Watch this interview on Bloomberg with Gary Burtless from Brookings and Bill Beach from the right wing Heritage Foundation to see a debate on the causes of our unemployment. For Heritage the problem is that corporate taxes and concern about future regulation are what is preventing our economy from improving.
But Burtless has a question in light of a couple of facts. Corporate profits as a share of income are at a 60 year high. Corporate taxes are near a 60 year low. Why would we conclude that less taxes and regulatory conditions that improve profits would make any difference?
And if future regulations are a concern, why not hire now in this low regulatory environment. If the regulations finally come that's when you scale back labor. You get while the getting's good.
The problem is lack of demand. Companies don't see that they need additional staff to meet demand and they don't see much by way of future demand. That makes sense. People are unemployed. People don't have spare money. If there were more demand then companies would hire. Instead they sit on their cash. That's rational.
First off, let me be clear that I disagree with the Heritage foundation. I don't think that corporate taxes and a fear of uncertainty are the main reasons for high unemployment. With that said, I think you unfairly characterize their views.
ReplyDeleteRegarding corporate taxes: let's not forget that the United States has one of the highest corporate taxes in the industrialized world. That is what matters. And it matters more in an environment where governments are intentionally trying to create demand (fiscal stimulus). Remember how Krugman said that the recovery plan has to be a WORLD recovery plan - in other words, if the USA uses fiscal stimulus and Europe doesn't, that makes our fiscal stimulus weaker, as some of it would simply leak to Europe and help their economies - at our cost.
Our higher than average corporate taxes puts a wall between European fiscal stimulus's and our increased demand. While I don't think it's a dominant factor, it certainly is a factor.
Regarding regulations, you write: And if future regulations are a concern, why not hire now in this low regulatory environment. If the regulations finally come that's when you scale back labor. You get while the getting's good.
Another example of you not knowing much about economics/business. For one, think of employees like expensive machinery - you don't invest in them unless you think LONG TERM your profit margins will increase. Of course they don't need more employees now, demand is low - but increased employees are more often seen with LONG TERM growth, not short term.
And this is precisely where Obama, and ObamaCare, and all his other large interventions in the economy scare people. It's difficult to predict long term growth in these environments. Again, it's certainly a factor.
Lastly, if I had to guess why unemployment is so high, I would put a large percentage of the reason on this.
Your repeated charges of ignorance on my part should just stop. Last time it's because you didn't read properly. This time it just makes no sense. You can't know that I'm unaware that startup costs of new employees can be significant. The fact that I didn't mention it in a certain context is not proof that I'm unaware of it. If you want to raise it, fine. Claiming I'm unaware of it is just false and absurd. Who doesn't know that? I could likewise respond to everything you say and mention something you didn't say and act like this proves you to be ignorant, but it's silly. Startup costs and future regulations are simply contervailing forces in this context.
ReplyDeleteYour link doesn't explain the problem at all. High health care costs? That's another way of saying expenses are too high, meaning profits aren't high enough to justify hiring more. Nonsense. This is record profits. I agree that health care expenses harm profits, and I'd like to see them come down with single payer or a public option, but if right now we had single payer and health care costs were cut in half that wouldn't make much difference. It would mean companies could throw more profits on the pile of their existing cash, which is at record levels. Your seem to be suggesting that they aren't sitting on the kind of cash they need because their health care costs are too high. They have record cash filling the coffers and you're suggesting they need more and that would fix the problem. Why? It wouldn't hurt to fix the health care problem for usre, but the key point is they right now have record profits. The major effect of fixing this problem is increasing their profits.
Although you may not appreciate the directness of HP, he has an extremely valid point - like Obama you have never had to write a check as a business owner and I would be willing to bet you never will.
ReplyDeleteThe start up costs and regulations are crippling - period.
What I get from HP is insults based on illogic. It's annoying. And a good way to make sure a conversation starts off on a crappy tone instead of a productive tone where mutual learning occurs. I wish he'd make his points without the insults. Then I'd refute them like I normally do.
ReplyDeleteI mean, it's just pure illogic to say I'm ignorant of start up costs. By this logic Gary Burtless from Brookings must be unaware of the fact that start up costs exist. I'm just expressing what he said here. If you don't say it then you are ignorant of it in HP's world.
You're also being illogical. It doesn't matter that I haven't written the checks as a business owner. You think this is some sort of ace in the hole that makes your opinions correct. People can still be wrong on these matters even if they own a business. A lot of business owners agree with me and not you on these points. Being a business owner doesn't make you right.
I work in hi tech engineering. I understand start up costs. In fact I have a pretty good idea how much it involves in my field, and it's substantial. The fact that I don't write the check doesn't change the fact that I understand it and understand the implications.
