Why Romney’s Business Experience Means Nothing
The reason why the Obama campaign is focusing so much on Mitt Romney’s tenure at Bain Capital is because they are trying — mostly successfully — to tear down the one thing Romney continually points to as the key reason why people should vote for him, because he’s a businessman who knows how to create jobs. Paul Waldman explains why this is nonsense:
Mitt Romney barely bothers to persuade the voters that he will be able to get things done in Congress or that he understands foreign policy. Instead, the phrase he repeats over and over on the campaign trail is “I know how the economy works.” The current arguments over Bain Capital notwithstanding, this has been the basic rationale for Romney’s candidacy, that during his time in business he gained a body of knowledge and a unique insight that will allow him, as president, to make dramatic improvements in the economy. During the primaries he argued that this experience would make him a better president than his Republican opponents, and today he argues that it would make him a better president than Barack Obama.
But if there were a magic key to unlock spectacular growth and widely shared prosperity, you’d think we would have found it by now. There hasn’t been a president in decades, the current one included, who didn’t have lots of businesspeople working in his administration. And Barack Obama talks to corporate leaders all the time. If Romney knows something they don’t, he hasn’t told us what it is. If you read through his economic plan, you’ll find that it contains the same things Republicans always advocate: lower taxes, reduced regulations, free trade, and so on. You’ve certainly heard Romney say that his business experience helps him understand the economy. But have you ever heard him say what exactly he learned that no one else knows?
Of course not. Because, as Waldman points out, his “economic plan” is just a laundry list of Republican talking points and platitudes that have never turned out to be true in practice. Lowering business taxes does not magically release a tidal wave of growth and new jobs, and lowering personal taxes certainly doesn’t increase government revenue.
theschwa:
July 20th, 2012 at 11:47 am
But…but…but…Smaller government! Job-killing regulations! 9/11!!! Homosexuals!!11111!11
Zinc Avenger (Sarcasm Tags 3.0 Compliant):
July 20th, 2012 at 11:57 am
Jobs* jobs** jobs***!
*: Lower taxes for Republican politicians.
**: Lower taxes for Republican donors.
***: Homosexuals, Democrats, poor people, and women – get back to where you came from, even if you didn’t come from there.
slc1:
July 20th, 2012 at 12:00 pm
The real job creators are the entrepreneurs who start companies that actually produce a product. Michael Dell, Bill Gates, Steven Jobs, Larry Ellison, etc.
eric:
July 20th, 2012 at 12:03 pm
The whole idea is ludicrous. CEOs aren’t hired to create jobs, they are hired to turn a profit. Creating jobs is not a skill they learn or practice.
Even if Romney were the best businessman the world had ever seen, I would no more expect him to be good at creating jobs than I’d expect him to be good at painting pictures.
raven:
July 20th, 2012 at 12:09 pm
Forget that. Who cares.
I want to know how Romney ended up with a $100 million IRA in Bermuda.
I could use one of those myself.
If everyone had a $100 million IRA in some offshore tax haven, we wouldn’t need to create jobs. Although there would be plenty of jobs for yacht masters, gardeners, and servants anyway.
Raging Bee:
July 20th, 2012 at 12:10 pm
Actually, the REAL job-creators are the people who work for the money they need to buy stuff, and who then use their hard-earned money to buy stuff (after paying taxes so their governments can buy stuff to serve the common good).
Businessmen won’t create jack shit unless there’s a profit to be made, and it’s ordinary people who are the source of said profit, and of the work needed to create whatever they want to buy.
This “businessmen are job-creators” stuff is nothing but a religious myth; and all that insight Romney says he has is no more real than the mystical wisdom claimed by religious con-artists everywhere.
Mr Ed:
July 20th, 2012 at 12:18 pm
I live in a house and drive to work so by Romney logic I should be a city planner. Just because he participated in part of the economy doesn’t mean he should over see the whole.
To a man with only a hammer all problems look like nails. I look forward to reading the cost/benefit analysis of attacking Iran.
Finally, Bane bought companies using leverage. How is this different than deficit spending. I’ll give you $2 million for the aircraft carrier and will finance the rest.
