Where do jobs come from?

When people get a job, they have money to buy stuff, when they buy stuff they create more demand and more jobs open up.

Jobs come from jobs. At least in my uninformed opinion.

How many economists does it take to change a light bulb?

None. The invisible hand takes care of it.

It is you as the entrepreneur deciding that demand is sufficiently strong enough for you to hire someone and still make a profit on the expanded business. It may be your idea that you have a track record that proves you can sell more by expanding the client base, or you have a product and people are asking for more and more of it and you can’t keep enough on the shelves of retailers or wholesalers.

The increased demand may be because you are selling something that will result in long term savings for consumers, or it may be something that is discretionary. Discretionary demand will increase as more people are hired and have disposable income.

IMHO if we (USA) got back half the jobs that were sent overseas our job market wouldn’t be in half a bad a shape as it is now.

The Stork.

Three industries add to the wealth of a country and truly add jobs: Manufacturing, Mining and Farming. The “service industries” merely move money around.

Discuss.

@worriedguy The computer you are using was designed by the so called money-moving service industry. Discuss that.

@worriedguy, absolute nonsense. You are aware that robots handle most manufacturing and farming now, and the majority of jobs in developed countries today are service industry?

To answer the question, let’s think about what is needed to create jobs.

There has to be a demand for some good which workers are needed to produce. That good may be from industry (products or services), or from government (for example, national protection or teaching). Demand fluctuates quite a bit based on a wide variety of factors, such as technological evolution (which can shift it, such as away from CDs towards iTunes) and recessions (which can dampen it wholesale across many industries).

In order for workers to work, they have to have a means to get to work. That means some sort of infrastructure, such as roads or public transportation. It also means they aren’t too poor that they can’t afford to get to work (unless they live on site as in Foxconn in China).

In order for workers to work, they generally have to be educated and socialized, which is a form of “human capital” that is jointly provided by government (schools) and private families who raise children who become workers.

@Qingu @worriedguy I’ll remind you of the crops that are rotting in the Georgia fields because of no available labor force, since the state cracked down on hiring undocumented workers.

It is growth of businesses fueled by more sales which stems from consumer confidence.

The short and broad answer is that “jobs” – in the abstract – are created by “demand”, again in the abstract. But that can be jobs in China as well as jobs in the USA. Demand for production (of some kind) is a “need” that will be filled by someone who decides to satisfy the demand at a price that the consumer will pay and (generally) yield a profit to the producer, making the risk worth his while.

The job you create – the concrete, advertised-in-the-paper, glad-to-have-you-aboard, can-you-start-Monday actual job that one of your neighbors will take – that’s on you, bud.

That’s because you decided to be the producer / entrepreneur willing to take on a risk (and hopeful of a profit) and satisfy the demand.

@marinelife Any thought to what we might do to increase consumer confidence?

@Cruiser Increase employment.

@Cruiser Realistically? Stop the repeated Republican brinksmanship, have the Republicans provide realistic alternative programs that are focused on relieving the middle class while recognizing that the top 2% of incomes need to pull their weight. The Republicans won’t even close tax loopholes that make no sense.

As the economy flourishes or falters job opportunities are either created or reduced.

Of course, one can continue to create away, within their own special environments, such as you are doing @Cruiser

Can I apply for a part time customer service posisstion?lol

@zenvelo Actually Cantor and McConnle last week held the door wide open to discussing ending “tax preferences.”

@Coloma Sure!! As soon as I can find a way to get more cash into my customers wallets so they can buy more of my products and THEN I will be able to offer you that new job!! I do expect I will actually need one in a short order but somehow I don’t picture you the long cold winter type!! ;)

@bob_ Sure the PC was designed here. Relatively few people here benefited from the sale of that.PC because we were dumb enough (greedy enough) to have it built in another country. China made the boards, the displays, the sound cards, the mother board. They assembled and boxed it. They built the ICs. That gives them a leg up on the next project because they have the infrastructure in place. They get it. The engineering budget that funds the design of the next project they will steal, will come from sales of this project. The units sold will be made in Chinese factories employing their people, their engineers, their designers, their construction industry. That is where the big money, jobs, and wealth are being amassed.
We are in debt, while China et al hold it.
Manufacturing, Mining, Farming. The rest is either a zero sum game or a kiting scheme.

