Quote:
Originally posted by That Guy
In all reality, fiscal economic policy can do very little to influence the recession boom cycle which is natural and will always happen.
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While I agree with much of the post, this particular point I do not. We will always have the business cycle, but we have made great gains in smoothing it out. HUGE gains!
When was the last time the US (as a nation) had 15% unemployment?
The welfare state compromise of post 1940 has done lots to provide not only social stabilization, but tremendous amounts of economic stabilization. By building a stronger and more stable middle class, we created consumers that could afford to buy durable goods as opposed to only subsistence goods. Cars, applicances, homes, and so on. The middle class are the strength of western culture. With a have/have-not society, we have people that buy only the requirements of life and those that buy goods (in small numbers) and save a great percentage of their income.
Why is that the US economy has not recovered despite tax cuts to the rich? Trickle down? Trickle down to bond salespeople maybe. Massive corporate tax cuts in Canada have NOT created a single job. In most parts of Canada, unemployment is still at or above 7.5%. Employment is driven by the need to produce, not by the level pf profits. Can you find me a CEO that thinks "hey, that tax cut gave us more capital to play with, let's hire some folks?" Not many do. They instead announce the higher profits in an effort to ramp the stock in the short term, making their own options worth lots more. Then they lay off folks, asking those remaining to work harder to avoid the axe.
The THEORY is that companies will reinvest the capital in increased capacity, and raise the number of employees. In turn, more employed folks pay more income tax, meaning a net income gain for government. For some reason in Canada, this is not working. Is it in the US?
Five years ago, Edmonton's unemployment rate was about 5%. Corporate taxes have been reduced from 12% to 3%. No drop in unemployment. No trickle down. In fact, lay-off announcements are starting to dominate the business section once again.