Day: July 4, 2011

The Fundamental Flaw in Republican Economic Cliches

Trish
Cozumel
Belt-tightening, Republican-style

When Republicans aren’t telling us how they want to run government like a business, they bluster on about handling government finances like Americans do around their kitchen table. If they can’t afford something, they don’t buy it. If their credit card is at its limit, they quit charging on it. Blah-blah.

Except this isn’t how either businesses or family finances work. At least, not in my world.

I happen to have a business. And while I do all I can to cut costs, I recognize that if I am to stay in business I simply must spend money. There are minimum levels of expenses that I have to meet: computers and software must be maintained, bills for internet access and domain names have to be paid, and on and on. And when I come up short for these costs, I do what I can to increase revenue.

Any successful business owner knows there is a point beyond which cost-cutting alone solves problems

Any successful business owner knows there is a point beyond which cost-cutting alone solves problems. In fact, to cut beyond those levels can put you out of business. If you cut your staffing or hours or locations so customers are dissatisfied, they will leave you. If you slash spending to the point you’re offering inferior products or services, they will leave you over that. And if you stop paying your staff or overhead, you might as well put out the “Closed” sign and walk away.

The same is true of the fabled kitchen table financials. Sure, you can get by without cable TV and you can cut your auto insurance coverage and you can even start shopping at the Scratch and Dent Food Store. But if all this fails to help you meet your remaining monthly bills, you will probably look at cleaning out the garage onto eBay or Craig’s List, getting a second job, cashing in a low performing retirement account, and whatever else you can think of to bring in more money.

Why do Republicans not know this? Why do they think we can lower the deficit (the urgency of which is in dispute) by cutting spending alone?

I can’t help but summon a picture of Chad telling Chloe they’re going to have to tighten their belts by spending a month this year in Cozumel instead of Capri. Cash flow problem solved!

But here in reality world, we know that if you’re going to stay on track, with your business or your life, when you fall short you find ways to increase the money coming in. Cash flow problem really solved.

Come on Republicans, start solving the problem.

Raising Taxes on the Rich Would In Fact Fuel Job Growth

Trish

We’ve all heard the Republican argument that if we continue to keep personal income taxes low for Scrooge McDuck, he will take this personal money he would otherwise pay in taxes and which he could spend on any number of things – a newer car, travel, really, really expensive and delicious june bugs – and invest it in enterprises that produce jobs.

Republicans tells us, as did former Gov. Mitt Romney, “With over 20 million people who are unemployed or who have stopped looking for work, the last thing we should be doing is raising taxes on job-creators, entrepreneurs, and small business owners across America.”

Except they’re dead wrong. Michael Linden, at the Center for American Progress, crunched the numbers.

In the past 60 years, job growth has actually been greater in years when the top income tax rate was much higher than it is now.

For instance, in years when the top marginal rate was more than 90 percent, the average annual growth in total payroll employment was 2 percent. In years when the top marginal rate was 35 percent or less—which it is now—employment grew by an average of just 0.4 percent.

And there’s no cherry-picking here. Pick any threshold. When the marginal tax rate was 50 percent or above, annual employment growth averaged 2.3 percent, and when the rate was under 50, growth was half that.

In fact, if you ranked each year since 1950 by overall job growth, the top five years would all boast marginal tax rates at 70 percent or higher. The top 10 years would share marginal tax rates at 50 percent or higher. The two worst years, on the other hand, were 2008 and 2009, when the top marginal tax rate was 35 percent. In the 13 years that the top marginal tax rate has been at its current level or lower, only one year even cracks the top 20 in overall job creation.