I’m an engineer by the way. I invent things. Engineering is ~8% of the budget, Manufacturing is ~50%..

A job arises when a human being discovers a value that is impossible or inconvenient to produce themselves, but they possess a value that they can trade.

Here is a hypothetical but probably reasonably accurate scenario of the origin of “jobs”

Once, human beings only had a couple of jobs to do. Make a weapon, find a critter, kill it.

Probably all human beings got to be fairly decent at making a weapon and hunting. If they didn’t they probably would not eat.

Over time, it became apparent that some human beings were really good hunters, but not great spear artisans. On the other hand, some human beings got to be good at spear making but were not particularly strong, fast or cunning like the hunters. So the spearmakers gave the hunters a better weapon, but since they had to make spears and not hunt, the hunters gave them some meat in exchange after they had been more effective at killing with the nicer spear.

It goes on and on from there.

@Cruiser Increase the debt ceiling to give the US continuity and stability.

@worriedguy Aren’t many engineers part of manufacturing anyways? Every manufacturing place I’ve worked had some, and most hired more on when demand for our products was high enough to warrant expanding the company. Someone has to draw up the prints that people like me use to manufacture things.

@worriedguy

I understand where you’re coming from. I agree that Manufacturing, Mining and Farming (or Fishing) are the ‘ultimate source’ of most wealth, but not all.

For example, the creation of Art – in whatever way you want to define that, whether plays, books, music, film, painting, sculpture – or a weak-hitting, poor-fielding shortstop who also can’t run the bases very well – can result in real wealth. It’s not ersatz wealth or fakery; “Art” can result in the genesis of “primary” wealth. I do agree that art such as that won’t exist in a place that doesn’t have the basics already started from the big three (or four) that we agreed on, but it’s real wealth.

For that reason I also believe that “service” can create primary wealth, too. You and I might agree that lawyers who sue one party to enrich another party (or to “make the victim whole” after a loss that they can prove and can attribute to the responsible party) fall into the “money shifting” kind of wealth transfer. But that doesn’t mean that “services” such as window-washing, dog-walking, babysitting and others (to name a few obvious low-tech enterprises) can’t create “actual” wealth, too – even lawyering.

In any case, the question was about “jobs”, not about “primary wealth generation”. Regardless of where money is “made” that can be spent downstream in the economy, being a barber, a security guard, “soldier, sailor, tinker or spy”, are all legitimate “jobs”.

Judging just from my personal experience, I’d have to say that jobs come from hell.

Jobs ultimately come from all sorts of human demands for goods and services. This the most simple answer I could think of.

@marinelife I am not convinced that alone would do it. Certainly SS and Medicare recipients will breathe a sigh of relief knowing their benefits are safe for the moment…but this higher debt ceiling ensures a higher debt that has to be paid off and that in itself threatens us with higher taxes which takes more money out of circulation that businesses and people could or would otherwise spend and or invest which ultimately IMO could mean more jobs.

@Cruiser it also depends on which businesses and people get tax cuts that you say would lead to money towards job creation. There are businesses out there with enough capital to create jobs who are not doing it enough. And they have the perfect excuse. Who could actually force them to hire? And who could challenge them on the nature of their businesses, that they could and should hire now.

“Sorry no demand yet, this market still sucks, but while we wait, better keep those tax cuts coming or else…”

Who could force them to hire in a democratic country? No one. But they will keep going for tax cuts and tax cuts and tax cuts…and they have politicians in Capitol Hill echoing their pitiful pleadings…see where this is going?

Isn’t it a double edged sword? Jobs come from demand. When more people demand your product, you hire another person to help get as much of your product out there as quickly as possible.

But when people don’t buy your product you need less staff, and less people have jobs which = less money for them to go out and spend, which means less staff needed all around.

People aren’t working, they aren’t buying, and vice versa, no?

