Who we vote into public office can have a big effect on our livelihood and our standard of living. So understanding economics is a real key to being able to maintain and improve our lifestyle. I have spent years trying to understand economics and our economy, and will try to provide what I think I have learned that's worth knowing.
Let's start with should we raise taxes on the rich? After all, they can afford it can't they?
First, realize that most of the money spent by the rich is discretionary. That means that they don't really need to spend it. I remember when Congress decided to tax the rich by a big increase in taxes on luxury boats. The result was that the rich stopped buying luxury boats in this country, so much so that over 80% of the luxury boat workforce was laid off and the amount of tax revenue from sales almost disappeared. A few years later, Congress repealed the tax and luxury boat sales slowly but surely recovered.
The other major characteristic of wealthy people is that they can hire a batttery of advisors (accountants, tax lawyers, etc) to advise them on how to evade paying taxes they don't like. If income taxes go too high, they will reduce their income, place more of their money in untaxed assets like municipal bonds, move their money overseas and reduce investments is U.S. businesses. The most recent example I have is George Soros who emigrated to the U.S., made billions here, has kept most of his money overseas in order to evade taxes in the U.S., and has now moved overseas entirely.
So increasing taxes on the wealthy beyond what is a fair share may be just a way to reduce government tax revenues, not increase them. Politicians who clamor for such action are trying to get your votes, not do something better for the country. And by the way, the top 1% of all earners in this country pay far more than their share. Here's a "Reality" lesson in economics from David R.Kamerschen,Ph.D, Distinguished Professor of Economics, 536 Brooks Hall, University of Georgia, Athens, GA. (http://www.uga.edu/) as of the end of 2004.
Top 1% earn 21% of all income; pay 37-1/2% of all taxes (up from 27.5% in 1992 and from 19.3% in 1980)
Top 5% earn 35% of all income; pay 56-1/2% of all taxes
Top10% earn 46% of all income; pay 67% of all taxes
Top 1% earn 21% of all income; pay 37-1/2% of all taxes (up from 27.5% in 1992 and from 19.3% in 1980)
Top 5% earn 35% of all income; pay 56-1/2% of all taxes
Top10% earn 46% of all income; pay 67% of all taxes
But let's leave the very rich and look at our economy in general.
Back in 2002 there was a BIG discussion and much dissension in Washington over how to "stimulate" the economy. This is a VERY important subject to each of us since a healthy economy makes the standard of living of most of us go up and an unhealthy one makes the standard of living of most go down. Note that I did not say that it goes up for all nor that it goes down for all, only that the vast majority of us follow the economy up or down.
What does an economy going up mean? Very simply it means that most companies have higher margins, a larger difference between the cost of sales and the revenue from sales, in the direction of costs being increasingly lower than revenues. This causes owners and managers to become more "confident" about the future prospects for their company. Companies are really just a bunch of people teamed up, however well, to achieve some sort of goal so "confidence" is a big thing. Being "confident" permits the owners to think about all sorts of things like paying employees more to retain them, buying more equipment and plant in order to increase production, hiring more people and/or paying out more of their earnings to owners. All of these choices cause more people to be employed in the economy as a whole (directly in the company concerned and/or in other companies which are their suppliers of equipment, parts and materials), and more people in the economy to have more money to spend.
Thus if profits are up, the economy will grow and become healthier and the standard of living of most people will rise. Back in 2002 we hadan economy which was going down, contracting or at least not growing. Companies started noticing a pronounced reduction in margins about a year and a half before. The stock market started going down about two years before. The margins or profits at companies had started to dry up totally in 2001 and they started laying off people, a situation which steadily got worse each month as owners/managers became less confident and profits got worse. People, always the last to respond, started to reduce their spending somewhat in mid 2001 and started pulling back significantly after 9/11.
Think about profits and confidence in order to understand what happened. As more people joined the lists of unemployed or had their bonuses disappear or pay cut or hours worked reduced, people had less money to spend and their confidence went down which caused them to more severely cut back on their spending than their earnings would require, just to save up in case more rainy days come.
