From Companies Spend on Equipment, Not Workers, a couple of days ago in the NY Times:
Two years into the recovery, hiring is still painfully slow. The economy is producing as much as it was before the downturn, but with seven million fewer jobs. Since the recovery began, businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent, according to the Commerce Department. A capital rebound that sharp and a labor rebound that slow have been recorded only once before — after the 1982 recession.
And the money that isn’t being spent on equipment?
Corporate profits, meanwhile, are at record highs, and companies are hoarding cash. Many of the companies that are considering hiring say they are scared off by the uncertain future costs of health care and other benefits. But with the blessings of their accountants, these same companies are snatching up cheap, tax-subsidized tractors, computers and other goods.
Now, I’m not (at least not here) questioning whether this is smart for the companies to be doing. We were told that we had to extend the Bush tax cuts for the richest so that they could create jobs. That was how we were going to get people back to work. The question, right back at House Speaker John Boehner, is, “Where are the jobs?”
In certain places, capital can’t (as) easily replace labor:
* restaurants
* retail
* live entertainment
* the movies
Know who doesn’t go out 20% more if they have 20% more money? The rich. Know who does? The middle class.
If you want to maximize job creation, you put cash in the hands of people who will spend it quickly — those who have little cash in the bank. They’ll spend a little bit of it at a time, spread out over their community… but there’s a lot of “they” there. Before you know it, restaurants are hiring, as are their suppliers. All those folks who work at stadiums, arenas, etc are hiring, as are their suppliers. And so forth.
Rich people choose to spend money based on lots of factors not related to exactly how much money is in the bank right now, since there’s enough money in the bank that they won’t feel the impact of this shopping trip. The middle class, however, dramatically changes how much we buy based on how much money we have left after paying the mortgage, student loans, utilities, groceries, and for our kids’ activities. Give us more money, and we’ll spend it… creating lots of jobs right here in our own communities.
This is why government spending on unemployment benefits during periods of high unemployment (like the present) is so much more effective than cutting taxes.
Where are our other-winged BMG participants who so loudly declared the benefits of extending the Bush tax cuts to the wealthy? All those small business owners who were going to expand and hire more people if only they were allowed to hang onto their obscenely low tax rates — where are they?
We are at the beginning of a campaign season. The various camps are making the opening moves that will define the issues that dominate the 2012 election. Our public transportation system is literally rusting away:
Why aren’t we talking about raising taxes on the wealthy?
You guys have to do a better job than this. Your spending-first plan was a bust and now you’re running again on raising taxes? You were shellacked in 2010 on that platform.
Here are two possibilities
1. as I outlined in my post on prices, we are in a period of latent inflation, where prices are itching to go up to meet the value of a dollar inflated over the course of this decade. The recovery will meet a bucking clutch as prices spring up and soak up any growth in incomes.
2. Ryan took the momentum from the December deal on taxes and squandered it worrying about the deficit. He hurt the Republicans chances in 2012, and that hurts the economy, because Obama has threatened to raise taxes if he wins in 2012.
The Ryan Republicans have so far done a bad job outlining a growth agenda. Ryan is for cuts first. Tim Pawlenty has outlined a 5% growth target for the US economy, which I think will win him the election, if he’s for growth first. I’d like to see the Dems have a better growth plan to compete with Pawlenty.
I thought the ‘shellacked‘ was more of a “gosh there’s a black guy in the White House… how’d he get there? He wants to do what to Granma?”
Inflation would have to go from a negative number to a positive number at a rate which it has never, ever, in the whole history of ever, and never, achieved. Your saying that the bullet placed on the back of the turtle which is moving uphill, and against the wind, is more of a danger than the nest of vipers your standing in…
But raising taxes doesn’t hurt the economy. It helps the economy. It’s good for the economy. Keep reading…
That’s because it’s not a growth agenda. It’s an Ayn Rand moral imperative.
