Tag Archives: economy

Tax Cuts Will Not Drive Innovation or Job Creation

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I’ve said it before and I’ll say it again, contrary to popular belief amongst the far right, cutting taxes won’t make the economy grow.  The basic facts speak for themselves. High-end tax cuts haven’t trickled down as job creation, at least they haven’t created jobs that provide a decent wage. The only things trickling down during the last six years of tax and benefit cutting have been  economic meltdown, foreclosures, unemployment, business closures and yet more budget cuts.  From a high-level perspective, the myths created by the far right haven’t come to be. On a more granular level, a large portion of this stems from the realities of how small businesses operate and the needs they have.  But then, the Republican agenda is not in fact about job creation, small business development or entrepreneurialism.  It’s about providing benefits for the elite.

Contrary to myth, most small business owners will tell you that their  tax rate doesn’t affect hiring. If they think I can do more business, they hire more workers regardless of the tax code. The costs of finding, hiring and paying new employees are business expenses. They’re deducted up-front from the taxable income of the business.

Fewer than 3 percent of taxpayers with any business income have yearly incomes above $250,000 (couples) or $200,000 (individuals). Most high-enders aren’t who you think of as small business owners. They include hedge fund managers, CEOs getting paid to sit on the boards of a variety of corporations and partners in wealthy real estate or law firms. These are the people whining that eliminating tax cuts will kill jobs at small businesses. They do not represent the majority of small business owners. Nor do they represent the bulk of job-creating businesses for the bulk of the population.

If Congress wants to help my company create jobs, it should support policies that strengthen our economic foundation and boost broad-based consumer income and spending.  More important than tweaking the tax code YET AGAIN is the need for stability in the system. Nothing scares small business owners more than a fickle market.  Today’s plummeting of the Dow is far more detrimental than closing loopholes and taxing the richest 5%.  The poor and the middle class are expected to sacrifice, the super-rich are not.  Small  businesses and the people they employ take the hit.

More tax cuts at the top won’t create jobs. But we will create jobs and strengthen our economy by rebuilding our crumbling roads, bridges, public transit, levees and water and gas pipelines.  In other words, if we invest in innovation, we will create jobs and stability. We won’t heal our economy by repeating the toxic policies the right is so in love with.

 

Class Structure and Economic Growth

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Class is a controversial issue in the United States, having many competing definitions, models, and even disagreements over its very existence.  It is something we simply do not want to address, preferring to limit the discussion to the myth of meritocracy and the American Dream.  But the truth is that it exists and with each passing year class structure becomes more entrenched.  With the Iowa straw poll yesterday and the reporting done by the far right, both yesterday and in the lead up over the last few months, class is becoming a central theme of the 2012 campaign, though we talk around rather than talk about, which is unfortunate.  The strategy is to allude to class warfare on the right and to simply ignore class on the left (or in the center) from fear of being labeled a socialist or hate monger.  And both positions will lead to stifled innovation, a lack of fair play and the slowed growth of the US economy. It is impossible to understand people’s behavior without the concept of social stratification, because class position has a pervasive influence on almost everything, from the clothes we wear to the television shows we watch to the clothes we buy and the names we give our pets. Our position in the social hierarchy affects our health, happiness, and even how long we will live.  And the more entrenched class structures become, the less likely we are to move up, or down, the socio-economic ladder.

Understand, I’m not suggesting a classless society or an economic policy governed by the state.  In fact, what I am suggesting is that the call for pulling yourself up by your bootstraps and the need to exercise of personal responsibility has been displaced by the far right, even as they use it as a rallying cry. The goal is to solidify a more rigid class structure because it produces less competition from people not born of wealth, status and power. Their claims that the current administration and the left are fostering “class warfare” amounts to fear mongering and is meant to manipulate people who have less.  How?

