Rossputin.com: Rational Thinking About Our World

Ross: If giving away $800 to every taxpayer will "save" the economy, why doesn't the government just give us all $100,000, and then we could all go on a nice vacation while the economy hummed along to full recovery?

The underlying problem with the economy is an extreme maldistribution of income between the working class and the capital owners. When a CEO can make 300 million dollars while an average worker's wages haven't even kept pace with inflation what results is a dysfunctional market economy starved for consumption spending. The average American has had to fuel his/her spending with debt obtained by borrowing on the equity within their home - that phantom equity has now evaporated.

In order to correct this out of balance condition there needs to be laws in place (similar to the anti-Trust legislation) that caps the annual income of all capital owners and their surrogates (CEOs, CFOs, etc.) at a specific federal percentage above that of the highest paid worker within their respective firm. Also, we need to eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.

Essentially, FDR was accurate when he characterized the Great Depression as an out-of-balance Economic malady. Rural income prior to the Great Depression was significantly lower than urban income, now (overvalued home equity) as then there was unlimited amounts of overvalued phantom equity flowing into the stock market, the income differential between labor and capital while nowhere near the current astronomical level was still much higher than sustainable. There in lies the root cause of the out-of-balance condition that precipitated the Great Depression. Any system including the market economy that gets to far out balance does not function properly. Certain constraints need to exist to keep the market economy from slipping into a dysfunctional state. Balance is the essence of stability nothing short of this will guarantee permanence.

SoftwareEng,

Thanks for the comments.

I don't know what to say except that you are absolutely completely wrong on almost everything you are claiming.

Just because some rich people are very very rich does not mean it is a "maldistribution" of income or wealth. Furthermore, in suggesting that CEO compensation be capped, you are assuming that money not spent on CEO salary would be redistributed to employee salary. It wouldn't. It would remain with shareholders, which would be great for shareholders...assuming the CEO increases the value of the company by less than his compensation. And if that's true, they should be firing that CEO anyway.

FDR tried some of the wage insanity that you are describing. FDR was a villain, not a hero. His economic idiocy was responsible for the Depression lasting so long. You should read "The Forgotten Man" by Amity Shlaes. You might learn something.

The "constraints" you describe are a prescription for economic death, as has been shown by every communist country. Your suggestions for eliminating work visas are also irresponsible at best. The idea that the Depression was caused by income differentials is not supported by history or by economic theory. What made it much worse was the Smoot-Hawley tariffs, interfering with international free trade. Eliminating visas is simply interfering with free trade of labor. You probably don't like H-1Bs because you don't like competing against foreign software engineers. But that doesn't mean that it's the government's responsibility to protect you at the cost of our economy.

You really should learn more economics before you start making such dangerous suggestions...and before you vote.

You really should learn your economics before you spout nonsense.

John Maynard Keynes –
- If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes its effects in increasing the propensity to consume is, of course, all the greater.
- Aggregate consumption depends mainly on the amount of aggregate income.
- Consumption – to repeat the obvious is the sole end and object of all economic activity.
- We cannot, as a community, provide for future consumption by financial expediants [stocks, bonds, 2nd mortgages on home loans, etc] but only by current output.
- Capital is not a self-subsistent entity existing apart from consumption.
- Consumption is directly tied to the level of employment.

My Proposed Program
• 2 year 800 billion emergency Infrastructure Investment Jobs Creation Program (IIJCP) aimed at building new interstate highways, mass transit systems, schools, bridges, public hospitals, libraries, and assorted public buildings.
• Eliminate labor arbitrage by canceling all Temporary Worker Visa programs (L-1, H1-B, etc.), and establish tax penalties for firms that expand their workforce above some threshold through outsourcing, or replacement hiring in foreign locations.
• Taxation of corporate profits in the amount of 95% for firms that exceed a threshold level of jobs outsourced to a foreign country.
• Taxation at the rate of 80% on individual yearly income received from any corporation, not-for-profit organization, or any form of legal entity where the total income exceeds the U.S. average yearly median individual income by 200%.
• Fair trade agreements that ensure nations will offer decent wages, humane working conditions, and sound environmental policies.
• A nationalized health care system for all U.S. citizens.
• An effective federally funded tuition assistance program for U.S. citizens targeted at professions in demand.
• Repeal all legislation that inhibits the right’s of individuals to organize under labor unions regardless of position or any other currently disqualifying classification.

My Observations:
• An economy can only function when a large proportion of the populace is engaged in the economy thus able to purchase what is produced.
• If price is inelastic and labor remuneration static demand will fall due to reductions by industries in their capital base (the most important being labor).
• Firms forced to compete (those that are not oligopolies) in an economic environment where demand is declining will still compete on price but efficiency gains and operating cost reductions by nature have marginal declining utility whereby a point is reached when the firm's factors of production (land, labor, or capital) must be slashed. These cuts in factors of production will have a multiplicative effect throughout an economy resulting in an ever building 'wave' of economic decline.
• It is important to keep in mind that an economy cannot continue to grow when long-term consumption continues to decline. This in turn ties directly to reductions in the factors of production to accommodate continual long-term reductions in consumption.
• When geographical barriers, constraints to the free flow of labor resources, underemployed resource utilization, similar knowledge distribution across all nation state’s, and nation state governmental inconsistency exists no global free market can exist and thereby at the nation state level no significant corresponding opportunity cost for engaging in one form of economic endeavor over another.

SoftwareEng,

Keynes is not all wrong, but he was substantially wrong.

Your proposals are basically socialist.

History shows that proposals like yours are doomed to failure, and it further shows that "supply side" policies generally succeed whether liberals/socialists like it or not.

Eastern Europe compared to their nearby "old Europe" neighbors is an instructive comparison.

I appreciate your attempt to write in economic language, but using more academic rhetoric does not increase your accuracy.

If a Democrat, esp. a Democrat other than Hillary, gets elected in November, we may see some moves toward your views. Then you'll see (as if FDR's prolongation of the Great Depression weren't enough evidence) what socialist policies reap for the polity.