Economics from a people first point-of-view

In my previous post, “Goldman’s Take on Trump’s Corporate Tax Cuts,” I discussed how these tax cuts are supposed to work to create new jobs for Americans, and the obstacles which might keep them from accomplishing that end.

Here is how Martin Wolf of the Financial Times describes the very real problem in the U.S. that voters on both sides of the aisle want to change:

Workers have not only suffered from declining shares of the pie [by over minus 4% of GDP over this century]. Just as significant is the steady rise in the proportion of men aged 25 to 54 neither in work nor seeking it from about 3 per cent in the 1950s to 12 per cent now…

This increase in the number of jobless prime-age American men since 1990 has made the US the second-highest jobs-loser among the thirty-five developed countries in the OECD (Organization for Economic Development). And it’s not just men having trouble:

After 2000, the declining trend in non-participation of prime-age women also halted. The proportion of US women…[age 25-54] in employment is now among the lowest of all members of the OECD.

We’ve been told repeatedly that tax cuts on the rich will somehow “trickle down” to the poor via new job creation. History shows that just isn’t true. I’ve discussed why in my post, “Taxes — Impact on Income Inequality”.

In addition, I’ve shown in “Goldman’s Take on Trump’s Tax Cuts” why corporate tax cuts are not likely to bring back manufacturing jobs from abroad. Now its time to look at the second part of the Trump’s job creation plan. Continue reading →

According to two rather skeptical commentators at Yahoo Finance video last week, Goldman Sachs’ take on how Trump’s corporate tax cuts might work goes like this:

(1) The statutory corporate rate of 39% would drop to the actual rate of 28% paid after companies use tax loopholes; then continuing to use tax loopholes corporations’ actual tax rate will drop to 15%. The result?

(2) Companies that pay way less taxes would make way more profits. And?

(3) Corporations would return those profits to shareholders through stock buy-backs and dividends as the stock market rises as a result. Likewise, overseas profits would come back to the US at 10% tax, and the result would be:

4) Shareholders would get and spend a lot more money.

I see the major problem with this reasoning is, shareholders are not individuals. Continue reading →

Review of Robert Reich’s 2013 Documentary “Inequality for All” – part 4 of 4

“You load sixteen tons, what do you get
Another day older and deeper in debt” (Merle Travis’ song, 1946)

During the last part of his 2013 documentary film, “Inequality for All,” Robert Reich asserts that a big lie was spread in this century. This lie says there exists a form of ‘class warfare’ against the very wealthy.

Those who disagree with higher taxes on the rich say that’s an attack on the ‘1 percent’. Supposedly these attacks come from the ‘99%’ and spring from envy.

Reich replies that this is the opposite of the truth. The middle class are the real “job creators,” not the rich. (See how Reich comes to this conclusion).

Another big lie promulgated in this century is that government is “bad” and financial markets are “good”.

In reality, governments, Reich says, are needed to create the rules by which financial markets function. This is necessary in order to construct and maintain our free market system.

Then Reich steps outside the usual realm of modern economics and harkens back to an earlier era of this field when it was called “political economy”. Reich makes a fourth assertion about income inequality:

High income inequality correlates directly with political polarization

Continue reading →