The Republican’s economic policy is based on appeasement. If we give in to the Job Creators’ latest demand for tax cuts, maybe they’ll create some jobs instead of demanding more tax cuts.
I completely agree. Its just really disingenuous to imply that if you give an investor a tax break, he’ll use it to create a U.S. based job.
I don’t understand why it’s bad to create jobs in China. Chinese people buy American stuff, and the more money they have, they more they’ll buy. Besides, are Chinese people less deserving of gainful employment? Why should I care more about some guy halfway across the country than some guy halfway across the world?
Trade, labor and immigration barriers should be dismantled worldwide. A big reason Chinese people make $30/day in China is because they can’t come here and make $30/hour.
Anyway, the problem isn’t that “job creators” create jobs in China, the problem is that they don’t create jobs, not any more than the rest of us at least. A) Companies create jobs, not rich people (especially not “top earners” – they’re employees like the rest of us). B ) Companies only create jobs when there is a demand for them. Which is due to everybody having money, not just a few fat cats.
Sure, rich folks might spur demand in yachts, Lamborghinis and other luxury goods, but the rest of us spur demand in food, clothes, electronics, and just about everything else. Plus there’s more of us. Lowering taxes on everybody would help our economy a lot more than just a select wealthy few. But that’s not going to fly with our current levels of spending.
That might come under the heading of what Leo Strauss, the political scientist, called a noble lie: something you tell the masses so they’ll let you do what’s best. And not necessarily best for the masses - but it keeps the lights burning.
I agree with davidm; there is only one “job creator”: demand. All claims of ability to create jobs should be treated like claims of alchemy. Believing in trickle down economics is tantamount to being in a cargo cult.
this whole tinkle down theory accommodates either.
you make the tax breaks really huge. a rich person can only buy so many gold toilets (and as mentions jobs are there mining the gold and making toilets). after they have bought their desired amounts of toilets then they might directly invest in a company creating jobs. more tax breaks is always the answer, if there aren’t enough jobs it’s because there aren’t enough tax breaks.
you know the old saying: one invisible hand washes the other invisible hand.
And some countries do it; certain breaks have been more succesful than others. In Spain it’s relatively common to play with Social Security (which pays for our medical system, our unemployment benefits and our retirement benefits - so one of the things creating a hole in that fund is the “job creation policies”), giving breaks to companies hiring someone from a “vulnerable group” (recent graduates on labor contracts, not “practice contracts”; people over 55; women; minorities…)
For example, at one point I had a contract which was “6 months and if we’re happy with you, you get a permanent contract with 0 trial period (the previous 6 months will be considered as having been the trial period)” but at the end of the 6 months, I got a 3-month contract because there was an upcoming tax break for companies hiring women; at the end of these 3 months, I got my permanent, no-trial contract, but for the first 6 months of the permanent contract the company only paid half of the usual SS tax for me.
It depends…did the rich guy buy it by magic, or through some more conventional means? Did he actually go to some other country to pick up his solid gold toilet? Well, then he probably drove a car and used an air port, at a minimum, so some non-zero number of US workers were involved. Or, if the SGT was imported, then you have all the folks involved in the logistics of that, marketing, sales, etc…again, a non-zero number of American workers would have been involved even if the gold and manufacturing was all done in some other country.
As to the OP:
Well, as pointed out, the rich buying a SGT would involve jobs and putting folks to work so it’s not a complete wash. However, if the rich spend all their money on such things they won’t stay rich very long, so the reality is that they are going to invest their money in something. If they are uncertain about the future, they the are going to invest in low risk, low return things. They aren’t going to want to expand their businesses or hire a lot of new folks because they don’t know what their costs will be, or their exposure…and no one wants to be the rich guy who lost all his or her fortune or had their company go completely tits up.
Leaving aside the gaming the system aspects, the problem is incentivizing the simple creation of jobs really doesn’t help much unless there is a corresponding demand for more services or products. Let’s say I own a company and you give me some sort of tax incentive (that is actually attractive enough for me to forget about all that uncertainty stuff) to hire a bunch of new folks for my factory. Great. Except, if I don’t have the corresponding demand TOO have a bunch of new folks, then I’ve hired a bunch of people who I don’t need and don’t have enough work for. I’ve increased my overhead and costs in order to reap some short term tax benefit.
