No, I'm not talking about welfare. I'm talking about MARKETS.
Has anyone ever broken this down and thought this through?
It's always a wonderful thing when "jobs" are "created". What is a job?
It's an economic exchange. Payment for labor. But is it value for value? Is it an equal exchange? Hardly.
Labor output is called productivity. What you receive in exchange for that is called wages (or a commission, salary, etc.)
So why is it that the value of your labor (productivity) is always higher than the value of your wage? This is most certainly true, otherwise an employer wouldn't be making a profit, and you'd soon find yourself without a job.
The reality is that business has a near monopoly on turning labor into dollars. You cannot convert your labor into dollars if your labor is vacuuming your carpet.
So in other words, to have a job is to voluntarily submit to being robbed. And your only alternative is to be a slave of another robber or starve.
That's how it works on the micro level. But let's take a look at the macro level. Every worker is also a consumer. And every product has a price.
If a product was sold for what it cost to produce, then the company making that product would be out of business. No profit would be made. So that worker, who is also a consumer, must submit to being robbed twice.
What is the result of all this? The answer is that wealth is continually being more and more concentrated into fewer and fewer hands. That's what markets do. They are giant wealth redistribution programs taking money out of the hands of the many and putting it into the hands of the few. High tech purse snatching, that's all it is.
And the sickest part of this game is that the most efficient way to gain more wealth is to have wealth to begin with. Capital is far more efficient in making you money than labor is. That's why they call it CAPITAL-ism.
So what happens when wealth becomes concentrated? The economy collapses.
Some economists argue that wealth can be created. I say it can't, and I've been working on how to prove this, but it's a work in progress. Regardless, it is safe to assume that the rate in which wealth concentration occurs is happening faster than wealth can be "created". If you believe in the Labor Theory of Value, as Adam Smith did, then the fact that domestic manufacturing is only 11% of our total GDP plays a sobering role here.
So what will happen when nobody has any money anymore? The economy will collapse, as it's been doing. But there are people who do have money, and it's concentrated into very few hands, about 900 people who we could call filthy rich, very filthy indeed.
One of the best ways to jump start our economy is to reposess the money these few have stolen from us and put it back into our own hands. This is the purpose of progressive taxation (the richer you are, the higher taxes you pay as a percentage). It's not to take what is legitmately theirs, as it was never legitimate to begin with. It's time to take back what has been stolen from us.
From the 1940's until the 1980s unemployment rates NEVER went into double digit territory. Top marginal income tax rates (the income taxes that the rich pay) ranged from 70% to 94% (yes, that's true). Today it's 35% and take a look around.
Even during the Clinton administration, he raised it from 28% to 39% ("the biggest tax hike in U.S. history!"...which actually wasn't true) the result was that we had the boom of the 90's.
Among industrialized nations around the world, the average top marginal income tax rate is right around 50%. And with the exception of Iceland, the U.S. is dead last in our economic recovery.
Maybe the time has come for us to say that one way out of this economic mess is to RAISE TAXES.
I'll leave you with this:
"It is the impossibility of living by any other means that compels our farm labourers to till the soil whose fruits they will not eat, and our masons to construct buildings in which they will not live. It is want that drags them to those markets where they await masters who will do them the kindness of buying them. It is want that compels them to go down on their knees to the rich man in order to get from him permission to enrich him." - Simon Liquet, 1767
If that were true, GM and Chrysler - and any company subject to a union stranglehold - would have remained viable companies notwithstanding their other bad business judgments.
In fact, their downfall was largely due to the opposite of your premise -they paid wages far in excess of the value of the labor received.
Outside of the union context, there are some dislocations in labor/wage equality but federal law sets a floor and the market in most businesses in large enough to provide for adjustments.
Nor can you prove your claim that the economy collapses the more wealth is concentrated. In fact, if you take the top one percent out of the equation, wealth in the United States is more spread out today than ever before. And regardless, the state of the economy has never fluctuated in line with the ebb or flow of wealth concentration.
Back to Econ 101 for you.
The problems with the US automakers is a specific one. In the larger scale, the biggest problem is with the lack of government regulation, allowing US automakers to become lazy and less competitive. Just look at the fuel economy standards they have in China for Christ's sake. Another aspect is our trade policy.
