Monday, September 8, 2008

The economy, more Lipstick on a pig

One thing I have never understood is how giving relief to corporations translates into relief for the middle class without regulation from the government. This is a belief usually toted by the right and supported by Senator McCain

One concept I don't understand is why people feel giving corporations tax breaks and benefits will stimulate the economy. This is nothing new that McCain is pushing. It was called "Reaganomics" by Reagan and "Trickle Down Economics" by Bush senior, Bush Junior would have called his tax policy something trendy had he been clever enough. But anyway the basic premise is this: You give big companies more money they will in turn create more jobs and the economy will grow. Now each administration of the three examples that I just mentioned: Reagan, Bush I, and Bush II all had recessions during their terms. Why is that? If easing the load on the top was better for society shouldn't each of these administrations have been the most profitable periods in history?

The answer is simple trickle down economics as a theory maybe sound, but so is communism as a theory. The problem is it is never implemented in its theoretical form.

To put it simple for those of us who have siblings lets say mommy gave oldest brother $100 and said give your younger brothers some without saying how much you had to give them what would happen? In theory you would split your good fortune equally, but in reality what would probably happen, if you didn't pocket the whole thing, is that you would give your sibling the smallest amount you could without them telling mommy. Now if they never knew you got any money they would be happy for whatever you gave them.

Same thing happens when you give industry breaks with the expectations it will improve society. Companies get to increase their profits, the shareholders get more profits and what do we get? We get to watch companies and shareholders increase their profits. Companies have already figured out in times of economic hardships they can increase productivity with out increasing work force (i.e production cost) by just making you work harder. They know when times are rough people are too scared of losing their jobs to complain. What's more is they don't have time to complain thanks to the extra work they have to do. Jobs still get shifted over seas because they can. Why would they reduce their profits by paying you minimal wage when they can go where there is no such thing? More money in big brother's pocket (and you thought big brother was the government.)

Now on the other hand if you strengthen the middle class you create more consumers, thereby increasing demand for products and services which in turns increases the need for companies to expand to meet this demand by creating jobs. Simple huh, makes common sense to me.

I started writing this post obviously before the big news of the markets crashing. Now McCain is all for governmental regulation of the market. I wonder if I would have never published this at all would he have changed his mind on Top down economics

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