Maybe such a move would stimulate growth in and of itself (putting a lot of folks back to work would, in theory, increase demand for goods and services, a non-zero number of which might be for products my theoretical company makes). Or it might not.
I’ll tell you think…in the current environment, you are going to have to give some pretty big incentives to get companies to hire a lot of folks because of all that uncertainty. BIG incentives. Not sure it would be worth it for fixing the problem you seem to be trying to fix.
I don’t know a lot (obviously), but I did stay at a Holiday Inn Express last week, so…
There is always risk. There is always uncertainty. Smart people can profit from it, consider how health care companies are buying up smaller companies to have capacity for the big increase in patients expected. But tax policy has little impact on that. You’d be foolish to give up on a 10% return investment for a 2% one for fear that increased taxes might cut it to a 9% return. (And rich people can afford diversified portfolios so they won’t go bust even if the riskier one fails.) What they won’t do is invest in expanding capacity, as you accurately note below.
There is a lot of leverage. We don’t need incentives for each new job, just enough to start the demand ball rolling. But we don’t have to risk dealing with companies - we could get it rolling by restoring the government jobs the loss of which has been holding back the recovery.
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There is always risk. There is always uncertainty. Smart people can profit from it, consider how health care companies are buying up smaller companies to have capacity for the big increase in patients expected. But tax policy has little impact on that. You’d be foolish to give up on a 10% return investment for a 2% one for fear that increased taxes might cut it to a 9% return. (And rich people can afford diversified portfolios so they won’t go bust even if the riskier one fails.) What they won’t do is invest in expanding capacity, as you accurately note below.
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There is always risk and always uncertainty. But the uncertainty right now is a bit beyond the norm, and the risks are a bit higher than usual as well. For instance, I know one of the big things worrying a lot of small businesses right now is…what will my healthcare costs be next year? What about the year after? That’s one of the things that keeping my dads old company from expanding, talking to the folks running it now…they don’t know what their costs will be or how they will affect their existing or future contracts, so they aren’t looking to expand or hire new folks until they know what they will be and are able to game things out a bit better.
Same goes for investment risk. Not only do you have the uncertainty inherent in our own shaky economy, but what’s going to happen in Europe (and China) and how will that affect investments in the next year? What will the tax structure be in the next year (i.e. will we be going back to the pre-Bush tax cuts? For The Rich™ only? For everyone? For some arbitrary definition of The Rich™? And what other effects might there be)? What about the Cliff? Will the automatic cuts go in, some watered down version of them based on who fights for what and has the pull to get their pet cut stopped…or pushed through for their pet peeve program? And what effect will THAT have on the economy and investment? Etc etc. Taking a risk in one thing, but right now a lot of folks with capital are in more a bunker mentality with their money, putting it in (hopefully) safe investment vehicles that will get them lower returns but also give them a lot lower risk exposure. I know most of the ‘rich’ people I know are thinking that way. Of course, I don’t know any billionaires so maybe in that crowd they are willing to take more risks. I’m not seeing it though reflected in a lot of folks willing to invest heavily in either expansion of their businesses and such, however.
And increasing our deficit spending. True, if it works (I’m skeptical of course, but you knew that already I’m sure) it would leverage later down the pike in terms of more folks able to buy more things, stimulating the economy in other sectors and also generating more new taxes that would, in theory, pay back some of that debt we incurred (well, except now we’d have more recurring costs that would need to be payed). If it didn’t work though (and the last stimulus wasn’t exactly an unbridled success…IMHO anyway), we’d have more debt and more recurring costs that you’d either need to cut by firing all those folks you hired or by yet a new cycle of more expenses and more increase in debt.
They haven’t know that for a while, and healthcare costs went up less than usual last year. Uncertainty about healthcare was due in part to Republican challenges. Now that the Supreme Court has ruled it should be better. Obviously the big healthcare companies are betting that either Romney is going to lose or that he won’t be able to repeal ACA.
The demand crisis predated the Eurozone crisis, and the Chinese situation is the result of that. And Europe show the effects of austerity programs.
