Democrats & Liberals Archives

Good News, Bad News

Some call it good news. Some call it bad news. What do you call it when you pick up the newspaper and it has as its major headline, as the L.A. Times did a few days ago, “JOB GROWTH BOOSTS FEARS OF INFLATION”?

According to the article, the number of jobs grew in December by 167,000. This must be good news for all working people, since experts expected only 110,000 new jobs. But then the article states:

But stocks fell, and bond yields rose as investors figured that the Fed, on guard against inflation, would not risk an interest-rate cut that could stimulate economic activity and feed inflation.

In other words, bad news for investors. A leading newspaper, one often derided as being part of the "liberal media," proclaims to the world that what is good for labor is bad for investors. The L.A. Times is not the only news source that does it. It seems that all media outlets are dispensing the same message:

Give labor a raise and inflation will increase. This is bad.

How come we never see headlines such as:

CEOs MAKING HUNDREDS OF MILLIONS INCREASE FEARS OF INFLATION

or

AUTO COMPANIES INCREASE PRICES INCREASING FEARS OF INFLATION

or

TAX CUTS INCREASE DEFICIT INCREASING FEARS OF INFLATION

The fact remains that every time a bank issues a loan the money supply is increased and it boosts inflation. Inflation is embedded in our system. Why does everybody pick on labor?

There is no conflict, or at least there should not be any conflict, between workers and investors. They both need a healthy economy to make money. However, conservatives have been focusing for the last couple of decades on the needs of business, with total disregard of workers (except in their campaigns). And the media has followed their lead.

It's time to give a break to working people, 4 out of 5 people in America. Adding jobs is good news, just as businesses making profits is good news. Workers have not been doing so well lately, while businesses have made huge profits. So, if workers are making more money this is definitely good news.

Posted by Paul Siegel at January 8, 2007 4:47 PM
Comments
Comment #202077

Tax increase = pay cut for “working people”
Tax cut = pay raise for “working people”
What kind of break are you wanting to give the “working people” Paul?

Posted by: kctim at January 8, 2007 5:17 PM
Comment #202079

kctim-
That is a simplistic argument, and you should be ashamed to use it.

First, because of our wonderful progressive tax system, we need not increase taxes on the working class to do things, just the way that Bush didn’t need to cut the average person’s taxes so much in order to give the rich a bonanza.

Second, if you looked at the history of that tax cut, you’ll see that most of the proceeds went to the richest folks.

Third, why introduce this argument rather than address the real situation: that those presenting financial news have bought into the whole cult of PE numbers?

It’s not enough anymore to be profitable, even. We dump stocks because the corporation doesn’t make enough, or grow its profit from last year. We’re resting our financial security and prosperity on abstraction and financial trickery.

Among those tricks is cutting staff. Fewer staff to pay means higher PE ratios. At least in theory.

The trick is, of course, there’s a limit to how much you can save by simply firing people. Businesses don’t run themselves, machines don’t press their own buttons, reports don’t type themselves, and cars and electronics don’t sell themselves.

The focus in many quarters has been taken off running a business well, and has been put on playing the numbers, regardless of what it does to the business. Innovation, honesty, and efficiency are dropped in the can for the sake of this game.

Since this abstractly meets the definition of providing value for the stockholder, most of the time the stock market doesn’t punish this kind of bad business practice.

This is one of the reasons that Congress needs to get back into the game of discouraging trickery and malicious business practices. We need good business, real business done. We need an economy that function in such a way that its not one revealed lie or bubble burst away from an economic downturn. We need the real generation of wealth, the real creation of productivity, not these kinds of counterfeit potemkin village varieties. The time has come to stop throwing workers under the bus to make up for a lack of imagination and work ethic on the part of those who should be called to use the resources they’ve got more profitably instead of engaging in this economic anorexia.

Posted by: Stephen Daugherty at January 8, 2007 5:39 PM
Comment #202083

Stephen
It is a fact and I am never ashamed to use facts.

Why introduce this argument?
Would you rather I had come up with my own headlines and play the little partisan BS game as Paul does?
No thanks.

