The Reasons Conservative Economics Can't Work.

Question

Why he is called "The Last Great Republican..."

#republicans

Lizard_of_Ahaz 9

Answer 1

Another very simple example to explain how completely insane the 2nd point is.

Assume you have two companies. Company A and Company B. Both companies make $1,000,000 per year in profits.

Company A is taxed at 90%, so at the end of each year, after paying taxes, Company A has $100,000 to reinvest back into growing the business.

The takes the taxes from company A and 50% goes to defense, then 40% goes to Company B.

So at the end of each year, after paying taxes, the money each company has to reinvest back into its business is:

Company A: $1,000,000 (- 90% taxes) = $100,000
Company B: $1,000,000 (+40% subsidy) = $1,400,000

If Company B has competent management, it will grow much faster than Company A because Company B has 14 times more money to reinvest back into growing the business each year.

Now assume all Company A's are in the United States, and all Company B's are in Japan and West Germany.

I have described exactly what happened in the 1950's when US companies were taxed at 90% and Japanese
and West German companies were heavily subsidized. That's why we started to see so many Toyota, Honda, VW, Mercedes, and BMW cars in the road by the early 1970's.

Answer 2

The Reasons Conservative Economics Can't Work.

Dollars in circulation change hands sometimes dozens of times a day when removed from circulation they restrict the ability of businesses to make sales reducing income which especially hurts small businesses without large cash reserves. When this money is out of circulation demand for products and services is reduced reducing the number of employees needed. In the US our economy is based 70% on consumption of goods and services so removing one middle class job will often result in the loss of two or more jobs further down the economic chain.

Reducing taxes on large corporations lessens the amount of tax deductions needed by the corporation to increase their profit margin but this is not a advantage for the employees of the corporate structure. When a corporation like Apple finds it is able to reduce it's costs further by having products assembled in China where workers are paid a dollar or less per hour and often work 16 hour days without overtime or benefits in unsafe conditions it can shift thousands of jobs that had starting wages of 15 dollars an hour over there leaving low paid retail and shipping jobs here. Also for every American worker laid off when a factory is closed in the US it takes 4 Chinese workers to replace him. While this can result in an increase in profit of 15 or 20 dollars a unit. The damage it does though is to remove 15 to 20 thousand factory jobs here plus at least 45 to 60,000 more jobs from the economic chain. Tariffs were placed on goods shipped to the US for a excellent reason and the WTO and NAFTA removed those it made it the economically feasible for big corporations to ship the products and still cost less than manufacturing them here. While this may look attractive on the books it often exploits children and entire families keeping a cycle of poverty in the country the factories are located leaving a moral issue which could destroy the corporations reputation and lower sales volume.

There are also several economic problems with this approach to business one of which is the people you have put out of work cannot afford your products reducing your market. Another is in addition to reducing the market you are reducing the tax base (number of people who pay taxes) putting further strain on your own economy. Still another problem is in most countries where workers are exploited there are no regulations regarding disposal of hazardous waste which as the Chinese are finding out is a larger problem than they first suspected. This is now costing their economy hundreds of billions of US dollars every year in lost production of food stuffs, medical problems, and cleanup. Nigeria is completely devoid of life in some areas that used to be thriving ecosystems and many other countries are having similar problems. Many people in the US hear about this and just say to themselves “so what that is a long way off it doesn't effect me” this couldn't be farther from the truth. The air you breath isn't produced just a few feet from you it circulates around the entire planet. Most CO2 is processed by algae in the oceans back into O2 which you breath and when other countries dump toxins in their rivers it ends up eventually in a ocean near you (you might even swim in it). Food is often shipped from outside the US now and may contain many of these poisons as well.

Now consider that big corporations are allowed to use tax shelters as well so they can send money to offshore banks legally and not be taxed. This also encourages hoarding taking large sums of money out of circulation and further damaging the economy. What most conservative voters fail to see is that money put into circulation is tax deductible also money spent increasing efficiency and reducing pollution is also tax deductible as well as creating more jobs. Also it allows smaller businesses to compete with larger ones because they pay a lower tax rate instead of a higher one as they do under the Bush system. Also there is an increased demand for products which means more money all around when more people are employed at jobs that pay higher wages. So far we are seeing the conservatives in office block any tax reforms in this country and this will result in the same problems caused by Bush implementing these policies. “Trickle down economics” only works when you have customers with unlimited buying power and a source of exploitable cheap labor to trickle it down to. The problem lies in the math without the unlimited funds to buy the products (earned with good paying jobs) you can't afford to exploit the cheap labor to produce the products for people to buy with the money they don't have. Like trying to control machinery using positive feedback it oscillates completely out of control.

Answer 3

I will explain why the second one is completely insane. It’s best to look at the issue in terms of supply and demand. During WWII, almost every industrial country in the world had its infrastructure bombed out. The countries were almost bankrupt as well. The United States was the most notable exception. We emerged from the war with a large portion of the world’s investment capital, a large portion of the world’s industrial infrastructure, and only 5% of the world’s labor. In terms of supply and demand, there was a huge demand for US labor and a small supply of US labor, thus US laborers enjoyed a standard of living they never had before and never will again.

During that time, (the 1950’s), a kid in my home town could drop out of high school, get a job at CAT operating a drill press, get married, buy a house, buy a car, raise a family, then retire at age 50 with a pension and healthcare benefits for the rest of his life.

What killed all that was the Marshall Plan and our obsession with winning the Cold War. If US Corporations had been allowed to keep more of their profits, they would have had more money to pour back into their factories, so the demand for US labor would have continued to grow, but The Marshall Plan and Cold War related spending took most of the profits from running factories and industries in the United States and sent those profits overseas to countries like Japan and Germany to help them build their factories, and it also sent the profits into the defense industry so we could defend the entire “Free World”

By the early 1970’s you started to see VW bugs, Mercedes, BMW, Toyota, and Honda cars on the road. You also started to see Sony consumer products in the home. That would not have been possible so early if the US Government had not taxed US companies at such extremely high rates and sent that money overseas to be invested in foreign factories.

By the late 1970’s there was so much foreign competition it took away almost all collective bargaining power of US unions. When CAT workers went on strike in 1978 and 1983, CAT management crushed the unions. Similar things happened in the same time frame in the auto industry. There was already enough labor that could be tapped in foreign countries that it was no longer possible for US workers to demand a huge premium over their foreign counterparts.

Now move forward to the end of the Cold War. When the Iron Curtain and the Bamboo Curtain fell, the labor of people in Eastern Europe, the USSR, China, Vietnam, and India became available to anyone who had money to invest. The world’s supply of free-market labor increased by a factor of about 5, while the world’s supply of capital did not increase by much at all. So with much more labor and only a little bit more demand for that labor, the price of industrial labor went way down.

It became extremely profitable to move the textile factory from Massachusetts to Vietnam or India because the labor there was 10 to 100 times cheaper. Globalization made possible by the end of the Cold War was a good thing for the majority of low-skilled laborers around the world. It brought about a huge improvement in the standard of living for workers in China, Vietnam, Malaysia, and India. However it was a terrible thing for low-skilled laborers in the USA because they have been forced compete on an equal footing with laborers in other countries that were once making 10 to 100 times less than they were for each hour of work.

Answer 4

#2 is completely insane and the reason why American workers have such a low standard of living today.

Answer 5

Now he’d be called a damn socialist. The corporate take over of America is almost complete.

Answer 6

Called by who?


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