Tuesday, October 22, 2019

Outrage of Nobel Proportions




If you can believe the Bloomberg Headline

Taxing the Rich to Fund Welfare 

Is the Nobel Winner’s Growth Mantra


You will be enraged by the paradigm of keeping poor people shackled to poverty by keeping poor people shackled to poverty programmes as a pathway to closing the gap.

And I haven't any Nobel Aspirations.  My outrage is a moral one, not a personal one.

And I don't know which is more repugnant.

The economic legerdemain or the linguistic legerdemain.

As the article reads I must focus on two points

1.  Giving tax cuts to the rich to create jobs is a fantasy because the rich have massive funds available and they will only invest the money to make more money.

2.  I never said anything about giving tax cuts to the rich to create jobs.

Years ago I emphasised this.

"Mr. Widget will not hire one additional widget maker until he has an order for one widget more than he can produce when operating at maximum capacity and optimal efficiency."

The Quotations of Slim Fairview © 2019

One of the few things Robert Reich ever said on the topic of economics that I believe makes any sense:

If you want to close the gap, you give tax cuts to the people who spend money.

This was adequately demonstrated by Henry Ford who doubled his employee's wages from $2.50 a day to $5.00 
a day.  And cut the work week to 40 hours.

In so doing, Henry Ford made it possible for his employees:

To buy a Ford
To buy a washing machine
To buy an ice box
To buy a radio
To buy a Sears Roebuck house. Some assembly required.

He, in effect, launched the middle class.

Needless to say, the African American community was left out.  Racism, segregation, and discrimination were operating in full vigor.  And still are.

Robert Reich is also the fellow who extolled the virtues of the 93% tax rate.  He told of how well the country was doing. Peace, employment, factories humming away....

What Reich did not say about the 93% tax rate is another example of economic smoke and mirrors.

When the tax rate was 93%

A Black man earned half of a White man's wage.
Women were kept barefoot and pregnant.
Mexicans and Filipinos were picking lettuce and grape for pennies a day.
There was no EPA and those factories were polluting the environment.
We were rebuilding Europe after WWII.

The 93% tax rate is a celebration of 
Racism
Sexism
Xenophobia
Pollution
Imperialism

Throughout the Obama administration, we heard about creative, innovative, high-tech entrepreneurs.

Richard Nixon had a plan for promoting entrepreneurship within the African American community.  Congress would not fund it.

Not too long ago, a Black civil rights leader said, "When White people die, they leave their homes to their children. This keeps the wealth in the family."

So, too, "When White people retire, they leave their businesses to their children. This keeps the wealth in the family."

A solution to closing the wealth gap is to close the income gap. Help the disenfranchised start their own businesses. Make profits. Grow their businesses, Buy their own homes, and, ultimately, keep the wealth in the family.

You can't leave Public Housing to your children.


Let's now focus on Slim's Paradigm:

Capital Investment + Economic Stimulus =
Economic Development + Growth

When people who spend money buy things
People who make things must make more things.
To make more things, they must hire more people.
They make more money.
At this juncture they can afford to pay hire wages. That or end up subject to competition, regulation, institutional investors dumping their stocks.

This is the paradigm established by Henry Ford.

When China elevated 700 million people from poverty to the middle class, China 
Created a consumer class.
Created an investor class.
Gave the Chinese people a buy-in.  A vested interest in the success of the Chinese Economy.

The alternative would be for big business to continue as it has with stagnant wages and ultimately triggering a backlash. Routinely at the polls. 

However, before you worry, there is little evidence that Congress ever raised taxes on the rich. Or that they will.
The ruling party notwithstanding.  

Conventional Wisdom: The Democrats don't want to tax the rich. They just want to blame it on the Republicans.
~ Slim Fairview

Well, how do we move from here?

If you want to close the gap you redistribute the money.
Henry Ford did not redistribute his wealth.  He redistributed the money.

Wealth is what you have.
Money is what you make.

One idea, which needs some economic modelling, runs like this.

A corporation gives its employees an immediate $5. an hour raise.  In exchange, the corporation takes a $10. write-down for labor costs.

The benefit to this is the multiplier effect.  
The multiplier effect is NOT trickle down economics.

In the illustration on PowerPoint on SlideShare, I created such an illustration.  Caveat: This has nothing to do with an $800. coat.  The $800. coat represents all the small purchases of the middle class, the working class, the working poor, in a one month period to coincide with that $5. an hour raise. 

(40 hours a week x $5. an hour = $200. x 4 weeks = $800.)


There are several other articles on the matter.







Sincerest regards,

Slim

If you find anything here to be helpful, please don't hesitate to send me a really tricked out Mac Laptop and, in lieu of a Nobel Prize, tuck a few dollars as a gift into the envelope along with the thank you note.  Slim

Bob Asken 
Box 33 
Pen Argyl, PA 18072

Copyright © 2019 Robert Asken
All rights reserved.