@mazingerz88 You bring up a GREAT point in that companies have down sized and learned to do more or at least the same level of business with less manpower. They were forced to do this to survive in this economic downturn. The law of unintended consequences comes into play where the executive decision makers see this as an opportunity to create profits off the back of their remaining employees and will take advantage of this. Why? Because they can exacerbated by ZERO incentives to do otherwise. To make matters worse they feel threatened by the dark cloud of uncertainty on the horizon of more taxes, less tax ‘loopholes’ to soften the blow and additional costs of doing business. Who carries this burden on their shoulders?? The employee and the consumer who will then pay more for less as well.

@josie is pretty much on target here. But I would add that productivity is the major driver of growth. As we continue to increase productivity, goods become cheaper and we expand our need for more goods and services. For instance the hunter may be able to take down his prey with a well thrown spear. But over time the spear gets dull and he needs two or three to get the beast down. So now he’s needs to take time away from hunting to sharpen his spear. Enter the pear sharpener. The spear maker can crank out a lot of spears, the hunter can take down a lot of game and the spear sharpener can keep the process flowing smoothly. Everybody producing more by doing what they do best and producing enough to feed them all.

The industrial revolution is a prime example of this process. As things became automated we didn’t lose jobs we gained them. The number of labor saving devices increased by orders of magnitude. Each worker became much more productive in that they could produce more product (cars, toasters, whatever) but all that automation created more jobs than it eliminated. Labor saving devices became more affordable in the home as well creating even more opportunities. As things like vacuum cleaners or lawn mowers became affordable, people realized they had something called leisure time. Devices were created to help to leverage that as well. Trailers for camping and fishing and hunting for sport. It’s all part of the economic cycle. Continuous expansion requires innovation, build the better mouse trap and you’ll spend less time trying to derat your house. That leaves time for other things. And someone will invent a product to help you consume that time.

Taxes and regulation run counter productive to that process. Making the goods you want to buy less affordable and the money you have to buy them less available. So here we sit.

@Jaxk Doesn’t “making goods more affordable” mean that making sure that more people can buy what is being sold? I mean, I know my spending went way down during the 13 months I was unemployed, and that the incomes for many of those that do have jobs isn’t increasing while the incomes for a select few are growing exponentially.

Seems to me that a jobless recovery really isn’t a recovery, especially if either the government needs more revenue to help those that the companies aren’t hiring or more and more people are sliding down the economic food chain. The word “unsustainable” comes to mind.

@jerv

You are right about the affordable point. Americans are finding things less affordable. The trick is to ask why. It’s important to note what has changed. Rich people have not raised prices nor have they taken any money from your pocket. Yet things are more expensive and you have less money to spend. Both make things less affordable and consequently less things are purchased.

We know the savings rate has increased since the beginning of the recession leaving less money for unnecessary purchases. Probably not enough to make a significant difference but a contributor. Taxes have increased. even if you don’t think the federal has changed much, State taxes have taken a bite. Neither of these have really hit the lower incomes very hard but they too find themselves with less money, so what is it.

Gasoline was in the $2 range before the recession started and hit the $4 range at it peak. The average household spends about $7 for every 10 cent rise in gas prices. That means that for the extra $2 every household lost $140/month in that rise. To make matters worse business uses as much gas as personal usage, which increases the cost of goods by another $140/month. That’s too big a hit for us to swallow and the longer it continues the worse things get. We can complain that the rich aren’t doing thier part but it won’t fix what ails us. And the more we tax and spend, the more we take from those that can have a positive impact.

We all like to talk about the budget and how we need to address the big ticket items (SS, Medicare) but when it comes an economic recovery gasoline is the big ticket item. And unsustainable may be a good word for this problem.

@Jaxk “Rich people have not raised prices, nor have they taken any money from your pocket.”

If their income increases more than mine has (other than as a result of investments) then they actually have. I mean, prices naturally rise slightly over time, and if they quadruple their income while I go for years without a raise (not even a “cost of living increase”) while gas double in price and my food bill increases in response to the rising cost of getting that food to market, the net effect is the same.

As for the state taxes, the prices on many things in WA state have increased because of that. I pay 9.5% (6.5% state plus 3% county) on many things, and things like alcohol and tobacco are literally twice the price I am used to in NH as a result of other taxes.

