Republican Economic Model

On Meet the Press today Governor Arnold Schwarzenegger outlined the flawed Republican economic model. Unfortunately that model has become accepted very broadly in American consciousness even among liberals and progressives. Basically the economy is in the doldrums so you can’t raise taxes because that will hurt business and in turn cause them to lay off workers. The Republican solution to a bad economy is to give tax breaks to businesses so that they will hire more workers. Giving tax breaks to businesses during a crisis is similar to giving money to thieves to police crime-ridden neighborhoods.

I heard a variant that economic policy recently from a Green-Democrat, can’t decide which to be. If we raise taxes in California businesses will move elsewhere. I have a very different view. My 30 years experience as a small business owner and employer tells me that I would make my hiring decisions based on my customers’ ability to pay for my service, and not ever because a tax break was available. Tax breaks were great and I used them when appropriate but mostly they just changed the way my books were organized.

Additionally this is a first year lesson in college level economic courses. Demand drives the business cycle plain and simple. Thom Hartman hammers this home often enough on his program. Wages are demand; when they go up folks have the ability to buy more and that causes the supply to increase. There are other means of getting money into the hands of consumers and that would be through social spending. But inflation and budget deficits are a real concerns that need to be addressed. If the social spending is based on borrowed money then deficits an inflationary cycle will occur. This applies in the same way to war funding, hence the 70’s economic crises.

Cycles naturally occur. Wages do not keep up with productivity, governments cut back on purchases and business inventory increases, production orders decrease and folks get laid off. The widening gap between earned wages and productivity of the workers is the driving force of economic doldrums-recession-depression or what ever you want to call it. The destruction of work related laws and the consequence of reduced labor union membership is the direct cause of this economic crisis; brought to us by the same folks all tax breaks are aimed towards. FDR broke the cycle in part by funding the creation of 4 million jobs in one month late in 1933.

It is very clear to me why Republicans want to defund public education, $9 billion in California’s 2009-2010 budget alone. They don’t want an educated work force that can understand the lies they spread. But why so many Democrats give up the fight and repeat those same lies is a mystery to me.

Dan Monte
http://busmansmuse.blogspot.com/
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inspired in part by: google these sites
[ Calitics:: Businesses Need Customers Not Tax Cuts ]
[ Daily Kos: Roosevelt created 4 million jobs in one month (updated) ]