So how did we fix this? The Japanese had been dealing with this exact problem for over 10 years and their approach was to increase government spending by building more bridges and roads and whatever. In essence, they thought that they could increase the number of jobs by their spending and thereby increase the aggregate amount which people had to spend and thereby the economy would get better. Well, they spent so much that they went from being one of the industrialized countries with the least amount of federal debt to being one with the most debt. And their economy, what of it? Well, not surprisingly it has remained a basket case and has caused many other countries to remain almost basket cases since Japan is such a large market and was importing lots from others when it had a healthy economy.
The real question is: "Can you spend yourself into prosperity?" The answer for an individual or a family is a rather obvious hell NO and the answer for a government is no different. Government spending does not positively affect profits or confidence, of companies or people, and thereby cannot help an economy. It does hurt it since having your government go deeper into debt reduces the confidence of the companies and people and causes them to pull back because they know that they will eventually be called upon to pay the government's debts. We may look dumb, but we aren't that dumb.
The fix to an economy going down is quite simple and mostly just a matter of common sense. Just don't forget what comes first between companies and people for the economy's health. It's always companies because they hire and give pay raises to people, not the reverse. And the government actually knows this difference although not many of them are in Congress.
When the banks were having a terrible profit crunch and many of them were going belly up a few years ago, in the midst of the real estate debacle created by Congress, the Fed noticed that the economy was starting to slow down because the banks had no money to make new loans to companies who wanted to expand. So the Fed decided to increase the profitability of banks so that they would stop failing and would over a relatively short period of time accumulate enough capital to be able to restart lending to companies. This is called "reliquifying" the banks or increasing their profits. To do so, the Fed simply lowered the rate at which they lend money to the banks full well knowing that the banks would not pass this on as lowered interest rates to their customers but would use the increased profitability or margin to increase their net worth which would then permit them to make new loans. At the same time, the Fed required the banks to get rid of their bad loans (called non-performing since no interest or principal was being paid to them) and mark down any real estate they held so that their books clearly reflected their true financial condition, mostly bad. Anyway, this increasing the profits of the banks as a whole did FIX the problem and the economy started booming again with lots of confidence.
When a company does not think it can get the capital to make an expansion, it doesn't bother even thinking about expansion or good times. This is what the Fed fixed. And with more confidence by companies, that expands the economy and the people start feeling it as well.
Well, now that we know banks use their increased profits to make more loans while other kinds of companies use them to buy more equipment and plant in order to increase production, what can be done to "stimulate" our economy? We know that government spending like giving farmers higher price supports or sending one time payments to people who don't pay taxes or building a bridge won't have a positive effect and may just reduce the confidence of companies further.
What we must do is to increase profits of companies since that is the only way to put money in their coffers for companies to use for whatever. Every company knows that it must spend money on research and develop better, cheaper ways to make their products so that they can compete with other companies. But without money they can't afford to do it and each is left to just hope that their competition can't either.
Our standard of living can't go up in these circumstances since the prices people pay for products can't go down since new efficiencies are not being pursued by producers. Government can increase profits only by reducing business costs. Less taxes, less regulation, higher equipment depreciation rates, lower costs of capital, investment credits and the like are all things governments can do to increase profits and thereby increase confidence.
Government can also reduce personal taxes, but this tactic only works if the reduction accrues to those who have earnings above their sustenance needs and will therefore invest the money. A tax cut for the poor makes their standard of living go up, but it has no positive effect on the economy as a whole. An across the board tax cut of say 10% frees up a lot of money in the bank accounts of the not-so-rich, well-to-do and wealthy and it is this money which most often is used as seed corn, money to fund a new business which creates new jobs. 75% or so of all new jobs in the U.S. are created by small businesses.
SO, the big question is whether facts and history will be used to stimulate the economy or will the effort be highjacked by class warfare, special interests or whatever. People who are yelling about how terrible it would be to give a big company like General Motors a tax cut just don't understand our economy or how companies big and small operate. No company hoards money unless it wants to be taken over and every company has to compete. This situation is not something which is under the control of any company so the outcome of a tax cut for businesses is a better economy every time. After all, companies do not pay taxes. They only collect taxes from their customers and pay them to the government. Corporate taxes are just one more way government uses to tax the electorate, us.
