Post by unlawflcombatnt on Jan 21, 2006 14:32:50 GMT -6
Some have asked the question: "Why do Republicans cut taxes without cutting expenses?" This is an excellent question. Republicans claim it will stimulate economic growth. In fact, it's doing the opposite. Cutting taxes on the top 2% is supposed to increase investment. But there's a catch to this "theory." There needs to be something to invest in. It's only benefit is to increase the SIZE of our industrial capacity. But current industrial capacity is under-utilized. Investment to increase the size of an already underutilized industrial capacity makes no sense. There's simply no current benefit to increasing its size. As such, there is no current benefit to increasing investment.
We need to increase the % UTILIZATION. Investment supposedly increases production. When it does, it does so by increasing industrial capacity size. It has little effect on percent utilization. Consumer DEMAND for production is what increases utilization.
In order for production to increase long-term, there must be an increase in production DEMAND. Again, investment has little effect on demand for production. If consumer production demand is stagnant, most of the tax-cut produced investment capital will sit idle. If it goes anywhere, it goes into over-valuation of the stock market, over-valuation of real estate, increased business "cash-on-hand" accounts, foreign bank accounts, CEO bonuses & salaries, stockholder dividends, and last, but not least, Republican campaign contributions.
Meanwhile, the inflationary effect of these tax cuts reduces spendable consumer income, reducing consumer spending. This REDUCES the very "production-demand" necessary to stimulate production, and reduces job growth for workers to provide that production. Thus, the top 2% tax cuts are not only unhelpful, they are detrimental. They slow economic growth. Their inflationary effect reduces inflation-adjusted consumer spending, which reduces the demand for production. Financial analysts have stated on many occasions that investment capital is plentiful at present. Consumer income is not. Consumer income limits consumer spending, as well as the production demand it creates. High-end tax cuts are not helpful at present, because increasing potential investment capital when it is already plentiful is of no benefit. It's NOT growing our economy. It's shrinking it, due to the inflationary reduction of "real" wages caused by these cuts.
It's worth mentioning here that CONSUMER SPENDING is 2/3 of economic activity. It's the largest component of the GDP equation, where
GDP=ConsSpen+Invstmt+GovSpen+TradeBal.
It makes a lot more sense to try to increase consumer spending at present. It is a larger component than "capital investment," and it is in far shorter supply. We need to "change-the-course" back to fact-based economic reality, instead of "faith-based" economic mythology. Investment does NOT create jobs. In contrast, demand for production DOES create jobs.
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Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.
Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.
We need to increase the % UTILIZATION. Investment supposedly increases production. When it does, it does so by increasing industrial capacity size. It has little effect on percent utilization. Consumer DEMAND for production is what increases utilization.
In order for production to increase long-term, there must be an increase in production DEMAND. Again, investment has little effect on demand for production. If consumer production demand is stagnant, most of the tax-cut produced investment capital will sit idle. If it goes anywhere, it goes into over-valuation of the stock market, over-valuation of real estate, increased business "cash-on-hand" accounts, foreign bank accounts, CEO bonuses & salaries, stockholder dividends, and last, but not least, Republican campaign contributions.
Meanwhile, the inflationary effect of these tax cuts reduces spendable consumer income, reducing consumer spending. This REDUCES the very "production-demand" necessary to stimulate production, and reduces job growth for workers to provide that production. Thus, the top 2% tax cuts are not only unhelpful, they are detrimental. They slow economic growth. Their inflationary effect reduces inflation-adjusted consumer spending, which reduces the demand for production. Financial analysts have stated on many occasions that investment capital is plentiful at present. Consumer income is not. Consumer income limits consumer spending, as well as the production demand it creates. High-end tax cuts are not helpful at present, because increasing potential investment capital when it is already plentiful is of no benefit. It's NOT growing our economy. It's shrinking it, due to the inflationary reduction of "real" wages caused by these cuts.
It's worth mentioning here that CONSUMER SPENDING is 2/3 of economic activity. It's the largest component of the GDP equation, where
GDP=ConsSpen+Invstmt+GovSpen+TradeBal.
It makes a lot more sense to try to increase consumer spending at present. It is a larger component than "capital investment," and it is in far shorter supply. We need to "change-the-course" back to fact-based economic reality, instead of "faith-based" economic mythology. Investment does NOT create jobs. In contrast, demand for production DOES create jobs.
_____________________________
Investment does NOT create jobs. It only "allows" for their creation. Increased Demand for goods creates jobs, because it necessitates hiring of workers to produce more goods. Investment "permits" job growth. Demand necessitates it.
Building a factory does NOT create jobs. Demand for production DOES create jobs. Goods are not produced if there is no demand for them. Without demand for goods, there is no demand for workers to produce them. Without demand, no amount of investment creates jobs.