Common Sense Political Economics

"If you laid all of the (PhD) economists end to end, to tell you which way to go, they would look like the spokes of a wheel."

Harry Truman

Monthly Archives: September 2015

 

One can complain about why government money ought NOT be given to poor people (We call that welfare.) or why government money ought NOT be given to Wall St. (corporate welfare).

The reason for the justification of those complaints is the assumption that the recipients are somehow responsible for the situation in which they find themselves. And of course there is some truth in that. The question of HOW much truth there is in each case is highly debated.

But there is one group in which the recipients are completely NOT, in anyway, responsible for their predicament. Zero responsible!
And there can be no debate.

There is not ONE child in America that is responsible for his or her economic predicament. NOT ONE!

According to Professor R. D. Wolff, Ph.D. economist, the number of homeless children attending schools has doubled during the Great Recession (2007-2014). These children live from pillar to post sleeping somewhere different every week and frequently changing schools.

Can you imagine how difficult it is for these little kids to learn anything when they get to school, often hungry and wearing poor clothes? Can you imagine what a life like that does to the formation of their sense of self worth. A sense of self worth is one of the most important factors of success in life; and a good education as well.

So the number of homeless children attending school now has been estimated at 1,360,000.
Those kids will grow up in a few years. How do you think those kids are going to contribute to our society? Are they likely to be responsible, productive and well adjusted citizens, or criminals and welfare recipients?

The amount that we (the government) have invested in helping these kids was $62 million in 2006. The number of homeless kids in school since then has doubled.
Yet the amount of money allocated for this problem in 2014 is the same as in 2006. Or in other words the amount per child has been cut in half. Today it amounts to about $45.00 per child per year.  That is less than $1.00 per week, per child.

And yet many conservatives in Congress want to cut it to zero. These same congressmen stood on the floor of Congress yesterday loudly applauding Pope Francis who preaches just the opposite of their heartless philosophy
Shame, Shame, Shame on them.

In the last 80 years we have had 11 recessions plus a Great Depression AND a Great Recession. All of those amount to a total of about 30 years out of 80; 30/80th.= 37.5%.
So capitalism was working well only 62.5% of the time.

Why do we continue to worship at the altar of capitalism when it only works 62.5% of the time? We just shrug our shoulders and say recessions are a normal part of capitalism. We cannot seem to imagine a better economic system. We say we certainly don’t want socialism because we conflate that economic system with a governmental system which is dictatorial.

But that is where we are mistaken.
Denmark for example, has a Democratic government and
socialistic economic system which also preserves the basics of capitalism.

If you had a car or a refrigerator which only worked 62.5% of the time, what would you do. If you had a roommate who only paid his share of the rent 62.5% of the time what would you do?

The laissez faire brand of capitalism we have been practicing
for the last 40 years has only has been good for the wealthy,
not “we the people.”
So why do “we the people” keep supporting an economic system that doesn’t support us?

There is a better way, a third way which I call
Democratic Social Capitalism and it is explained in my book,
GREED IS GOOD-SO IS SOCIALISM: A UNIFYING MAIFESTO.

We need to greatly increase the income tax rate
for people and companies who are the highest earners.
The income tax rate under President Eisenhower
was about 90% for the highest brackets. Eisenhower
certainly could not be called a socialist.

Recently the Democrats had to fight tooth and nail just to get the
highest rate raised from 35% to 39%. and Obama was
labeled a socialist for that. If you ask the Socialist Party of America
if Obama is a socialist, they will laugh at you.

THE ARGUMENT, COMMONLY PUT FORTH
BY CONSERVATIVES, THAT DECREASING
THE INCOME TAX RATE FOR SMALL
BUSINESS WILL CREATE JOBS, IS FALSE.
I know that it seems counter intuitive to say that increasing
the income tax rate on small business will
NOT kill jobs.

However the truth is that this is
a myth the conservatives have institutionalized in
America. Nobel prize winning economist
Paul Krugman recently wrote that “Affluent
taxpayers are likely to save the great bulk of ANY tax
break” rather than spend it. So let us start with the
premise that small business owners are in business to
make all the money they can. Put yourself in the position
of owning a small business during a recession.

Say you started out with about a hundred employees
before the recession and now you’ve had to cut back
to seventy. First of all, you probably are not making
much of a profit (or none at all) because your business
revenue is down 30%. But if you were making more
than a profit of $250,000 a year and the government
decided to reduce your income tax a small amount,
what do you think you would do with that little bit of
extra money? Would you use it to hire more employees
and/or buy more equipment or land? Probably
not. Why would you want to reduce your net profit by
hiring employees you don’t need. You just spent the
last year “downsizing” and getting rid of employees.

You will NEVER hire more than the minimum number
of employees needed to get the job done. Hiring more
employees reduces your net profit. Additionally, why
would you want to buy more equipment when about
30% of your equipment is now sitting idle. The truth is
that you will only keep the minimum number of employees
and equipment needed AT ANY GIVEN TIME
to satisfy the amount of customers coming in the front
door.
THE ONLY THING THAT WILL CAUSE YOU
TO HIRE MORE PEOPLE IS IF THE NUMBER
OF PEOPLE BUYING YOUR PRODUCT OR
SERVICE INCREASES.
Since the lower and middle class simply have no disposable
income in a recession, they are not going to
increase their purchases of your product or service.

So this creates a vicious cycle: consumers having little
money to buy, means no increase in sales volume,
which means no increase in employment.
No increase in jobs equals no money in the hands
of consumers to buy anything. Conservatives argue
THAT INCREASING INCOME TAXES ON BUSINESS
IS A JOB KILLER. But this is just another form of the
“trickle-down trickery.”

NEITHER A TAX BREAK NOR A TAX INCREASE on business
will significantly AFFECT EMPLOYMENT. A decrease in income tax rate
will not increase the number
of jobs because business owners will most likely put
any extra money into savings. Remember that the income
tax only applies to the surplus money left over
after paying for ALL of the materials and labor costs. The
surplus is the net profit. So if all of the costs of a company
are already paid for, taking away, (i.e., taxing), some
of the net profit of the entrepreneur will have no effect
on the business.

The only thing that will create jobs is
if the lower/middle class have money for purchases.
When they do, the business owner will immediately
start hiring more employees to satisfy the increase in
demand for goods and services. This is trickle-up economics;
trickle down never works as well as trickle up!

THIS IS COMMON SENSE POLITICAL ECONOMICS

Several of my progressive friends have criticized the inclusion of the word

“Greed” in the title of my book
GREED IS GOOD-SO IS SOCIALISM: A UNIFYING MANIFESTO.

I did not write this book to persuade progressives to open

their minds to a little more socialism.

That would be like “preaching to the choir”; a waste of time.

I wrote it to persuade conservative democrats, and independents,

and moderate republicans to open their minds a little.

As we know, 20% of the electorate are far right wing, and 20% are far left wing.

They cancel each other out in most elections and they are seldom

persuadable.

So it is the middle 60% that always decide elections.

These are the ones I’m after.

Most of them are more afraid of the word socialism than the plague.

If I just entitled it Socialism is Good. Nobody would read it except

far left wing progressives.

But with the Greed is Good part, I hope to “hook” some middle of the roaders

into taking a look at it.

And if you think about it, this book is exactly what people

need to read to convince them to vote for a person like Bernie Sanders

who has labeled himself as a socialist.

I hope this better explains what I am trying to do.

Wendell

Subscribe to Blog

Follow along on Social Media
Visit Us On TwitterVisit Us On FacebookVisit Us On LinkedinCheck Our Feed
Categories