You will note that I have pretty well ignored consumer spending which is about two thirds of our economy. I do so because changes in consumer spending do not drive any economy. It is needed, but it rises and falls automatically in response to what companies are doing. When companies are more profitable they are more confident and spend more. As a result, consumers have more earnings and confidence and they spend more. What comes first, the chicken or the egg?
So the above is how I understand things economic. If you disagree or don't understand what I mean, please comment and I will try to help. An understanding of Economics 101 is a necessity for knowing who to vote for or support if we expect to be able to help the poorest in our society. The rich always make out no matter what, a key reason why some of them don't seem to care or are active socialists. It is the rest of us who suffer.
Best regards, Ben
Author <a href=""Leading'>http://www.bensimonton.com">"Leading People to be Highly Motivated and Committed"</a>
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Comments: 38
What you see if you're not part of the elite upper 5%, is a dramatic increase in property taxes, state and local "fees," and a dramatic cutback in services, which causes us all to dig deeper to make up the loss.
Social spending is gutted (while corporate welfare is massively increased), which results in inevitable higher crime, at a huge cost to the whole of society.
Public education funding is gutted, which results not only in higher property taxes and lesser opportunities for our children, but also ultimately, higher crime rates.
Bottom line is, if you're part of the upper 5%, by all means, vote republican. If you're part of the other 95% and you don't want to pay higher taxes and fees, vote democratic. Simple.
Just take a gander at what's been happening to the middle class and below since the latest round of voodoo economics were rammed down our throats. Average wages are down, interest rates and inflation are up, poverty increases every year, taxes and fees are higher, and less is being provided for average Americans. All the while, Paris Hilton and Teddy Kennedy are raking in massive tax welfare handout checks and pocketing them. Talk about class warfare.
Not surprisingly, you provided no economic theory or understanding prefering to threaten those of us not rich with all sorts of bad things.
I am sure that everyone can recognize this as the politics of fear, not the understanding of what makes an economy strong.
I have heard similarly protestations from Teddy Kennedy so you have accurately represented the Democrat Party's view.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
It's not about warfare, it's about the stability of the country. If we become much more of an aristocracy of the rich, the whole balance of power will disappear, and the land of opportunity will become a land of class division. I know you care about the general health of our society, and I'm not suggesting the wealthy should be "punished", but the gap between rich and poor can become too great to permit true freedom at some point.
Ben, it is republiCONs who're engaging in class warfare. Taking from the poor and middle class, and giving to the wealthy, while demonizing anyone who stands up to denounce it.
"Not surprisingly, you provided no economic theory or understanding prefering to threaten those of us not rich with all sorts of bad things. "
What is the point of arguing economics theory with someone who so clearly has no clue of it himself? There is no possible way that anyone will ever convince you that the reason why your cost of living has risen is PRECISELY because of your precious tax giveaways to billionaires, so why even bother?
You've immersed yourself in the delusion created by your rightwing talking head pundits, and there's no turning back. You will never even bother to do any actual research on your own to verify the validity of the ludicrous and highly discredited claims that you so frequently parrot, let alone entertain any opposing viewpoints. You simply don't possess the critical thinking skills to do so. I can recognize that. Why can't you?
"I am sure that everyone can recognize this as the politics of fear, not the understanding of what makes an economy strong."
Voodoo economics does nothing but transfer massive amounts of wealth from the bottom 95% to the upper 5%. Period. It does NOT stimulate economic growth EXCEPT at a time when an economy experiences VERY high inflation, VERY high interest rates, and VERY high unemployment. Then, and ONLY then, does voodoo economics actually work to stimulate an economy, but if it's not reversed when those high figures are brought back under control, the result is recession, every time.
"I have heard similarly protestations from Teddy Kennedy so you have accurately represented the Democrat Party's view."
I threw the red meat out there for you specifically, because I know that you people only respond to those types of statements. It's rather Pavlovian, wouldn't you say?
Meanwhile, back in the real world, I am not married to ANY party or strict, narrow definition of ideology. I have studied the pros and cons of both regressive and progressive economics, and have found regressive policies to be highly detrimental to the middle class. The numbers simply do not support the notion that regressive policies either grow the economy, or have anything but harmful ramifications for the vast majority of America.
The simple fact is that, historically, the nation's economy has performed better under progressive tax codes. If the opposite were true, I would be all in favor of regressive taxation. You see, unlike you and Ben, I don't simply parrot off ideological party talking points.