And we have one party yelling about the government being bad for causing uncertainty while being the fundamental cause of that uncertainty. They push us to the edge of the cliff, and then yell at us for being irresponsible for being near the edge of the cliff. I remember that one of the causes of the big boom in the '90s was that the markets finally saw Congress and the President working together to do something reasonable. The chances of a big middle tax increase are negligible, and the impact of a high earner tax increase is going to be between minor and none.
The surveys I’ve seen seem to indicate that market risk is a far bigger issue than tax policy or health care. As it should be. My point is not that the people with money are evil or doing anything stupid, but that we need government policy to create conditions so that the smart thing for them to do is to invest. The reason that the job creator thing is so bogus is that it assumes that the wealthy are dumb enough to take the money they get from a further tax cut and flush it down the toilet. If I owned a business I wouldn’t be investing in expanding it either.
But as Spain has shown, if you try to cut the deficit now by cutting spending employment falls even more, your tax revenues decrease, your safety net levels increase, and you are in worse shape than before. Remember Keynes said that you increase taxes during good times, if you ignore that, like Bush did, then indeed you are in trouble.
If you stimulate, then eventually revenues go up, welfare spending goes down, and you have a surplus. I just heard this morning that BART ran a surplus last year. Of course the stimulus program was not optimal - it had too many tax cuts, and not enough support for local governments to avoid layoffs. But it sure beat the Republican proposal.
[QUOTE=Voyager]
They haven’t know that for a while, and healthcare costs went up less than usual last year. Uncertainty about healthcare was due in part to Republican challenges. Now that the Supreme Court has ruled it should be better. Obviously the big healthcare companies are betting that either Romney is going to lose or that he won’t be able to repeal ACA.
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No, a lot of the stuff in the ACA hasn’t gone into effect yet or been implemented, and no one really knows what the costs will translate into once it does go into effect. IIRC, a bunch of stuff goes in in 2013-14, and a lot of that is vague enough that no one knows what the costs will actually be once they go in.
I disagree that this is due to supposed European austerity programs, but regardless of the why, it’s a huge uncertainty. If the EZ melts down or goes into a huge recession then it will have a huge impact on the US. Same with China. And vice versa…it’s a positive feed back loop either way.
Again, I disagree with your assessment here, but it’s not relevant, since unless you posit some sort of sea change on the political front this is the reality, and is adding to the uncertainty level, regardless of who is at fault. If the economy goes tits up then it will be cold comfort to investors who stick their necks out that it was all the Republicans fault (or all the Democrats fault, or some combination of both).
It all adds up to the current reluctance to take risks…that’s what I was getting at. Whether the worry is about tax policy, health care or economic stability, it all factors into the equation. No, if I owned a business I wouldn’t be looking to expand either. That’s the trouble.
I don’t believe that Spain has demonstrated this, as I don’t believe that they have serious cut back on their actual budget…nor, even if we assuming I’m wrong about that, does this demonstrate that the converse is true (i.e. that hiring a bunch of new government workers is going to stimulate the economy and bring revenues up). Yes, I do remember Keynes saying that (;)), and while I’m more a Hayek fan I don’t have a real issue with tax increases (devil, details) in the good times I don’t think that large new spending proposals to increase the government payroll is something that is wise. Personally, as I’ve said before, I’m in favor of a modest tax increase right now , but only coupled with budget cuts (or, at least a moratorium on new spending or expansion into new programs and entitlements)…i.e. if you are going to raise taxes then you do so with the intent of paying down the budget, not generating new spending initiatives and future payroll commitments which will increase your recurring costs AND add to the deficit and national debt all rolled into one. Obviously you aren’t going to agree with what I’m saying here, so setting that aside I’ll just say that, getting back to the uncertainty thing which was my main point, that doing it your way would increase the uncertainty, at least in the short term, and wouldn’t spur business or folks with capital to start loosening up on their bunker mentality, not until they saw the way the wind was blowing economically, so in the short term you wouldn’t see it doing more than a token stimulation to the overall economy…and one we’d have to pay for down the road with increased debt, deficit spending and recurring additional payroll costs. Urf…doesn’t sound prudent to me. 