Randomfactor:
July 20th, 2012 at 12:20 pm
Romney DOES know how the economy works. Every dirty trick that his gang has gotten legislated to help the strong batter down the weak. And he wants to make it WORSE.
skeptifem:
July 20th, 2012 at 12:29 pm
Then there is the fact that whenever there is a problem with his business past (investments, decisions at bain) he syas it was someone elses fault. That means he doesn’t really take any responsibility for a job that gave him 100k a year or where his money goes after he earns it. What kind of expert can’t explain why his company made certain decisions or the reasons for investing money?
skeptifem:
July 20th, 2012 at 12:38 pm
No one really understands the economy completely. Very meaningful questions remain unanswered. The current economy makes it impossible for businesses to worry about the long term (because if they fuck up the short term they are gone), or “externalities” (like pollution or resource depletion), and they are forced to replace anyone who doesn’t adhere strictly to the anti-social agenda of shareholders. All the rules are rigged to fuck the majority of humans to begin with.
fastlane:
July 20th, 2012 at 12:54 pm
And the entire (R) congress just voted against Obama’s jobs plan. So, they really think that attempting to fix the US economy takes a backseat to party politics.
cptdoom:
July 20th, 2012 at 1:00 pm
Actually that explains why Willard’s business experience is a net negative for the office of Presidency. Corporations are always focused on the short term, and Bain itself, both its consulting and capital arms, distinguished its abilities in the market by demonstrating their ability to focus solely on the bottom line for their clients and investments, to the exclusion of any other consideration.
But it is the job of the government, mainly, to deal with long-term issues, externalities and public goods, none of which are adequately dealt with by the market. How would Romney’s business experience help him deal with long-term issues like the environment, which any corporation would want to exploit in the short term for their own profit, but that must be maintained for the long-term for the good of the country – AND to maximize the long-term potential for our economy to continue to thrive (e.g., you can make more money in the short term mining the hell out of public lands, but the long-term benefits of those public lands, both for maintaining ecologic balance and to provide a place for people to vacation and relax, thus making them more productive overall, are of much higher value, but the market cannot account for that).
Of course, the Romney campaign has to point to his business experience (although, ironically, there has never been a big-time business person elected as President) because his public service career has been so minimal. He’s won one election, and then didn’t run for re-election because he knew he’d lose. His biggest achievement in that term was RomneyCare, but now he must disavow that because the dirty Kenyan, Muslim, Socialist, Fascist, anti-Colonial, Sharia-loving Marxist stole his idea. Thus he’s left with the one crowning achievement of his gubernatorial efforts – Sunday liquor, beer and wine sales.
arakasi:
July 20th, 2012 at 1:19 pm
Well, if Romney is going to bring his business experience to bear on our economy, then his true economic plan will have to go something like this:
1) Acquire Canada, and place a hand-picked representative in the PM’s office
2) Have Canada borrow approximately 3x its GDP from Saudia Arabia
3) Canada then pays the US approximately $2 trillion in management fees
4) When Canada defaults on the loan payments, have the PM declare bankruptcy, and sell off Alberta & Quebec for pennies on the dollar
5) Write off the book value of Canada off as a loss and deduct that ammount from the taxes that anyone w/ a net worth over $1 million has to pay
The GDP of certain Caribbean islands will skyrocket as we shift the Treasury over to them.
It will be peace, prospertity, and puppies for everyone
TGAP Dad:
July 20th, 2012 at 1:22 pm
As I recall, that’s exactly how Engler sold himself to the Michigan electorate, and stated often he would “run the state like a business.” And he was elected to three terms – violating his promise to only serve two terms.
David C Brayton:
July 20th, 2012 at 1:26 pm
Running the government is not like running a business. The goal of most for-profit businesses is to make a profit.
The goal of government is not to exploit labor and capital to make a profit. Rather it is to foster a place to live where one is free and everyone has the necessities of life (security, food, health care and a place to live).
d cwilson:
July 20th, 2012 at 1:38 pm
The Obama strategy is brilliant: Take Romney’s one strength and turn it into a liability. Finally, the democrats are learning the lessons of Kerry’s failed bid: Never let your opponent define you, define him instead. Hitting Romney as a vulture capitalist instead of a sacred job creator puts him on the defensive and keeps the conversation on his tax returns.
As for “the businessmen are job creators” BS, that’s total nonsense. Adding more jobs is the last resort of any decent businessman, because payroll cuts into profits. If you can squeeze a higher productivity with fewer people, then that’s what you’re go do. And we Americans buy into it. So those of us who are now doing the work of two people count themselves as the lucky ones, as at least we haven’t been outsourced to China.
Yet.
Businesses only add more jobs when it’s the only way to keep up with demand, so the real job creators are the people who buy stuff.
drdave:
July 20th, 2012 at 2:42 pm
Check out Nick Hanauer’s TED talk:
eric:
July 20th, 2012 at 2:59 pm
@17 (Quoting): Your argument comes down firmly on the side of one party.