In regards to GM specificially, the person most at fault for their downfall I would put in the lap of Roger Smith and his amazingly horrible GM10 plan.
In regards to wealth concentration and the economy collasping as a result, here's some data for you. Take note of when the Great Depression happened.
http://nickgogerty.typepad.com/designing_better_futures/2009/06/great-depression-and-top-marginal-tax-rates-since-1913.html
Actually, DEBT is more spread out in the U.S. today than it has ever been before. Productivity from the 1950's to the early 1990's DOUBLED. Since then, productivity doubled again. We should have 4 times more wealth on the household level than we did in the 50's. Guess what? We don't.
The top 1% isn't the problem. Those folks are making under $250,000 a year. It's the top 0.2% that concerns me. It should concern you too.
and Roger Smith specifically but almost any unionized business tends to rebut your premise that the value of labor ALWAYS exceeds the value of wages received.
And I also agree that wealth concentration is a concern but I do not see the sure cause and effect relationship you highlight, nor may that be inferred from the marginal tax rate chart in your link.
But if you are concerned about wealth concentration, the way to attack that is through the estate tax, not the income tax as a high income tax tends to have very negative effects on the economy while an estate tax comparatively speaking does not.
and what did you do with Marikod?
Sheesh, I get busy and miss a few days around here and you go get all reasonable on me.
I guess that is my sideways way of saying that I agree with you. I am not a proponent of any unduly high tax, but I find myself agreeing with you inre to the estate tax, with the possible execption of family businesses that are forced to close due to estate taxes. Family farms are the best example of this. Rather than eliminate "wealth concentration" the estate tax, when applied to family run businesses like the family farm, have exactly the opposite effect by running these smaller farms out of business and replacing them with conglomerates.
At the risk of sounding like a lib, I do have to admit that reducing the ranks of "trust fund babies" is probably a good thing. No one needs to start of life with hundreds of millions of tax free dollars. I would prefer we all start off more equal and allow the cream to rise to the top.
to keep the federal estate tax exemption high. Currently, it is I think about the two million. In other words there is no federal estate tax at all unless the estate is worth over 2 million at death.
But I see no policy value on allowing billionares to pass on their wealth to their children without a substantial estate tax bite. While John Rockefeller earned his billions many of this decedents simply inherited vast wealth and did nothing to earn it.
To his credit. Waren Buffett favors a high estate tax and is leaving the bulk of his wealth to charity anyway.
but I agree with you completely.
The key to eliminating wealth concentration without discouraging productivity, ambition, and hard work is not to tax the most productive and successful among us into oblivion, but to create a more fair and level playing field. Idle billionare trust fund babies do nothing to better this country, The Hunt brothers are a good example of this. HL must be rolling over in his grave.
I believe that hard work and success should be encouraged, not discouraged. Noone needs to start at the top and work their way down. I also agree that a high estate tax would encourage billionares to do something worthwhile with their fortunes before they die, rather than stockpiling it for generations of worthless decedents to come.
that the less hard you work the better your wage to productivity ratio will be.
I have spoken to workers before who are looking for ways to improve their atmosphere at their job. One thing that I always tell them is that they should intensionally engage in a slow down. Try to drop their productivity rate to zero while not making it look obvious.
If everyone worked less hard, then it would force companies to hire more workers and unemployment would go down. Working harder just allows the bosses to make a better profit, and they do so at your expense.
I am a business man, and try that shit at my company and your ass will be out on the street in a NY minute.
It's perfectly obvious that you look at things from a workers perspective. Your statement about slowing productivity also supports my opinion about your lack of understanding of business. It may also put you in the category of "too stupid to talk to" Honestly, do you really believe any of the drivel you are espousing? Or did you take a page out of Eddie's book and are you just posting shit so ridiculous that you are guaranteed a rise out of anyone that reads it?
Either way, this conversation is getting to stupid for me to continue to participate in. Enjoy the rest of your day.
I find it hard to believe that you would seriously advise workers to "try to drop their productivity rate to zero" on grounds this would "improve their job atmosphere."
Under what possible scenario would this improve the work atmosphere other than reduce the time they are actually working?
Sounds more like a sure fire way to get well ...fired.
