Monday, April 18, 2011

Who/What creates job's

One of the strongest arguments form the right is the cut taxes for the rich because they create jobs. It makes sense on the surface, if Joe Ceo has to pay an extra million in taxes he cannot use that money for other things like pay salaries for a few extra workers. But there is always more to the story.

Watching an interview with the president of the AFL-CIO reminded me of what really drives companies to hire employees, and while the CEO does hire and does help the economy out by hiring, this idea is just a reaction to other market forces. Mainly demand.

A company is only interested in hiring if they have an increase in demand that they cannot meet, so they hire someone knew, meeting the extra demand, thus making them more money. But when times get slow, demand slows, why do I, as a CEO need to keep extra people around. You can give me all the tax cuts and interest free loans in the world but why would I hire someone to make something that I cant sell? Why would I hire a new home salesman if homes are not selling?

According the AFL-CIO consumer buying makes up 72% of our economy. So to get our economy going we need to be buying things. If we don't work we cant buy. If you give corporations billions in tax cuts and free money they still will not hire anyone because no one is buying. But if you give everyone who is out of work billions they will buy and than companies will hire.

But our leaders are not interested in clever ideas that will actually work, and solve large issues of the day. They would much rather throw money at the leadership/wealthy class, than give it to the people that can fix this economy. The Federal Reserve Bank has already given the large banks and other large corporations access to trillions in interest free loans, yet they are sitting on the money, they will not invest it because there there is no demand.

Its almost like the middle class is the secret to fixing the economy but our political leaders cannot get them involved, because they do not support political campaigns in huge amounts. And the ones that do support the campaigns in large amounts are constantly whispering in our leaders ears, "give us more money, give us more tax breaks, give us less regulations", a steady drumbeat, a steady mantra, like the march into the Iraq war.

But after 30 years of tax cuts for the rich and less regulation for corporations we have a growing Oligarchy and shrinking middle class. We need strength from both of these groups to be strong nation.

The same thing happened with the economic crash of 2008. A bubble built around home mortgages and when it popped there was so much leverage on Wall Street that the stock market crashed, (leverage meaning companies would put up 1 million dollars as collateral and bet 100 billion dollars on mortgage stocks), when the banks crashed loans became hard to find and companies went under, jobs were lost and people did two things, stopped paying taxes and asked for unemployment benefits, this put a strain on our federal and state budget.

So how would you fix this? Would you create jobs? Bail out Wall Street? Ball out homeowners about to go under? Help everyone?

Our leaders chose to Bail out Wall Street and what they are doing now, cutting our spending.
Wall Street is now back on top making more money than before the crash and since no one went to jail for all their illegal activity it now says that even when you take our nation to the brink of collapse you will still highly benefit from it. They are sitting on trillions in interest free loans and refuse to loan it out, or help homeowners facing foreclosure. This has only helped part of our economy.

The plan I like that no one talked about in DC was to go to the point in the economic food chain where this whole mess started, the home mortgages. You give them the money, with some type of string attached, and they have to use the money to pay their mortgage. Since this started the collapse this will end it, because the money will make its way through the whole food chain.

The banks will get their money back in both scenarios.But, in the one chosen by DC we have the money starting and ending with the banks resulting in one part of the economy recovering and the rest not. In the other we have the money hitting every spot in the economic food chain and all areas recovering.

It reminds me of a nature channel documentary I saw about Yellowstone. When it was being populated with animals they wolf, the main predator of the landscape was left for last. And before they introduced them the rangers began to have problems with the landscape. Parts of the plant life were dying. This lead to other animals dying who needed the plant life. And wouldn't you know it was all because of the wolf. Once the wolf was introduced to the land they began to hunt the dominant herbivore, elk or something. When they elk were not hunted they stood in one area and ate all the plant life and moved on, but now that they were being hunted they grazed a little and moved on. This allowed the land to recover.

The Republican Party today would have been against the Wolf being brought back to the landscape, they would have argued that it is an aggressive hunter who would have further disrupted the landscape. And they would have benefited one animal to the detriment of the whole landscape.

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