[jeffkrol]

washingtonpost.com

At the same time, even conservative economists acknowledge that while the rich account for a disproportionate share of consumer spending, raising their taxes by a modest amount won't alter that spending or have much of a short-term impact on the economy. The reason: Wealthy people make considerably more than they spend, and they save the rest.

We can argue about where middle class ends and rich begins, but there is nothing magic about $250,000. Indeed, there are hints that, to mollify the waverers, the White House may be willing to temporarily extend tax cuts on incomes up to $1 million. That would still raise 85 percent of the additional revenue that would come from reinstating the 39.5 percent tax bracket, while limiting the impact of the tax increase to the top 0.2 percent of households by income.

Republicans like to justify their opposition to taxes on the rich by claiming it's really job-creating small businesses they are protecting, since the profits of many small businesses are taxed at personal rates. This is simply hogwash, as a recent analysis by the Congressional Budget Office concluded. For starters, the job-creating prowess of small business is largely a political myth - particularly so in the recent downturn in which small businesses have accounted for a disproportionate share of the job losses. More significantly, any firm that has taxable profits of $1 million is unlikely to be a struggling small business so starved for cash that a modest increase in tax rates would prevent or discourage it from hiring a profit-producing new employee.

Given the economic challenges we face and the anxiety we all feel, if Democrats can't make a convincing case for raising taxes on 315,000 millionaires and using the money to rebuild the country's aging infrastructure, then maybe they don't deserve to be reelected.

Background:
Steven Pearlstein - Small Businesses Can Handle an Insurance Mandate - washingtonpost.com

By now, however, that analysis of net job creation has been repeated and embellished and oversimplified by so many lobbyists and politicians that it is only a matter of time before the magic number swells to 100 percent of job creation and small businesses will be demanding to be exempted from all taxes, all regulation and the Ten Commandments.

Thought that line was funny.

But the dirty little secret is that a lot of small-business job growth has also been driven by the decision of big businesses to outsource many tasks that they used to do in-house. In an economic sense, jobs haven't been so much "destroyed" and "created" as they have been shifted from one company to another.

After all, one reason small businesses "created" all those jobs in the first place is that they enabled big companies with generous health plans to outsource work to small companies that had lower cost structures because they offered no insurance at all. If simply requiring those small businesses to offer health insurance would wipe out that cost advantage and drive them out of business, then maybe those companies weren't the great engines of innovation and efficiency that they always claimed they were.

In the coming weeks, we'll find out if political mythology will continue to trump sound economic logic. After all, small businesses would be the big winners from those new health insurance exchanges, and Democrats in both the House and Senate have agreed to sweeten the proposal even further by offering tax breaks and exempting the smallest firms from any health insurance mandate. Still, most of the small-business lobby remains reluctant to sign on.

It gets you to thinking: Maybe there's a reason why these are small businesses.

O/T for later:
http://thehill.com/blogs/blog-briefing-room/news/116713-feingold-decries-sys...-destroy-obama

Sen. Russ Feingold (D-Wis.) decried what he said was a "systematic, conscious" effort by groups to "destroy" President Obama.

Feingold, who's facing a tough reelection effort this fall, blamed coordinated opposition to Obama and the Democratic agenda in Congress for some of the political and electoral woes facing his party this fall.

"A conscious decision was made by certain groups to destroy this presidency the minute it started," Feingold said in a question-and-answer session with The New York Times published Tuesday evening.

"People say it was the healthcare bill — no, it wasn’t. I go to every county every year and hold a town meeting," he added. "Within days of the president being sworn in, I had people showing up at my town meeting with hats on, with tea bags coming out, saying this is going to be socialism.".............................."I started coming back and telling my staff and my friends -– way back in spring of '09 -– that something is going on out there that is pretty deadly and pretty harsh even before we had any idea what the healthcare bill was going to be," he said. "There appears to be a systematic, conscious attempt to dismantle this president, so I’m less surprised than other people.”.

