chuckakers 426
+1 Chuck
Personally right now I think stimulating the economy would be best if left in the hands of small businesses. Corps are cutting costs and laying people off to try and "tighten the belt" for the slow economic times. Meanwhile consumers have stopped spending. If small businesses are given tax breaks right now it is another incentive to grow. Is a recession the right time to grow? Hell yeah! If a small business has the resources then a recession is a great time to grow. Labor and resources are cheaper and they have a potential one up on their competition who might not have the same abilitiy. This growth will provide jobs in addtion to the money the business itself is spending.
Personally right now I think stimulating the economy would be best if left in the hands of small businesses. Corps are cutting costs and laying people off to try and "tighten the belt" for the slow economic times. Meanwhile consumers have stopped spending. If small businesses are given tax breaks right now it is another incentive to grow. Is a recession the right time to grow? Hell yeah! If a small business has the resources then a recession is a great time to grow. Labor and resources are cheaper and they have a potential one up on their competition who might not have the same abilitiy. This growth will provide jobs in addtion to the money the business itself is spending.
"If this post needs to be moderated I would prefer it to be completly removed and not edited and butchered into a disney movie" - DorkZone Hero
DanG 1
Businesses won't spend money to grow if they don't think there is a market for their goods.
Imagine yourself as the small businessman who makes widgets. Because the economy is tight, no one is buying your widgets. Then the government reduces your tax rate. Are you going to expand your business and start making even more widgets that no one wants? Or are you going to start building that nest egg for the next time things slow down?
Stimulus has to address both sides of the equation. Tax breaks should benefit both the producers and consumers. Supply and demand.
- Dan G
Imagine yourself as the small businessman who makes widgets. Because the economy is tight, no one is buying your widgets. Then the government reduces your tax rate. Are you going to expand your business and start making even more widgets that no one wants? Or are you going to start building that nest egg for the next time things slow down?
Stimulus has to address both sides of the equation. Tax breaks should benefit both the producers and consumers. Supply and demand.
- Dan G
You're making assumptions that arent necessarily correct. The first assumption is that these small businesses are manufacturing goods, which isn't the case. Close to 80% of small businesses are in the service industry. So growing doesnt mean making more widgets.
Besides, the growth you're talking about in vertical growth, which should NOT be done during a recession. That type of growth should be done when business and/or the economy is strong. Your point of supply and demand is very valid here. The type of growth we are talking about would be lateral or horizontal. Growing in different directions or tweaking procedures, services, policies. This growth sets a more solid foundation for further growth of the business to build on.
Besides, the growth you're talking about in vertical growth, which should NOT be done during a recession. That type of growth should be done when business and/or the economy is strong. Your point of supply and demand is very valid here. The type of growth we are talking about would be lateral or horizontal. Growing in different directions or tweaking procedures, services, policies. This growth sets a more solid foundation for further growth of the business to build on.
"If this post needs to be moderated I would prefer it to be completly removed and not edited and butchered into a disney movie" - DorkZone Hero
chuckakers 426
QuoteBusinesses won't spend money to grow if they don't think there is a market for their goods.
Imagine yourself as the small businessman who makes widgets. Because the economy is tight, no one is buying your widgets. Then the government reduces your tax rate. Are you going to expand your business and start making even more widgets that no one wants? Or are you going to start building that nest egg for the next time things slow down?
Stimulus has to address both sides of the equation. Tax breaks should benefit both the producers and consumers. Supply and demand.
I don't disagree. Working both sides of the equation is easily accomplished by giving tax cuts to individuals too. But handing out money to people who don't pay taxes (which is the post I was originally replying to) will only create an artificial and temporary market for said goods, and that won't create long term stimulus OR economic confidence.
Chuck Akers
D-10855
Houston, TX
D-10855
Houston, TX
wmw999 2,589
The problem is that entirely too many people save their tax cuts, rather than spending them. Good as it is for those people, it doesn't do much for the economy.
It's a chicken and egg problem. Right now the chickens are too scared to lay the eggs (be they service or product eggs), and the customers are too busy taking care of themselves to buy them.
The businesses to encourage are the ones that people turn to in harder times; tools, hardware stores, communication. Well, at least that's my opinion. People are cancelling dog-walking, baby-sitting, daycare, haircutting -- all kinds of service businesses. Many of those are discretionary spending, which is the first thing to be cut, and the last thing to be added back.
Wendy W.
It's a chicken and egg problem. Right now the chickens are too scared to lay the eggs (be they service or product eggs), and the customers are too busy taking care of themselves to buy them.
The businesses to encourage are the ones that people turn to in harder times; tools, hardware stores, communication. Well, at least that's my opinion. People are cancelling dog-walking, baby-sitting, daycare, haircutting -- all kinds of service businesses. Many of those are discretionary spending, which is the first thing to be cut, and the last thing to be added back.
Wendy W.
There is nothing more dangerous than breaking a basic safety rule and getting away with it. It removes fear of the consequences and builds false confidence. (tbrown)
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The best way to create an ongoing stimulus is to cut taxes on businesses.
That argument was well presented, and I'm familiar with the concept and I even agree with most of it. If I were going to rebut with one word I would say "TARP".