Reality often does.
wscott:
July 20th, 2012 at 3:02 pm
Well, there is some validity to the idea that when taxes (business or personal) are too high they impede growth & revenue. So if we currently had historically-high tax rates, this strategy might have some merit. It would at least be open to discussion. But when tax rates are already at historically-low levels, it’s pure nonsense. That’s today’s GOP for you – dogma is SO much easier than actual thought.
Michael Heath:
July 20th, 2012 at 4:34 pm
Mitt Romney has yet to demonstrate any abilities or motivation to make prudent fiscal policy decisions. However that doesn’t falsify the opportunity business leaders disproportionately have to strive to better to comprehend the economy – especially if they had some formal training in economics and continually relate their business experiences to the economy as a whole.
Arguing that this opportunity doesn’t exist is no better than the idiotic argument federal fiscal policy should use the same principles as the head of a household when it comes to managing their household checking account. Sen. Mark Warner is an excellent example of an ex-businessman who understands economics and demonstrated success as a governor of VA and now as a U.S. Senator because of his background in business.
In addition claiming businesses aren’t job creators is a perfect illustration of how liberals can behave just as idiotically as conservatives. Of course they are – who even trumps them? Just because contemporaneous Republican leaders misrepresent how businesses contribute to job creation, or oppose such, doesn’t by default mean businesses in general aren’t job creators.
I’ve personally participated in capital investment projects which yielded thousands of additional jobs, not jobs that were moved, but instead a marginal increase due to organic growth. In fact those projects are my proudest memories career-wise; the appreciation people have in securing a great job is an incredible feeling – where I was unworthy of their appreciation since it wasn’t my investment dollars or decision to “go for it” by building new factories, I was merely an employee carrying out business investors’ and executive management’s plans. Businesses have few if any equals on this critical aspect of any capitalistic economy, including China’s.
And the idea we don’t know how to optimally run an economy is also horseshit. The problem isn’t cluelessness, it’s how we do politics – both political leaders and voters. And while I rail constantly on conservatives for their inability to govern, a large proportion of liberal voters are equally incompetent when it comes to understanding and prioritizing optimal fiscal policies.
Michael Heath:
July 20th, 2012 at 4:42 pm
Wscott:
Taxes are too low for sustain and grow our economy. However we shouldn’t so easily conflate pir conclusions regarding current vs. optimal tax rates on businesses and individuals. A rising global economy in the context of the U.S.’s strength and weaknesses creates a set of premises that I think convincingly argues business taxes are too high here in the states. Conditions have changed where the old paradigm is busted. That argues optimal tax reform doesn’t require us to merely return the top earners to the Clinton-era tax rates, but that nearly all U.S. individuals should be paying higher taxes while businesses pay less. Except for those businesses who enjoy avoiding their total costs, get high subsidies. and enjoy other sweetheart deals thanks to government which creates barriers to entry for attractive new sectors like green energy; those who obviously pay too little now would include at least agriculture (especially corn and sugar producers), coal, and the oil industry.
jnorris:
July 20th, 2012 at 5:20 pm
Every time someone says big corporations don’t create jobs or rich people (the Job Creators tm)should pay more taxes a goblin at Gringotts Bank dies.
harold:
July 20th, 2012 at 5:31 pm
Clearly, by definition, personal or corporate income tax rates can theoretically be too high.
There’s precious little evidence that they ever were in the US. The US economy was thriving under the massively progressive taxation implemented by the liberal hippie socialist, Dwight D. Eisenhower. None of the bumps that the US experienced in the mid-seventies were due to excessively high tax rates on people who were then living in vast luxury after paying (or evading, but often at the same expense) their taxes.
However, even if they ever had been, that’s irrelevant, because the Republican position is always “lower taxes”, whatever taxes currently are.
That’s exactly like saying “drink more water” – it can be good advice or fatal advice, depending on the situation. Republicans are like a doctor who tells patients to drink more water when they’re mildly dehydrated, but also tells them to drink more water when they’re dangerously hyponatremic and in kidney failure. And whose practice is mainly hyponatremic kidney failure patients, partly because he’s been telling them mindlessly to drink more water for years now.
Michael Heath –
I don’t know why you think US businesses pay too much in tax.
Which taxes are you talking about? Most business are organized as pass through entities that pay no income tax themselves. Corporate tax rates are applied to C-corporations. I don’t know what percent of businesses are C-corps off the top of my head, but I’m guessing not most. C-corporations can write off everything, including depreciation, salaries, etc, from their taxable income.