First, it ensures that the wealthy and the middle class look to the their own needs first and slowly but surely learn to fear any discussion or plan that can be construed as taking away what they already have.  Never mind that history and a great deal of economic theory indicate that the fear is misguided.  There is nothing to indicate that GE having to actually pay some taxes or Donald Trump having to pay an extra $32 for every $1000 he makes will stifle job creation.  The stage is set to make those who have something fear those who have less, even as the misguided approach to taxation plunges the nation further into debt and stagnation.  The idea is to create the illusion that the great unwashed masses are a threat to you and yours, thereby manipulating people into backing the fanatical positions of the far right.

Second, as to the poor and the working class folks, the strategy is more subtle and far more morally corrupt. The language used, “class warfare,” “division,” “socialism,” plays to the collective American cultural ideal of the lone cowboy working his way up from nothing to become the most important man in town.  It is riddled with the myth of the strong individual who overcomes hardship by bucking the system and the man.  Unfortunately, the system the far right would impose makes the possibility of living up to this cultural ideal nearly impossible.  Doing away with things like Pell Grants, collective bargaining and equitable taxes means that the barriers to moving across class lines become insurmountable.  Never mind that I have all the tools I need to climb the mountain, all you get are a pair of shoes and an ice pick.  Well, let’s make that a pair of shoes, shall we?   Add to that the notion that breaking down class walls will lead to further economic distress and, for many, the wrath of God and you now have a population so riddled with fear that it actually embraces the diatribe of the far right, even as they slowly but surely having every last thing they own and have fought for stripped from them.

Ultimately, this is damaging to business and economic growth.  Why?  Because when there is no longer a real opportunity to excel based on merit, people quit trying and innovation dies.  The experiences and inventiveness of those trying to pull themselves from one economic situation to another are stifled and the people in power, the increasingly small number of people, seek only to maintain their own position.

Has it happened yet?  Of course not.  We look at the growth of companies like FaceBook and we see that the good idea still has a chance (ignore for a moment the fact that Mr. Zuckerberg is from the privileged class).  But the plans that the likes of Rick Perry and Michelle Bachmann have would and will crush economic growth long-term by making class division stronger.  Even the supposed moderates like Mitt Romney are espousing a system designed to exploit people and entrench a more rigid class structure as he panders to the far right of his electoral base.  Are pundits, politicians and media houses right to talk about class division?  They absolutely are.  But those in the center and those on the left need to be willing to do so as well, rather than hiding from it.  Coming to terms with class will lead to a reexamining of what matters most to us as a society and spur innovation.  It will lead to economic growth.  Ignoring will lead to further economic decline and a permanent underclass.

The Decline of a Civilization, Part 2

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A little reminder of recent history.  In the German presidential election held on March 13, 1932, there were four candidates: the incumbent, Field Marshall Paul von Hindenburg, Hitler, and two minor candidates, Ernst Thaelmann and Theodore Duesterberg. 70 percent of the German people voted against Hitler.  The fanatical minority remained on the fringe and there was no indication of the subtle horrors to come.

However, since Hindenburg had not received a majority of the vote a runoff election had to be held among the top three vote-getters. With only three parties to vote for, it was little surprise to see the Nazis gain ground.  On April 19, 1932, the runoff results were: Hindenburg 53.0 percent
Hitler 36.8 percent
Thaelmann 10.2 percent. Thus, even though Hitler’s vote total had risen, he still had been decisively rejected by the German people.  When Hindenburg appointed Franz von Papen on June 1 as chancellor of Germany, he immediately dissolved the Reichstag and called for new elections, the third legislative election in five months.

The Nazis, determined to bring down the republic, did everything they could to create chaos in the streets, including initiating further class divisions, political violence and murder. The July 31, 1932, election produced a major victory for Hitler’s National Socialist Party. The party won 230 seats in the Reichstag, making it Germany’s largest political party, but it still fell short of a majority in the 608-member body.

On January 30, 1933, President Hindenburg appointed Adolf Hitler chancellor of Germany. Although the National Socialists never captured more than 37 percent of the national vote, and even though they still held a minority of cabinet posts, Hitler and the Nazis began to consolidate their power.

