Economic theory, which is basically bullshit, is often coached in mathmatical terms to disguise the fact that it is pure bull. However there are some very simple concepts which make very good common sense, and if one looks at that, instead of how to use current data to justify one’s action politically, one comes up with obvious surprising results.
Labor Demand < Labor Supply
That is why so many people are out of work. Now here are the players.
- Workforce Market
- Commodity Market
- Foreign Investments
- Financial Markets
Government is our last option.
So our workforce if we compare the same counting today as was during the Great Depression, is running at 85% capacity. Meaning 15% are unemployed.
Going down the list then,
Corporations are at their best ever. Corporate profit the highest percent of GDP ever.
Financial Markets also are at their best ever. Dow Jones is at record highs.
Commodities are performing well, all indications are of a long term bull market.
Foreign Investment is at an all time high. Never have we had this much outside money.
Real Household Income is declining. We are headed downwards and are currently tied with 1994 as it rose out of the 91 recession, and prior to that, tied with 1984 as we were coming out of the 1982 Recession.
Bottom line with government out our equation, we have the investment side of our economy all doing spectacularly well, and the household side going down.
Proof enough that the free market system, or capitalist system does little for the good of any nation, just as little good it did prior to the legislation that became law after the crash of 1929 when Democrats swept the Federal Government.
Government is the great equalizer. For a fix, government needs to step up and side with We the people (or households), and as a referee would in any sporting event, make the playing field fair.
It can to it in either of two ways. It can impose necessary restrictions upon businesses which increase their demand for labor at the expense of their corporate profits. For example, pass legislation to imprison CEO’s for malfeasance. Only then in order to keep their heads out of hot water, they hire environmentalists, social engineers, accountants, and other highly trained personnel whose prime function is to make sure the company is not doing anything shady.
It can also split the corporations into multiple smaller ones, each now requiring a new president, several new vice presidents, new HR’s, new financial planners, etc and with one fell swoop, increase the demand for labor. This too, comes at the expense of corporate profits, which are currently huge primarily due to economies of scale.
And it can indirectly create demand by raising taxes. When taxes go up on profit- earned, less profit gets earned by design; less “reported” profit, less money handed over in taxes.. Meaning the bulk of that money is now spent being reinvested into the business just so it can’t be taxed. Building projects, higher wages, more R&D gets spent into the economy, This too, comes at the expense of corporate profits on the books.
But that is why higher tax rates are actually the best alternative. Higher tax rates tend to create less taxes, so government still needs to stay small. The revenue collected is lower for the simple reason that if there was absolutely no tax, all the money earned would belong to me. But if more of what I earn goes to you, then I will figure out a legal way to keep more for myself, and report less. So whereas as tax rates go up, total tax revenue comes down; the net effect is that more money goes into our economy thereby creating more demand.
The demand for labor then gradually rises to equal the supply and if it continues on its upward path, yes, yes, so there are more jobs than workers, then competition begins pushing the individual wage rates higher.
Which adds to the increased demand.
Using tax rates works best for now instead of the government interfering with day to day operations of all businesses, it actually creates an environment where each business can operate independently to its own best interest, and as they do, the demand for labor rises even more…..
Anyone who argues for less government input into the economy is in the wrong century and can’t read economic figures that are plain as day. So how does one interpret the cries for less regulations that are hurting corporate profits? Easily. One realizes that sooner or later corporate profits have no choice but to fall, so our household income can increase. Loss of corporate profits is a “good thing”.
One should mention in the same breath, that labor’s percent of wages is deteriorating all across the world. It is a world wide phenomenon. The answer is simply that deference of all governments over the past decade and a quarter, has been given to those in charge of investment.
Policies favoring Investment must now take a back seat to those which put people back to work, which if done, raise the incomes of all of us… Even those of the 1% , though not as much as they have been lately been accustomed. But everyone still benefits.
Raising taxes is where we need to go.