As it happens, I actually would argue for allowing C-corps to hand out dividends before paying taxes. I’m a pro-dividend progressive (not the same thing as being a “lower taxes on dividends than on worked-for money” progressive). American businesses should be returning money to the risk-taking share-holder, instead of hurling millions at CEO’s, who in my subjective opinion are currently almost completely useless as a group, and far more likely to harm than help businesses, with only a few exceptions.
Dr X:
July 20th, 2012 at 6:09 pm
@Eric:
Thank you! And among many things, that could entail hiring or firing people. And Romney likes firing people.
netamigo:
July 20th, 2012 at 6:42 pm
What Romney’s business experience with his tax returns does show is that Romney is a first-rate deadbeat tax dodger. Fortunately, most people believe in America and support the common good.
dogmeat:
July 21st, 2012 at 4:00 pm
Michael,
You and I have gone ’round-and-’round on the taxes issue, as others have pointed out recently, there are two major problems to your claim. First, it is far from proven that US Corporations pay too much in taxes.
Second, there is a major flaw in the argument that cutting business taxes will increase capital investment and therefore spark economic growth. I know that is part of the theory, but even in the theoretical model there are a number of “it depends” elements. In the real model we’ve seen over the last thirty years there are even bigger problems.
1) Capital investments don’t necessarily mean more jobs. Increased automation of a factory, for example, actually can lead to a significant reduction in jobs.
2) Nothing says that businesses will open or keep their facilities in the US even with the reduction taxes. In addition, such a proposed reduction may never be enough to bring businesses back. A perfect example of this would be Apple. I read a piece a year or so ago that talked about Apple moving their facility from one over seas location (can’t remember if it was in Japan or Taiwan) to one in mainland China. This move increased their per-unit profit from a “paltry 50%” to 63%. No feasible tax cut could offset this wage differential.
3) Nothing says that a company will actually invest their tax cut enhanced profits. They could do what many businesses have done for the last few decades, dramatically enhance their top level executives’ salaries, increase their dividends to shareholders or better yet, use the money to hire lobbyists to get even more subsidies and benefits from the government.
dsmccoy:
July 21st, 2012 at 6:45 pm
I think prominent CEOs like that are a bit overrated when it comes to creating jobs. (Steve created my job though, so I’m not complaining.) Somewhere around 50% of the jobs are in firms with under 500 employees.
http://www.census.gov/econ/smallbus.html
But nearly 2/3 of the new jobs created came from sub 500 employee companies:
http://boss.blogs.nytimes.com/2009/08/05/are-medium-sized-businesses-the-job-creators/
The percentage of jobs in the sub 500 employee range has been shrinking slowly, back in 1988 it was more like 55% (see census.gov link). The smaller companies doing the new hires must either grow past 500, get bought by larger companies, or go out of business/shrink, but whatever their fate, the new jobs are usually there.
Another thing I think is interesting in the census.gov data is that companies over 500 employees spend around 15% of their sales or receipts on payroll whereas companies under 500 spend closer to 20%. (I can’t help but wonder if the increasing income inequality is related to the growing percentage of jobs in larger companies.)
Michael Heath:
July 21st, 2012 at 8:44 pm
dogmeat writes:
Capital investment decisions consider all major cost components in order to project a net return on capital (investments). Out of the tens of thousands of mid-cap and large corporations on earth, I doubt there are more than a relative handful who don’t use math formulas for large capital investment decisions that don’t consider the cost of taxes on future cash flows, along with with all other major costs. All companies I’ve ever worked so did, where those decisions had billion dollar impacts on their respective bottom lines.
In addition, you ignore capital liquidity. Owners of capital consider the cost of taxes when it comes to investors consider selling their assets, say an investor owning a coal company’s stock, and considering selling it to invest in a different stock. Figuring out the projected return of the new stock after considering the cost of a sale of the current asset is also math, taught even in introductory finance classes. In the higher finance classes we students learn to measure how taxation rates impacts levels of capital investment and capital liquidity at industry sector and entire economies. And again, this is not merely theoretical, these buy/sell decisions considering the tax implications is what many employees in finance departments do in companies who make a modest to large number of capital investment buy/sell decisions.