Ryan is for NOT TAXING. If he could get away with NOT TAXING by invading a foreign country, he’d do it. If he could get away with NOT TAXING by tweeting pictures of his shwantz to half the world, he’d do it. Cuts merely paint a veneer of seriousness to his efforts to NOT TAX. Cuts are the only way he can say “NO TAXES” without people laughing at him with the same derision with which I’m laughing at you right now.
Here’s my growth plan: go back to the Clinton tax brackets. The economy grew 4.9 percent on average between 1983 and 1987 (after the Senate Democrats held Reagans feet to the fire and ushered in a large tax increase…) and nearly 4.7 percent between 1996 and 1999, under Clintons oh-so-onerous taxation scheme.
You can’t escape it. Put taxes back to where they were before Bush blew up the deficit. Simple as that…
.
“I’m not Romney!”
Rich people are taking their tax cuts to the bank and saving it.
Like my dad used to say, “they’re rich for a reason”. That reason is that these people have significantly more cash flowing in than they have flowing out.
I’m seeing a lot more of those.
but they don’t completely replace cashiers, and they don’t replace people who stock and maintain shelves, clean the place, manage the operations, count the money, unload the trucks, review inventory and place orders, and so forth. For example, at Home Depot, cashiers make up fewer than 10% of employee hours within the store. That doesn’t include the truckers, the warehouse employees, the employees at HQ, etc.
Oklahoma
Because North Dakota owns its own bank, that bank never stopped lending, no tax custs, no government layoffs, no drop in jobs – businesses starting and growing and the public sector healthy, too. Check it out: http://www.usatoday.com/news/nation/census/2011-03-16-north-dakota-census_N.htm
Per capita support for public higher education in North Dakota makes Massachusetts look like a midget. Ditto population growth, low housing costs … and did I tell you? No tax cuts and no public employee layoffs, either.
“The biggest impetus for the good times lies with energy development. Around 650 wells were drilled last year in North Dakota, and the state Department of Mineral Resources envisions another 5,500 new wells over the next two decades. “Between 2005 and 2009, oil industry revenues have tripled to $12.7 billion from $4.2 billion, creating more than 13,000 jobs”
http://online.wsj.com/article/SB10001424052748704893604576198881896338372.html
“What accounts for the state’s success? Dakotans didn’t bet the farm, so to speak, on solar cells, high-density housing or high-speed rail. Taxes are moderate—the state ranks near the middle in terms of tax per capita, according to the Tax Foundation—and North Dakota is a right-to-work state, which makes it attractive to new employers, especially in manufacturing. But the state’s real key to success is doing the first things first—such as producing energy, food and specialized manufactured goods for which there is a growing, world-wide market. This is what creates the employment and wealth that can support environmental protection and higher education. “
No state has invested heavily in “solar cells, high-density housing or high-speed rail.” Not one. Not even California. Way to throw a bunch of knee-jerk conservacrap at the issue in a wholly irrelevant way.
Now, as for North Dakota: they generated 444 thousand MWh of electricity from wind in March 2011, out of 3165 kMWh total. 14%. Second in percentage only to Iowa. As for rail, North Dakota rivals New Mexico for second place in passenger rail miles per capita in the Lower 48 (Montana is first). As for investment, they’re exploring a $100M upgrade on Amtrak’s rail’s in ND, which share with freight rail. In fact, in August 2010 North Dakota’s members of the House of Representatives and the Senate declared that they will “find the necessary funding needed” in order to help Amtrak cover the maintenance costs handed off by BNSF for continued use of the Empire Builder Amtrak line through North Dakota. As for high density housing, it’s North Dakota for chrissakes. What do these 10 states — the 10 states with the shortest tallest buildings — have in common: VT, SD, WY, ME, ND, ID, MW, WV, NH, AK? If you guessed snow, well sure. Another guess: extremely low population density. Of course North Dakota doesn’t have dense housing.
Need a business loan at a fair rate – Bank of North Dakota sure beats out Bank of America, TD, Citizens, etc.
Training for those enterprises, going to community college and need a student loan at a fair rate? Check out what Bank of North Dakota charges.
Again, yeah, the oil helps – but fair lending and accessible education and housing sure help too.
As a small business person, I can tell you lending is available at low rates in Massachusetts from any of the small/medium size banks.