Paul “says” he wants to give workers a break. Well, there is only one break that will make a difference in the workers lives: a pay raise.

Posted by: kctim at January 8, 2007 6:03 PM
Comment #202091

The biggest single wage increase over the long run for working Americans is a single payer universal health care system.

The economy’s growth would slow a bit in the short run, but, that would head off inflation, but in the long run the economy would be strengthened for two reasons. Current wages would be sufficient for most workers with universal health care and employers would receive the immense boost of being relieved of their contributions to employer health care insurance.

Posted by: David R. Remer at January 8, 2007 6:29 PM
Comment #202101

Stehpen,

You said, “Among those tricks is cutting staff. Fewer staff to pay means higher PE ratios. At least in theory.”

This is no trick. It works, and it is painful for most business to implement. You seem to gather all of your ideas from how businesses are run from businesses that are members of the Fortune 500 club. But that only represents 500 companies and less than 10 million jobs in America.

The majority of Americans work for smaller companies where those charged with making the decision to cut staff are probably firing friends and or acquantences. It is no fun. But it works.

For example, I just found out that the corporate overhead for my project just went up 2% for this year. Unless we can win more business quickly and redistribute the overhead to more projects, they will have no choice but to cut staff. It is too bloated in the corporate offices. We have a staff that was designed to handle more growth than we have experienced. But if we handn’t hired them, and we had experienced the growth, we would have been ill equipped to handle it.

Staffing is not an exact science. It is not easy to forecast how many people you need for now much less how many you will need next year and in 5 years. It is always qualified on what you think may happen. If what happens doesn’t come true, you have to adjust. When you bite the bullet and make the adjustment, Wall Street sees that as a sign of fiscal responsibility, as they should.

The “numbers game” as you call it, is a direct reflection of how outsiders perceive the way that you are doing business and what profits you will make for investors compared to the many other alternatives. It is not “bad practice” to make sure that the business is staffed appropriately for what needs to be done.

Posted by: Rob at January 8, 2007 7:00 PM
Comment #202123

kctim-
It’s only a fact if:

1)the taxes being cut happen to be the ones these people pay.

2)That the taxes are cut from surplus and not deficits that must be paid back

3)That the tax cuts don’t create a deficit that raises interests rates and inflation, which takes money out of people’s pockets.

That’s a lot of big ifs.

Your premise also suffers from the fact that you suggest it even when we’re in the midst of one of the deepest fiscal holes we’ve ever been in. It’s a good time to stop digging when you find yourself this deep in a hole. The Right has been consistent in denying that this is all a problem. Tax cuts have become a dogma, considered the right solution to the problem regardless of circumstances.

The corporate executives have had no shame about inflating their own compensation while the people they pay have to pay for more and more with stagnated wages. At some point, they have to recognize that you cannot forever support a consumer economy on such profound inequality. At some point, it’s in your interest to keep people well paid.

Rob-
It can be done for legitimate reasons, no doubt, but far too often, its done merely to elevate the stock price, without proper consideration of the consequences.

I was speaking in general of the big businesses, not the small. But the principle remains: it is a means of cutting costs that can bring its own costs. I don’t know how many times I’ve heard of businesses that cut staff to become more profitable only to leave workers struggling under unmanageable workloads.

The PE number, in the end, is an abstraction, and one that gives the illusion of being a conclusive score. It can hide massive fraud, stagnant thinking, and economic fads can often be an inordinate element of it.

In the end, a more systematic, fundamental view of the business is better. Business operate in the real world, and the numbers must be such that they tell us about what’s really going on.

Posted by: Stephen Daugherty at January 8, 2007 11:22 PM
Comment #202126

America’s workers do need a pay raise. They also need tax relief. But I doubt they’ll get either. If anything they’ll get a pay cut when the Democrats raise the income tax again.
Pay raises will cause inflation. But I don’t believe it will be as bad as some would have us believe. When employers pay more they have to charge more. But the cost is spread out over the whole product line.
The same goes with creating more jobs. When employers hire more employees their cost go up. And chances are the prices can go up also. But usually the added cost in this case is covered by increased production.