For their part, the German people quickly accepted the new order of things. Keep in mind that the average non-Jewish German was largely unaffected by the new laws and decrees. As long as a German citizen kept his head down, worked hard, took care of his family, sent his children to the public schools and the Hitler Youth organization and didn’t involve himself in political dissent, a visit by the Gestapo was very unlikely. Keep in mind also that, while the Nazis established concentration camps in the 1930s, the number of inmates ranged in the thousands. It wouldn’t be until the 1940s that the death camps and the gas chambers that killed millions would be implemented.

The overwhelming majority of Germans did not seem to mind that their personal freedom had been taken away, that so much of culture had been destroyed and replaced with a mindless barbarism, or that their life and work had become regimented to a degree never before experienced even by a people accustomed for generations to a great deal of regimentation. The Nazi terror in the early years affected the lives of relatively few Germans and a newly arrived observer was somewhat surprised to see that the people of this country did not seem to feel that they were being cowed.

Fast forward 79 years.  We are seeing a similar pattern develop in the US as Tea Party fanatics consolidate power and force their will on a majority of the population. The likes of Michelle Bachman support what amount to little more than reeducation camps for homosexuals, Rick Perry holds a national day of prayer clearly meant to exclude non-Christians (and Christians that don’t practice their faith according to the far-right ideology of fringe Evangelicals) and the entire Republican party willingly throws the future of the US economy into doubt, all to curry favor with extremists.  And sadly, the other side of the aisle buckles like Chamberlain in the misguided belief that the opposition is rational.

Hyperbole? Perhaps.  But it’s worth noting that the average German in 1932 did not see the slow chipping away of civil liberties, tolerance and the collective moral structure of the society.  The goal of fanatics is to spread discontent and fear.  In doing so the bulk of the population is primed to accept anything the regime says in the hope chaos will stop.  Even if it means murder and state-sanctioned terror.  The Party is secretly thrilled that the US saw a downgrade the other day.  They relish the thought of a new recession because it positions them to take control.

 

The Decline of a Civilization

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Civilization in decline is a very real thing. Civilizations rise and fall in their world standing, power shifts, the strength of nations ebb and wane as time passes. Moral and ethical decay accompany the slow collapse of nation states and this phenomenon is something the far Right has been harping on for years.  Unfortunately, the Right is the cause, not the solution.  And the economic downgrade on the S&P is sign number one.

The economic downgrade is not a reflection of the so-called moral liberalization of the US.  While the Right talks about “moral decline,” they seem incapable of addressing the underlying truths of cultural and political systems throughout the ages.  Quite simply, feeding people, improving the quality of life, sparking innovation, etc. is THE moral imperative of a representative government.  It is NOT to fixate on cultural changes they deem unworthy of their dictatorial interpretation of God, the family and the state.  Civilizations, regardless of the diatribe they put forward, do not fall because of gay marriage and birth control.  Every great revolutionary movement and/or period of chaotic turmoil that engulfs a nation is inevitably tied first and foremost to economic decline, the disparity of wealth between rich and poor and fanaticism brought about by fanatical groups bent of controlling the populace through a mix of fear and exploitation.  In other words, the arguments of those responsible for the economic slipping of the US don’t stand up to scrutiny, either in the current state of the world or from a historical perspective.

Britain, Germany, France, and Singapore – all of who have AAA standing – are cases in point.  All have universal healthcare, taxes that are equitable and a social system that is simply more tolerant when addressing issues of sexuality and religion.  While the EU certainly is dealing with its own economic woes, they are significantly more stable than the US and better positioned to grow in the years to come.  Unlike some of our governors, they are focusing on resolving their problems rather than calling for God (and a deity that excludes Jews, Muslims, Catholics and Hindus at that) to intervene. The focus for those nations with AAA standing is to generate revenue while reducing spending. The result is not perfect, to be sure, but they are still better situated that the US as it flounders in deadlock brought on by Tea Party lunatics whose understanding of economics is rooted in a bizarre mix of fundamentalist ideology and a grotesque bastardization of Adam Smith’s writings on free markets. It is rather like Hitler coopting Nietzsche.  But then, their policies aren’t meant for everyone.  No, they are meant to increase the power of the few, exclude the bulk of the population from economic and political discourse, instill fear in an increasingly entrenched subservient socioeconomic class and kick the “weirdoes” into line.

