Here comes the other economic shoe dropping...

[Coito ergo sum]

Higher taxes hurt businesses. Very simple concept.

Yeah, sure, as do higher wages, and what's bad for business is bad for everyone, blah blah blah. I've heard all this crap before. It's older than von Hayek, and it doesn't match with what's happening in the real world.

It does match what is happening in the real world.

It's not "what's bad for business is bad for everyone."

In the real world, however, people work for businesses. So, it would make sense for us to want businesses to be successful. It does not make sense to raise taxes, fees and regulatory costs on businesses, and then look about in dismay, wondering why they're not hiring people. It should be very easy to conceptualize: if you owned a business, and you were thinking about hiring an employee, and the government increased your taxes by 15%, raised your licensing fees, increased your insurance costs, and imposed regulatory requirements that added thousands of dollars worth of expense to your balance sheet, would you be more likely or less likely to want to hire an employee?

It's economics 101.

False. Every business wants to maximize income and minimize costs thus achieving the greatest financial efficiency, or return on investment, possible. No business wants to hire another employee unless it has to which dictates an increase in demand which in turn dictates an increase in quality of life of the average consumer.

Economics 102

And, that makes what I said "false" how?

Both are true. Of course businesses don't want to hire employees they don't have to. Why would you want businesses hiring employees they don't need? You WANT waste? And, if you ran a small business, would you just hire unneeded employees to have hanging around?

What's false is your suggestion that forcing employers to hire workers will increase demand and then increase the quality of life for the average consumer. That ain't economics 102. You've never studied economics, have you?

[Clinton Huxley]

In the real world, however, people work for businesses. So, it would make sense for us to want businesses to be successful. It does not make sense to raise taxes, fees and regulatory costs on businesses, and then look about in dismay, wondering why they're not hiring people. It should be very easy to conceptualize: if you owned a business, and you were thinking about hiring an employee, and the government increased your taxes by 15%, raised your licensing fees, increased your insurance costs, and imposed regulatory requirements that added thousands of dollars worth of expense to your balance sheet, would you be more likely or less likely to want to hire an employee?
It's economics 101.

Or, to summarise, employers should be allowed to exploit workers without let or hindrance.

You must have been reading someone else's post. That summary certainly has nothing at all to do with anything I wrote. I thought you Brits thought of yourselves as more enlightened and intelligent. It's not showing.

I was just bringing a little brevity, dear boy.

[Coito ergo sum]

In the real world, however, people work for businesses. So, it would make sense for us to want businesses to be successful. It does not make sense to raise taxes, fees and regulatory costs on businesses, and then look about in dismay, wondering why they're not hiring people. It should be very easy to conceptualize: if you owned a business, and you were thinking about hiring an employee, and the government increased your taxes by 15%, raised your licensing fees, increased your insurance costs, and imposed regulatory requirements that added thousands of dollars worth of expense to your balance sheet, would you be more likely or less likely to want to hire an employee?
It's economics 101.

Or, to summarise, employers should be allowed to exploit workers without let or hindrance.

You must have been reading someone else's post. That summary certainly has nothing at all to do with anything I wrote. I thought you Brits thought of yourselves as more enlightened and intelligent. It's not showing.

I was just bringing a little brevity, dear boy.

Brevity, together with an inaccurate straw man.

[Coito ergo sum]

If you lot weren't so adverse to the idea of VAT it might help. Just saying

At least one of the Republican candidates is suggesting exactly that.

VAT is more complicated than a mere institution of a sales tax. Depending on how it's implemented, it can result in a multiplier effect, where the percentage tax is imposed several times along the manufacturing and distribution chain.

Sales taxes are also considered quite "regressive," and therefore they tend to be opposed by the liberal and/or left hand side of the political spectrum. Donna Brazil of the American Democratic Party was on MSNBC last night making exactly that point, while denigrating candidate Herman Cain's suggestion of a Value Added Tax.

[Clinton Huxley]

Left to their own devices, business owners will always do the absolute minimum. You only need to look at the rather lax practices in factories in the Third World. Why is your PC so cheap? Because some poor peasant in China is paid a pittance to make it and given only a cup of mercury to drink all day, during their 5 minute lunch break. Wow, those trainers are good value! That's because a 4 year old made them.

It's a sad state of affairs that the full majesty of the law needs to be brought to bear to make employers treat their staff like humans, but there you are.

[Coito ergo sum]

Left to their own devices, business owners will always do the absolute minimum. You only need to look at the rather lax practices in factories in the Third World. Why is your PC so cheap? Because some poor peasant in China is paid a pittance to make it and given only a cup of mercury to drink all day, during their 5 minute lunch break. Wow, those trainers are good value! That's because a 4 year old made them.

