Monday, July 12, 2010

Ideology Trunps Reality

      There is a saying that the success of a business is dependent upon three things: location, location, location, and for many businesses that is true. For example, if you are managing a restaurant or a retail store, your establishment needs to be located where customers can easily find it.
      But no matter what your business, whether you are a drug dealer, an aircraft manufacturer, or anything in between, there are three things even more important than location: customers, customers, customers. Especially with the increasing use of online buying, if you have a good delivery service available, your business could be located way back in the mountains. But without customers, you may as well be selling buggy whip sockets or antimacassars (look it up).
      There are very few people who can afford to be a customer without having a job. So it is extremely important for the economy to include a large number of working people – people with jobs.
      It is an axiom among conservatives that we produce jobs by cutting payroll taxes for employers, so let us look at that. Suppose you are running a business, and you have one employee who makes $30,000 per year. As an employer, your payroll taxes for that employee cost you about $2,200 per year.
      Congress is considering a tax bill that would give you a $1,000 tax credit in 2011. So your employee will cost you about $1,000 less (assuming the bill passes). Are you going to go out and hire another employee? I doubt it. You don’t need two employees costing you $62,000 instead of one employee costing $32,000 unless you have more customers – a lot more customers.
      I have written about the coming “double dip” recession (See for example June 23, June 10, March 12, February 7) which is rapidly approaching. In the past few weeks world leaders have taken giant steps to ensure that this calamity arrives quickly and disastrously. By agreeing to cut deficits rapidly they have stymied any real gains against recession, and have thrown the worldwide economic machine into reverse.
      The United States Senate has also managed to add more fuel to the fire by refusing to extend Unemployment Insurance to those job seekers whose assistance has run out. Granted such insurance would not create jobs, but it would stem the hemorrhaging of hundreds of thousands of buyers from the customer base at a critical time.
      Cutting deficits means cutting back expenditures for highways, technology, education, etc. - all great job and customer producers. The economic reality is that governments need to judiciously spend extra money during downturns, and judiciously cut back spending during good times. To put it another way, save a little during the good times to tide you over during the bad times.
      Ideologues say the problem is that even if governments spend during down times, they don’t cut back during up times. Perhaps so, but that is not an economic problem – that is a problem of political will. Cutting back at all times practically guarantees extreme highs and lows.
      But who am I to suggest that reality should trump ideology?
      But the greatest example of transformation and transcendence in man’s attempt to control his surroundings was the Hebrew concept of monotheism. Although the details are lost in antiquity, it appears that this concept grew out of the idea of one god who was superior to all other gods. At some time after that, all other gods became superfluous. This one god was admittedly a jealous god, and demanded rigorous standards of worship from his chosen people. He was a stern father figure.
      Man Takes Control – The Spirit Runs Through It.

      The book or a free download is available in paperback or on Kindle.

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