Do you think a man is entitled to an opinion on abortion? Are you entitled to an opinion on wars even though you've never fought in one? You don't know what it's like to be in extreme poverty and old. I guess you should have no opinion on Social Security. You should have no opinion on multi national corporate action since it starves indigenous people and you've never been a starving indigenous person. To say "You're wrong because you've never experienced it" is totally false. In your world it's a way of discrediting my positions without actually interacting with the facts. Deal with the facts. Are regulations a problem for hiring people? Not if I have more cash than I've ever had and higher profits than ever. If I'm sitting on enough cash to hire 1,000 people, but I don't see demand, then why would I hire? If on the other hand 100 employees were required to meet tougher environmental regulations and those regulations are coming down the pipe, what would I do? I'd hire the 100 people. The regulations would cause hiring and reduce unemployment. Refute that if you can. Telling me I don't own a business changes nothing.
Here's the reality. Corporations want more money. More regulations means they make less profit. So they don't like them. And they pretend that these regulations compel them not to hire. To convince others to go along with laws that put more money in their pockets they pretend that these regulations prevent you from hiring. They don't. They cut in to the bottom line. That's what they don't like.
Okay - fine. You don't want me to read into your statements, then explain further for me.
ReplyDeleteWhat do company profits have to do with hiring more employees? Please elaborate further. I think I know what you mean...but if I assume so, you get angry. So I'll let you explain.
Oh and, btw, I am still wondering where my post even mentioned - nor discussed, the topic of start up costs??? You keep saying I did...but I didn't.
ReplyDeleteBut hey - unlike you, I won't get on you for making assumptions.
I don't get mad at you for misreading. You do that all the time. Almost every time. I get made at you for misreading, then basing insults on the misread. I'm saying even if you read me properly, why insult? That ruins what could be a productive exchange.
ReplyDeleteYou want an open ended discourse on the relationship between profits and hiring? I suppose if I don't say certain phrases you are thinking of this means I'm ignorant. Seems pointless. I've made my points. If you can refute them and want to feel free.
Normal internet communication requires the presumption of good faith. In other words, if something isn't clear make charitable interpretations. Even if I don't qualify a statement 15 ways to cover every nuance, this doesn't necessarily mean I'm unaware of it. You do the opposite of charitable interpretation. Find enough wiggle room to interpret my statements in the most ignorant and ridiculous way possible, then heap on insults on that basis. It's really a waste of your time and mine. It's too bad because I'd much prefer to learn from you.
Where did I insult you? I re-read my post. The most that could be said as an insult is "Another example of you not knowing much about economics/business". That's not an insult man. Unless you honestly think this is your area of expertise. Do you?
ReplyDeleteIf you responded to my posts on foreign policy with "Oh, this is another example of you not knowing much about foreign policy" - I wouldn't consider it an insult. I DONT know much about foreign policy. You pointing out the obvious.
I thought I was doing the same.
But look at my dilemma. I've asked you to elaborate further on what you mean. So that I DONT have to assume. You refuse to. This isn't the first time. So of course I stopped asking and just assumed. But then you get mad at that as well. You say I assumed wrong. So what do I have left to do? How do I engage your points?
I even quote the relevant point and make an argument.
Let me see if I can get you to see my point from a different angle:
ReplyDeleteWe both agree that the BEST thing the government can do to create jobs is to reduce the payroll tax on future employees. Right? Remember, even CBO agreed with me.
If this is true - how does it fit into your whole "companies have enough profit already" argument above?
And if it doesn't fit - who do you think is wrong? Your economic understanding, or the CBO's?
About poverty Jon - I went through it. My father was not always a responsible working man - he had several stints of 90 days off without pay and once he was actually lay'd off (fired for the most part) for more than one year. I was young, but remember us living in an RV and on $50/week. Additionally I have nearly an entire side of my family that are part of the parasite class. I see - first hand - that side of the ledger, I am speaking from some level of experience. No I have never been so poor that my life was in danger, but I have experienced what it was like to wear the same pair of jeans - only pair of jeans everyday for a year.
ReplyDeleteSame is true about business, I do not know it all by any stretch but writing checks and being responsible for others does matter - matters a lot. I started 2 business, have been involved at the ground level for 2 more so again speaking from experience matters.
I fully accept your opinions and welcome them - I think HP does as well, but you have to understand that you take a brutally hard line stance that you are right and we are wrong - that is why some of our conversations get salty at times.
