax burdens and huge profits, and are sitting on massive cash reserves.
Apparently there’s a “environment of uncertainty” because taxes are too high and regulation is stifling. But isn’t it really the fact that demand is low? A failure of supply-side economics? If demand is low, why would I hire people if the resulting output won’t get purchased? To me, this seems to be a blatant demand problem, and yet I keep getting told that it’s all about taxes. Lower the taxes, and they’ll take the risk, etc. But I don’t see how Obama’s policies can be considered so harmful to business when they’re some of the most lenient in history.
I don’t understand how much merit these points have or if the data is speaking plainly, here. Which side better reflects reality? Do the rich really act as the job creators, or is it more of a mantra that gets repeated for some ideological pursuit?