I never refuted that we need to cut spending in some areas, but how can you defend the egregious bell curve of our current tax system? How can you justify yourself having to pay outrageous taxes so that Bank of America can not only pay $0.00, but actually get money back? How can you justify the top earners paying <20% while most middle-class people pay >30%?

But you are correct that gasoline and especially diesel fuel are “big ticket” items as they have profound effects on the prices of so many other things, giving the average person a double-whammy. The 10% raise I got a few months ago barely offsets the rising cost of the gas I use to get to work; compound that with the increase in grocery prices and it almost makes me want to skip a meal so I can afford some Vaseline to make the boning hurt less.

@jerv

Just a few points. I have no problem with leveling the playing field so that exemptions for everyone are the same. I have no problem getting rid of subsidies that favor one group or industry above another. I do have a problem when you try to argue that the rich don’t spend their money or in some way should be subjected to a different set of rules. Believe it or not when there is a recession, the top 1% actually lose income. That is not a cry for sympathy, just a fact. The middle class generally stays about even (no growth) while the lower incomes continue to increase albeit slower. You can see this in the numbers for the 2003 recession. When the economy recovers the top 1% grows faster than the rest. The point is that they are the ones that can afford to invest in this country. We should encourage that not penalize it. Wait for the end of the recession and raise thier taxes during good time like Clinton did.

Currently many of us have no expendable income. Those that do should be able to spend or invest what they have. We need investment desperately. Those that can afford it should be buying up property, repaving the parking lot, investing in automation to decrease the cost of goods. All things that need to be done but are on hold waiting to see if the government will be confiscating that money. This class warfare is killing us.

Apparently, there is this button on the President’s desk, and if he wasn’t out to destroy America because he hates all white people and is a Marxist, Communist, Nazi, he would push the jobs button. But he refuses. That’s how the far right tells it. They ran on a platform of “Jobs, jobs, jobs” as if they knew how to create them. But since taking control of the House in 2010, all they have done (besides trying to cut jobs) is ask, “Mr, President, where are the jobs?” But they did try to pass a bill to replace all energy saving light bulbs in federal property with incandescent ones. Sadly, that GOP bill failed to get enough GOP votes to pass.

Now, cynical humor and political jabs aside, jobs flow out of two elements being in relatively good match, the supply side and the demand side. We are deep in a demand side crisis because of all the wealth average and poor Americans lost due to the real-estate crisis of 2007. We had been in a recession almost since George W. Bush took office and destroyed the Clinton surplus, but the housing bubble made it LOOK like things were at least OK. Actually, Bush created the fewest Jobs since the Administration of Herbert Hoover. So much for the Big Lie that cutting taxes for the rich is what creates jobs. Clinton raised taxes. 23.1 million new jobs in 8 years. Bush slashed taxes for the rich. 3 million new jobs in 8 years.

But things didn’t look bad at first under Bush, because we were at near full employment at the end of the Clinton boom years. It was only when the bubble burst that we started hemorrhaging jobs at up to 780,000 a month. And whereas Bush inherited a surplus and shrinking National Debt, he blew through the surplus in months and doubled the National Debt, leaving us on track for financial ruin and ill equipped to do the heavy deficit spending needed to refloat an economy where consumers simply could not spend.

The supply side is fine. US corporations are sitting on $2 trillion in cash. They dare not invest it in new production (hiring) because consumers can’t buy the stuff they already have in inventory. The GOP solution. Cut taxes even more for corporations and millionaires so they can sit on even more cash. Fix the supply side when the demand side is broken. Break the demand side even more by slashing spending on everything that benefits the middle class and poor in any way. That’s like treating cancer with massive injections of known carcinogens. If we massively cut spending now, it will put us into a depression. The jobless claims will bankrupt the government and we will be in a mess that will take decades to sort out.

Desires and motivation to fulfill them for cash.

For me, from the little people. Brouhhhaahahahaha!! :D

Wow. Great question.
Jobs, if they’re not government, are generally created by consumer demand.

@Jaxk I don’t considering keeping only $750–800K out of every million instead of $850K to really qualify as “penalizing”, especially not when somebody who earns $100K gets to keep less than $70K of that though. How much incentive do you need to get rich? Isn’t there already enough?

