Jobs outlook for small businesses may be getting bleaker

[Conan71]

This is a perfect example of why our political system kinda sucks.  Half of our country is bound up in an ideology that proudly has no grasp of history, and no grasp of basic economics. 

Gaspar, "government programs and infrastructure improvement projects" are quintessential economic stimuli, and have been since the Depression.  What's more, they work to bring the economy around, albeit slowly.  And, of course, one man's hand out is another man's hand up, but it's obvious that 99% of the stuff you see around you is the former. 

Keynes, who helped pioneer this approach, has yet to be debunked.  In fact, he's broadly considered to be the guy who saved us from the Great Depression (Keynes came up with the theory, FDR implemented it with policy).  Why suddenly it's so heinous to follow that same path now is absolutely beyond me. 

I haven't yet heard any sort of proof as to why getting money back into the system through government programs is actually a bad thing.  Like, actual proof.  I've heard a smile-ton of ideological spew that has absolutely no backing beyond what Fox News or the Talk Radio Kuiper belt vomits forth.  I've also heard a lot of hyperventilation about why this somehow makes us unAmerican, or saps our Vital Bodily Fluids. It completely ignores that fact that we have had it this bad in the past, only worse, and that we fixed it by doing what Obama is doing now.  This is not controversial by historical standards, but if you know no history and don't care a whit for it then it will seem as radical as the bomb-throwers of 1848.

No one has been able to refute this.  Why the Great Depression solution is not also the Great Recession solution.  Until that happens, all of this is just half of the electorate being afraid of the dark.

I'll go so far as to agree that recessions and depressions are great for our countries infrastructure needs.  One important factor you are ignoring when comparing what President Obama and our current Congress is doing to what FDR did is all the hand-outs to special interest groups and wasteful pet projects which benefit few these days.  Something else the government did different back then is they were not paying millions of people to look for work, they put shovels in people's hands and gave them work.  We paid for productivity, today it's acceptible to pay people to exist in mediocrity and squalor.  What favors is the government doing to society to pay people to be unproductive? 

There's also considerable thought that defense spending for WWII is what eventually brought the country out of the economic funk.  It also provided U.S. workers with new, more technical skill sets from building defense equipment like aircraft, vehicles, communication equipment, firearms, etc. as well as bringing new people into the workforce like "Rosie the riveter".  We created a generation of people who had valuable skill sets, rather than a generation of people who learned to hold their hand out and recieve manna from Heaven.

Some of the flaws in Keynes theories is the idea that saving is a bad thing:

"Keynesian economics warns against the practice of too much saving, or underconsumption, and not enough consumption, or spending, in the economy. It also supports considerable redistribution of wealth, when needed. Keynesian economics further concludes that there is a pragmatic reason for the massive redistribution of wealth: if the poorer segments of society are given sums of money, they will likely spend it, rather than save it, thus promoting economic growth. Another central idea of Keynesian economics is that trends in the macroeconomic level can disproportionately influence consumer behavior at the micro-level. Keynesian economics, also called macroeconomics for it's wide look at the economy as a whole, remains one of the important schools in economic thought today."

http://www.wisegeek.com/what-is-keynesian-economics.htm

Interestingly, the majority of the people of my grandparent's generation who lived through the Great Depression were generally frugal savers always mindful that another Depression could happen, not the sort of people who would ascribe to Keynesian thought.  Keynesian economics, I think, advocates spending to reckless levels and makes people think of debt as being more acceptible.  It all works until it's time to start paying it back, then what?

I believe strongly in the psychological effects of recession.  If you start talking about an impending recession enough, you will eventually have one because banks will slow down lending and people will slow down spending and horde cash.  As long as the press keeps beating down the economy and President Obama's foes want to keep beating down the economy, people and companies will continue to horde cash.  People are afraid of more joblessness and the government making it even harder to find jobs via new regulations which are going to make it more costly for companies to put people on their payrolls.

[nathanm]

I agree that some of the money could have been spent better, but it doesn't matter. As long as it's getting spent, it stimulates the economy. Even Jindal's failed sand berms did that, despite every red cent of the $360 million going to his fourth largest campaign contributor.

And really, saving is a bad thing. On the large scale. It's good for your or me individually, but collectively, it's just money that's sitting idle. That's why we let banks loan it. When banks are loaning, that works pretty well.

And actually, Keynes did address the end game. What to do when the economy is better, and why debt doesn't actually matter as long as we can keep borrowing. The extra spending, through its stimulation of the economy, increases GDP compared to what it would have been without the spending. That effect lasts through the entire business cycle, which then gives more revenue with which to pay off debt. Also, with a well-managed economy, inflation will slowly eat away at real value of the debt, making it more manageable.