I realize how important avoiding these facts are to your political ideology. But that’s not a compelling motivation to continue to avoid these facts nor is it very compelling for others to consider your argument – unless your preaching to the choir of course. I would hope liberals remain skeptical to all ideological and partisan arguments that avoid or deny what experts understand, including talking points long favored by liberals which avoid how the world actually works. In this case that be nearly all medium and large corporations in all developed economies.
dsmccoy:
July 21st, 2012 at 9:24 pm
The main reason businesses don’t hire is because of weak demand. If sales picked up they would be hiring right quick. Business hire more people not because they have extra money laying around they want to spend on payroll; they hire more people because they need them to provide the products and services which people are buying from them. So all of this talk about businesses not hiring because of taxes is so much ideological bull.
slc1:
July 21st, 2012 at 9:25 pm
Re dsmccoy @ #27
I used the individuals named as examples (note the etc). Many small to medium sized companies are started by entrepreneurs. I would also expand the term product to include services of various types. For instance, someone who starts a plumbing business or an auto repair business which employs service people is included.
By the way, I am most unimpressed with the citation of Staples as a business that expanded under Bain. Staples is a retail outfit whose personnel does not require a high level of education or expertise; most of the employees are not well paid. In other words, unlike the plumbers or automobile repair services these aren’t good jobs.
dsmccoy:
July 21st, 2012 at 9:36 pm
@ slc1 #30
I agree, especially about companies like Staples. Jobs at Staples are better than no jobs, but Staples has something like 90,000 employees. Employees only have a very tiny stake in the company. Smaller companies usually provide better quality jobs and more are fulfilling because each employee has more of a stake in it.
Michael Heath:
July 21st, 2012 at 10:04 pm
dsmmcoy writes:
Not necessarily true; companies generally do not cut employees as fast as improvements to processes and systems allows. Instead companies in a down-part of the market cut jobs and when the recovery occurs, realize they don’t need to rehire at the same rate of prorata of revenue they needed previously.
Certainly we continue to suffer from a lack of demand while also suffering from Republicans both obstructing expansive fiscal policies since 2007 and having restructured many state governments over the years so those states are employing austerity measures at the very point we need them to instead stimulate their economies with expansionary policies. In fact the weakest aspect of the labor market after the start of the recession is cuts in government jobs, especially at the state level. Where a large portion of the 2009 stimulus was used to merely slow down those state spending cuts, especially initial federal expenditures directed to state budgets after the stimulus was passed.
Michael Heath:
July 21st, 2012 at 10:09 pm
dsmmcoy writes:
Please cite the person and exactly what they wrote which you disparage here. It’s poor form in this venue to take on some ghostly personage rather than confronting those with whom you disagree and exactly what they wrote. One compelling reason is it prevents strawman rebuttals that avoids the actual argument being made yet has the rebutter still wanting their argument to win the day without having to bother to make a meritorious argument.
dsmccoy:
July 22nd, 2012 at 2:05 am
@michael heeth
Exactly why demand is low, people who get laid off of of government jobs reduce their spending and things spiral down.
dsmccoy:
July 22nd, 2012 at 2:15 am
@michael heeth
Sorry if that offended you. Your statement was so long a puffed up it didn’t really lend itself to direct quote.
But this:
You seem accuse others of hitting on talking points, but ignore your own.
It’s actually fairly simple: taxes are part of the cost of doing business, but the decision to expand or contract is mainly driven by demand.
The rest of your bloated argument is just so much rationalization of what your own ideology tells you about taxes.
Michael Heath:
July 22nd, 2012 at 7:25 am
dsmccoy writes:
I respond:
dsmccoy responds:
I wasn’t offended, why you would think that is beyond me. I instead made it clear to you that it’s poor form to disparage others which has you avoiding their argument, which normally reveals someone with a position they can’t defend yet want to promote it anyway via a strawman. Which you then go on to do as we observe below.
dsmmcoy claims it was this comment from me that caused him to respond with, “businesses not hiring because of taxes is so much ideological bull”:
dsmccoy, this is incoherent. I do not claim in this comment that businesses aren’t hiring because of taxes as you claim I did, but instead am arguing liberals shouldn’t employ defective arguments no better than a YEC on certain topics where we can easily predict many will. I’ve heard your argument many times before, always from liberals who reveal they have no clue how businesses and economies actually work but expound anyway. I suggest showing some character and admitting that you misrepresented what I wrote in order to continue to promote a view you can’t defend on its own.
dsmccoy then writes:
Again with the assertions of what others write with actually quoting what they wrote that supposedly reveals a defective argument. Please quote exactly where I employ talking points instead of what I know to be basic math taught to all finance and accounting majors, and used by virtually businesses to make investment decisions, and the collective impact of those decisions on economies.
dsmccoy writes:
democommie:
July 22nd, 2012 at 8:18 am
I’m NOT gettin’ into no economicat fight! I will say this:
Whether you’re a glass half-empty or a rose colored slice-o-the-pie sortaguy, you’re barkin’ up the wrong horse of a different kettle of fish when you talk about Mittunswillard’s business A-Q-Men.