Now, if you are into things like “snowball effect” or “critical mass” then it’s a fine idea, but the truth is that reality doesn’t follow the formulas. You might want to look at page 4 of this US Census data.

BTW, many sources I’ve seen put the lower tiers at slower growth than the middle class, and some actually show negative growth. It’s a bit hard to figure out which if any is actually correct, but the weight of evidence I’ve seen allows me to make a qualitative observation even if I can’t make a quantitative one. Damn statistics!

@Jaxk Penalizing the rich? Give me a break. The top 1% used to pay top marginal rates of 70% and more before Ronald Reagan came along and started us on the slide toward an oligarchy. Now they pay an effective rate of 17.2%. We’re talking people that earn in excess of $348,000 a year. The poor, deprived millionaires and billionaires. That top 1% earns 24% of all income in the USA and owns 40% of all the nation’s wealth. Yeah, they are so poor and deprived, let’s do cut all entitlements and ship that money off to the poor, poor rich instead of squandering it on people that might starve without it. Ayn Rand would be so proud of you, preaching her Gospel of Greed so powerfully.

@ETpro

It’s hard to make sense of an irrational argument. The Democrats have had control of Congress since 2007, before the recession. You want to blame the republicans for every thing you don’t like. The Democrats have had absolute control (filibuster proof) over the past two years as well as the presidency. You want to blame the Republicans for everything you don’t like. Now the Republicans have gained ½ of congress for the past six months. They are of course responsible for everything you don’t like. Is there any point where the Democrats take responsibility for anything.

You want to credit Clinton for the growth in the 90s. But we had a Republican congress. Make up your mind, either congress is responsible or the President is responsible. If you credit Clinton for the growth then must fault Obama for the lack of it. If you want to blame congress now, you must credit congress for the 90s. Your selective blame and credit game doesn’t work.

And if you want to play the job creation game let’s include Obama. His is the worst record with a -54% annual increase. I noticed you left Obama off your list so I thought you’d like the update.

@jerv

I assume qualitative means that you believe what you want regardless of the data.

@ETpro

Very interesting way to put it. I’m the greedy one but I’m not asking anyone for anything. You however are not greedy because you want to take more from the rich. Kind of a Robin Hood thing I guess. Or at least some kind of hood (meaning gangster).

@Jaxk No, but it means that you can tell a positive from a negative and negligible change from a dramatic one. And you don’t need to know how many foot-pounds of force are in Mike Tyson’s left hook to know that it will hurt either.

If I felt that it would make even the slightest difference, I would take a whole bunch of sources and give you the average, but history has already demonstrated the futility of citing facts, so it’s not worth the effort.

@jerv

“but history has already demonstrated the futility of citing facts”

Something we can agree on. I’ve definitely noticed that but I keep plugging away hoping that maybe someone will actually look at them.

@Jaxk It’;s hard to talk sense to an irrational ideologue. When did the real estate bubble begin to grow? Here’s a chart to help fill in those convenient lapses in ideologue memory that helo make their beliefs right even in the face of overwhelming evidence to the opposite. I will trust that even you recall that the Republicans controlled the Presidency and both houses of Congress in 2000, and they even had a strangle-hold on the Supreme Court.

Taking from the rich. No. I would be fine with them just carrying their fair share of the burden. As @jerv correctly observed,m and average Joe earns $100K and pays 30% of it in taxes. The top 1% of taxpayers averaged about $138 million in income, and paid taxes at a rate of 16.6%.. That is reverse Robin Hood, my friend.

I’m truly not the ideologue here. I don’t love taxes. I don’t want to give more to the government just to make myself feel good. If I did, I could always just donate anonymously. I seriously doubt if even the most flaming liberal who secretly donates all the cash they can spare to the IRS. But when we start talking about wrecking Social Security, Medicare, Medicaid, Pell Grants, Education and such so the wealthiest among us can get even more, that’s GREED. There is no other name for it. And to prevent that happening, I am OK with paying what I paid when Bill Clinton was in office. Id did just fine then.