The decline of Rome, Persia, China (though once again in ascendancy) were all tied to fanaticism, backward-looking social policy and economic collapse.  The rich are exalted and encouraged to exploit the poor, tacitly or otherwise.  The keys to the kingdom are handed to the supposed “barbarians” by the very people who belittle them as being morally and culturally inferior.  And this is by no means an issue of ancient history. Nazi Germany, Stalin’s Soviet Union and Pol Pot’ Khmer Rouge are all modern examples of what happens when the lunatic fringe is given charge.  And while all of these groups responded to economic collapse with hyper-taxation, so to speak, the underlying conditions that led to it were the same as what we see before us now – economic collapse brought on by mismanagement and unstable governments.  The response was a factor of the time, just as the Tea Party mentality is a US response to our economic chaos.  Unfortunately, the results are ultimately the same – further economic decline that leads to complete economic reorganization, abuses of power by a fanatical elite and the scapegoating of populations who don’t tow the line. So much for the moral superiority of our would be paragons of Truth.  It is simple.  The mad have taken over the madhouse and they can’t seem to understand that their behavior is making things worse (and will no doubt continue to do so).

So what it means to business?  Everything.  Innovation will continue to falter, the gulf between the rich and poor will lead to further social disparity and the economy will continue to deteriorate.  It doesn’t matter what you produce and how you market it when there is no one there to buy it.  Free enterprise is crushed rather than encouraged.  The entrepreneurial spirit is dashes when people eventually begin to buy into the lies propagated by people more obsessed with their own power and station than the conditions of the country in which they live.  Can feed your family?  It’s because of homosexuals.  Can’t treat your child’s cancer?  It’s your own damn fault.  Roads falling apart and bridges falling down?  The private sector will right the problem.  Now get back to work scrubbing the floors. Our downgrading by the S&P is not a reflection of the moral decay espoused by the Right, it is a reflection of their own moral lacking and completely misguided understanding of economics.  And it reflects, I believe, much harsher times ahead.

4 More Years?

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As we prepare for another kick to America’s economic cajones, I thought I’d post a few interesting stats.  No, this has nothing directly to do with anthropology, business-focused ethnography, design, etc.  It does, however, deal with business and where we want to be in the next decade.

Following years of declining wages and rising poverty, the Republicans finally crashed the American economy in 2008.  67% of voters say that an agreement to raise the debt ceiling should include tax modifications (either as increases or in the form of closing loopholes) for the wealthy and corporations, not just spending cuts.

The Dow Jones industrial average increased by 29.5% in the one-year period following Barack Obama’s inauguration on Jan. 20, 2009—the third best showing, going back 110 years, for the U.S. stock market in the 12 months following the inauguration of a new President. Franklin Delano Roosevelt’s first year, which began on March 4, 1933, tops the list with the Dow increasing by 96.5% over the next 12 months. On average, Presidents in the Democrat party saw an average one-year gain of 24%, while Republicans averaged 1%.

What does all of this tell us?  Well, it tells me that the people clamoring for zero regulation, perpetual tax cuts and no government involvement in anything are simply inept when it comes to managing an economy.  It also speaks to the power of the party’s myth — tell someone you’re an expert long enough and people will buy into it.  Preach free enterprise even as you attack the products that your moral extremists find objectionable (alcohol, non-religious media programming, violent video games, etc.) and people with small minds will rally to the cause.  Contradictions and dogma are easy enough to sell when you have the right spin doctors.