Government should be countercyclical. In the good times, taxes should be raised and debts should be paid off. (what Clinton was doing in the late 90s) It both pays off government debt and helps prevent the economy from getting too good, which leads to rampant inflation. In a recession, the government should lower taxes and spend money. The concepts are simple, although understanding all of the nuance of Keynes' position takes a long time.

It's painfully obvious that fiscal austerity has done nothing for the Irish, the Greeks, or any of the Baltic countries, yet somehow we're still being sold this bill of goods. If there were some indication (other than talking head yammering..you know, technical indicators) that the market was the least bit concerned about our current borrowing, I'd be more amenable to that line of thinking. They're not. We really can't afford another 1937 right now. Not unless we want to end up like Japan, whose currency is deflating and looks to be on track for a second lost decade.

What we need to do in the short term is either grant the states a big block of cash or lend them said big block of cash. The massive cuts coming in many state governments will only serve to deepen the recession as state employees lose their jobs and states cut back on other expenditures as well.

Out of curiosity, Conan, what do you think we should have spent the stimulus money on? What do you see on stimulus.gov that you think was an utter waste? Personally, I'd like to see more funding for rail and more loan guarantees and/or grants for rural broadband, nuclear power plants, and real electric cars. As in ones that can go 150-200 miles on a charge. We should shore up our levees, and probably even move forward with marshland restoration projects in Louisiana. Concrete things that will improve our infrastructure and economy going forward. Much better than make-work, although if all that can pass Congress is digging holes and filling them in again, that would be better than nothing, at least until we're no longer staring deflation in the face.

And Conan, if anything, WWII bringing us out of the funk, as you say, is probably one of the clearest and most obvious signs that Keynes was fundamentally correct.

[Gaspar]

What we need to do in the short term is either grant the states a big block of cash or lend them said big block of cash. The massive cuts coming in many state governments will only serve to deepen the recession as state employees lose their jobs and states cut back on other expenditures as well.

That's an interesting angle, and one I don't necessarily disagree with, but. . .of the states that have been hit hardest, many have taken a hit for different reasons, most related to their own internal mismanagement of finances compounded by a tight economy.

California-was failing under the burden of massive social systems even before the housing crisis.  They continue to attempt more spending now even though they are broke.

Arizona-had such inflated home prices and was experiencing development on a massive scale when the bubble burst.  The growth rate was the highest in the country and many were moving there to flee housing prices in California and enjoy the strong growing economy.  They literally got caught with their pants down. The landscape is now littered with new empty or half finished homes, and the problem is compounded by a massive influx of illegal aliens, drugs, and the social burdens that come with that.

Nevada-was very much in competition with Arizona in the housing arena and shares many of the same economic woes.  Boom to bust.

New York-more like the California model with layer upon layer of social programs and the tax burdens that come with them.  As unemployment grows, they have less to pay for programs, but they are unwilling to suspend spending.  California and New York have an addiction.

Alaska-population is sparse, and most workers in Alaska are seasonal.  Logging, petroleum, and tourism rule the realm.  When the season ends, workers dig into savings or just go on unemployment until next spring.  Any small hiccup in the construction materials industry or tourism impacts them ferociously. Trickle down.

New Jersey-in much the same condition as it's neighbor, but they are actually beginning to turn things around.  They are cutting programs left & Right.  Decreasing spending and offering tax incentives to businesses and tax payers in general.  They may not need any help. 

Oregon & Washington-nothing more than "Northern California." Social programs too expensive to fund by taxing an unemployed workforce.  No willingness to reform.

[nathanm]

That's an interesting angle, and one I don't necessarily disagree with, but. . .of the states that have been hit hardest, many have taken a hit for different reasons, most related to their own internal mismanagement of finances compounded by a tight economy.

California-was failing under the burden of massive social systems even before the housing crisis.  They continue to attempt more spending now even though they are broke.

Uh, no. California's problem is the initiative system there. It takes something like 2/3rds of the voters to approve a tax increase, but only half to approve a spending increase. Voters constantly vote themselves new programs without new taxes, and there's not a damn thing the state government can do about it.

Besides, you're missing the point that cuts are exactly the opposite of what we need to do right now. The problem is that when we need to be making the cuts after the economy recovers, everything seems like sunshine and roses, so why cut? In any event, all the states are suffering mightily with the twin shrinkages in property and sales tax, not just the ones you enumerated.

Interestingly, sales tax receipts are back up YoY in many states, although the loss of so many state government jobs will certainly not help that situation.