Business people don’t want to borrow, be it for lack of confidence in future economic growth or expand for fear of what it will cost to employee someone.
Just checked on cost of energy in the Dakotas, it’s 50% more expensive here, in North Dakota it’s 8 cents a KWH vs. the 12 cents I pay now – and then who knows how high it will be when cape wind goes online.
The issue isn’t whether or not small business owners can obtain loans in Massachusetts.
You and your fellow proponents of extending the Bush tax cuts for high-income taxpayers forcefully made the claim that those cuts would create jobs. The cuts were made, and the jobs have not and will not materialize.
We need to invest in our communities, in America itself. When John F. Kennedy built dams around America, those dams brought jobs and prosperity to places like where I grew up near Greers Ferry Lake in Arkansas. The military, the space program, the interstate highway system–all these government programs brought jobs to America and helped people rise to or stay in the middle class.
For ten years the wealthiest Americans have not paid their fair share. It is time to end the Bush tax cuts, and time to start building again.
BTW, Matt Stoller has a new essay on Politico about public infrastructure, and how privatization undermines the long term public good. Read the whole thing.
that the drive toward privatization and lean government isn’t just a Republican phenomenon. Democrats have gone along with it too.
Bill Clinton and Al Gore championed the “reinventing government” movement in the early ’90s, which called for more privatization and less government regulation. The outsourcing of inherently governmental functions since then finally brought us to the stage at which government had no capacity to detect or prevent the approaching subprime mortgage scandal and subsequent economic meltdown.
And has that leaner, downsized government resulted in lower deficits? No, the deficit has been rising steadily. The tax cuts have played a role in this, of course. But it seems government is still spending just as much if not more than before, and yet that spending isn’t being used to build anything or create jobs.
Still, despite all the evidence of corporate malfeasance and the failed promises of job creation in cutting taxes, it’s still almost impossible to change the prevailing public belief that government can’t do anything right and should be further downsized.
Despite all the evidence we’ve seen to the contrary, that’s a belief that’s awfully difficult to shake.
Well, when combined with not-going-to-war and not-cutting-the-taxes-of-the-rich, yes. See President Clinton for details.
It seems we’ve been trying to get this point across for a long time now and it goes nowhere. There is something going on that we simply don’t have the power to overcome. It is beyond frustrating. I’ve been doing something a little different to try to make a difference. I have created a facebook account (which I swore I would never do, but did it because my son is on it and I wanted to keep an eye on him).I have had some great debates with friends and relatives which helps to share the reality of what is going on (I’ve learned a thing or two also). Discussing it here on BMG is great also, although we are mostly preaching to the choir, this forum does draw the attention of elected officials who should give these discussions their attention. It seems though that here we are labeled the “liberal base” and somehow that negates our credibility? (huh?????) Well, I would say that this is not the “liberal base” but a mish mash of people from many walks of life whose conversations don’t end on this website. While I normally promote Democrats loud and strong, my only recourse because of being ignored and marginalized is to turn to candidates who are outside of the box, no matter the consequences. The only way we are going to get out of this mess is to upset the apple cart, throw away the damaged goods and fill it with a new and more enlightened batch of leaders. It’s a little scary, but so is the status quo. There are still a few Dems that I would enthusiastically support. I am not supporting Obama next year and I have not made a decision on “the people’s seat” yet. Not happy with the choices; if Mike Capuano or Elizabeth Warren run I will support them. Am still looking at Bob Massie, but I just can’t seem to have confidence that he will be a fighter for change. I am still looking into it though. Haven’t had time yet to look into the others. I am not so desperate and disillusioned that I would vote for Scott Brown and will be sending along plenty of anti-Scott Brown messages no matter who or if I choose a candidate to support.
But thank you for continuing to try to convey to our elected officials that tax cuts for the rich don’t work. It’s just so sad that the Dems got on board with that. They have pretty much ruined themselves by doing so.
It’s true that some of our elected officials have made some disappointing decisions, with bad consequences. All I can say is, when I hear an elected official say, “We have made hard decisions about cuts to the most vulnerable,” my first thought is, “because you made the easy decision not to demand the rich pay their fair share.”