Ugh, that’s what I get for posting on a iPad. Hopefully you can translate the above semi-coherent blather, typos and syntax errors into…something. :smack:
Making predictions is tough, especially about the future, but I’d suspect that there are plenty of people out there ready to tell you about costs. Healthcare costs have been a random factor for some time now, anyhow.
Whatever the reason for the coming European recession, I agree that an EZ meltdown will be bad. But the demand and investment issue started when Europe was doing better than we were, and there are plenty of American companies not investing who don’t have all that much exposure to Europe - and plenty with exposure (like high tech companies) who are investing.
So it behooves both parties to compromise. My example did not deny the existence of a cliff, by the way.
You seem to be saying that business owners have turned into pussies. I don’t think the inherent willingness to take risks has changed - the environment has changed so there is less investment even with a constant level of risk aversion. Give them a better economic climate, and they will do it.
IIRC, since some point (the start of Obama’s term or later) we have gained over 4 million private sector jobs and lost 900K public sector jobs. Firing public workers in a downturn is new. If we restored those jobs, don’t you think the demand picture would be better? We’ve gone way past cutting fat - a fire was worse than it had to be near me due to closing fire stations, which meant the one company nearby was on another call when it started, and the only available company was far away.
Republicans decry uncertainty when it comes to ACA but don’t mind it at all when it involves the debt ceiling. (Though ACA would be more certain if they stopped trying to repeal it.) However the studies I’ve seen, as I said, say that uncertainty is a red herring and lack of markets is the real killer.
I think I don’t have anything to add about paying for debt.
You might want to advance 2 decades to the current minimum wage – jus’ sayin’. Minimum wage in Tibet is closer to $150/month, and in more expensive areas like Shanghai and Shenzhen closer to $300.
We live in an age of Orwellian Newspeak. “Job creators” is the term for what we used to call “filthy rich.” … and they are the same CEOs who have been CUTTING jobs for the last 12 years or so.
Study: Tax Cuts for the Rich Don’t Spur Growth
http://finance.yahoo.com/news/tax-cuts-rich-dont-spur-151649273.html
I’m a small business owner - very small, its just me!
But, business is going well, and hopefully sometime in the near future it will grow enough that I will have to hire someone to help out, as I just won’t have the time, nor the expertise to take advantage of demand. Wow, I’d become a job creator!
Let’s say someone from the government walked up to me and handed me a bag with $50k in it. I would look at that money, look at my business, and say…well demand is still pretty flat, so I don’t need to hire anyone. I’ll use this money to pay down some debt I have, and save the rest for later. I won’t hire anyone, just because I have the money to get someone to sit here and do nothing.
Let’s say demand goes through the roof. I’m working 22 hours a day and I do the math, that I will increase my sales by more than I will have to pay a new employee. I will hire someone and become a job creator. Sure, taxes might come into the math equation on that, but really, the couple of percent, or even a few thousand dollars won’t change that equation, especially not more than increased demand will.
How about downstream effects - instead of me hiring directly, I need to purchase more, inventory, capital, supplies, etc? Again, if I have no demand, that $50K handout won’t be used for anything but paying existing debt and saving. I won’t buy more stuff unless I need to based on demand. And if I have the demand, I’ll find a way through using cash reserves or borrowing to make sure I can meet that demand.
Its all about demand.
(as an aside, one of the reasons I haven’t fully abandoned my regular corporate job for my business is: - health care. If I had government single payer health care, I could quit and focus, but I can’t because I need the insurance. So, lack of socialized health care is actually causing me to stop being as much of an entrepreneur, slow down my business expanding, hiring, etc. If health insurance were not an issue, I’d me MUCH more willing to take risks, start/expand business, leading to growing economies, hiring, etc.)
I’m not sure if you are serious or not, but this implies that the only thing holding back the billionaires of the world from buying more gold toilets is a bit bigger tax refund. Which is obviously not the case. Give someone making $40K a thousand bucks, it will likely get into the economy; give a guy with $250M in the bank a couple hundred thousand he’s not all of a sudden going to think “finally I can buy that new XXX that I’ve wanted but couldn’t afford!”
I notice that when Moammar Gadaffi buys gold toilets for his mansion, it’s a sign of profligate decadence, but if an American hypothetically buys one, he’s defended for creating jobs.