With consumers slow to spend, businesses are slow to hire
CHICAGO -- Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they've yet to start hiring or make major investments.
Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.
But here in the heartland of America, senior executives say neither side's assessment fits.
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.
Why is consumer spending flagging. A lot of this has to do with Supply Side economics that have weakened the middle class. Cenk Uygur was conducting an MSNBC interview. The interviewee pointed out that he used to be focused on tax cuts until he realized his business couldn't make a profit without customers buying his product or services.
Supply Side (SS) economics is really blind to importance of consumers to business. The Republican tax breaks are essentially a subsidy to large corporations and small businesses that assume the businessman are selling the products and services to consumers. Tax breaks to middle class and low income earner under SS economics is modest.
Tax breaks are pointless if profits drop. In addition, Moody's Economics conducted a study which shows that permanent and temporary tax cuts are far less stimulative than food Stamps and unemployment compensation that provide purchasing power to consumers and are quickly rolled back into the economy.
According to the Washington Post, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes.
Again we have an oversimplification of the problem. The Federal Reserve completed a study that showed the Supply Side Reaganomics devastated the middle class. One third became affluent and the other two thirds reversed or treadled water.
The fate of the middle class did not improve greatly during the Clinton years either. Bush finished off the middle class during his eight year presidency with his 'tax cuts' that doubled the deficit.
During the Bush inaugural address , he stated:
It is is an impressive crowd. The top one per cent Americans now haul in 50 per cent of the income and own 90 per cent of the wealth. The only thing would fix the American economy would be huge tax increase on the affluent. This is essentially what FDR did during the Great Depression and World War 2. The top US income earners were in the 90 per cent tax bracket.
Can the US work its way out of the Great recession. This is doubtful. Banks make their profits by moving paper around and most of the industrial base of the US has been offshored.
Will Democrats have the balls to tax the affluent? That is also doubtful. Most Democrats think even a 40 per cent tax on top income earners is risky.
Executives see little evidence that the economy is slipping back into recession. But they describe a business environment in which sales come in fits and starts and their customers can't predict what they will want to buy in the future.
Why is this? Because the vast middle class that make up the bulk of consumers is broke. SS economics will neither help the affluent or the middle class in present predicament the US is in. Income tax cuts won't help businesses that aren't making money.
source: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/20/AR2010082005165.html?hpid=topnews
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CHICAGO -- Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they've yet to start hiring or make major investments.
Many Democrats say the economy needs more stimulus. Business lobbyists and their Republican allies say it needs less regulation and lower taxes.
But here in the heartland of America, senior executives say neither side's assessment fits.
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.
Why is consumer spending flagging. A lot of this has to do with Supply Side economics that have weakened the middle class. Cenk Uygur was conducting an MSNBC interview. The interviewee pointed out that he used to be focused on tax cuts until he realized his business couldn't make a profit without customers buying his product or services.
Supply Side (SS) economics is really blind to importance of consumers to business. The Republican tax breaks are essentially a subsidy to large corporations and small businesses that assume the businessman are selling the products and services to consumers. Tax breaks to middle class and low income earner under SS economics is modest.
Tax breaks are pointless if profits drop. In addition, Moody's Economics conducted a study which shows that permanent and temporary tax cuts are far less stimulative than food Stamps and unemployment compensation that provide purchasing power to consumers and are quickly rolled back into the economy.
According to the Washington Post, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes.
Again we have an oversimplification of the problem. The Federal Reserve completed a study that showed the Supply Side Reaganomics devastated the middle class. One third became affluent and the other two thirds reversed or treadled water.
The fate of the middle class did not improve greatly during the Clinton years either. Bush finished off the middle class during his eight year presidency with his 'tax cuts' that doubled the deficit.
During the Bush inaugural address , he stated:
“This is an impressive crowd: the Have's and Have-more's. Some people call you the elites. I call you my base.”
It is is an impressive crowd. The top one per cent Americans now haul in 50 per cent of the income and own 90 per cent of the wealth. The only thing would fix the American economy would be huge tax increase on the affluent. This is essentially what FDR did during the Great Depression and World War 2. The top US income earners were in the 90 per cent tax bracket.
Can the US work its way out of the Great recession. This is doubtful. Banks make their profits by moving paper around and most of the industrial base of the US has been offshored.
Will Democrats have the balls to tax the affluent? That is also doubtful. Most Democrats think even a 40 per cent tax on top income earners is risky.
Executives see little evidence that the economy is slipping back into recession. But they describe a business environment in which sales come in fits and starts and their customers can't predict what they will want to buy in the future.
Why is this? Because the vast middle class that make up the bulk of consumers is broke. SS economics will neither help the affluent or the middle class in present predicament the US is in. Income tax cuts won't help businesses that aren't making money.
source: http://www.washingtonpost.com/wp-dyn/content/article/2010/08/20/AR2010082005165.html?hpid=topnews
Subscribe to the Rightardia feed: feeds.feedburner.com/blogspot/IGiu
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