---

Last edited by jeffkrol; 09-03-2010 at 07:06 AM.

[Nesster]

Job creation - via small business - AKA small consulting firm outsourcing what used to be done in the big company - and via larger business hiring - is only a part of the equation. Why would any business hire new employees in the USA? Demand is still weak, nobody seems to have the stomach yet to test equity and debt markets for financing, and offshoring still looks like a good deal.

The other part? This recession, unlike the several other recent ones, has impacted the professional/middle manager class - the white collar worker - more than ever. More of these are out of jobs, and a large proportion of those who held on to jobs saw their incomes go down substantially - I'm talking in terms of 25%+ in many cases. And this downward trend was ruthless and lasted 2 years (we'll see what happens this year)... Coupled to this, this demographic is invested in the markets - via 401(k)s and similar, and via deferred compensation schemes consisting of company stock and options. Depending on industry and the luck of the draw as to which company you work for, your stock may be worth 10% of what you got it for, and your options are way under water.

And then, as if that wasn't bad enough, the value of your house has plummeted... and if you need to, selling is extremely difficult (as your buyers are by and large in the same boat as you).

This group I believe were the big spenders and big borrowers, and now are feeling tight and without much hope for recovery any time soon. For there's no pressure for corporations to give large raises, on the average, due to high unemployment, offshoring, and slack demand.

Additionally, this group - a big chunk of them baby boomers - is looking at a way less flush retirement, ever increasing health insurance costs, and for many, ever higher college costs for the offspring.

A tax increase would hit them where it hurts already... yet, if this group can't get its confidence back, and be tempted to put some of its money - and maybe raises - into spending rather than paying down debt and trying to catch up with the 401(k), I'm not sure how fast any recovery will be.

And this all is against the background where incomes stagnated in real terms for 10 years of 'prosperity', health costs and in many places real estate taxes took an ever larger chunk from all wage earners in America. Government spending, easy credit, and the housing boom were the compensating items. Govt spending, till spending on wars sent a lot of the money off shore... govt bonds and real estate inevitably boomed because of the weak dollar policies...

So in all this, what do the parties sell?

[Parallax]

I have little knowledge of how world or national economies work (as should be evident by some of my previous posts ).
This question is just that; a question, not something I am advocating as I truly don't know what the ramifications would be.

What would be the effect of a substantial increase in import duty on consumer goods?
What would happen if we ramped it up incrementally, say 10% per year, starting next year until ultimately there was a 100% duty.

or alternatively:

Limit, by law, the amount of goods imported to a country to an amount equal to
what is exported to that country.

[GeneV]

Job creation - via small business - AKA small consulting firm outsourcing what used to be done in the big company - and via larger business hiring - is only a part of the equation. Why would any business hire new employees in the USA? Demand is still weak, nobody seems to have the stomach yet to test equity and debt markets for financing, and offshoring still looks like a good deal.

The other part? This recession, unlike the several other recent ones, has impacted the professional/middle manager class - the white collar worker - more than ever. More of these are out of jobs, and a large proportion of those who held on to jobs saw their incomes go down substantially - I'm talking in terms of 25%+ in many cases. And this downward trend was ruthless and lasted 2 years (we'll see what happens this year)... Coupled to this, this demographic is invested in the markets - via 401(k)s and similar, and via deferred compensation schemes consisting of company stock and options. Depending on industry and the luck of the draw as to which company you work for, your stock may be worth 10% of what you got it for, and your options are way under water.

And then, as if that wasn't bad enough, the value of your house has plummeted... and if you need to, selling is extremely difficult (as your buyers are by and large in the same boat as you).

This group I believe were the big spenders and big borrowers, and now are feeling tight and without much hope for recovery any time soon. For there's no pressure for corporations to give large raises, on the average, due to high unemployment, offshoring, and slack demand.

