But it shouldn’t. I have a pretty simple question or request, that is completely off-topic.
One of the main sticking points between the two major U.S. political parties is the dispute over whether cutting taxes, especially for the wealthy, creates jobs.
Can anyone direct me to a statistical study, based on year-by-year unemployment rate, tax rate, and other factors, that proves conclusively one way or another who is correct? Does such a study exist? Is such a study possible? If these is no hard statistical data to prove either party’s claims can we conclude that when either party talks about the best way to create jobs/ improve the economic status of the workforce that they are essentially lying or telling fairy tales.
Hopefully this wont get ugly. I just want to know if there’s a book that deals with this stuff that anyone can recommend. You can PM me if the idea of posting this i distasteful for whatever reason.
Well, Mike I can’t provide you any statistics about this argument either way. In any case, I have found that statistics can usually be found to support any argument, no matter how tenuous. However, here is my own brief opinion concerning the issue of job creation – or more importantly, the lack of jobs for those who need them.
When I was growing up, I lived in a prosperous U.S. city that had a heavy manufacturing base. Many key industries were located there and employment was good for everyone. Plants often ran 24 hours a day, 7 days a week – my mother worked at one. Salary levels were good, which helped the overall local economy. The manufacturing base supported the retail and service end. Basically, there was work for everyone.
Slowly, however, all of these companies gradually moved off-shore. So-called ‘free-trade’ became the name of the game. Now, all manufacturing I am aware of is done is places like China. The city I once lived in is now depressed, with no manufacturing to speak of and retail is at the lowest end of the scale. I now live in another city in another country, but we are in basically the same position – little or no manufacturing, importing all our goods from China and other low-wage ‘new’ economies.
When I do a casual inventory, I find all my clothes come from China, my computer, almost all my electronics, tools, appliances, etc. The U.S. doesn’t manufacture anywhere near what it once did – when I was living there. If you lose all or most of your manufacturing jobs, and have nothing significant to replace them, don’t be too surprised if your whole economy goes down the tube. It’s a simple economic fact. No amount of tax cuts or credits will ever reverse this. Only if people stand up against the political and corporate forces that stole the good jobs away and sent them elsewhere, can a more prosperous economy be again built and maintained.
This means effective tariff laws that protect local industries and incentives to keep jobs and manufacturing local. This also helps the environment, because it is better to transport the goods locally than from sources 1000’s of miles away. However, try to find any politician or political group advocating for the retention of local jobs and in-house manufacturing of essential goods.
I blame it all on Nixon and his trip to China – ha! That’s my off-topic rant. In any case, it’s beyond a simple tax cut or not equation. For things to imporve, the economy itself must be self-sustaining and jobs kept at home.
There are 3 kinds of lies.-you’ve heard the mark twain quote.
That being said. People who have money want to make more money. When we have one of the highest corporate taxes in the entire world, it becomes a necessity to move manufacturing out of the country. When unions no longer bargain for basic rights, but drive costs up so high that you have to ask the government for a bail out, it might be time to get out of the business. When you combine the two, you have a place that has become increasingly hostile to business. People act as though a business has to exist or has to operate in America. It doesn’t, and when it becomes to expensive, the business will move or close down, or sell out to another entity.
If you start a business, and build it into a major corporation, and it becomes too expensive to continue to operate in your state, or your own country, would you not move to another state or country to continue to stay in business, or would you let taxes and unions eat away at the bottomline until you are unable to compete against other businesses?
It may be too late to bring some jobs back, and we may have to begin to accept that the American economy will not be based in manufacturing any longer. Manufacture of goods will be left to machines and cheap labor. When China becomes to expensive, manufacturing will move to Vietnam, as it has already, and then elsewhere.
When unions no longer bargain for basic rights…
In Detroit’s auto industry, unions were getting 45 minute bathroom breaks for employees. Apparently, workers had to weave their way through a labyrinth to get to the bathroom. The real solution? If it takes so damn long for your workers to get to the toilet, maybe you need to build some more restrooms.
Anyway, I know this doesn’t answer or even address Mike’s OP, but I thought I’d throw it out there.
Who are the wealthy? Please define.
It seems like the Wikipedia entry for Trickle-down ecnomonics might not be a bad place to start.
50 million, liquid capital
This is a young topic but the start of a good discussion, and I’m really glad to see no one has been condescending or overtly rude.
Would be nice if it stayed that way, methinks.
About the 45 minute bathroom breaks..