It's a sad state of affairs that the full majesty of the law needs to be brought to bear to make employers treat their staff like humans, but there you are.

How does raising the cost of doing business here in the US solve the problem of the poor in China?

Don't we want American and British businesses to do well? Yes? No? We don't want them to do well? We want to "stick it to them" because of what happens in China, a country in which the US and the UK don't have all that much jurisdiction, last time I checked?

It is a tremendous straw man to suggest that because China allows X, Y or Z, that here in the US and/or UK, we have to saddle employers with higher taxes and more costly regulations. There isn't an issue here in the US and as I understand it in the UK with companies treating their staff inhumanly, is there?

[Clinton Huxley]

Left to their own devices, business owners will always do the absolute minimum. You only need to look at the rather lax practices in factories in the Third World. Why is your PC so cheap? Because some poor peasant in China is paid a pittance to make it and given only a cup of mercury to drink all day, during their 5 minute lunch break. Wow, those trainers are good value! That's because a 4 year old made them.

It's a sad state of affairs that the full majesty of the law needs to be brought to bear to make employers treat their staff like humans, but there you are.

How does raising the cost of doing business here in the US solve the problem of the poor in China?

I never said it would.

Don't we want American and British businesses to do well? Yes? No? We don't want them to do well? We want to "stick it to them" because of what happens in China, a country in which the US and the UK don't have all that much jurisdiction, last time I checked?

We can, however, influence working conditions in our respective countries. I view having humane working conditions as a prerequisite of company that is "doing well".

It is a tremendous straw man to suggest that because China allows X, Y or Z, that here in the US and/or UK, we have to saddle employers with higher taxes and more costly regulations. There isn't an issue here in the US and as I understand it in the UK with companies treating their staff inhumanly, is there?

It's a tremendous strawman to claim that is what I implied. We don't have such an issue with Western companies treating their staff inhumanely (well, not to the same degree) precisely because the bleating of the exploitative classes for slack regulation has been resisted.

[Coito ergo sum]

Left to their own devices, business owners will always do the absolute minimum. You only need to look at the rather lax practices in factories in the Third World. Why is your PC so cheap? Because some poor peasant in China is paid a pittance to make it and given only a cup of mercury to drink all day, during their 5 minute lunch break. Wow, those trainers are good value! That's because a 4 year old made them.

It's a sad state of affairs that the full majesty of the law needs to be brought to bear to make employers treat their staff like humans, but there you are.

How does raising the cost of doing business here in the US solve the problem of the poor in China?

I never said it would.

Ah, I see. You were changing the subject.

Don't we want American and British businesses to do well? Yes? No? We don't want them to do well? We want to "stick it to them" because of what happens in China, a country in which the US and the UK don't have all that much jurisdiction, last time I checked?

We can, however, influence working conditions in our respective countries. I view having humane working conditions as a prerequisite of company that is "doing well".

Me too. But, again, that has little to nothing to do with the suggestion that raising taxes, increasing regulatory costs, and otherwise increasing the costs of doing business here in the US, or in the UK, helps business and helps increase employment, or whether the reverse, reducing such costs as helping business, is a "false" resort to a "discredited" trickle down economics.

It is a tremendous straw man to suggest that because China allows X, Y or Z, that here in the US and/or UK, we have to saddle employers with higher taxes and more costly regulations. There isn't an issue here in the US and as I understand it in the UK with companies treating their staff inhumanly, is there?

It's a tremendous strawman to claim that is what I implied. We don't have such an issue with Western companies treating their staff inhumanely (well, not to the same degree) precisely because the bleating of the exploitative classes for slack regulation has been resisted.

If one follows the line of discussion, nobody was talking about Chinese working conditions. The issue was whether or not increasing or decreasing operating costs and costs of doing business helped or hurt businesses - and as a corollary, whether we want to help businesses, or not.

I agree that it would be great to twist China's arm to improve working conditions there. That said, what's your position on whether or not increasing taxes and other costs on businesses helps them or hurts them? And do we want to help them and do we want them to do well?

[Jason]

What's false is your suggestion that forcing employers to hire workers will increase demand and then increase the quality of life for the average consumer.

False. If the average consumer enjoys a higher quality of life they have more disposable income. If they have more disposable income they dispose of more money thus increasing the demand these new businesses have to meet. It's a virtuous circle. That's the problem with the Occidental economy - it's based on a vicious cycle wherein minimizing cost and maximizing income are seen as good for the economy when in actuality it is biting the hand that feeds it. Employees are also customers.

