Dear America,
A few weeks ago, the Chinese released data on their GDP, that is, their gross domestic product. For the last quarter, the annualized rate of GDP growth declined to 6.7% compared to our annualized growth rate of between 2% and 3%. The reason for the greater increase in GDP in China was an increase in consumer spending that accounted for over 84% of that 6.7% growth rate, whereas in the United States it hovers just below 70%. Consumer spending is driving Chinese economic growth, and it constitutes a vast majority of growth in all industrialized nations. Business and industrial investment is a small fraction of GDP...less than 15% and probably closer to 10%. So, if we want to stimulate our economy to faster growth, should we be supplementing business spending with tax cuts for business and industry, or should we be augmenting consumer spending by raising the minimum wage, and thus raising our consumers' capacity to spend. The reason that that question doesn't end with a question mark is that it is rhetorical. Of course, higher incomes lead to more growth than capital spending does because there is more of it to start with...and everybody does it. When the only people you help are businesses--remember, Mitt Romney told us all that "businesses are people too" and a conservative Supreme Court agrees with him--you get only a fraction of the boost for GDP because so many fewer people are enriched. In short, tax cuts for business and industry don't help us nearly as much as tax cuts for the spending public...those at the bottom--the ones who spend a larger portion of their incomes, and an increase in the minimum wage would probably help the most. But what other evidence suggests that, in particular, tax cuts for business don't help much.
Well, even if you believe the New York Times' business and industry shills like Adam Davidson --he says that American business and industry is hoarding only $600 billion--it seems clear that there is plenty of money laying around for capital expenditure already. Of course other estimates of idle capital in the hands of business and industry range from $2 trillion to $7 trillion in this country, and considering that Apple alone admits to having $200 billion all by itself, the higher estimates seem far more credible. So, how will putting more money in the hands of business and industry leaders cause more capital expenditure. Again, a rhetorical question. It won't, and it hasn't. In fact, business tax rates seem to have next to nothing to do with economic growth as evinced by the fact that Ronald Reagan decreased taxes for business, among others, and his administration created about 16 million jobs. Bill Clinton twisted Newt Gingrich's arm to force an increase in taxes to pre-Reagan rates, and his administration created in excess of 22 million jobs. Then of course there's George W. Bush, who resurrected the Reagan tax cuts, and by the time he left office we were losing close to 800,000 jobs per month and his administration managed to create less than a net of 1.5 million jobs in eight years, whereas the Obama administration, in which taxes on the top 1% returned to pre-Reagan levels, has created close to 10 million jobs in just more than 7 years despite starting out with the legacy losses created by George W. Bush. In terms of percentages of job creation, Ronald Reagan in eight years barely beat Jimmy Carter who had only four, and Bill Clinton outstripped Reagan by about five to four. In a nutshell, tax cuts have a pretty dismal record when it comes to the economy as it affects the common man. Add to that the fact that real earnings, that is the amount of money that a working man or woman makes adjusted for inflation, didn't grow for the first thirty years after Reagan, and it is barely growing now, if at all, while the top 1% control record amounts of income and wealth as percentages of the whole. Our economy becomes more stratified every day based on money, and that is a function of the lingering economic affliction that is Reagan's "supply-side economics."
Of course, Paul Ryan, the Republican Ayn Rand acolyte who runs the House of Representatives,
still believes in the supply side, and his policies favor tax cuts and deregulation, both of which are Republican mantras that you can hear anytime one of them opens his mouth. And Donald Trump, you know who and what he is, wants tax cuts that favor the rich too. Ironically, both men claim that such strategies will help the middle class working man and woman. Apparently history means nothing to Republicans, but it should mean something to you, America.
Throw in the fact that none of the Republicans ever specifies which regulations are so burdensome that they cost jobs and you have a full outline of the differences we are looking at. Imagine how fast we common people would be losing ground if business were all of a sudden unregulated. We will all be voting in less than three months, and we have the choice of allowing the stagnation of our general population's economic weal to continue or hoping for change in the form of a progressive...or at least comparatively progressive...president, and perhaps more importantly, a more progressive--that means Democratic--Congress and Senate. I know which I prefer.
Your friend,
Mike
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