Friday, October 17, 2008

The Media love (elite) Crackpot Economics

How else to explain the attention poured on "Joe the Plumber" after the last presidential debate? He didn't express one idea you wouldn't find in the most tendentious essays on the Wall Street Journal's editorial page, or spouted on air by faux populist like Limbaugh and O'Reilly. In other words, in giving "Joe" so much attention and air time, the media isn't providing a rare forum for the "working man" or "average American" -- once again they are only highlighting another mouthpiece for America's elites.

I'm a small business person and I hate the Republicans for peddling economic nonsense that benefits large corporations by getting out their tiny violins and weeping over the imaginary plight of small business. And the media for allowing them to get away with it.

How can income taxes affect phony Joe's ability to hire? You pay income taxes on profits - after expenses like labor. If Joe's business isn't generating enough business and income to justify hiring an employee he has problems entirely separate from the issue of income taxes. One problem could be that the market he is working in simply can't support his business. A likely problem is too few potential customers with enough disposable income to use his services. In that case "spreading the wealth around" in terms of economic stimulus may be exactly what his business needs.

Bottom line; you hire employees to increase earnings. At least, good business people do. Decisions about hiring have to be justified by demand. Will hiring allow you to increase earnings by producing and selling more products or services or reaching a broader market of customers? Etc. A job is not a charity or a favor dispensed by employers. (As Republicans imply when they say business owners "create" jobs. No. Market demand creates jobs. Employers hire employees to help them meet and exploit that demand; to be more productive.) Salaries don't come out of an owner's personal income – they are an expense that CONTRIBUTES to his or her income. Every single employee's salary has to be justified by what it contributes to the bottom line. The point of hiring is to INCREASE production and the earnings of the business, and therefore increase the owner's personal income.

If the demand for your product decreases, because of poor market conditions, competition, changes in the market that you didn't anticipate or other miscalculations on your part, you lay people off.
Joe the Plumber, if he decides to hire another plumber to help him in his work, will do so because it means the company can do more work. And Joe will pay his new employee a salary that allows him, Joe, to make money from that work.

If, in a market with strong and growing demand for his services, Joe lets his employee go because his personal income taxes went up, how is he saving money? He's not. He's just limiting his ability to make money.
If times aren't good and demand for services drop, Joe may have to layoff his employee because there is less demand. Less demand means less work to do and that, of course, mean less personal income -- which most likely will mean less taxes owed.

Joe doesn't want to pay taxes. That's just normal human selfishness that we all can relate too. But, as citizens, most of us know, or should know, that a sophisticated economy requires doing so. It is going to be hard to right the nation's economic woes without an honest discussion of taxes -- the who, how and why -- that includes respectful consideration of competing and conflicting interests. So while it would be easy to think that "Joe" is the problem, the bigger problem is the media's preference for promoting resentments, fueled by phony arguments from less than honest ideologues, spouting tired ideologies, while ignoring the real, and worried, voices of the broader citizenry.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home