For instance your right about record profits for corporations - it is a fact, but it is also a fact that there are 10 new regulations put in place per day that costs companies billions, we have a President and Presidents that target segments of business per his/their beliefs and for Obama he continues to want to spend more and more money that he does not have. Businesses and the wealthy are the enemy and they are simply going to sit out during his tenure. You always laugh at me when I talk about Atlas Shrugged or at least the concept - this is a less than silent protest to the agenda. Businesses have too many unknowns and that is a major factor here.
I don't have to refute your position with facts other than what is happening - if the regulations and policies were sound then there would be hiring - that is the facts I am using here.
My company makes decisions everyday to protect our company against this agenda - we could expand, but it would cost us too much and expose us too much.
Jon it is back to common sense my friend - if companies are not hiring during record profits then you have to say that the policies in place are a major part of that and needs to be changed to stimulate hiring.
One last comment about business Jon. The simple idea that if you and the Left don't like the profit margins gives you the right to step in and force business to do what you want by law or regulations is really the issue for me. Why target those successful business versus giving opportunity for new businesses in that field to compete?
ReplyDeleteAnother words - if you feel that an area of industry is too profitable and that they are holding onto profits versus hiring then make it easier for a new company to get in the game and hire those qualified people that can't get in with said company?
Instead of focusing on ways to take (what is not yours) from those profitable companies why not look at ways to allow new companies to develop in that field?
This is where the Left gets in trouble - forget about the corporate jets and taking more from the rich. Just make it easier for a new company to start up and hire people in that industry.
I don't respond to every comment on foreign policy with "This is another example of your ignorance" because yes, it is insulting and second it does nothing to further the discussion. What I do if I think you are unaware of a fact is I state the fact and make you aware of it. OK, maybe it's coming off to me in a way that you don't intend. I'll accept that. But I'm going to ask you to refrain from the stuff that focuses on me personally (what I'm unaware of) and focus instead on facts and arguments. Those statements are "to the man" (in Latin it's ad hominem) and for me they are perhaps easily interpreted in a very negative way.
ReplyDeleteHere's how the payroll tax fits into my paradigm. What is necessary to turn our economy around is an increase in demand. The poor have no disposable income. Let them keep more of their money and they will spend it, which spurs demand, which creates jobs.
The rich in our society today are not going to spend the extra money you give them. Cut corporate taxes or reduce health insurance costs. Cut environmental regulations. This shouldn't be expected to change anything since they already have a lot of disposable money. Giving them more won't incline them to spend it. Give the poor more and they will spend it. The spending creates the demand that creates the jobs that reduce unemployment.
That's why it's important to recognize that tougher environmental regulations on fossil fuel companies right now will actually reduce unemployment. They have to pay to employ the people needed to comply with the regulations.
Here's what would also work. Take money from the rich and pay people to dig ditches. When those ditches are dug pay the same people to fill them in. That would actually spur demand by putting money in the pockets of the poor. Basically that's welfare. Welfare right now would spur demand and reduce unemployment. Of course that's a stupid thing to ask someone to do. Better to have them do something productive. But digging ditches (or sitting on their butts for that matter) would actually help our present situation.
Chad, sorry if I've come off prickish here, and I can see that you are making efforts to be charitable and I appreciate that. HP's initial comment just pissed me off a bit. Maybe I'm taking it the wrong way, but it's so common that at this point even a little thing grates at me. I know I come across like those that disagree are morons and I need to work on that. I'm going to reply to what you said later and I'll promise not to be an ass hole.
ReplyDeleteOkay - no more economic ignorant comments from me. My bad. But I really didn't think it annoyed you (you have alot of weird pet peeves, my friend). I meant it as "see, here, it's these type of comments that make me think your economic understanding is low". Since you have asked me before where you have made those comments. But fine, I'll stop.
ReplyDeleteOnto your comment - you write:
Here's how the payroll tax fits into my paradigm. What is necessary to turn our economy around is an increase in demand. The poor have no disposable income. Let them keep more of their money and they will spend it, which spurs demand, which creates jobs.
Okay - but then, why didn't the CBO say tax cuts for the poor then?
Payroll tax cuts are more than merely tax cuts for the poor: they also affect the rich. If a VP at a company gets hired on, she too would get the tax cut. VP's are certainly not poor.
In fact, payroll tax cuts is split between the employee AND the employer. Do you deny that the EMPLOYER (the corporation that is having RECORD profits), also gets some of the payroll tax cut revenue?
So again, let me be more pointed: why did the CBO pick a payroll tax cut ABOVE a tax cut simply for the poor?
I meant it as "see, here, it's these type of comments that make me think your economic understanding is low".
ReplyDeleteDo you think that makes the statement less annoying? People that disagree with each other generally think their opponent lacks understanding. As much as you've read I think you lack understanding too. But to make it personal and point that out constantly is what bothers me.