If I were to carry out the argument even more I would mention that the free market theory has holes in it, holes that led us into this problem. Greenspan pointed that out when he noted that he had failed to comprehend that there would be corporate leaders who would put their own welfare ahead of the corporation's. Somewhere over the past 25 years or so corporate America has just gone insane with regard to its priorities. And while I agree that handing people money to spend may not be the best thing in the long run, I have a hard time giving further tax incentives to sector of folks who have proven time and again that they feel that they deserve their own rules, massive compensation regardless of performance, and that when they have indeed been "stimulated" by the government that they prefer to give their "elite" (the one's who drove their company into the dirt) bonuses while laying off workers and faxing the rest of the cash to the Caymans.
I really don't know what the answer is with regard to the stimulus, but regardless of how it's handled, the package needs to be tempered with a huge dose of accountability.
Andy9o8 2
All you're really proposing is a redux of Reagan -era "supply side economics", which in fact were really - as properly criticized at the time - "voodoo economics". It didn't work then, and it won't work now. The labor supply didn't increase substantially, nor did business (especially small business) investment in infrastructure, nor did private savings (relative to the GDP). Supply-side economics is really "trickle-down economics", or as it used to be called at the turn of the 20th Century, "horse and sparrow economics": feed the big horse enough oats, and a few un-digested oats will pass through him so that the little sparrows can pick them out of his manure.
billvon 3,120
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>When businesses have more money, the typical response of management is
>to use it to grow the business.
Uh, no. When businesses have a bigger market, their typical response is to grow the business. A business that has more money but no additional market gets no advantage by growing. They can make more widgets, but since there is no market for them, they lose money.
>to use it to grow the business.
Uh, no. When businesses have a bigger market, their typical response is to grow the business. A business that has more money but no additional market gets no advantage by growing. They can make more widgets, but since there is no market for them, they lose money.
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When businesses have more money, the typical response of management is to use it to grow the business.
But this environment is anything but typical. The banks were given large (fucking large) infusions of cash so that they would make the lending markets more liquid again, but aside from giving bonuses, they're all electing to hold onto all the cash for fear of failure. While that might be the intelligent choice for them, it doesn't seem like the intelligent choice for us if the purpose of the money is to move things along again. Quite the opposite, it suggests that bailout II should be geared toward increasing the demand side.
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Will some of that "new money" be used to treat execs to vaca's or remodel office suites? Sure it will, but why should anyone care? It's the free market doing what it does best.
The free market got us into this mess.
Not necessarily Bill.
Really we're arguing in circles here. Growth must first be defined before we can really argue when and how it should be done.
I beleive chuck and I are arguing one type of growth while other are arguing a different kind.
Increasing production, sales, clients is really just a small part of growth, and doesnt cover all aspects. Growth can take many forms.
Really we're arguing in circles here. Growth must first be defined before we can really argue when and how it should be done.
I beleive chuck and I are arguing one type of growth while other are arguing a different kind.
Increasing production, sales, clients is really just a small part of growth, and doesnt cover all aspects. Growth can take many forms.
"If this post needs to be moderated I would prefer it to be completly removed and not edited and butchered into a disney movie" - DorkZone Hero
billvon 3,120
>Increasing production, sales, clients is really just a small part of growth . . .
While I agree, increases in production/sales are what matters for _economic_ growth. A company could buy a bunch of land and grow physically, but that does not influence the economy.
While I agree, increases in production/sales are what matters for _economic_ growth. A company could buy a bunch of land and grow physically, but that does not influence the economy.
Cool! So do I.
Now that we've established that I wanted to point out that the reasoning behind giving money to people with no money is a sure fire way to inject that money back into the economy immediately. At least that's the theory. I don't know how much actual local stimulus it would create if those checks were spent at WalMart.
A theory, yes, but simply giving money to people doesn't create an ongoing stimulus to the overall economy. There would of course be a one-time bump in things, but once the money is spent, things would eventually return to the way they were before the money was handed out.
The best way to create an ongoing stimulus is to cut taxes on businesses. I know that ruffles the feathers of the libs who think all businesses are bad and that if you let them keep more of their profits, the executives will just take more exotic vacations, but the story runs deeper than that.
When businesses have more money, the typical response of management is to use it to grow the business. That's how they stay competitive (as in grow or die). This leads to the hiring of more employees and the spending of more money to expand facilities, buy more product, etc.
A multiplying effect is then in place. As businesses spend more money, the businesses they buy things from begin to see more cash coming their way, and they will likely use that cash to grow as well. The new employees have money to spend, which they will do at businesses that sell the goods and services they want and/or need. Those businesses then have more money, which they use to expand. When they expand, they need more employees, more product, bigger facilities, etc., and the cycle continues.
Will some of that "new money" be used to treat execs to vaca's or remodel office suites? Sure it will, but why should anyone care? It's the free market doing what it does best. If someone gets a treat for being successful, so be it. All I care about is that the business is doing well, which allows employees to make a living wage and spend more, making the positive effects of the tax cuts to multiply.
Tax cuts work because they create an incentive that builds on itself. Giving people who don't pay taxes money to spend is like giving someone a fish instead of a fishing pole.
D-10855
Houston, TX