“A rising tide lifts all boats” – attributed to JFK
So, we were having this discussion at lunch about corporate out-sourcing and the shrinking middle class and the sorry state of the economy in general. I’m an economic conservative, for the most part. I tend to be a little more Libertarian than Republican, but I respect the economic growth that took place in the 80’s based on deregulation, tax breaks for corporations and HUGE AMOUNTS of defense spending. But, you know what? “Trickle Down Economics” doesn’t work anymore… Let’s consider this.
Classic supply-side economics says that when the economy is stimulated such that it encourages entities to produce(supply) goods and services, this, in turn, creates jobs, which enable people to spend, leading to more production and so on and so on. Demand is, in essence, secondary. In the 80’s, income taxes and the taxes on corporations were reduced across the board and, like good supply-side-ers, corporations in this country hired workers, paid wages, paid taxes and the economy grew. It was in the best interest of corporations to do this; meaning it increased their profits, which is the true motive of any corporation.
Today, this model is ineffective due, mostly, to the outsourcing of jobs overseas to cheap labor markets like China, India and Mexico. Corporations are following their motive, higher profits. They can now, with the advent of high-speed data transmission lines, relocate call centers and manufacturing to the developing world and shave millions off of their costs. This is good for the bottom line, it’s good for the stock holders’ dividends and it’s good for the developing world… but it’s shitting all over the American economy. Couple this with the willingness of foreigners to invest in US corporations and it means much of those profits, which would previously have been reinvested in the US economy, are now going to pay overseas workers and to pay interest on loans made, not just by foreign individuals or VC firms, but by SOVEREIGN STATES! Here in Las Vegas, the sovereign government of the state of Dubai has invested close to $3 Billion in MGM/Mirage, acquiring 5% of MGM/Mirage and 50% of the City Center project. The City Center project is the largest, private construction project in the US and will total over $7 Billion at completion; and half of the profit will be going to fund the Arab state of Dubai.
So, as you listen to candidates (and the Pres.) talk about economic stimulus and how they want to pull us out of this slump, listen to see if they are proposing anything which will keep jobs here in the US! Look for candidates who propose incentives for businesses who don’t out-source jobs overseas or who propose tax cuts for businesses who reinvest their profits back into the local economy. Our country is never going to survive if we keep sending money overseas!
Just my 2 cents (or should that be, my 2 rupees),