Economics 103

[Coito ergo sum]

What's false is your suggestion that forcing employers to hire workers will increase demand and then increase the quality of life for the average consumer.

False. If the average consumer enjoys a higher quality of life they have more disposable income. If they have more disposable income they dispose of more money thus increasing the demand these new businesses have to meet. It's a virtuous circle. That's the problem with the Occidental economy - it's based on a vicious cycle wherein minimizing cost and maximizing income are seen as good for the economy when in actuality it is biting the hand that feeds it. Employees are also customers.

Economics 103

You've got the cart placed squarely before the horse. There has to be product demand sufficient to necessitate hiring the employees first. What you're saying is that if only all the employers at once would just go ahead and hire workers, whether they need them or not, the economy would boom because of all the employees with income to buy stuff. You can't really believe that.

[Jason]

Higher taxes hurt businesses. Very simple concept.

When you tax a thing, you make it more expensive. That's the idea behind, say, cigarette taxes - raise the price to discourage people from buying them. Yet, you would pretend that the concept somehow becomes inapplicable to any other product or service.

False. Gasoline taxes in the United States are used to fund transportation projects and are thus intended to support the infrastructure the automobiles drive on.

Wait - False?

You think that gasoline taxes being used to fund transportation projects means that raising taxes on gasoline doesn't make gasoline more expensive? And, you think that means that higher prices don't exert downward pressure on demand? Is that what you think?

No I don't think they decrease demand at all.

Recent research suggests that consumers are not very
responsive to changes in the price of gasoline, at least in
the short run. (Increased expenditures on gasoline have,
however, reduced consumers’ saving, real income growth,
and probably other forms of consumption.)3 For a variety
of reasons, consumers are currently only about one-fifth
as responsive to short-run changes in gasoline prices as
they were several decades ago. That decline in sensitivity
has been attributed to growth in real income, which has
rendered gasoline a smaller share of consumers’ purchases
from disposable income.

If anything they increase demand for new, more fuel efficient products as the same report states:

If sustained, higher gasoline prices would increasingly
influence consumers’ automobile-buying habits. Consumers
typically own a vehicle for several years, during
which time little can be done to affect that vehicle’s fuel
economy. Consumers who are considering replacing a
vehicle are more likely to buy a more-fuel-efficient vehicle
the higher they expect gasoline prices to be during the
time they own their next vehicle.

Furthermore, it has little to no effect on the driving patterns of consumers, again from the same report:

Recent empirical research suggests that total driving, or
vehicle miles traveled (VMT), is not currently very
responsive to the price of gasoline. A 10 percent increase
in gasoline prices is estimated to reduce VMT by as little
as 0.2 percent to 0.3 percent in the short run and by
1.1 percent to 1.5 percent eventually.1

Average weekday traffic volumes on some freeways have
declined slightly in response to higher gasoline prices,
CBO’s analysis shows. The routes on which that response
was detected are adjacent to commuter rail systems.
Weekly average gasoline prices appear to have had little
effect on traffic volume at other freeway locations or on
weekends.

In response to higher gasoline prices, drivers optimally
would slow just to the speed at which the value of the fuel
saved equaled the value of time lost to slower driving. By
that logic, motorists who valued their time more would
slow down less, or not at all, than drivers who valued
their time at a lower rate per hour. At any given gasoline
price, a motorist’s preferred speed also depends on factors
that are unrelated to gasoline prices or the value of time,
such as the local speed limit and its enforcement, the
time of day, the time of year, the physical characteristics
of the road at that location, and traffic density.14 However,
in keeping with the evidence cited earlier, speed
should be correlated with the value that motorists place
on their time.

In short, higher Gasoline prices, caused by taxes, speculative inflation, or genuine supply shortage, have no negative impact on economic demand and, in fact, have a positive impact on demand as older, less fuel efficient vehicles are leaving the roads sooner as people looking to replace their current vehicle are looking for something more fuel efficient thus creating more demand on the automotive sector and stimulating economic growth.

Regardless of all that, my point was that taxes are not always intended to reduce demand or consumption. Gasoline taxes in the US are intended to fund transportation projects such as the building of new roads and the maintenance of existing ones.

[Jason]

What's false is your suggestion that forcing employers to hire workers will increase demand and then increase the quality of life for the average consumer.

False. If the average consumer enjoys a higher quality of life they have more disposable income. If they have more disposable income they dispose of more money thus increasing the demand these new businesses have to meet. It's a virtuous circle. That's the problem with the Occidental economy - it's based on a vicious cycle wherein minimizing cost and maximizing income are seen as good for the economy when in actuality it is biting the hand that feeds it. Employees are also customers.