I don’t know all of the details here, but I can walk half a mile, if not a full mile, in 15 minutes, and accounting for 15 minutes in the bathroom-which is about 3 times longer than a normal #2 visit, I just don’t see how an employee would need a 45 minute bathroom break-unless the employee is taking a ‘bath’. It would seem to me, that if there truly was an issue, that it would be much more cost effective, and efficient, to actually build a few more restrooms here and there, and maybe closer to the workspace. The cost of building a bathroom, and even losing some space somewhere, can’t be more than allowing each employee to take 1 or 2 45 minute restroom breaks a day, in addition to the lunch break and other breaks that they likely already get.
I don’t see this as a solution that the company came up with, but I could be wrong, its not like they have had the brightest minds running these companies over the last quarter century.
I am naturally inclined to side with Mike Clayton here over Jason but I would still like to see some data to back up either claim.
The main question I would have for Jason is, how much money are the unions costing corporations vs. how much money they and their executives are making. Also, as has been stated before, elsewhere, how can we be sure that cutting these high corporate taxes will ensure jobs? How do we know the wealthy will not simply horde their money? Are the people who are moving their businesses out of the country doing so because otherwise they will be out of business and starve, or because they will not be able to afford the fanciest jet for weekend holidays?
I realize some of that sounds hostile, but again, I don’t know. I also realize different business will require different responses but I’d imaging if you have the capital to move your business overseas you aren’t running a mom and pop organization.
Also, can anyone remind me whether any of Reagan’s tax-cutting, trickle down policies improved unemployment (taking into account pop. growth etc.)? Hmmm, that last question is probable something I could easily find on my own:)
The way I see the history of unions is like this: there was a time when life was hard, and when mechanization came, life became more dangerous than it had ever been before. Before the industrial revolution, how long did your average person set about their day’s work? I don’t know, but I thin that we can all agree, that the working conditions and hours that people were required to work in and for, were far greater than we would consider reasonable.
The local law makers of the time did nothing to improve conditions, and so man used their natural rights to form a union in order to bargain for basic working rights. This was a great thing, in a time when it was needed. I think that they have achieved what they set out to achieve, but have gone far beyond that to the point where some unions have actually made it difficult for the company that the workers are employed by to make money.
Workers have basic rights, such as a 40 hour work week, and safe working conditions, etc.; but they don’t have a right to work at a specific place. Many workers, particularly at places where Unions have made it very hard to fire even the worst workers, feel as though they can, and should work at a place forever; and people mistakenly come to the belief that the company belongs to them. It does not. It belongs to the man or woman who started it grew it, runs it, or even bought it. The average worker at a company has no more individual responsibility for the success of a company, as they do for the failure of the company.
At another site that I visit, we had a conversation and a poster posted this:
“To further the bolded point above, consider the contrary case…one where a loss is produced. Pick a bankrupt company, say Blockbuster as the most recent major example. Is Blockbuster headed for liquidation because its checkout clerks did a bad job? Were the stock boys to blame? HR people? Accounting? IT Dept?
The answer is of course those people didn’t cause Blockbuster’s demise. Blockbuster went under due solely to the decisions made, and strategic decisions pursued by the very top, handful of executives. Blockbuster failed to identify the rent by mail opportunity as NetFlix did. They failed to jump into the rental kiosk business like Red Box, until it was too late. They have no notable strategy in streaming online video. All of these failures were in spite of the fact that Blockbuster was far and away the best positioned company to capitalize on each and every one of these opportunities at the time.
If the groups of people in the first paragraph weren’t responsible for the failures cited in the second paragraph, it is also the case that they wouldn’t have been responsible had the correct strategies been pursued instead, thereby making Blockbuster hugely profitable. Therefore, having no responsibility for generating profits (or losses), labor does not deserve a share of the profits.
The Blockbuster example holds for the majority of companies, especially those where labor is easily interchanged, i.e. most if not all union jobs."
Now, this is why I think that the age of Unions today is past, because we have basic workers’ rights, and people have freedom of movement, and people work many jobs over a lifetime, now; but in the private sector, people do have a right to unionize, and to be fired. I do, however find it hard to understand why, today a person would like a job enough to stay, but dislike it enough to petition against it. Public sector unions should not exist, as the government shouldn’t have millions of people on the payroll, and furthermore, government workers shouldn’t be able to pay union dues with tax payer money, and then with that tax payer money mount union campaigns against the taxpayers to force them to pay them more money.
How much money are executives and owners making? Does it matter? In a free society, with 40 hour work weeks and safe work environments; a business owner must pay competitive wages in order to get the best workers. The business owners must also take on all liabilities and expenses, in addition to paying their workers. If the business fails, the workers will take their accumulated skills and go and work for someone else, perhaps in another town, and the owner goes back to being a worker for someone else. If I hire somebody to run my business for me, and under their watch I grow from a 1 million dollar a year company to a 50 million dollar a year company, how much should I pay this person?