You created this WillyWonka personna to make you look open minded and reasonable by contrast. lmfao
Is WillyWonka the left's response to TJ? It does go to show that the fringe from either side of the aisle looks equally as ridiculous. I really can't decide which one of them comes off the most inane, it's a dead heat IMO.
that estate taxes wipe out family farms. Most family farms, especially these days, don't even make close to enough money, in sales or on their holdings for the estate tax to even apply in most cases.
Actually, what is playing bigger havoc in Agriculture in the US is our corn and sugar subsidies. It's also not good for our health either, but that's a whole different rant.
There should be no trust fund babies. When I'm in one of my moods, I will often say that this is the most beautiful picture in the world.
Income has absoulutely nothing to do with estate taxes. Are you trying to say that the value of the underlying real estate of a family farm is not enough to trigger onerous estate taxes? You actually make my point for me, since the businesses are only marginally profitable, the estate taxes virtually wipe out the family farm as the heir are unable to generate enough income to pay the taxes. Even you should be able to grasp this.
Estate taxes are obviosly not the only threat to the family farm, the other factors that you cite are valid, but they serve to exacerbate the problems of the estate tax on family run business, not make them moot.
In most intenses when the value of productivity drops below the value of a worker's wage, that worker is fired or laid off. Usually this happens before it even gets there. If this wasn't the case with GM, I think it would be another example of GM's poor management.
In economics it's always difficult to lay down causal relationships. That's why it's called the dismal science. You can only screw with the inputs and look at the outputs. Connecting the two is always a gamble. However, when you have similar events happen with similar inputs, in this case low top marginal income tax rates, making that connection is a little more of a sure bet.
I don't see any negative effects high marginal income tax rates have. What were your thoughts on this?
I agree with you on estate taxes. Generational wealth is a very dangerous thing. However, the down side of estate taxes is that it is only applied "once in a lifetime."
set wages to a proper level in a market economy, at least in a for profit insitution. You could at a non-profit co-op (in theory anyway).
Personally, I think the best plans for setting wages to proper levels would be to adopt an entirely new economic system. I prefer the plans proposed by David Schweickart (Loyola University Chicago) and Robin Hahnel (Portland State).
You overlook the blaringly obvious...
ANYONE IN THIS COUNTRY CAN START A BUSINESS!!!
We reward risk takers!! The guy who works on the factory floor gets paid what the prevailing wage is. Economics 101. But he has taken NO RISKS!! Put nothing really ON THE LINE!!
If a small business owner's company does not make money, they still have to make payroll, therfore the employees still get paid, the owner does without.
So just because you may not have the guts to step up to the plate, there is no reason to bash those who do.
Go ahead!! Raise the tax rates!! And watch all of these empolyees you so plead for pay the price!! Liberals are so out of touch when it comes to understanding economics.
Remember they raised the luxury tax on yachts a few years ago to some ridiculously high number beccause they said these yachts were just toys of the rich. Did the rich suffer? NO!! They didn't buy boats. RESULT: The companies that built these yachts FIRED a lot of their employees!! Democrats had to roll back the tax because, as ususl, they could not see the bug picture!!
Snow,
I love you bro, but you're like a talking point without a brain.
Let's start with the blaringly obvious. Almost no one in this country can start a business and be successful. That's the reality. We have allowed the big box stores to run amok, making the entry fee for a mom and pop business far too high. Furthermore, we have rigged our tax rates (particularly FICA taxes) to put small entrepreneurs at a severe disadvantage, never mind the health care costs. Class mobility in the U.S. is among the LOWEST in all industrialized nations. That's a signal to how well our small and medium sized businesses are doing in this country, and it ain't good.
You are quite right that we reward risk takers. But only the risk takers on Wall Street and at financial institutions. Meanwhile we kick small business owners in the ass in order to protect the profits of the Fortune 500 from any competition.
Actually, the guy who works on the factory floor is paid based upon his bargaining power. If you think workers don't take a risk every time they punch in, then I can only suspect that you're either the most cheery optimist I've ever encountered, a bit delusional or you've never had a job. According to the AFL-CIO in 2004 alone more than 12,000 workers were injured on the job every single day—and that doesn't include the estimated 50,000 to 60,000 workers who died from occupational diseases.
I'm not sure what a bug picture is (sorry I couldn't let that typo pass without a mention, it made me grin), but generally speaking taxing consumption is a bad idea. It tends to discourage consumption. This is why I think we need to lower state sales tax rates significantly and make up the difference with a more progressive income tax.
