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The U.S. economy continues to strengthen. Last week, we learned that 209,000 jobs were created in July. This increase represented the sixth consecutive monthly payroll gain of more than 200,000—the longest such stretch since 1997. Over the past 53 months, our private sector has produced nearly 10 million new jobs. The unemployment rate has fallen nearly four percentage points from its peak of 10 percent in October 2009, dipping to a six-year low of 6.1 percent in June… With real GDP having grown at a strong 4 percent pace in the second quarter, the economy is now 6.6 percent larger than it was before the Great Recession.

As we know, the economy is not great yet. One of the major reasons can be see by the lack of demand for large base items that comes from the lack of spare change among many people resettled into new jobs now paying less than their old jobs.

Take recreational boats… It does not make sense to increase production of boat building when those extra boats will not be sold because there are not enough people with enough money to buy them… There are plenty of people; just not enough with the sufficient funds they once had left over to pay for that boat on the lake…

boat sales

As you can see, despite the positive job data, we have a distance to go before we reach the esoteric heights where Americans are confident enough to spend money on items requiring additional manufacturing jobs to be created…

Essentially people need to be paid more so they can buy more.

So how do we go about that? Write wages in stone? That doesn’t work, it’s been tried. If wages are not marketable, then they become an entitlement. If I can’t sell myself to a higher bidder, then my personal expansion is out of the question. Likewise, I may be very productive, and that covers my coworkers who are not productive at all. If one gets paid for only showing up, over time, that is all some will do. So writing wages in stone as a policy is out.

Economic graphs made across history show us an interesting trend. Wages were flat though the 1800’s. 100 years of flat wages. When the income tax went into effect, the first rise began. When it was cut, the wages declined. Then with the New Deal, with its increased rates, they again soared. When income taxes reached near 100%, national unemployment was in the negatives because of the very high number of people working two jobs. Only when taxes were cut in ’88, did wage rates begin to fall, to rise when taxes were raised in ’92, climbing all the way until the W. Bush Tax Cuts went in, and they’ve been declining ever sense…

Why? It is debatable because it is a task so huge, that mining data is impossible. But we tracked. It happened. As is the usual human tendency, even when it is something we don’t understand such as patting Betty Grable’s pin up’s bottom every time you fly up to engage the enemy, each time we are successful, we keep doing it…

In theory, if you have money as an employer, which is about to be taxed and handed over to Uncle Sam, putting it into your business makes more sense than handing it over carte blanche. At least in your business, you still have control over it and can steer it in directions you desire. That includes paying ones people. “Hey, Boss? I’ve got a baby on the way, and my wife can’t work. I’ve done a lot for you, can you spare more money a week?” “Might as well,” he says, “I don’t get to keep any of it; Uncle Sam takes everything extra I make”..)…

Which explains why the economy only began to really grow, after January 2013, when the Bush tax cuts on the top .5 of one percent were pushed up to 40% from Bush’s 35% rate…. That extra 5% was the catalyst for the growing economy we see now.

Compare what would have happened if Obama had lost in 2012…..

Romney’s budget plan would lead to a net loss of 554,000 jobs by 2014

A budget revenue-neutral, would lead to a net loss of 1.9 million jobs over the next two years, largely because of deep spending cuts, the report found.

The weaker job growth and outright job losses under the Romney plan are driven by his proposal to cap government spending at 20 percent of gross domestic product (GDP), a move that implies very large cuts to overall spending.

And just to put a finger on how well this really is? Here is the growth outlook posted by economic think tanks leading up to the election of 2012. One must bear in mind they are probably going to be politically inflated considering when they were announced….

“The budget plans put forward by Barack Obama would lead to increased employment of about 1.1 million jobs in 2013 and 280,000 jobs in 2014, relative to current policy.”

Where as actually, we outdid that. 2.2 million new jobs in 2013…. and so far as of July 2014, this year has already grown…1.6 million brand new private sector jobs…

Those calculations, once poo-poohed by Republicans as being pie in the sky and based on myth, have simply been crushed…

Raising taxes on the top earners… works.
Tax Cuts Don’t (just ask Kansas, Wisconsin, Pennsylvania, Florida, and Tennessee.)

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Kansas elected one of the most conservative people alive as their governor. Sam Brownback. Today, Kansas’s bond rating was dropped a level due to increased income tax cuts. Riding in on the promise that cutting taxes creates prosperity, Brownback has found that isn’t necessarily so. Kansas is lagging in comparison to five nearby states in nearly a dozen key measures associated with employment and business expansion…

Improvements in the state’s economy trails growth in 11 of 12 categories compared to activity in the six-state region of Kansas, Missouri, Colorado, Nebraska, Oklahoma and Arkansas in the areas of private business establishment, employment, population, gross domestic product, personal income and private industry wage level. These measures were among the highest priorities of Brownback and his council.

Decline comes from cutting taxes and pushing a pro-business agenda. And the answer why is pretty simple. You see, when you just give people money they don’t have to work for, corporate welfare, they become lazy. Why should they open a new plant? They can just buy out a competitor with all the new money they have, pay for it by cutting staff, and increase margins.

Cutting taxes provides incentive to cut jobs, not hire new ones. Business-television salivates when companies buy each other out. (Ok, their stock do prices rise). But once the acquisition takes place, the firings begin; half of the corporate presidents have to go; half of the vice presidents have to go; half of the secretaries have to go; half of the administration, has to go.. So too much money handed to businesses, cost society jobs. Someone gets wealthier, but they don’t spend that wealth, they just park it. And who can blame them. With stocks rising due to the Fed’s free money, If one can make 20-25% per year as in 2013, why would they invest in a plant that only breaks even 10 years from now?

Now, on the other hand, in those states with higher tax rates,.. if you keep your money, you lose it… to taxes. That provides incentive to bury your money inside your own business. Bury it as in making necessary repairs, upgrading, expanding, research and development, all of which increase the worth of your business, should you ever sell it. In other words, businesses do not serve their first role as a primary means to make money, but instead they become the way to hide or bury ones money and shield it from taxation and store it for when you might need it at some later date..

Consequently, when you spend in Research, and hire all bright people, you just might stumble upon a new concept that is also economically viable. Across this past decade of Bush tax cuts, research into cures for diseases have dropped, research into making better products have dropped, and research into developing new ideas, have dropped…. Across America, business costs allocated to research and development have been scaled back.

This hurts all of society for the gain or one or two people at the top. Unless reversed, we too face the prospect of Kansas who elected a Tea Party Governor as did Pennsylvania. In both cases, doing what the Tea Party says should be done, not only did not work, but worked the opposite way than it predicted. Cutting taxes and deregulating businesses, hurts the economy more than it helps…

Kansas, Wisconsin, Florida, Pennsylvania, Tennessee, Ohio, formerly prosperous, all elected Tea Party Governors… All are growing slower out of the recession than surrounding states who didn’t…

The point is, voters gave several states experimental leeway to try their new approach in the 2010 elections… every one of those states has failed. For those of us who understand the differences between myth and realities, this comes as no surprise. For the rest, you should be asking yourself if we can truly afford another 4 years of pursuing myth followed by finger pointing over the failures each myth-pursuit has caused, or if not,… vote for someone who will simply raise taxes on the rich. Do that, and the boom times return…..

(btw, Delaware Growth was just ranked 13th by Business insider (better than 37 other states)