If I, as a business owner, overpay somebody who does not improve my business, then that is my fault, and if I am contractually bound to pay them a lot of money upon firing them, then that is my fault, too; but that was a chance that I took in hiring that person. If that person would have made my company more successful, then I may have been able to give raises to everyone, but rarely does a company ever ask everyone to make less money, no matter how bad the CEO ran the company.
Cutting taxes does lure business, and you can see this in Ireland, and in the American South. In the American South, companies such as Mercedez Benz, Toyota, and Nissan are building plants, while the big three is closing plants in the American North.
The wealthy, in general, are always investing their money into something, be it their own company, or other companies in which they own stock. The wealthy, even when they spend recklessly, are still putting a lot of money back into the market place. Whether eating at nice restaurants, that employ highly paid chefs, and wait staff, or buying private jets. If I worked for a company that made jets or yachts, I would not be mad at any millionaire who was ordering a jet or yacht. Most people don’t hoard their money. Is the guy that works for the company building the jets and yachts, living in a 1 room shack and hoarding his money, or is he spending it in the marketplace and buying a nicer home? And if somebody does horde their money, then, so what. Its their money, but most people, rich or otherwise don’t have such discipline, otherwise their wouldn’t be things such as jets, yachts, movie theaters, video games, etc. People both rich and poor spend their money, rather than hoarding it.
Now, what of the guy who simply wants to move his company to china so that he can exploit workers and make obscene amounts of money, well is he not free to do that? We can boycott him, and God can punish him for his immorality, but is he not allowed freedom of movement? Maybe we can ban him, or revoke his citizenship, or something, if that is lawful, but can we lawfully stop him from moving and taking his money elsewhere?
Trickle down, what a joke! Free flow for bathing in luxury at the top, rancid slough of despond at the bottom, all the more appalling for Capitalism’s constant reminders that what you own is what you’re worth and all the adverts of must-have products. Inequality breeds crime, division and all sorts of social costs. Now try cutting taxes for the poorer workers- less divided society. and the fat cats needn’t worry unduly, they have the means to exploit that extra spending power; the magnet effect. Businesses gain too, and can still create extra jobs, And the Right are always harping on about welfare dependency: shouldn’t they approve that tax cuts for the lower incomes might create more of an incentive to work than much greater wealth at a level so far out of reach? In the UK, we’ve seen the results of Reaganomics/Thatcherism, carried on by “New Labour”, (Maggie-admiring Tory Bliar), crowded jails, homelessness, boom and bust, credit crunch. About the only decent thing Bliar did was the minimum wage- opposed by the Tories on the grounds it would cost lots of jobs. The Tories ended up admitting they were wrong.
The poor are more generous than the rich, who will be more likely to top up their bank accounts than have all the extra dough circulate.
Unemployment is a tricky one. I don’t know what the numbers were under Reagon, before Reagon, or after; but I believe a few years ago, perhaps under Bush 2, that the people who calculate unemployment threw out the old way, and came up with what you could call a sliding scale-basically so that it never looks as bad as it really is.
For instance, we now no longer count people as unemployed who no longer receive unemployment benefits, as their time to receive them have run out. Thus 10% unemployment is more like 20% unemployment.
Whoever is in the whitehouse uses numbers that make it look better than it is.
Oh and while we’re at it, let’s close all the tax loopholes for the rich and clamp down on the wealthy tax-dodging crooks who cost so much more than benefit fraud. Yes, jobs for more tax fraud officers would be a good investment
I completely agree that there should be no tax loopholes.
Mike Spence, it is very hard to do a direct measure of 1 to 1 on the effect of cutting corporate taxes and the unemployment rate. These are very hugely complicated things that we are talking about here, and I am not sure if anybody has yet written the real book on this, perhaps me and you can co-write it. The problems in finding the numbers that you, and I want, are as follows:
What is the real unemployment rate?
Minus government workers.
Has the amount of government workers increased during the time period measured? Surely, an increase in public employees would need to be excised from any real investigation as to whether cutting corporate taxes decreases unemployment. Furthermore, there are many factors that cause unemployment, beyond just the amount of money that lawmakers are willing to tax companies; and these factors such as the global marketplace also have a very large impact on the decision to lay off or hire workers. Some of the numbers you will find will send mixed messages and you will even see unemployment drop sometimes when taxes were raised, but in what way, logically would a business man being taxed more cause him to hire more workers, simply for that reason-unless the economy as a whole was booming and he had to hire workers to keep up with demand?