No, it is not. My comments are based upon facts, not ideology. It just happens that, for now, the facts seem to weigh heavily against republiCON ideologues, and in favor of democrats.
"You say you are not married to any party or ideology so you can change to agree with the fad of the year. "
There's nothing wrong with voting based upon a candidate's principles, except that these days, republiCONs have no principles. I oppose abortion, but support a woman's choice. I oppose illegal wars of aggression but support a strong defense. I oppose massive, gluttonous federal spending (especially when it's done on a credit card), but support nationalized healthcare and public education funding, even for 2 years of college. You tell ME which party I should marry myself to. There isn't one for me.
"Bush and America bashing just happens to be the Liberal fad at the moment. "
America bashing? What the hell is that? Another wingnut talking point form of pejorative? Bush has earned every bit of stinging criticism that the MAJORITY of Americans has for him. That's right...you goofballs are in the firm minority for continuing to worship every molecule of Bush's existence.
"Ben was correct about the class warfare. "
No, he wasn't. Class warfare is when the right engages economic policies that take from the middle class and poor in order to fatten the wallets of the already-wealthy, while at the same time accusing anyone who points this out of engaging in "class warfare." Thanks for helping me make that point.
I thoroughly enjoy reading your posts.
I only have a few comments, none of which are really substantive.
First, I don't think it is neccessary to condescend that most people in this area or atleast the ones worth responding to don't understand economics 101.
Second, you wrote: "People who are yelling about how terrible it would be to give a big company like General Motors a tax cut just don't understand our economy or how companies big and small operate. No company hoards money unless it wants to be taken over and every company has to compete."
I think this an incredible over-simplification of the economic process that occurs in corporate America everyday. I will concede that most companies won't "hoard" money. I will even second the notion that the more money companies have the better off "we" are. By "we" I mean both the rich and the Middle Class. (The bottom 10% of Americans will never have it good, but this is a different discussion.) I do know, however, that companies have proven over and over, time and again, that they aren't neccessarily the best stewards of excess margins and profits. The examples of this are too many to name. And just like people, when they have too much money on hand they have a tendancy to spend it on things they don't need....more importantly on things that don't benefit the overall good of the economy.
Third, "Your" theory is basically trickle down economics with a few twists. So nothing really astonishing here, and quite frankly hasn't been proven to be the be all end all solution to economic growth.
As in everything in life there needs to be a healthy balance.
I didn't invent the word. Sorry. What else would you call republicans who no longer hold any conservative values or principles?
"income redistribution makes me sick and that is exactly what these Leftwing loonies want to do."
That's precisely what voodoo economics is. Take from the middle class and poor and hand it to the millionaires. Income distribution.
"I will even second the notion that the more money companies have the better off "we" are. By "we" I mean both the rich and the Middle Class."
This is a perfect example. By every measure, in terms of cost of living, rising poverty, rising healthcare costs, and falling wages, the middle class is NOT doing better. The rich most DEFINITELY do better under voodoo economics, and always have. That's who it was invented for. The middle class and poor, however, suffer.
With Clinton's progressive tax policy, the middle class, poor, AND wealthy benefitted. THAT is the truest definition of "the rising tide lifts all boats." Regressive policies simply do not allow it.
"I do know, however, that companies have proven over and over, time and again, that they aren't neccessarily the best stewards of excess margins and profits."
This is the great bain of capitalism. It HAS to be monitored and regulated, in order to prevent abuses. This is precisely why public infrastructures are best left with careful public oversight, rather than tossing them to the "free market" winds.
The fact is, regardless of what the rightwing talking heads have to say about it (and, they're merely looking out for their own best interests), the facts about progressive vs. regressive economics speak very differently. Not only do regressive tax codes hurt the middle class and poor, but they also, ultimately, hurt democracy, because they seek to squash the opportunities of all who do not currently have millions, while directly all opportunity to the "haves."
The result is an eventual collapse of socio-economic structure, and of democracy itself. A democracy HAS to have a strong, viable, thriving "middle class." Without it, you have an aristocracy, or plutocracy, where the only opinions that are heard and acted upon are from those with wealth.