Mittdehshitt is NOT a “Job creator”. His main focus, even in those years when Bain was apparently demonstrating fiduciary malfeasance by paying HIM for doing nothing, was “Joblessness creation”. And he EXCELS at that.
Michael Heath:
July 22nd, 2012 at 8:42 am
democommie writes:
Who in this thread is doing this?
dsmccoy:
July 22nd, 2012 at 10:54 am
@Michael Heath:
And I’ve heard yours before, always from people who buy into the self important bloviations of large business “leaders”. Large businesses are high profile and have the resources to make people listen to them, but I provided REAL data above, not theories, that 2/3 of all new jobs are created in businesses with less than 500 employees. Down there business decisions are much more driven by the reality of whether people are buying the stuff you are making and not by whether it’s a good time to build a new factory in Arkansas right now.
Jobs trickle up, not down, just like money does, and the sort of tax averse arguments you make are buying into the trickle-down economics of the big players. It’s merely masked in “job-creator” jargon.
Michael Heath:
July 22nd, 2012 at 11:14 am
dsmmcoy writes:
Except I didn’t depend on “bloviations”, but instead simple math, what businesses worldwide actually do, and how it impacts economies. These are facts, not opinion. Do you really think increasing an important cost factor will not have an impact on decisions? Even from a rudimentary logical perspective, your argument is idiotic – while also being denialist given your false claim such costs aren’t even considered.
And why? Well the most parsimonious explanation is the same reason we see YECs make equivalent arguments; to defend and promote a position which is indefensible because the YEC will not or can not adapt to reality and yet still wants more people to join him/her. I remain comfortable arguing policy based on reality.
Michael Heath:
July 22nd, 2012 at 11:58 am
dsmccoy writes:
Do you realize you’ve descended from strawmen arguments, themselves almost as low an argument can sink to an ad hominem, the lowest form of rhetorical fallacy.
dsmccoy:
July 22nd, 2012 at 1:02 pm
@Michael Heath
For all of its math, economics is not a science. The results of the math depend on the assumptions which go in from the start.
An example: Back in the 1980s a local bookstore flourished. Small bookstores would open and close all the time, but this one found a great combination of location, style, and business sense. As sales went up, it expanded into the space next door and added a coffee bar, hiring all the while in response to demand. The small center the place was in saw a boom, other small businesses being attracted to the foot traffic. All of this in response to local demand and people taking second mortgages on their houses and such.
Then Borders opened up a mile north and Barnes and Noble a mile south, the local bookstore withered and died, the surrounding businesses died or moved. The center went into a slump that lasted over a decade.
I’m sure there were people at corporate for the two chains who were putting all that math into their spreadsheets, and if you read Business Week or Forbes you would believe that the chains had created jobs in the area. But the reality of what happened on the ground was that the market niche was found and the jobs created by a local business person doing much simpler math. The chains essentially used the math to prove that they could co-opt the little guy and take over the market niche.
Local jobs were essentially stolen by the big guys and replaced by lower quality jobs. So even the 2/3 of jobs created at the small end number I cited above is not the full story, it’s hard to tell how many of the other 1/3 are stolen from the small guys, but it’s clearly not zero.
That’s all history. Both chain stores are gone now and the book industry is fighting other battles.
But the same pattern plays out all over all the time. The big guys have the megaphone, the theories, the math, but what they often do is enter areas already tested by seat-of-the-pants local entrepreneurs.
Job creation at the high end where you math applies is highly overrated.
dogmeat:
July 22nd, 2012 at 2:38 pm
Michael,
I find your responses on this thread ironic and amusing.
First, you attack others regarding their “ideology” yet in your reply to me you didn’t bother to respond to the substance of my post or any of the legitimate and valid points I was making. Instead you resorted to what amounted to name calling. Note, I didn’t say corporate taxes were too high, too low, or just right, simply that your constant claim that they are too high has never been substantiated. You’d made this claim despite comments by others, posts by Ed, and evidence provided that lead to rather legitimate questions regarding your claim.
Second, you attack others regarding their use of “strawman” arguments, except that is precisely what you’ve done with some of the comments here. I presented what was a (highly simplified) cost analysis reasoning as to why simply cutting corporate taxes could result in a far less positive impact than what you were hoping for and instead your response is a cartoon caricature of my comment and a rather arrogant effort to “teach me” about cost analysis. I intentionally provided a rather simplified argument because it was a non-professional source I was paraphrasing on a blog post. Simple fact is, if I, as a business, can save $10 per unit in labor costs at the expense of $1 per unit in higher taxes, if all other things are equal, I’ll make that choice.
