Free market economics.

Free market economics.

Now, the current way of thinking that the right is feeding us goes as follows. The free market creates jobs, taxes stifle the free market, regulation stifles the free market, and that is how the government stifles job creation. This is what Reagan famously referred to as "trickle down" economics, the idea that allowing the market free reign to create opportunities for the rich to enrich themselves will also provide the circumstances for the wealthy to create jobs by spending more money and investing in their own businesses. I can't argue honestly that they are totally incorrect; any way the government injects money into the economy will stimulate it. However, as a guitarist I've learned that there are good ways to practice, better ways to practice, and flawed ways to practice. Flawed practice can help, but good practice is so much more effective. Let's go.

Does the money trickle down? Yes. Does all of it trickle down? No, if it did it would be "shower down" economics. Trickle is accurate, because once some money gets diverted to offshore accounts, international investments, real estate speculation, and savings accounts, yes, some of it will be spent locally, thereby stimulating the economy. Is this as effective as targeted government spending? No. Traditionally towns spring up near military installations because soldiers have money, but not so much that they can afford to save most of it. So all the soldiers on, for instance, Ft. Riley in Kansas spend their money locally. (It should be mentioned that pay adjustments relative to the civilian sector have changed the situation somewhat since the beginning of the professional, all volunteer military. But that's not pertinent at the moment.) People paid a living wage by Uncle Sam spend it, and stimulate local economies. They generate them where they don't already exist. If we give a tax break to the commanding general on Ft. Riley, or even what we can call a well deserved raise of $1000 a month, will that affect the local economy? No. He might buy a car or a bigger house. Or he might just invest it in his retirement fund. If we extend that same raise to all the colonels and above on Riley the same applies to each individually.

Let's argue that instead of giving 100 colonels a $1000 raise we give 1000 privates $100. Would the 100 officers inject $100,000 a month into the local economy? I think we can agree they would not. But would 1000 privates? Oh you better believe it. Their families would eat better or go to an extra movie. Maybe they'd blow it on a motorcycle. But almost all of them would spend it locally, every time. And would that money trickle up? Absolutely! Who do you think owns the motorcycle dealership or the Chili's or the movie theater? So the government improves the lifestyle of 1000 privates by a small but noticeable amount, the economy gets a noticeable boost, and even rich folks see profits go up. Everybody wins.

I realize that making it a raise for privates is less frightening than leaving the wealthy at their current tax rates and spending the money on roads. It's the same concept economically but taxes are a big buzzword. Here's a reminder. Taxes under Clinton were lower than under Reagan, taxes under Obama are low than under GWB. They've been going down steadily for over half a century.
Wait, did I just say that the economic collapse under the Bush administration happened despite lower taxes than under the economic prosperity of the Clinton years, or Reagan, or even Eisenhower? How can that be true if low taxes are the only way to save the economy? Simple, you have been lied to. A dollar of tax cuts generates less than 40 cents of economic activity. (I'm sorry I can't remember the exact figure. If I find the article I'll try to post the link.) A dollar of unemployment benefits generates over $1.60 in economic activity. (Again, same article from back when Republicans were blocking unemployment benefit extensions. That's why I can't remember the exact figures, and why unemployment is the specific program.) So, clearly, if economic recovery had been a Republican priority they would have done it with targeted spending.

Do taxes stifle the free market? Despite the nasty rumors to the contrary, no. Not really. If an employee will generate income, you will hire him. (Or her, the traditional gender neutral pronoun in English is masculine, just go with it.) If that employee costs more than the revenue he will generate, you will let him go. How do taxes figure in? Simple. Employee salaries are tax deductible. They are not figured into taxable business income. Exempt. Free. Tax holiday. Got it? So if you own a business, pay yourself $80 thousand, and your company pulls in $90 thousand, its taxable income is $10 thousand minus legitimate business receipts. You still owe personal income tax on $80 thousand, but that would have been true if you worked for McDonalds. Um, as a manager? I don't know if Mickey D's pays that well, I'm guessing no. How about taxes preventing investment in your business? Computers and a company car, are they tax deductible too? You bet. If you don't want to pay income taxes, ever, just go spend every dime of profit on legitimate business expenses on the last day of each year. It would work, although you might have a whole lot more copy paper than you need.

Does regulation stifle the free market? Absolutely, and thank God for that. Because if I know anything, I know that child labor, slavery, and no meat inspections were profitable. Standard Oil made a fortune before anti-monopoly regulations. OSHA makes workplaces expensive, even more expensive than paying the families of some people who die in unsafe working conditions. What about banking regulations? Even with them Wall Street managed to package sub-prime loans as grade A investment packages and destroy our economy. Imagine what could have happened if Reagan hadn't put in new regulations during the S&L crisis in the 80s! Oh, Bush repealed those. That was the problem, got it. Almost forgot. I like the airbags that Uncle Sam makes car companies put in my car, and as a daddy I like the Latch system that attaches to my safe, government regulated, car seat. Remember the Ford Pinto? Now with exploding rear bumpers, great fun at parties! I'm glad for building regulations that make surviving a tornado in Oklahoma or an earthquake in California a statistical likelihood.

I think tomorrow I'll correct all the scary Republican buzz words like Socialist and Nazi. Liberal is not a dirty word, nor is it actually linked to elitism!

Thanks for reading.