@ETpro

I hate to nit pick but according to your chart the housing prices started escalating in 1997. Which is consistent with my memory of it. In fact, The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan. Here’s an except from that plan:

“For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership.”

Now if you want to fault Bush for continuing the push for home ownership, I’ll give you that. But if you want to lay the housing bubble on Bush’s feet, I think that’s a bit disingenuous. As for the Supreme Court, it is fairly balanced with Kennedy being the swing vote. You may think it’s conservative just because you are so far left.

As for wrecking SS, Medicare, Medicaid, what are you talking about. These programs are all in trouble. Surely even you can see that. If you believe these programs are in fine shape, I guess we don’t have much to discuss. If you believe they can be made financially viable, I’m all ears. Otherwise the Democrats have offered absolutely nothing to fix them. You’re fast to criticize the Ryan plan but offer nothing in return.

As for education, it doesn’t need more money. It needs more education and less social engineering.

@Jaxk Don’t challenge me to defend Clinton’s role in all that went wrong under Bush. Clinton triangulated way too much. But the chart clearly shows that runaway prices in housing started in 2000. That’s when the TV talking heads began to point to a housing bubble. So to claim that the Democrats taking control of the House in 2006 caused the collapse of 2007 is to claim that they had some sort of time machine and made Republicans do wrong-headed things 6 years before they came to power. Where is your proof of that?

The entitlement programs are in trouble because we have built in so many cuts and loopholes into our tax code we are no longer funding them. The tax revenues as a percent of GDP are lower now than they had been since the Truman administration. That’s the fault of don’t tax, just spend that the GOP has pushed. And as David Stockman candidly admitted, that’s why as Reagan;s budget director,m he pushed it. They wanted to “Starve the beast.” Kill entitlements by cutting taxes so deeply they went bankrupt. The more you keep arguing, the more you confirm that the GOP stands for Greedy Oligarch Pigs. They are the party of the corporate jet setters and billionaires. They could care less about all the culture war and race issues they use to rile up their Reagan Democrat dupes and keep themselves in power. They care only about serving the rich masters of the GOP.

@ETpro

It’s pretty easy to see where you get your ‘deny and blame the Republicans’ approach to everything. Lay off the liberal blogs for a while. They’ll rot your brain.

And you need to look at the chart again. It clearly shows the spike in prices started in 1997. Put on your glasses and you’ll be able to read it better. Nothing to do with the Democrats taking office in 2006, I don’t know where you got that. It happened as a result of the Clinton housing policy (linked above).

BTW, your link to tax revenues is is wrong. Not only are there no labels but there is no way it represents tax revenue. We never had revenues above 90% of GDP. No offense intended but have you been drinking?

Fact from fiction, truth from diction. I think jobs, for the most part comes from entrepreneurs and business owners. If I am an inventor/entrepreneur and I see something that will make life easier or do something more efficient but there isn’t a widget to do it and I invent it, I hope the public will buy it. If I believe in the widget I invest money, mine and maybe others too, that means a factory. Depending on how large I start, I put a few, a dozen, or dozens of dozens to work. Then I add work to those who will service the factory with food services, t-paper, office supplies, etc.; which means maybe those businesses expand, creating more jobs. Then I have to have a sales force, someone to go to the trade shows, do the infomercials to get the world out, creating some jobs there. In order to keep everything going John Q has to go down and buy the widget. He does that, the lights get paid, the supplies get purchased, and Larry Lunchmeat take home his pay check. No one buys the widget, the business goes belly up and everyone heads for EDD to get an unemployment check. If Larry Lunchmeat loves the widget and tells all his friends and family who buy it and they love it, maybe there are more people wanting the widget than there are in existence, or can be produced. Then I have to expand to keep up with the demand so construction workers get work because I am expanding or building a second campus. Once construction is complete, I have to hire more people to work it. I need more delivery drivers, the people that do food service and provide the supplies might have to hire more to keep up. The jobs originated from the people willing to stick their neck out to start a business, it is then up to the consumer to keep it afloat.

@Jaxk Sorry about the link to the tax curve. I inadvertently grabbed the URL to one of the GIF files on the source, not the site. But the fact is that the revenue as a percent of GDP is the lowest it’s been since 1950. Here is a solid, well documented link.