Economics 103

You've got the cart placed squarely before the horse. There has to be product demand sufficient to necessitate hiring the employees first. What you're saying is that if only all the employers at once would just go ahead and hire workers, whether they need them or not, the economy would boom because of all the employees with income to buy stuff. You can't really believe that.

Actually I do. The businesses who seek to maximize their quarterly profits do so to appease stock holders and increase their stock value at the cost of the people they employ. Either by outsourcing to cheaper labour markets or by initiating, often drastic, cutbacks in their labour force. This is taking boxes out from the bottom of their tower to put them on top. In the short term it works for their purpose, but in the long run it causes the ruination of the economy as a whole. So rather than min/maxing a responsible economic model not based on greed but rather sustainability ought to seek a natural equilibrium wherein they do not seek to maximize return on investment but rather make reasonable profit with the mutual benefit between employer, employee and the economy in mind.

Unfortunately this is impossible with the current economic model and it is one of the mortal failings of rampant capitalism. The government has to step in and initiate 'make work' programs for the public, as it often does now and through history, as the economic model has failed to sustain itself.

[Coito ergo sum]

Higher taxes hurt businesses. Very simple concept.

When you tax a thing, you make it more expensive. That's the idea behind, say, cigarette taxes - raise the price to discourage people from buying them. Yet, you would pretend that the concept somehow becomes inapplicable to any other product or service.

False. Gasoline taxes in the United States are used to fund transportation projects and are thus intended to support the infrastructure the automobiles drive on.

Wait - False?

You think that gasoline taxes being used to fund transportation projects means that raising taxes on gasoline doesn't make gasoline more expensive? And, you think that means that higher prices don't exert downward pressure on demand? Is that what you think?

No I don't think they decrease demand at all.

Higher prices tends to reduce demand, subject to the price elasticity and/or inelasticity of demand.

Recent research suggests that consumers are not very
responsive to changes in the price of gasoline, at least in
the short run. (Increased expenditures on gasoline have,
however, reduced consumers’ saving, real income growth,
and probably other forms of consumption.)3 For a variety
of reasons, consumers are currently only about one-fifth
as responsive to short-run changes in gasoline prices as
they were several decades ago. That decline in sensitivity
has been attributed to growth in real income, which has
rendered gasoline a smaller share of consumers’ purchases
from disposable income.

That is recognizing price inelasticity of gasoline as a product. People have a great need for it, and therefore if you raise the price of gasoline, people will first cut other things and bite the bullet and pay more, but as the price goes up, people's usage will go down. Just make gas prices $10 a gallon here in the US, and see what happens.

To say that raising gasoline prices has no effect on demand for gasoline is complete and utter bollocks.

If anything they increase demand for new, more fuel efficient products as the same report states:

They would increase demand for other products with a concomitant decrease in demand for gasoline....like if people switch to electric vehicles. That makes my point. Thank you.

If sustained, higher gasoline prices would increasingly
influence consumers’ automobile-buying habits. Consumers
typically own a vehicle for several years, during
which time little can be done to affect that vehicle’s fuel
economy. Consumers who are considering replacing a
vehicle are more likely to buy a more-fuel-efficient vehicle
the higher they expect gasoline prices to be during the
time they own their next vehicle.

In other words, they'll use less gasoline by buying a more fuel efficient vehicle, tending to reduce demand for gasoline. Again, you make my point. Thank you.

Furthermore, it has little to no effect on the driving patterns of consumers, again from the same report:

Recent empirical research suggests that total driving, or
vehicle miles traveled (VMT), is not currently very
responsive to the price of gasoline. A 10 percent increase
in gasoline prices is estimated to reduce VMT by as little
as 0.2 percent to 0.3 percent in the short run and by
1.1 percent to 1.5 percent eventually.1

That acknowledges the price inelasticity of gasoline, meaning that it takes more than a 10% increase in gasoline prices to start effecting how much people buy. That's not contrary to my point, as I specifically noted the concept of elasticity when the issue first came up. This stuff your posting does not in any way counter the notion that when you increase the price of things, it exerts downward pressure on demand. That, of course, is always subject to elasticity and inelasticity because, for example, people's demands for "necessaries" stays up longer than for luxuries. I.e. the demand for a video games will go down faster with price increases than the demand for milk or bread.

Average weekday traffic volumes on some freeways have
declined slightly in response to higher gasoline prices,
CBO’s analysis shows. The routes on which that response
was detected are adjacent to commuter rail systems.
Weekly average gasoline prices appear to have had little
effect on traffic volume at other freeway locations or on
weekends.