Of course, this is precisely what the neocons want anyway. They despise democracies, specifically because they offer a voice to all, including those without wealth. This argument has gone on for eons, and in fact, was in heavy discussion amongst our founders for years.
There are so many errors and falsehoods in this article, it's difficult to counter them all.
Benji mentions the luxury tax on yachts but omits several key facts. First, the luxury tax didn't just applay to yachts--but airplanes and higher-end autos. The dirty little story behind yachts is the fact that many rich people declared their yachts as a second residence and obtained tax deductions as such. In fact, to qualify as a second residence--one only had to spend 14 days a yaer aboard the yacht and the yacht must have a sleeping berth, a portable toilet and a hotplate.
IOW, US taxpayers are subsidizing the rich to own yachts. (Full disclaimer: I owned a 55' Chris-Craft Constellation for several years.)
The most recent example I have is George Soros who emigrated to the U.S., made billions here, has kept most of his money overseas in order to evade taxes in the U.S., and has now moved overseas entirely.
Actually, Soros made his fortune in overseas hedge funds. Further, Soros' official residence is in New York City and he pays more US taxes in a month than ol' Benji has earned in his lifetime.
BTW, Soros makes charitable donations to the tune of $400M annually.
What we must do is to increase profits of companies since that is the only way to put money in their coffers for companies to use for whatever. Every company knows that it must spend money on research and develop better, cheaper ways to make their products so that they can compete with other companies.
Of course, this doesn't happen. take a look at the disparity in wages between a CEO and the guy who stocks shelves in the warehouse.
The reason why company pensions are rapidly disappearing is because executive compensation packages are growing and unfunded.
You said "It's not about warfare, it's about the stability of the country. If we become much more of an aristocracy of the rich, the whole balance of power will disappear, and the land of opportunity will become a land of class division. I know you care about the general health of our society, and I'm not suggesting the wealthy should be "punished", but the gap between rich and poor can become too great to permit true freedom at some point."
I must admit to a lack of knowledge about the gap between rich and poor. I don't know if it is less today than 500, 1000 or 2000 years ago but would like to know.
I also don't know how a gap becomes as you say "too great to permit real freedom". But I would appreciate being enlightened.
I am concerned that the compensation of many CEOs has skyrocketed in the past 10-15 years into the tens and even hundreds of millions. Tort lawyers have joined them as have our top entertainers. I don't think that any of them are worth so much.
For me, out-of-sight compensation reflects society's embrace of multiculturalism and relativism, and its growing disdain for God and God's values. The only absolute truth our universities seem to hold is that there are no absolute truths. Ethics can no longer be taught as right and wrong, only as pragmatism or utilitarianism.
So please enlighten me, John.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
You said "I do know, however, that companies have proven over and over, time and again, that they aren't neccessarily the best stewards of excess margins and profits."
Although I agree that companies do a lot that is wrong, there is no better economic system than ours to my knowledge. The others fail miserably for everyone compared to free market capitalism.
You also said "Third, "Your" theory is basically trickle down economics with a few twists. So nothing really astonishing here, and quite frankly hasn't been proven to be the be all end all solution to economic growth."
I don't agree with "hasn't been proven" as I believe that it was proven by Kennedy, Reagan and Bush II in the U.S. as well as in other countries, most recently Ireland. The Irish adopted exactly the economic program I explained above and have turned a moribund economy into one of the best. The U.S. is conflicted between Keynesian and supply-side Hayek economic stimulus methods and has never consistently applied either. But, we have experienced an average of ~2% economic growth since our founding, well above that of any other country.
I would appreciate knowing what you believe is a more effective economic stimulus program, better than mine.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
It just baffles me that you bother to spend time posting articles on a message board, but seem to have no ability to do your own research. What's even more baffling is that, in light of the fact that you seem completely helpless with regard to doing any research on your own, you cling to your ideological beliefs as if your very life depends upon it, even after they've been thoroughly disproven by others. Does that seem rational to you?
"For me, out-of-sight compensation reflects society's embrace of multiculturalism and relativism, and its growing disdain for God and God's values."
This is a first. A rightie lamenting and condemning high compensation.