[Gaspar]

Uh, no. California's problem is the initiative system there. It takes something like 2/3rds of the voters to approve a tax increase, but only half to approve a spending increase. Voters constantly vote themselves new programs without new taxes, and there's not a damn thing the state government can do about it.

Besides, you're missing the point that cuts are exactly the opposite of what we need to do right now. The problem is that when we need to be making the cuts after the economy recovers, everything seems like sunshine and roses, so why cut? In any event, all the states are suffering mightily with the twin shrinkages in property and sales tax, not just the ones you enumerated.

Interestingly, sales tax receipts are back up YoY in many states, although the loss of so many state government jobs will certainly not help that situation.

Well that's our division in philosophy.  In my opinion and experience, cuts in government spending and taxation cause economic growth. 

To most liberals, it is important to increase government spending and taxation to increase economic growth.  The problem is that the tax base necessary for funding programs is shrinks, the liberal solution is to shift the tax burden to businesses and the wealthy.  In anticipation, businesses and the wealthy eliminate jobs (layoffs) to compensate for loss in income and decreased demand.  Production levels decrease. 

Businesses and the wealthy have one thing in common, they are planners, so even an anticipated or threatened increase in taxation or regulation will result in decreased growth as resources are shifted to shelter the entity from harm. 

As for the programs themselves, each new spending program creates a legacy that must be fed, and because spending always exceeds production in government endeavors, the spending becomes another burden on taxpayers of every level. 

As for the increased regulation, the Keyneasian model functions only in situations where regulation and stimulation can be applied and then removed.  The best analogy is a traffic signal.
 


The problem in the real world is that regulation and the government programs/projects created in the stimulation process don't go away, and most function more like a toll booth than a traffic signal.  What we end up with is a tollway with booths, and stop lights every few feet.  This is where the keynesian model breaks down.  Intervention is not retractable and has an ongoing cost associated to it.
 


IMO the two things are diabolically opposite.  You can choose to stimulate the economy or you can choose to regulate it.  I have recently changed my view on regulation, some is necessary, and should be applied when the economy is in a state of boom to reduce recklessness and avoid bubbles. Otherwise you have a thousand cars speeding down the Autobahn.  I used to discount all regulation but I recently got schooled by an extremely wise economic sage and could pose no effective argument against his philosophy.   

Stimulation is a combination of the relaxation (or retraction) of regulation and infusing money into the economy in the most effective manner.  The majority of this capital has to go to those who employ, produce, distribute, and innovate. 

So that's my philosophy and it differs greatly from yours.  We have a host of examples emerging on the state level now.  Lets see which model works.

[Red Arrow]

Businesses and the wealthy have one thing in common, they are planners, so even an anticipated or threatened increase in taxation or regulation will result in decreased growth as resources are shifted to shelter the entity from harm. 

There's the problem.  Businesses and the wealthy aren't following the program.  They need to get with it.  What are they thinking?

[heironymouspasparagus]

Here is one of the better "quick overviews" of early 20th century history.

I thought it was particularly interesting to note the Republicans raised tax rates from 25% to 63% during that time.  Bigger than ANY Democrat tax hike ever.

Unemployment at about 25% by the time Roosevelt is elected/inaugurated.
In Roosevelt's first four years, unemployment was down under 15%.  Then he stopped deficit spending and we went right back into it. 

Wow!  How did Sweden do it?  Keynesian style.

And then from 1945 to 1963 we had tax rate of at least 88%.  And the greatest booming economy the world has ever seen, before or since.
So, I guess from the historical results, the best thing that could be done now would be a tax hike.  Just like fueled the greatest boom in the history of the world.  And the mid 60's expansion.  And Reagan's "good times".  And the Bush I and Clinton expansion.  In fact, every boom we have had.  Ever.

http://www.huppi.com/kangaroo/Timeline.htm

This is reality.  Not the tea bagger ranting and ravings.

[Gaspar]

Here is one of the better "quick overviews" of early 20th century history.

I thought it was particularly interesting to note the Republicans raised tax rates from 25% to 63% during that time.  Bigger than ANY Democrat tax hike ever.

Unemployment at about 25% by the time Roosevelt is elected/inaugurated.
In Roosevelt's first four years, unemployment was down under 15%.  Then he stopped deficit spending and we went right back into it. 

Wow!  How did Sweden do it?  Keynesian style.