@Hypocrisy_Central That’s a good analysis of what drives new job creation in a healthy economy. Our problem is that with a growing income and wealth disparity that’s been steadily eating away at the purchasing power of “Larry Lunchmeat” and his cohorts, we slide toward becoming a banana republic where there are no Larry Lunchmean’s to buy new widgets that are invented. Instead, a small group of oligarchs own virtually all the wealth and control the government and the police to keep things just as they are.

@ETpro

I have trouble with some of the conclusions but not the data. If you look at the same data over time, you get a better picture (at least I do) on what is happening. We haven’t changed tax rates since the start of the recession, so that’s not it. But we see the same kind of drop in revenue during the 2000–2002 recession (it is significant to note that the revenue returned to about 18% after the tax cuts). I know the stock market dropped similarly in both recessions and there’s a good chance that the drop is a result of losses at the beginning, offsetting gains now. But I’m guessing.

I look at the example of GE. Jeffery Immelt spends enormous time with Obama. He is one of Obama primary jobs consultants. Immelt paid no taxes on $10 billion in profits and has reduced employment at GE by 50 workers. Kinda looks bad. But I don’t know why GE paid no tax. Until I do, I’m reluctant scream foul play. Either way, if GE paid zero tax at 35% it is unlikely that raising the rate would have much affect. Of course lowering it wouldn’t either.

I think we are in agreement that the corporate tax should be lower but broader. I’m not sure we are in agreement on how to make that happen.

@Jaxk I think that the problem isn’t the marginal rates, but the effective rates. Granted, I’d like to see the Capital Gains rate tweaked a bit, but I think that most of the problem is loopholes. The tax rate doesn’t matter if you can fudge things to make your adjusted gross artificially low, and that is why you pay taxes that multinationals don’t; they are better bullshit artists than you’ll ever be.

@jerv

No disagree here. That’s what I meant by broader. The problem I have here is defining what is a loophole. That’s why I would really like to know how GE managed to pay no tax. If it was losses carried forward, I don’t really have a problem. If it was GE buying 10,000 new electric vehicles and getting the tax rebates, I would.

@Jaxk Interesting comments above. We’re not that far apart in thinking. I have ZERO interest in raising the corporate tax rate. I would like to cut it down to 20% or 25% max and eliminate loopholes so that all companies here play on a level playing field with one another. Tax subsidies to targeted industries is one place where I am totally on board with Libertarians. No corporate welfare. No favored sons. No crony capitalism. To me, carrying losses forward isn’t a loophole, it’s a reality. Carrying LBO debt forward is a loophole.

@ETpro

I’m not disagreeing here but I’m not aware of any special tax loophole for LBOs. The debt is real debt and the assets are real assets. I don’t like LBOs in general, they are a bit risky (to say the least). Is it that you want to eliminate LBOs or make special rules for them? Or am I missing something?

This talks about how liquidity has stalled because the Fed is paying interest on bank reserves, which is making them reluctant to lend (since they can make money on their reserves). Maybe that aspect is part of the engine.

@obvek

Excellent article. I had no idea that was going on. It makes a lot of sense. I have trouble understanding why the fed would pay interest on those reserves, let alone the excess reserves. And it would definitely compete with the lending between banks.

@Jaxk The LBO debt is real enough, but the net result of all too many LBOs is to generate nothing of lasting claue except profits for the corporate raiders. They buy in, cut the workforce and/or offshore jobs to lower costs, then hit the golden parachutes. Maybe there should be a time of ownership requirement fbefore LBO debt can start being used as a deduction. In all too many cases, the raiders leave the pension fund looted, a huge pile of debt, jobs gone (often permanently) and a company so weakened and debt rideden that it ends up in bankruptcy. Mitt Romney’s Bain Capital was a good example. While he touts it as proof he knows how to create jobs, it certainly isn’t ttrue unless he’s talking about jobs everywhere except the USA. Granted they did have some real successes, like Staples. But the overall balance sheet of job creaton was a negative one during ROmney’s tenure there.