Here's some enlightenment on the gap:
http://www.washingtonpost.com/wp-dyn/articles/A34235-2004Sep19.html
http://archives.cnn.com/2000/US/01/18/wage.gap/
http://www.commondreams.org/views05/1127-25.htm
http://www.cbsnews.com/stories/2004/08/13/national/main635936.shtml
http://seattlepi.nwsource.com/local/186625_incomegap17.html
http://washingtontimes.com/specialreport/20050730-114005-1449r.htm
If you are TRULY serious about wanting to be further enlightened, I would urge you to read David Kay Johnston's book "Perfectly legal," which painfully points out the inequality and slanted tax code and how it harms the middle class and poor. You might also read some of Thom Hartman's books, such as (for instance) "Unequal Protection," which also illustrates how unfairly the scales have been tipped against the masses.
http://carbon.cudenver.edu/~ldeleon/pad5220/resources/papers/dream.html
I also took the time to read your "terrific eye-opener as to what trickle on economics REALLY does". It is appears to be a rant about many, many things even invoking Marxism.
While being greatly disturbed by the gap between rich and poor, the author gives us no sense of perspective, no constructive criticism and no fix. If things were so bad in mid-1995 and so obviously without hope according to the author and Robert Reich, how come Democrats tell us that the Clinton years were some of the very best? Or was it a Republican controlled Congress that subsequently turned things around?
I don't think that it was so bad except for the "sky is always falling" crowd that denigrates most everything American. We always have our ups and downs for a great many reasons, but our worst conditions are almost always better than what the rest of the world is achieving. There is no way to stop change.
I lived in Westchester County during that time and am well aware of what happened at the GM plant. GM did not solve their problems with over-compensation of their workforce at that time and might not do it this time. Meanwhile, us consumers had to pay for all that over-compensation. I for one have no sympathy for them when they have to face reality.
Being able to readjust to actual market conditions is one of the great strengths of our free market system. Our free market system has been the best system in the world and has produced the best standard of living in the world, even for the poor. Just ask immigrants if things are really great here and you will find out whether or not the sky is falling.
The "sky is falling" group demoralizes and demotivates people, makes them feel like victims rather than filling them with hope. Bad, Bad. So the Clinton years were bad?? Oh really?? Did not meet your definition of moral perfection? We can't ever be perfect, but we can be better. Ranting never helps.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
I am suggesting that a wealthy person has vastly more power in our society than an average one. And if the trend continues it will eventually undermine the sense of belonging to a democratic system for most people. That can't be good for rich or poor, and the ability to amass ever more money and power will not be in the interest of the few, who actually depend on the many to acquire wealth as well as provide a meaningful way to use it.
Therefor, there is an upper limit to the value of your style of economics, even if it does work as you predict. There is simply no reason why the very wealthy should not be constrained by a progressive tax system, and the super wealthy, by a super progressive system. People with vast fortunes can fix the game in their favor, but they can't play it out indefinitely. A CEO may be more valuable than a worker, but not 2,000 times more valuable.
You speak of morals and God's values, does it not occur to you that those running this ship of fools are not playing by His rules? At what point should we impose some limits on those that your system unleashes to live out their prideful arrogance?
That's telling.
"It is appears to be a rant about many, many things even invoking Marxism."
Translation: "I really didn't read it, but rather just glanced at it with an already-jaundiced eye, fully intending to condemn it as meaningless without any thought whatsoever."
"If things were so bad in mid-1995 and so obviously without hope according to the author and Robert Reich, how come Democrats tell us that the Clinton years were some of the very best?"
The Clinton budget that was supposed to "destroy the economy," according to the righties, wasn't signed until 1993, while we were in the grip of a rather nasty Bush/Voodoo economics-based recession. Those things don't turn around overnight.
"Or was it a Republican controlled Congress that subsequently turned things around?"
Not a single republican voted for the budget. Sorry.
"I lived in Westchester County during that time and am well aware of what happened at the GM plant. GM did not solve their problems with over-compensation of their workforce at that time and might not do it this time. Meanwhile, us consumers had to pay for all that over-compensation."
"Overcompensation of the workforce." Isnt' that neocon code word for "we need to slash and gut pay for everybody except the corporate officers?"
"I for one have no sympathy for them when they have to face reality. "
What a shocker. Spoken like a true neocon.