And then from 1945 to 1963 we had tax rate of at least 88%.  And the greatest booming economy the world has ever seen, before or since.
So, I guess from the historical results, the best thing that could be done now would be a tax hike.  Just like fueled the greatest boom in the history of the world.  And the mid 60's expansion.  And Reagan's "good times".  And the Bush I and Clinton expansion.  In fact, every boom we have had.  Ever.

http://www.huppi.com/kangaroo/Timeline.htm

This is reality.  Not the tea bagger ranting and ravings.

Wow!  So it should follow that if we were to raise the effective tax rate to say 95% the economy should really boom and there would be tons of opportunity?

Why not simply do away with income all together?  The government could take 100% and then distribute food, clothing, and housing.

heron, it's easy to take bits and pieces of information and assemble funky timelines.  The man you are quoting, Mr. Steve Kangas was very fond of the old Russian style of governance under the Soviets.  I hardly consider him an economic philosopher. 

FAIL!

[we vs us]

Wow!  So it should follow that if we were to raise the effective tax rate to say 95% the economy should really boom and there would be tons of opportunity?

Why not simply do away with income all together?  The government could take 100% and then distribute food, clothing, and housing.

This is one of rhetorical problems underlying a lot of conservatism: a wildly misinterpreted slippery slope argument.  It actually DOESN'T follow that total confiscation would improve the economy 100%, and the argument isn't, and never has been, that.  No Democrat anywhere is suggesting what you're saying we're suggesting.

[Gaspar]

This is one of rhetorical problems underlying a lot of conservatism: a wildly misinterpreted slippery slope argument.  It actually DOESN'T follow that total confiscation would improve the economy 100%, and the argument isn't, and never has been, that.  No Democrat anywhere is suggesting what you're saying we're suggesting.

I know, no Democrat, or any sane person would.  Contemporaries of the late Kangas, such as FOTD who first suggested a 95% taxation rate, on this very forum, and now our "new" friend Heron see things differently.

Democrats and Republicans are only teams playing the same game.  There are Liberals and Conservatives in each group, here is where the division lies.

[Red Arrow]

So, I guess from the historical results, the best thing that could be done now would be a tax hike.  Just like fueled the greatest boom in the history of the world.  And the mid 60's expansion. 

I must have missed a tax hike that fueled the mid 60s expansion after the JF Kennedy tax cuts.  I know he wasn't a Republican but he cut personal income taxes anyway.

[Gaspar]

I must have missed a tax hike that fueled the mid 60s expansion after the JF Kennedy tax cuts.  I know he wasn't a Republican but he cut personal income taxes anyway.

Disregard.  Heron was quoting a moonbat.

[nathanm]

Well that's our division in philosophy.  In my opinion and experience, cuts in government spending and taxation cause economic growth. 

Unfortunately, the dogmatic conservative approach is no better than the dogmatic liberal approach. There is, in fact, very little correlation between economic growth and the top marginal income tax rate.



http://www.slate.com/id/2245781

I hadn't seen these quotes before:

Leaders of a century ago invoked justice in remarkable language that is unimaginable today. President Woodrow Wilson called paying taxes "a glorious privilege." Supreme Court Justice Oliver Wendell Holmes Jr. observed that "taxes are what we pay for civilized society." In 1942, President Franklin Roosevelt said, "In this time of grave national danger, when all excess income should go to win the war; no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000." That $25,000 is the equivalent of $323,208 in today's dollars. Can you conceive of a modern president suggesting that no American should earn more than $323,000 after taxes? (President George W. Bush went to war twice without once calling for such a common sacrifice to pay for it.) And President Harry Truman in 1948 vetoed a broad-based tax cut, even in the face of an expected and eventual congressional override, and then asked for a tax increase following his upset victory.

My opinion is that tax rates should be as high as needed to fund the government's operations (whatever they may be) and no higher.

[waterboy]

I read it that the escalating tax hikes during and after the depression, which were used as much to punish the wealthy (who had the reputation of putting us in a depression), as much as to stimulate the post war economy, had the effect of throwing fuel on the fire during the 50's-60's. Remember, people weren't too sure that the depression might come back. They didn't realize that the ramp up for the war had already assured us a B12 shot of stimulus.

By pouring money into roadbuilding, funding suburban development (FHA, VA etc) and feeding the military to defend against Communism, we were stimulating the economy at the same time we had close to a 80% upper tax bracket. Kennedy did effect some cuts but nothing like the Bush giveaway. Besides, nobody ever paid the marginal tax rates on purpose.

...but I could be wrong about what Heironymous meant.....

[Gaspar]

My opinion is that tax rates should be as high as needed to fund the government's operations (whatever they may be) and no higher.

LOL   Don't worry, they will never be any higher than what is needed to fund the government's operations.

The problem is that the "government's operations" continue to grow uncontrolled.