Finally, you attack others for their lack of knowledge regarding economics. Yes, you’re right, my knowledge of economics is so limited that the majority of my high school students who take my economics class as sophomores (instead of the normal senior enrollment) earn college credit. This was true even the year where they had no textbooks and based their knowledge solely upon my ignorance of economics.
My points were simple:
1) You still haven’t proven that the corporate tax rate is too high. It might be, but given that it’s your argument, you kind of have to prove the point before you can argue that others are ideologically blinded. [hint: It makes you seem like a hypocritical ass]
2) Simply cutting corporate taxes may or may not increase the likelihood that businesses will construct new facilities, buy new materials, hire new workers, etc. You consistently and constantly ignore the impact of other factors that make this a much more complicated issue than you allow it to be despite the fact that you slam us for “not understanding” the very process that incorporates those factors. You also constantly wave away legitimate points made by others as “ideology” without much effort to refute those arguments which again suggests more than a bit of hypocrisy. Again, other costs of business are a major factor in these decisions, you acknowledge this yourself and then wave them away as nothing. The lack of demand is cited by numerous business journals and economists yet you wave this point away like it doesn’t matter. Really, who is being driven by ideology here?
3) We’ve seen, observing the activities of businesses over the last thirty to forty years, that many of the assumptions of economic and business schools (and schools of thought) don’t necessarily hold true. We saw with the Bush recovery that cutting the taxes of the “job creators” doesn’t necessarily mean they create jobs or that those jobs are truly desirable jobs. Some refer to the ’00 “recovery” cycle as a jobless recovery cycle. We saw profits increase, we saw wealth grow, but we saw median household income go down 7 of the 8 years he was in office. Namely we saw trickle down economics was a dismal failure (at least its publicly stated goals). We saw major problems with deregulation of various industries as both criminal and incompetent activities led to catastrophic consequences for people who had nothing to do with the decisions being made.
In many ways your proposals regarding the tax structure of this country have ties to these failed policies which is why people are skeptical of their feasibility or desirability. Along with tax cuts for the wealthy, eliminating capital gains taxes, eliminating estate taxes, flat taxes, and so called “fair taxes,” the idea that cutting corporate profit taxes is a good idea needs to be proven, not simply stated as fact. All of these tax proposals have obvious primary impacts that can be seen and measured, they help a very small group of people to increase and enhance their wealth. The secondary and tertiary impacts of these tax proposals are more nebulous and complicated.
In theory many things *should* happen if they are implemented, in practice the theoretical outcome hasn’t always lived up to the hype and the results have been very negative for those who, at this point, cannot afford to lose much more. In addition, you have the long standing historical drive for those who have wealth to increase and expand that wealth, protect that wealth, and use that wealth to manipulate the social and political systems to grant themselves more power and wealth. Given that your strategy dovetails nicely into this long standing “war” (if you will,) you again have a responsibility to actually prove your points if you want to convince others that they are valid. You have to provide evidence that refutes the evidence that suggests your claim that corporate taxes are too high isn’t true. You have to provide evidence that such a change would actually have a positive impact on the US in a global economy where labor costs, availability of resources, and environmental questions play major roles in choices businesses make.
I see a lot of things we could do to improve our industry, enhance profits, cut down unemployment, but many of them are entirely undesirable. We could eliminate wage, safety, environmental, and quality regulations. Roll back the clock and party like its 1899. But I don’t think any of those ideas are particularly good ones (and would wreak havoc with the climate and quality of life of everyone but the very top). We could implement taxes, penalties, or embargoes on those countries that don’t “play fair.” Of course that would likely result in a trade war that wouldn’t really help anyone and, given that we import over 85% of the stuff we use, would likely hurt us more than it would our “opponents.”
The end result is, we could do a number of things and it is the responsibility of those who advocate for any of them to clearly delineate the benefits and hazards of their plans. Personally I could see lowering the corporate tax rate (not eliminating it) while at the same time eliminating most of the loopholes companies use to avoid paying. But really, that isn’t going to happen. The cuts would get through congress quite easily, the eliminating loopholes part isn’t going to make it out of the first committee meeting. To be frank, and honest, I think our system may be irrevocably broken. We have too much influence on our political system for us to actually pass and implement the comprehensive reform we need. Too many people are convinced that policies that are not only dangerous, but catastrophic, are good ideas and should be implemented immediately. Too many politicians care more about party loyalty and getting reelected to really address the issues we need deal with, and too many issues have been politicized when they should be dealt with as matter of fact problems that have to be addressed (climate change being a huge one). We have far too much doubling down on really bad ideas based upon ideological concerns rather than utility. The Republicans have adopted this strategy as a core principle, but the Democrats certainly aren’t immune from the same idiocy.
dsmccoy:
July 22nd, 2012 at 3:05 pm
@dogmeat
Well said.