"Being able to readjust to actual market conditions is one of the great strengths of our free market system."
Weren't you just complaining the other day about gas stations that might go out of business if they couldn't adapt to the market demands for biodiesel?
"Our free market system has been the best system in the world"
I honestly can't see where anyone has suggested that it has not been the best system in the world. However, it's not going to remain that way for long by following the same policies that destroyed Argentina's economy.
"The "sky is falling" group demoralizes and demotivates people"
You and other self-defeatists, perhaps. For most of us, it motivates a call to activism and change.
"So the Clinton years were bad??"
Huh?
"Ranting never helps."
So, now you don't like Limbaugh, O'Reily, Hannity, Savage, Coulter, and the other rightwing windbags that dominate the MSM?
To point to a country like Ireland seems a little out of line in defense of your economic theory.
If we were to go down that route than I would point to almost all of the Scandanavian Countries as great examples of an alternative to your economic model, but I know its not a fair comparison.
Ireland along with almost every other European Country still maintains significant Government Susidies throughout numerous industries. Moreover, once you evoke a country like Ireland you then have to start factroring in government progams such as healthcare initiatives that continue to help business growth.
I don't think you want start involving social initiatives in your discussion on Economic Prowess.
I do agree with you, however, that the American Economy has proven itself out as a very strong case study of success.
I would be very careful, however, when you start singling out presidents as the fathers of those successes..
You said - "I am suggesting that a wealthy person has vastly more power in our society than an average one. And if the trend continues it will eventually undermine the sense of belonging to a democratic system for most people. That can't be good for rich or poor, and the ability to amass ever more money and power will not be in the interest of the few, who actually depend on the many to acquire wealth as well as provide a meaningful way to use it."
I could not agree more.
Then you said - "Therefor, there is an upper limit to the value of your style of economics, even if it does work as you predict. There is simply no reason why the very wealthy should not be constrained by a progressive tax system, and the super wealthy, by a super progressive system. People with vast fortunes can fix the game in their favor, but they can't play it out indefinitely. A CEO may be more valuable than a worker, but not 2,000 times more valuable."
I don't concur that higher taxes on the rich would constrain them at all. Actually, it would cause them to take actions which would damage our economy and standard of living by taking their money elsewhere and not investing in the U.S. This is the effect which exorbitant taxes have on the rich, very predictable and very humanlike.
Then you said - "You speak of morals and God's values, does it not occur to you that those running this ship of fools are not playing by His rules? At what point should we impose some limits on those that your system unleashes to live out their prideful arrogance?"
I have thought long and hard on that one. My own analysis reveals that the bigger government is the more reason people have to influence it to their benefit. It also reveals that the longer our elected representatives spend in government, the more dependent they become on donations to their reelection and thus the greater power and influence the wealthy have.
So limiting the size of government and establishing term limits for all politicians is the only fix I can come up with. Two terms would restore what was the norm 50 years ago. What we don't need is professional politicians because they too easily become corrupted and lose any sense of the people. They actually become our rulers if allowed to stay too long.
Thanks for your thoughts, John, but I think that increasing taxes on the rich would not serve our long term interests. In order to get enough tax revenue, those who like that solution usually want to apply it to those earning over $100K or some such low limit.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
Shorter Benji: The devil made me do it
How can you possibly have an intelligent discourse with posters on your article if you don't read their posts?
Secondly, being from Ireland, I agree with you that in their case, the thriving Celtic tiger was a direct result of simulation of businesses through a 10% across the board corporation tax. Add to this the fact that the IDA (Irish Development Authority) provided grants to stimulate business like subsidies to Microsoft, HP & Intel who all came to Ireland for easy access to Europe and the low corporation tax.
There are however other reasons, English speaking, well educated workforce, especially technically. Friendly politics (We can't go to war) - tongue in cheek on that one. Good Friday agreement resulting in more stability between Catholics and Protestants in the North. Lots of subsidies from the the EEC for increased infrastructure which fueled construction historically one Irelands strongest economic sectors. Also, keep in mind that Ireland as a community of between 3-4 million has smaller government which forces more efficiencies in Government.