Additionally, this group - a big chunk of them baby boomers - is looking at a way less flush retirement, ever increasing health insurance costs, and for many, ever higher college costs for the offspring.

A tax increase would hit them where it hurts already... yet, if this group can't get its confidence back, and be tempted to put some of its money - and maybe raises - into spending rather than paying down debt and trying to catch up with the 401(k), I'm not sure how fast any recovery will be.

And this all is against the background where incomes stagnated in real terms for 10 years of 'prosperity', health costs and in many places real estate taxes took an ever larger chunk from all wage earners in America. Government spending, easy credit, and the housing boom were the compensating items. Govt spending, till spending on wars sent a lot of the money off shore... govt bonds and real estate inevitably boomed because of the weak dollar policies...

So in all this, what do the parties sell?

Not sure I follow all of that. I don't think the middle managers and professionals who have suffered would be hit by letting the tax cuts expire for those who make more than $1 million per year. I also question whether, under the current conditions, equity formation from the sorts of investments made by the top 1% makes it back into the U.S. economy in a way that stimulates much growth, so the negative effect on the supply or demand side of the economy may be minimal.

So, how does one stimulate demand in the U.S.? More domestic projects?

[mikemike]

I have little knowledge of how world or national economies work (as should be evident by some of my previous posts ).
This question is just that; a question, not something I am advocating as I truly don't know what the ramifications would be.

What would be the effect of a substantial increase in import duty on consumer goods?
What would happen if we ramped it up incrementally, say 10% per year, starting next year until ultimately there was a 100% duty.

or alternatively:

Limit, by law, the amount of goods imported to a country to an amount equal to
what is exported to that country.

A trade war because other countries would respond by imposing similar restrictions on US goods. The US is actually incredibly constrained in the ways that it can limit international trade compared to other countries which have more authoritarian governments who can make more laws more whimsically, and I think you know which one I am thinking about.

I think the other issue is that we have a huge trade deficit with our largest trading partners like China, Mexico, Japan, South Korea, the EU, and energy countries like Canada, Russia, and OPEC and a huge trade surplus with the rest of the world.

Reducing our oil consumption and pressuring China to appreciate their undervalued currency would probably go 90% of the way to fixing the imbalance.

Probably the best way to curb conspicuous consumption would be a national sales tax. I like the FAIR Tax plan because it is nice and simple. Newseek also recently had an article about a proposed Clean Slate Tax plan where the income tax code would be rewritten from a clean slate eliminating all loopholes and itemized deductions while rates would be cut in half across the board and the lost income tax revenue from the reduced rates would be replaced with a VAT. Either would be preferable to the monstrosity that is the current lernaen hydra that is our current income tax code.

[Nesster]

Not sure I follow all of that. I don't think the middle managers and professionals who have suffered would be hit by letting the tax cuts expire for those who make more than $1 million per year. I also question whether, under the current conditions, equity formation from the sorts of investments made by the top 1% makes it back into the U.S. economy in a way that stimulates much growth, so the negative effect on the supply or demand side of the economy may be minimal.

So, how does one stimulate demand in the U.S.? More domestic projects?

At $1mill, no, at $250K, yes for a portion of this group.

The folks, say between $100K and $500K annual income - who've been hit hard for the first time in their lives, as a group, and in average - need to get into a spend mode for an economic revival in the discretionary or postponable purchase sector.

There are a lot of uncertanities for this group - the failure of the health care plan to really address future health costs - the seeming 'death of equity' (largely psychological, but also demographic, as the boomers work into older age and market returns may not rebound) - the seeming stagflation of income - none of these issues is truly addressed by either party. And as I said, Obama's health care may be a step in the right direction, or not, but none of us is convinced it will truly address health care costs in the next 10 years.

Job creation is a good goal, white collar job creation is even better, and an improvement in the perception of future economic improvement is better yet.

Democrats haven't made clear points on any of these; while the Republicans are pushing the same as before - though maybe with fiscal responsibility this time (I'm not holding my breath) but a simple, clear message that appeals.