@ETpro ~ But Romney is a Conservative, and therefore perfect and infallible. So that means that Bain Capital is a shining example of how things should be done.

@jerv There are so many Romney doppelgangers you have to specify that fate donw to the hour, minute and second before you can state whether he is an establishment conservative, a liberal RINO, or a far-right Tea Partier.

@ETpro As a gamer, I prefer rolling dice and then consulting the appropriate table.

@jerv Ha. I’ll ask our dining room table, then. Oh, and roll the cide first. This is pretty complicated stuff.

@ETpro

I don’t disagree with your portrayal of LBOs. I’m not sure the tax code is the place to fix it. Junk bonds have been a problem for quite some time. Kind of a feast or famine market. I wouldn’t disagree with a limitation on these but I wouldn’t do a special tax provision to handle it. Specials always create loopholes rather than plug them.

FWIW…I just bought the company I worked for for 15 years and performed a mini LBO where the old owner requested a sizeable down payment. The same bank we do business with for over 20 years who would have hand delivered a wheel barrow full of cash 3 years ago no questions asked….I had to collateralize dollar for dollar the entire amount. The crazy part is my home wasn’t good enough and they demanded to attach all the assets of the company as well. It was the most excruciating lending process I have ever been through!

The size of the document is bigger than Encyclopedia Britannica! HS!

@Cruiser My rule of thumb is that if it can’t fit on a single Letter-sized page in a 9-point font, ask for some lube :D

@jerv You had to bring up the lube part didn’t you! XD

@Cruiser Good luck with it, man. It was a gutsy move while Congress is flirting with deliberately defaulting on the debt because the Tea Party Republicans think it would be a neat thing to do.

@ETpro That reminds me of a quote from one of my RPG books:
“It’s going to be hard to test my theory without destroying the universe…. but what the Hell!? It’s a really neat theory!”

@jerv Ha! Spot on. The Tea Party set seems to think, “Yeah, I know we’re destroying our own country, but at least the government will be gone with it.”

@ETpro Didn’t The Doctor destroy his home planet and the rest of his race to prevent that sort of nihilistic destruction? Maybe I’m just weird for seeing all of these parallels…

@ETpro The upside is I bought the co. based on current sales during a recession and if we ever turn the corner of this downturn there will be no looking back!

@Cruiser I already own my company, and we’re in the same boat. Let’s hope Washington doesn’t torpedo us.

@ETpro Well all I want and hope for is that Washington loosen the ropes a bit to regroup our financial situations so we have some breathing room to begin to reinvest in our businesses and employees. I see some hinting now that Obama may actually be considering this very concept.

@Cruiser

I hope you’re right although I see little hope that Obama will consider loosening his stranglehold. I seem to be in a similar boat with my business although if I could get the government out of my pocket, I’d be doing OK even in the recession. When I look at my P&L the only line that is increasing is government payments and it is increasing exponentially.

@Jaxk Think how much less you’d pay if the multi-nationals picked up their end. While the top 0.1% of individuals pay almost their fair share (a 1% hike would cover it), the top companies pay $0.00, leaving you and @ETpro to pick up the slack.

@jerv

We may have very different ideologies but I don’t disagree with closing loopholes. Unfortunately I don’t see that resulting in anything different in what I pay. Do you honestly believe that even if the loopholes brought in another $trillion in revenue (over the 10 years), that Obama would change his stance on anything? He’d still be pushing the tax hikes, he’d still be pushing for more spending, what would change?

@Jaxk That is a separate argument for another time/place. Suffice it to say, I believe that every president (past, present, and future) has/does/will want[ed] to spend ridiculously unwarranted amounts somewhere in the budget. That transcends partisanship. Sadly, because of the way things went, increased spending is now required in some areas… but I take that as a sign that we need to trim the fat from others.

The way I see it, I took the fact that I am currently in a slightly better position than I was five years ago (mostly due to Seattle being cheaper than NH) as an “excuse” to pay off past debts and then max out the company match on my 401k (a luxury I wasn’t able to afford until fairly recently). Why can’t Washington be nearly as responsible with their “extra” money?

@jerv

After increasing the budget by 30%, that’s all I ask. Trim some fat somewhere.