Back in the 60's state sales taxes averaged 2% nationally. Compare that to where you live today. The states instead got more of their income from the federal gov't who were taxing the rich at 70% at the time.
First. GOOD POST!! You backed up your arguments with solid examples. While I may not agree, you put thought into the post and gave some solid points!! I appreciate that!!
In regards to the "bug". LMAO!! That was great. I will be the first to admit I type and post too fast. Just enjoy the board and have very little time to actually participate. Also tend to do it too late in the evening.
To your points:
You are correct in that starting a business is VERY difficult. I believe the number is about 9 out of 10 new businesses fail. BUt do not forget, its not a one shot deal. Many people start many businesses until one finally takes off. I read an interview with a rich guy who talked about how so many people only see his successful company and his wealth and know nothing of his first six that failed. He also made another comment I found interesting. He said that if you are smart and you do finally obtain real wealth, you will be rich for the rest of your life (don't spend beyond your means).
I find it amazing you would talk to me about the tax code. Based on my previous posts you could probably guess by now I HATE THE FRIGGIN TAX CODE. So we agree.
Your Wall street comment reeks of a liberal talking point. The most MILLIONARES in the country today are small business owners. So before you get your talking points from the DNC, you should check them out.
Bargaining power works in the short term, but in the long term the markets always win. Don't believe me, take a trip to Flint Michigan and see how well that bargaining power thing is working out. And you better check your stats and get them from a more trustworthy source. They will count friggin paper cuts as job injuries. I think you will find the amount of "real" injuries much lower. And don't forget the poor executive whose G5 crashes while he is on his way to the CEO's Business and Golf outing in Palm Springs!! 
Finally, and I know you probably hate the guy, but Limbaugh was fired 7 times before he finally hit is big. He could have quit after any of those. Instead, he now has a 400,000,000 contract with a syndicator. And he is literally a small business entrepenuer.
-- Modified on 11/20/2009 5:08:00 AM
Snow, as a general rule, I hate typo nazis. Everyone screws up from time to time. I do all the time. I'm worse usually in that I will sometimes screw up positive with negative. I'll say "do" when I mean "don't". I often don't proof read what I write, so it happens. No biggie. But "bug picture" was just hilarious. I imagine everything is "the big picture" with a bug. lol.
My brother, who didn't get a higher education, is running a small business himself, an antique store. I've helped out from time to time. They literally have 4 employees, 5 if you count me helping out a few times a year (which I actually don't, since I'm volunteering). So, I know how hard it is to start a small business, and keep it running. And it's far too hard. We need to give a leg up to small businesses so we can increase competition in the marketplace. Instead we tend to protect large businesses. This is even true in the tax code. Large medium sized businesses are taxed at a higher rate than large businesses, which is utterly insane.
I hate the tax code myself. It needs to be simplified big time.
I disagree with you that most millionaires are small business owners. Of course, keep in mind, the way I'm defining "small business" may be different than yours. I'm assuming you mean small business based upon the number of employees, as per your Limbaugh example. I'm using the definition laid out in tax law which applies it based upon taxable income. If we use that definition, Limbaugh is not a small business at all, but rather a medium sized business.
In regards to Flint, I think bargaining power still applies. The workers there are without jobs because their bargaining power has dramatically decreased. Part of what determines bargaining power from the outset is the supply and demand of workers and jobs. I probably should have mentioned that earlier.
Truth be told, even getting ill at a job would technically count as an injury on the job. But worker injuries are far more common than one might think. When I was a 19 I worked on a loading dock unloading and loading 18 wheelers. I can tell you that injuries happened all the time, everything from hurt backs to sprained wrists and knees. I once saw a guy nearly get crushed to death. Luckily the guy was quick on his feet.
I am defining small business by number of employees. In all, fairness, I believe it to be an accurate measure.
You are right about their bargaining power decreasing, but that is not because the company got stronger, but weaker, You can not demand a company give you something they no longer have. Personally I look at the Auto Unions as a group that "HELPED" to kill the golden goose. They were not totally responsible, but they definately played a major role.
I use to work in a kitchen at a restaurant in high school. Needless to say I got burnt all the time. I don't think that means I should have been pulling down 100K for that.