The Republican's in the current circus over the debt ceiling are sending highly conflicting economic messages. First, I need to make the gratuitous political observation. The Republicans assert that they are for smaller government and keeping the government out of people's lives. Yet they hypocritically assert that government must provide business with "incentives" to foster economic expansion. Those are ridicules assertions from a party that proclaims that government is evil, that government programs are wasteful., and that the government should not have the power to determine winners and losers. If the Republicans were true to their calling they would be encouraging private industry to step in. That clearly will not happen since it is private industry that is laying people off or not hiring.
Now for the economic question. The Republicans want to depreciate entitlement programs. They also want to provide "incentives" to private industry claiming that it would foster economic growth. I contend that "incentives" are actually a form of welfare (subsidy). The Republicans say that welfare for the poor is bad, but welfare for private business is good. Besides the obvious deceitfulness, how would giving money to a company to hire more (unnecessary) workers promote economic growth? We are currently in this mess, because there is no consumer demand so companies would not be motivated to hire or produce more products. Furthermore, if you deprive the poor of their government welfare then they won't have the money to buy products. In fact, I would advoate that it is the poor who should be given the "free" money since they would be voting through their purchases for the products that should be produced.
PS: I am not attempting to justify welfare. My point is that depriving group A of money and giving it to Group B really is a zero sum game. Providing businesses with welfare does not create demand for their products. Hence it will not promote economic growth.
I think incentives to business means not taxing them as much.
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It's easy to refute an argument if you first misrepresent it. William Keizer
Correct, but if businesses are taxed less the consumer has to make up the tax deficit by paying more. If the consumer has the tax burden, then they won't have the money to buy the products that businessess make. For me this is a zero sum game.
To promote the production of products that the consumer wants, the tax burden should be on the producers. That way the consumer determines which businesses are producing the goods and services necessary to service the economy.
Taxes are a cost-of-business. Unfortunately our politicians and the businessess perpetuate the myth that taxations stiffless business. Not only that, but they make is sound as if taxes are a "black hole" . Regretfully this makes for good sound bytes and has populist appeal. Consequently, Congress simply goes for the populist spend binge with ever greater deficits and the continued devaluation of dollar.
So
1. Taxes are a cost-of-business that is not passed on to the consumer. If the business gets taxed, the consumer wins. He is saved from the tax burden, and will not have to pay a cent more for any product.
2. The amount of business getting done is the same whether the tax on businesses is 0% or 99%.
3. A 99% tax on business has no effect on the wealth or economy of the country as a whole.
4. Politicians want to lower taxes on businesses constantly.
5. Taxes are not a black hole, it's a myth somebody is perpetuating to make it sound that way.
6. The ever greater deficits and continued devaluation of the dollar would just not exist in the first place if only politicians did what they hate to do and taxed businesses.
7. Not taxing someone is giving him welfare. [From your previous post].
We differ by too much to continue profitably. I can but refer you to Economics in One Lesson by Hazlitt, available free here and other places. Good luck to you.
Maybe we differ, but others deserve a response to your questions.
1. No. Taxes are added to the cost of the product.
2. No. I fail to understand how you get to that assertion. If a company is taxed 5% that increase is passed to the consumer. But the consumer has more money to spend, since he/she does not have a tax burden.
3. No. This does not reflect what I have stated. If the government needs $1 trillion dollars to operate, it can extort the money from the consumer, or from business, or a combination of the two. It has no effect on the wealth or the economy.
4. Hey we can agree. Of course politicians want to lower taxes on busienssess because it is the businesses that can afford to hire the lobbiest to represent them. The consumer is simply a revenue unit to be abused.
5. Taxes pay for much of our infrastructure and things like defense. But acknowledging the benefits of taxation does not win votes. Its the preception of "FREE" money that earns the votes.
6. Another point of agreement?!
7. H'mm. Let me rephrase it this way. If a business had a tax obligation of $X but because the business is a green business it magically gets a credit of $X dollars. The business pays $0 in taxes. That qualifies as welfare because he got to keep that $X.
If a company is taxed 5% that increase is passed to the consumer. But the consumer has more money to spend, since he/she does not have a tax burden.
So if the consumer pays taxes directly to the govt that's a tax burden. But if he pays that same money to the business, who hands it over to the govt, then the consumer doesnt suffer. The middle man takes away the pain.
I will admit that what I wrote was poorly worded. In either instance the cosumer is still paying a tax. Either by having the tax embedded in the price of the product or by paying the tax directly to the government.
Steve,
Congrats on that courageous reply. Have you looked into austrian economics at all? that book is indeed a good place to start.
Too a degree and I hope to learn more. While there is a lot that I can accept, there is also a lot that I cannot. I tend to be pro-government (in a utopian sense) and pro-environment.
Your studies may lead you to discover that those two admirable sentiments are incompatible.
Just as a quick factoid, the places where the environment was totally trashed, most polluted rivers, most poisonous air, and so forth, were the former Soviet Republics. Reason is simple. More govt produces more poverty [as AE proves], which produces bad environment [because they cannot afford a good one. After all, it does have a price].
Thanks for the come-backs. Cheers.
I have found a nice example of environmentalism in Charles Wheelan's Naked Economics. Black rhinoceros horns are highly prized. But these animals are going extinct. Cutting off their horns hurts their survival rates. How do we protect them, pass laws? Actually, giving them to private owners would be best. Private owners care about their animals (for profit) and would make sure that the population is actually growing. So although their horns still get cut, their population increases. Plus, private owners have much greater incentive to protect their animals from poachers.