This isn't likely to happen: Obama takes the offense with austerity and a clearer, simpler picture of the health care issue. Unlike the Republicans, the Democrats will balance the budget and make sane, sensible cuts in government. But I'm not sure Obama and the Dems have this in them... they are no Clinton

[mikemike]

Given the economic challenges we face and the anxiety we all feel, if
(A) Democrats can't make a convincing case for
(B) raising taxes on 315,000 millionaires and
(C) using the money to rebuild the country's aging infrastructure,
(D) then maybe they don't deserve to be reelected.

I don't see why B has to lead to C, but A is definitely true no matter what follows it which is why D is true.

[troglodyte]

Jeffkrol,
The 'exploited' small business will always scream about how poorly their treated. They're like Rodney Dangerfield.
I once worked for a sprinkler fitter company. They hired illegals. It's not all strawberry pickers or oranges bags on the freeway

---------- Post added 09-03-10 at 01:57 PM ----------

offramps.
Here's what the owner would do:
He'd make a contract saying the number of workers was going to be all he had. But then he'd only have half or less do the job. He'd over book appointments for fitters showing up. He'd then give the client a

---------- Post added 09-03-10 at 02:02 PM ----------

discount because the job was taking over twice as long as agreed. He would then bitch about how ungrateful his clients were and didn't understand fitter workload.
The funniest part was I was hired to construct an inventory and true workload (not the

---------- Post added 09-03-10 at 02:05 PM ----------

workload promised on the actual contracts). He was being ripped off from theiving illegals and them being too lazy eating too many chimichangas! I'm sorry to say I was the one to solve his problems. Then once I fixed them I was thrown to the curb.

[Ira]

Jeffkrol,
The 'exploited' small business will always scream about how poorly their treated. They're like Rodney Dangerfield.
I once worked for a sprinkler fitter company. They hired illegals. It's not all strawberry pickers or oranges bags on the freeway

---------- Post added 09-03-10 at 01:57 PM ----------

offramps.
Here's what the owner would do:
He'd make a contract saying the number of workers was going to be all he had. But then he'd only have half or less do the job. He'd over book appointments for fitters showing up. He'd then give the client a

---------- Post added 09-03-10 at 02:02 PM ----------

discount because the job was taking over twice as long as agreed. He would then bitch about how ungrateful his clients were and didn't understand fitter workload.
The funniest part was I was hired to construct an inventory and true workload (not the

---------- Post added 09-03-10 at 02:05 PM ----------

workload promised on the actual contracts). He was being ripped off from theiving illegals and them being too lazy eating too many chimichangas! I'm sorry to say I was the one to solve his problems. Then once I fixed them I was thrown to the curb.

No offense, but have you discussed this with a counselor at all?

Not only are you expressing rage, but I can't even understand who the hell you're expressing it at.

Everyone? And you're the only one in this entire scenario who did the right thing?

Think about the implications of what you wrote here.

[troglodyte]

Ira,
Who's showing rage except you? It was just a small true story of why the small business is failing. I have many more stories about how great you liberals are who are in small business. Who are utterly racist and not exploiting 'the poor illegals.' It

---------- Post added 09-03-10 at 06:20 PM ----------

also shows these illegals aren't that exploited. They're milking the US tax system, making as much or more than over half of us on the forum. They're not only those making less than minimum wage There are many other reasons even illegals with engineering

---------- Post added 09-03-10 at 06:24 PM ----------

are also being hired, and even in this depression are making the American dream. While real Americans are the ones suffering. So yes I know the implications of what I wrote. It's not this fairytale about the Mexican poco coming here out of poverty.

---------- Post added 09-03-10 at 06:31 PM ----------

Which is in answer Jeffkrol's to why no new employees are being hired lately. New employees are being hired but they aren't legal in an effort to screw over the tax system for the regular American tax payer. I'm sorry I have to explain all this to you.