This one is rather subtly off the mark, I’d say. Off on two different sides simultaneously, even, as follows:
(A) Inventory replacement, “snatching up cheap, tax-subsidized tractors, computers and other goods,” is not very usefully considered as an alternative to hiring back some of the disemployed. The real alternative is for ScroogeBank and the Goldman-Saxons (&c. &c.) to engage in specuvestment with those oodles of cash they are sitting on: just buying Treasury bonds would do nicely, though I have heard there are better pickings than that overseas.
Prof. Dr. Krugman just saw the light:
(B) Though crucial to understanding the real-world economy, ‘rentiers’ scarcely exist in the Foxcuckooland economy, that happy garden where “tax cuts for job creators” has never yet been known to fail. A close look at the propaganda actually purveyed to the selfservative kiddies should reveal hardly a trace of ScroogeBank: jobs are created by, say, the “Bailey Building and Loan Association” of It’s a Wonderful Life. By M. Poujade. By “small business.”
To go after poor Jimmy Stewart as if he were tryin’ to get rid of all of his financial corporation’s human clerks and tellers and install cost-cuttin’ robots instead would be, I think, a very misguided line to adopt. [*] Jimmy would never do a thing like that.
Happy days.
–JHM
___
[*] The class enemy hardly ever deploy the word ‘corporation’, I believe, except in the name of some particular company. “Small business” — in this genre of “Whig pastoral,” as I believe it was called in Schlesinger’s _Age of Jackson — is always a sole proprietorship, or maybe a mom-and-pop.
Conveniently for them, this obsolete folderol can be used two completely different ways. In addition to (usually) pointin’ out what an all-’round great guy Jimmy the Job Creator is, Scrooge apologists can, on occasion, pretend that the BB&LA belongs to Mr. Bailey the same way his boots belong to him, that it is therefore an outrage for some Psocialist clown from Washin’ton to show up at the front door and start tellin’ their hero what he can and candt do.
I hear liveandletlive’s frustration and agree with Petr on points as well (that viper reference was too appropriate). The venom from Washington has not brought this country together, but divided it – perhaps irrevocably. Our political platform has morphed into something I can hardly recognize. The empty posturing (to gain exposure) has become more important than whatever the issue is at hand. Be it a reckless Congressional member, a wily ex-Governor, a hollow, fence-sitting TV personality, or a stone-faced party leader, the entire lot are making a mockery of Washington.
Taxes are a necessary evil – GET OVER IT. When applied fairly, everyone benefits. How does a thriving nation support infrastructure; provide state police, build schools, fund a ready military, protect national parks, or maintain highways without them? Pushing more responsibilities into the hands of state government alienates…or is that the real plan? You want 50 small, individual countries? The tax-contributing citizenry is declining – fast and furious. Yes, people are working and living longer, but very few families have 7 or 8 kids now, like my Dad’s generation.
THIS is the “new” Congress? The Congress who railed it could produce more jobs? Seems a little too convenient that ‘good’ jobs remain scarce, while those restaurant jobs, or part-time, un-benefited $11 dollar-an-hour positions occasionally seep out, yet keep the financially disadvantaged, right where they are. Sure business leaders will save jobs in the U.S., as long as we don’t pay any attention to what they’re doing (i.e., in with corporate anarchy, out with Elizabeth Warren). We get it that spending is a problem now – why wasn’t anyone thinking about that before we started blowing billions every month in Iraq?
Finally, the pompous and public marginalizing of folks receiving unemployment compensation or other public assistance must end. Fair to say a high percentage of them did not choose to be in difficult economic circumstances. One can just imagine how heartless some Americans appear to other nations – it’s inexcusable and embarrassing. Indeed, there are snipers who abuse the system and should be rooted out, but many don’t. Few things boil my blood more than hurtful, thoughtless postings that put the word poor in quotes. Tell me, what is it that compels a person to make someone already down on their luck, feel even worse? As a nation founded on the principles of unity, we should be better than this.