Tuesday, March 17, 2009

Carping--A form of Fishing

We can thank Republicans and conservative Economists for the outcome of this analysis. The federal government fairly dropped the Concept of a Budget Surplus with the Wilson administration and WWI (We hear a thundering ‘Wilson was a Democrat!’). This is (was) quite true, but Republicans and conservative Economists came up with the Concept of reducing Taxation to where it cannot pay for Expenditures in Bad Times, and only marginally scrape by in Boom season. This does not let Democrats off, as they join with Republicans in an insistence that government spending must increase at all levels; though there may be a lot of Lip Service Speeches proclaiming support for reduced Spending–simply damned few Votes. The real lure to Tax-cutting is touting salvation for family households, while in fact, the major Tax-saving always is achieved by the Corporation and Business; while households get at best a evaporating marginal Tax reduction easily absorbed by higher Prices charged by businesses. This leadership by the Business Class may well destroy Us, if Wealth becomes too concentrated.

The Question which should be answered, but is not, consists of How Much does any marginal tax reduction affects the average business performance. A tentative Outline by myself would suggest that marginal tax reduction effect has only a significance of 0.07 or 7% of the saved taxes being spent within the business format. The overwhelming majority of the funds saved (tentative 80%) go to maintaining the Living Standards of the business leadership, while the majority of the rest of the total goes to Debt repayment. The Reader should remember that Numbers and I have a relationship akin to Divorce Court, when contemplating my success with Modeling economic events. It is still probable to be a fair reality of the impact of marginal tax reductions, with Statement that the relationship between marginal tax reductions and Hiring is also similar to Divorce Court; Everyone is quick to claim Sensitivity, yet no one is quick to express any sentiment showing it. I even drew up a significance for suppression of Price Hikes in Product sold, finding little evidence, and assigned a 0.03 or 3% reading to this aspect; the whole schedule assigning a real value to the nominal total Size of the actual realizable saved Taxation (Business lilely to get about 14% more than Government estimates).

I might have lost my Readership with my eloquent authorship, so I will state that a business must save approximately $100,000 in Taxes from a marginal tax reduction to generate a new Hire; requiring, with the Unit sizes of marginal reduction, a business making about $2.7 million pe year. Businessmen will continue to set their Prices for Product based upon what the Market will bear in excess of Costs, and are more likely to cut Production schedules before Profit margins, especially if Sales drop less than 20%. Business leadership does enjoy the support of marginal tax reductions in maintenance of their own household Costs, and will Hire if there is Need. This leaves no actual Stimulus, but with Good Feeling among business leaders. It still does not solve the basic problem of the buildup of Public Debt, all because Business does not want to pay Taxes, and Politicians like to Spend in order to garner Votes. lgl

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