That's in the context of the small price increases that the report covers. Again, as prices get hire, pressure on demand increases and it tends to go down. Is that something you are really trying to dispute?

In response to higher gasoline prices, drivers optimally
would slow just to the speed at which the value of the fuel
saved equaled the value of time lost to slower driving. By
that logic, motorists who valued their time more would
slow down less, or not at all, than drivers who valued
their time at a lower rate per hour. At any given gasoline
price, a motorist’s preferred speed also depends on factors
that are unrelated to gasoline prices or the value of time,
such as the local speed limit and its enforcement, the
time of day, the time of year, the physical characteristics
of the road at that location, and traffic density.14 However,
in keeping with the evidence cited earlier, speed
should be correlated with the value that motorists place
on their time.

Look, when gas prices go up a lot, people start reducing their demand. Like in the 1970s when they started siphoning gas out of each other's cars, and started carpooling more, in relation to the dramatic increases in prices. The same studies that you're referring to, and material from the FTC, make the point that "short term" price increases don't effect demand that much because it takes people time and effort to find a substitute. E.g. - if you drive an SUV and prices go up 10 or 15%, you bite the bullet because to start saving gas you either have to move homes and reduce commute or get a new vehicle. But, over time, people start buying fewer SUVs and more fuel efficient cars as the price gets higher.

None of this that you've quoted demonstrates anything I have said is "false." It's exactly in line with what I wrote. Thank you.

In short, higher Gasoline prices, caused by taxes, speculative inflation, or genuine supply shortage, have no negative impact on economic demand and, in fact, have a positive impact on demand as older, less fuel efficient vehicles are leaving the roads sooner as people looking to replace their current vehicle are looking for something more fuel efficient thus creating more demand on the automotive sector and stimulating economic growth.

Regardless of all that, my point was that taxes are not always intended to reduce demand or consumption. Gasoline taxes in the US are intended to fund transportation projects such as the building of new roads and the maintenance of existing ones.[/quote]

[Warren Dew]

No I don't think they decrease demand at all.

Increased expenditures on gasoline have,
however, reduced consumers’ saving, real income growth,
and probably other forms of consumption.

...

In short, higher Gasoline prices, caused by taxes, speculative inflation, or genuine supply shortage, have no negative impact on economic demand ... [italics added]

Your own quote says exactly the opposite of what you're claiming there.

I mean, I'm a big fan of higher gasoline taxes, but it absolutely does have a negative impact on economic demand, unless offset by reductions in other taxes.

[Ian]

I think I'll get Coito's panties in a bunch...

Dow Logs 4th Weekly Gain, Positive for 2011

The Dow Jones Industrial Average jumped 267.01 points, or 2.31 percent, to finish at 11,808.79, finishing firmly in positive territory for the year.

The S&P 500 rallied 22.86 points, or 1.88 percent, to end at 1,238.25. The Nasdaq gained 38.84 points, or 1.49 percent, to close at 2,637.46. The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 32.
http://www.cnbc.com/id/44988273

Biggest 3-Week Stock Rally in Over 2 Years
http://www.cnbc.com/id/44993061

US Doing Better Than People Think: Goldman's O'Neill
The U.S. is "doing a lot better than the mood appears to be. There seems to be this mood around an inevitability about the next course or we’re back in recession or close to it. I don’t really buy that," O'Neill said, adding he sees "no momentum for a recession."

Most U.S. data have been strong, particularly in manufacturing and auto sales, he said, and current U.S. growth in the 2 percent area "strikes me as the cruising speed." In addition, "you have clear bias from the [Federal Reserve] under Ben Bernanke."

After talking with U.S.-based company clients and Goldman's own investment managers "a lot of them seem pretty, I wouldn't say optimistic, but certainly contented."

It would take "a few new negative shocks going on to drag the U.S. down."

He also discounted the effect of Greece, which he said is "only a $350 billion economy. China will import another Greece this year."
http://www.cnbc.com/id/44976558

Economy May Improve in Late 2011: JPMorgan Executive
"If there is a surprise to the upside it will be the U.S. economy in the latter part of this year," he said. Large corporations are doing extremely well, with a lot of cash on their balance sheets, he pointed out, adding that small-business loans at JPMorgan were up about 70 percent from a year ago.

"Small businesses are beginning to borrow significantly for the first time in years," he said. "Last year we didn't have the demand."

The consumer, meanwhile, "is getting his own financial condition in much, much better shape," Staley said, citing the bank's data that tracks debt compared to disposable income.

"So, while there's a sense of confidence coming back, I think the consumer is poised to start spending again," Staley said. "There’s a lot of propellant to get the economy going once that confidence number comes back."
http://www.cnbc.com/id/44980823