I do find that your article while obviously earnestly believed by you is also highly simplistic. Big corporations are not a team of people. Corporations are legal entities with a life of their own and shareholders if they are public to whom their officers are accountable. I am as leery of large corporations as I am of big government. Large Corporations care about one thing, the bottom line. The health of the economy is irrelevant to Marketing for a large corporation, what is relevant is the demand for the companies product and services. If there is no demand, then stimulus needs to be provided normally in the form of cost cutting so the price of their goods is more appealing and will result in an increase in demand. Although this is also a simplified view, it definitely puts the focus back on consumer spending.
Let's make it really simple, if lower class families are scrimping to fill their cars with gas, and their wages are not rising (Even though the economy is pretty healthy), what does this say about corporate America which includes large energy companies? You know why they get away with it? Because gas is a necessity not a luxury and as such consumers do not have a choice but be part of the demand chain. They know this and consequently their lack of action is expected. Do you honestly think it is in the interest of American consumers to have their tax dollars subsidize a booming industry?
How exactly does having a 100% tarriff on Brazilian Ethanol help the consumer although this is more a government policy issue than corporate related. You and I are paying for it out of both cheeks on a daily basis.
Overall, I agree that there is merit to a part of your argument, but I will caution that there' a lot more at play here than large business. If you have a progressively poorer middle class due to taxes and the innefficiencies of government, then you have reduced consumer spending due to less disposable income.
I also agree with Ben in that if you were to impose super progressive taxes on the super rich, they will try their best to hire a bevy or lawyers and accountants to evade those taxes. Short of being able to do that, they'll move their money and likely spending elsewhere. Or they'll just move. No one wants to be on the wrong side of Robin-Hood style confiscation of their wealth. Also, really high taxes for rich people is a disincentive for poorer people to succeed. After all, why should I put in the effort to work hard, study hard, and take risks if the government is going to take it all (or most of it) anyway?
Thank you! I was having trouble sleeping this evening so I decided to read gather articles. I got half way through yours and found that I could not keep eyes opezzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
Unfortunately it doesn't work that way and what you think is common sense is not.
Increasing money in the hands of the poor increases demand. This causes prices to rise and that makes everyone poorer because they are unable to buy the same amount of goods with their money. It has been tried over and over again with this same result. It is called Keynesian economics.
Increasing supply is the only way to make things better for everyone because prices don't rise but actually go down and we get more for the same number of dollars. The only way to increase supply is to decrease the cost of doing business thus causing the business owner to have more money which most of them will put to work in their business hiring more people, expanding services and products, etc, etc.
If you think about this from the standpoint of a business owner, common sense will work. When business owners see prices rising, they lose confidence and cut investments. That makes the economy slow and less people are hired.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
Baloney.
This is a gross lie from Ben.
Keynes taught that demand was the major driver of the economy--especially in periods of economic recession. As demand rises, so does the supply which drives higher employment and wages.
You are right about that one product and I agree totally. But I am talking about the entire economy, not one product. Because the price of oil is up, consumers can afford less of other products and their standard of living goes down. Those producing the other products also have to pay more for their oil so their costs rise and their profits go down. So these two effects cause the overall economy to grow less rapidly or even contract.
Once again, if you put yourself in the position of a business owner, you can visualize the effect on yourself and thus on the overall economy. This effect has been proven again and again. We cannot spend ourselves into properity. Giving poor people more money is not a solution for an economy. Much better is to give them better jobs and education. What Keynesian economics contends will happen never has.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
Nothing could be further from the truth.
Let's remember Keynesian economics came about in response to the Great Depression. And it was a huge success: the U.S. went from the greatest depression it has ever known to the greatest economic boom it has ever known. The success of Keynesian economics was so resounding that almost all capitalist governments around the world adopted its policies.
In fact, since the adoption of Keynesian economics--the US hasn't experienced a depression. Remember, the US saw at least a half dozen depressions prior to the Great Depression.
Frankly, Benji hasn't a clue as to what he's talking about.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
Kennedy, Reagan and Bush II got us out of recessions through eschewing Keynesian economics and embracing supply-side economics. Roosevelt made matters worse in trying to get us out of a depression using Keynesian economic theory. Roosevelt was saved by the war.
Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"
I do see you caught the same revisionist BS in response too, some thing shave not changed.