But I appreciate your efforts to work with me and I apologize if I'm taking it the wrong way.
Can you refer me to this CBO discussion we had? You say the CBO didn't recommend some things and did recommend others. Which report do you mean?
The payroll tax cut implemented is strictly on the employee side. The employer side hasn't changed. So this is a tax cut skewed heavily in favor of the poor. Payroll taxes are heavily regressive as you know and we're only cutting the employer side. Sure, the rich enjoy the benefit but as a % they don't get nearly the benefit the poor do. That's why this is a boost. It's all very consistent with what I'm saying. The rich are swimming in cash. Throwing more on their pile doesn't change much. The poor are really struggling. Wages are down over the last few years for the bottom 80% of the population. It's really tough on the bottom 50% and bottom 30%. Without disposable income the demand falls and so does the employment.
OK Chad, let me respond to your comments.
ReplyDeleteYou are right that experience counts. I appreciate your thoughts here because you will have insights I won't see because of your experience.
But I have to be entitled to opinions even if my experience is limited. You and I both care about the world. We want it to be better and if you are like me you are trying to make it better. But that does mean we have to be allowed to work towards goals even if we don't have direct experience.
You say the regulations hurt your ability to hire. I accept that. But to evaluate the problems obviously we have to look not just at your business, but business overall. Take a look at what business owners are telling us. The problem is lack of demand, not government regulation according to them.
I really don't have a problem with large profits. I just think that at root some of your arguments and some of HP's arguments boil down to the claim that profits are not high enough. I'm just trying to evaluate that claim. If they are not high enough but they are at record levels then what level would be sufficient? And why wouldn't compliance with environmental regulations, which if anything would harm profits, why wouldn't that spur employment?
I really don't want to take anything from anybody. I wish we could have zero taxes. But my approach is not to try and determine some perfectly just level of taxation. It's to just take a look at outcomes. What kind of a society does a zero tax world, or our present tax world, create? I really think higher taxation would produce a world that was more pleasing even for the rich.
Chad - can you elaborate on the following -
ReplyDeleteThis is where the Left gets in trouble - forget about the corporate jets and taking more from the rich. Just make it easier for a new company to start up and hire people in that industry.
Setting aside your concerns of burdensome regulations, if you can (for now). Why would someone/group want to establish a new business in an existing market that is saturated (due to lack of demand) already?
Sure, the rich enjoy the benefit but as a % they don't get nearly the benefit the poor do.
ReplyDeleteYou still didn't answer my question Jon, let me repeat it: why did the CBO pick a payroll tax cut ABOVE a tax cut simply for the poor?
I mean, you can't get more than 100% than a directed tax cut for the poor. Even if the percentage 'wasted' from a payroll tax cut on the rich was small, it's still more of a waste than a tax cut directed strictly to the poor - yet the CBO didn't choose that. Why?
In other words, I am comparing TWO very specific policies: a tax cut specifically targeted to the poor vs a payroll tax cut. In your world view, you would expect the former to be the preferred method, yet the CBO chose the latter - why?
I'll dig up the link later, I am in a rush home right now.
I'll need to see exactly what the CBO did to answer your question. I await your link.
ReplyDeleteHP -
ReplyDeleteYou still didn't answer my question Jon, let me repeat it: why did the CBO pick a payroll tax cut ABOVE a tax cut simply for the poor?
I mean, you can't get more than 100% than a directed tax cut for the poor. Even if the percentage 'wasted' from a payroll tax cut on the rich was small, it's still more of a waste than a tax cut directed strictly to the poor - yet the CBO didn't choose that. Why?
This is an educated guess -
A payroll tax cut is not intended to help only the poor but all working people.
A payroll tax cut comprised of a cut only on the employees contribution is guaranteed to affect all workers. A traditional tax cut does not come with this guarantee. I am assuming it is true that many working poor w/ families pay little to no income tax.
In terms of percentage of new disposable income people/families on the lower income levels have a greater percent of net income gain. My guess is that people on the lower income level are also more likely to spend all of the "new" income on goods.
Numbers always help me so let me try using made up examples:
Take three workers -
Woker 1 makes $30k
Woker 2 makes $100k
Woker 3 makes $300k
Assuming a payroll tax cut of 2%. The benefits to these workers are -
Worker 1 - $600
Worker 2 - $2,000
Worker 3 - (roughly) $2,120
I will go out on a limb and say worker 1 is extremely likely to spend all the $600
Worker 2 is likely to spend the $2,000
Worker 3 is not likely to spend the $2,120
How am I doing?