Any attempt to make corporate taxes make sense runs into a brick wall like the attempt to end the oil subsidies did back in March.
democommie:
July 22nd, 2012 at 11:18 pm
“Who in this thread is doing this?”
Nobody.
It was snark. I must be drinking the wrong sort of window cleaner today.
I will say this; If the last 30+ years of the rich getting richer and the poor getting fuckeder isn’t a fair example of how lowering corporate/personal taxes, gutting regulatory and oversight agencies and letting the “free hand” of the market level the playing field has NOT led to economic equality or even stability than a fair example of that phenonomenon does not exist.
Michael Heath:
July 23rd, 2012 at 10:33 pm
dogmeat to me:
It’s poor form to not blockquote that which you attempt to rebut. I’d be happy to engage with direct rebuttals to what I write. But I’m not going to respond to out of thin air supposed characterizations of what I wrote.
Michael Heath:
July 23rd, 2012 at 10:43 pm
democommie writes:
There is no doubt that American individuals pay too little in taxes, especially the richest. But that’s a very different conclusion than the conclusion we should increase business taxes in spite of existing in a very competitive global economy where we can’t and shouldn’t compete on being a low-wage economy. One can argue for higher taxes, as I do, yet also argue our taxing capital when we’re already at a disadvantage on labor is obviously bad policy, by the very simplest use of logic; though economists also concur so it’s not a mere mental exercise in logic.
democommie:
July 26th, 2012 at 4:19 pm
Michael Heath:
I am not an economist, although I know a couple, so I’ll defer to them or you on the nuts’n'bolts piece.
Here’s the deal, for me. If you need to increase revenues and you don’t tax business–where does the revenue come from? I’m guessing the people. If, as you seem to think, the rich should pay more taxes, what mechanism do you propose that would effect such a thing? The very wealthy already employ armies of people to do everything that they can to avoid paying personal income taxes–even at the lowest rates in years What’s going to keep them from doing the exact same thing they’re doing now if the laws are changed?
The “Flat tax” which I think I’ve read your saying your in favor of, with certain caveats, would bed a fine idea–if it wasn’t subject to exactly the same sort of fuckwaddery as current tax law.
What this country needs is not a fair tax, but fair tax laws. People that make billions because of being able to escape the true external costs of doing business need to be brought to account. I know that’s about as likely to happen as the prospect of the U.S. having a Kenyan muslim president–er, I mean, except for the current one! {;>)
Michael Heath:
July 26th, 2012 at 5:08 pm
democommie writes:
Well, no need to guess. Economists are roundly in favor of taxing individuals more, both with higher income rates and higher estate taxes, both of which were in the Democrats plan which passed the Senate this week.
democommie writes:
Effective tax rates haven’t shrunk for most high income earners because they’ve gotten better at tax avoidance, they’ve shrunk because we’ve cut their stated rates for income, capital gains, and dividends.
democommie writes:
As noted above, the problem isn’t so much avoidance but instead that we dropped their rates. However this country does suffer from the incredible volume of intellectual capital focused on tax avoidance for big corporations, which is one reason I don’t think we should be taxing businesses. Far better for talent to focus on growing the bottom line in other ways. This redirection of talent away from organic growth to tax avoidance is also a common observation when a company’s growth in its core operations is slowing or stagnant, which makes tax avoidance as a way to continue to grow profits in spite of stalled revenue so attractive. However the country loses from an opportunity cost perspective because our best talent is focused on tax avoidance which only harms government coffers, rather than top line (revenue) growth which helps nearly everyone.
democommie writes:
I have always been a fierce and vocal opponent of the flat tax in the U.S. or any developed economy. The only time a flat tax works is in emerging economies like Eastern Europe coming out of the cold or Ireland a couple of decades ago attempting to exploit their being an English-speaking country seeking capital investment from the U.S. That was when the U.S. looked to have a presence as the European Union emerged in a place within its comfort zone given the language barrier in other countries. [It was certainly within my comfort zone, I loved traveling to Ireland on business.]