The economy is a roaring beast. Sometimes, when the economy is doing well, greedy politicians will tax corporations more, knowing that the corporations will be making more, and the corporations will still continue to hire new workers to meet the demand that a strong economy requires; but this is not an indicator that taxation spurs on economic growth, but rather that the economy has grown despite taxation.
Sometimes, when the economy is doing well, greedy politicians will tax corporations more,
Like when? Please give me an example.
Mike Spence, it is very hard to do a direct measure of 1 to 1 on the effect of cutting corporate taxes and the unemployment rate.
They’re completely unrelated. Profits are taxed. Profits aren’t used to create jobs. The money used to create jobs is not taxed.
If you start a business, and build it into a major corporation, and it becomes too expensive to continue to operate in your state, or your own country, would you not move to another state or country to continue to stay in business
Again, business expenses are not taxed in the U.S. In fact, in most countries where we offshore jobs too, the governments have a revenue tax! Your underwear is made in El Salvador for one reason and one reason only: it’s cheaper to produce underwear in El Salvador. Taxes have nothing to do with it.
@ Mike Spence
Liars figure, but figures don’t lie.
One must look at long-term chart trends to cut through the party bullshit.
The following charts can be read without considering the “how” which both sides lay clam to – draw your own conclusions.
DJI 1960 to present note the index in the 1960’s grew at a rate somewhere near the population growth or the growth in GDP. Notice the DJI skyrockets when Reagan cut taxes. Money goes where money grows.
Treasury Yield 30 Years 1977 to present
Notice how since the 1977 highs, yields have been dropping. Yields rise as risk rises and fall as risk is perceived to be lower. In the recent financial crisis, US treasury yields dropped – not what one would expect during a financial crisis, but the US is the financial haven for the rest of the world. Evidently, US debt buyers are NOT concerned about US debt levels. That low cost debt was used to finance jobs.
I lost the link from the below blurb to the chart, but look a chart up yourself:
U.S. labor market performance in international perspective: from 1960 to 2000, U.S. unemployment rates improved from relatively high to the lowest among the G7 countries; Canada and the United States were leaders in job creation, while Japan and Europe had much weaker employment gains.
“Liars figure, but figures don’t lie.”
Depends on whose figures are doing the talking.
Notice the DJI skyrockets when Reagan cut taxes.
Notice how it skyrocketed even more when Clinton raised taxes.
Notice how it stopped rising when Bush cut taxes.
Conclusion? DJI has nothing to with taxation rates.
@ Roscoe Depends on whose figures are doing the talking.
In the long term, all figures grade to the mean. That is the point of looking at long term trends.
Jerry Jerry Jerry
Let’s post a long-term chart of effective tax rates, shall we?
As long as people are thinking short term and anecdotally, you will get yourself confused.
Robert, the single largest income tax cut in U.S. history belongs to JFK, not Reagan. So why does your “long term trend” begin with Reagan?
Where’s your long-term tax chart Jerry?
Go back to JFK if you want….
Something happened in 1982 that had a profound effect on the DJI.
What was it?
Clue: The DJI moves primarily the inverse of bond yields.
Did tax cuts do something to bond yields?
Look at the bond chart – a nice steady decline – why?
Robert — “In the long term, all figures grade to the mean. That is the point of looking at long term trends.”
No one looks at the long term in the U.S. The voters certainly don’t.
That is right Roscoe, but the long term it made up of the short term.
We are analyzing the effects here:
Economy = expectations
Inflation = bottlenecks
Notice the bond yields ticked up at the tax cuts – that makes sense: more cash = more inflation.
But then bond yields declined, because better economic expectations lead to more capital investment which is long term and not inflationary.
Tax cuts = capital investment = lower bond yields = jobs
I’m not sure the point you’re trying to make. When JFK slashed income taxes, there was no long term upswing in the DJI for the next 20 years. When Reagan slashed income taxes, there was. It has now been 10 years since Bush cut taxes. No upswing. So what were the differentiators?
And what does any of this have to do with job creation?
Oh, you’re talking about venture capitalists. There are much more efficient means to get them to invest than income tax cuts. The socialist Obama just passed the largest investment incentive tax cut of all time. But Democrats don’t care and Republicans deny so nobody even paid attention.
Jerry see my post above your post.
That isn’t the effect tax rate chart –
That chart actual shows a declining trend in the unemployment rate starting with Reagan (linear regression from top of 1980 to 2008 (?)) Then we had the worst job recession since the great depression. ( The reason would require another thread.)
you’re talking about venture capitalists
No, tax cuts of the Reagan sort weren’t very specific, that is why the effect was so dramatic: they changed everyone’s expectations about the future.
I’m not sure Obama’s targeted tax cuts will work as well – but they are the right idea:capital investment = jobs