Posted by: Ron Brown at January 8, 2007 11:58 PM
Comment #202134

Stephen Daugherty,

I have an honest question regarding your arguments about tax cuts. When Bush and the Republicans voted in the tax cuts, I’d heard it would cost the Federal government billions in lost tax revenues. I’m presuming that this model would be for the same level of economic activity, spending, etc at the lower tax rate as compared to the original tax rate. However, Bush’s tax cuts have actually grown Federal revenues, primarily from the rich cashing in on these same lowered tax rates. My question is two-fold. First, did the lowered tax rates increase government revenue above and beyond what was projected with the old tax rate? Second, if this is the case, than how did the tax cuts “cost” anything if they resulted in more revenue?

It would seem to me that the Bush tax cuts were a good thing to the Federal government. While one can argue that if we had been using the old rates on capital gains that we’d have seen even more revenue, I question whether or not all of those transactions would’ve taken place under the old rates. From everything I’ve read, it was these tax cuts that stimulated all of the investment and profit-taking that actually INCREASED the percentage of Federal revenue taken from the wealthiest Americans. The only downside that I can see is that these increased revenues gave Bush the ability to honestly say that the deficit had been halved without curtailing spending.

Pelosi and many of the Democrats have been arguing for a middle class tax cut. I don’t think anyone here would say that its wrong for the middle class to take any monies that they would realize from such a tax cut and spend it as they see fit. I fail to see why its wrong for the rich to do the same thing. Bush’s tax cuts seem to have stimulated the economy and allowed for more investment. This has led to, amongst other things, an end to the horrible times of 5.5% unemployment that was all the talking heads could drone on about a year ago. Jacking up tax rates on the rich will do nothing but lead them to not invest their money, which will end up hurting the economy, hurting employment, and lowering the revenues paid by the rich.

Posted by: 1LT B at January 9, 2007 3:37 AM
Comment #202141

Stephen
Forget the left vs. right spin.
A tax increase means less money in ones banking account. A tax cut means more money in ones banking account.

1) Thats common sense my friend.

2) and 3) The average worker only cares about the money that is in their account. It is govt’s responsibility to only spend what it takes in.

“Your premise also suffers from the fact that you suggest it even when we’re in the midst of one of the deepest fiscal holes we’ve ever been in.”

I am always in favor of giving workers a pay raise. I believe cutting wasted spending is more effective and more fair to workers.

“At some point, it’s in your interest to keep people well paid.”

It is also in the govts best interest to keep people well paid. To place all of the blame on CEO’s, we should also blame govt for such high taxes which are needed to fund programs in which govt has no business in funding.

Since I do not care what other people make, I guess it affects me in a different way. But I believe you are only looking at half of the problem based on your personal beliefs.

Posted by: kctim at January 9, 2007 10:10 AM
Comment #202149

I thought Greenspan and his replacement both felt that while there might be short term gains from the tax cuts, that it was not sustainable, and would need to be changed for the long term.

Posted by: womanmarine at January 9, 2007 11:30 AM
Comment #202151

Everyone,

One fact that I see that is never brought up in the tax arguement is that our upper 1% does not live in the U.S. and does not pay our taxes.

Carnegie, Rockafeller, etc… all of the super-rich live in the Virginia Islands and places of that sort where taxes are near minimal.

If I was a multi-billionaire I wouldn’t live here. It would cost me too much money.

Does any one actually believe that there is any one out there paying >30% taxes on 1+ billion dallars. Seriously, it is not happening. So the whole tax benefits to the upper class is out, because it doesn’t exist.

That is why the average for an American citizen who lives in America and pays American taxes is $36,400 annually and that is including all the students who are exempt. If you were to not include them the average is nearly $60,000 annually.

Also, taxes raises and cuts both increase inflation.

If you raise taxes companies raise their retail price in retrospect. They always have they always will.

If you cut taxes people have more, spend more, increasing demand, increasing the price of products.

If you leave the taxes the same people progress with more stability spend more money increasing demand, etc…

I know you see where I am going with this.

Tax cuts and increases do only negative effects. New taxes and revoking prior taxes are a different story. Maybe we could debate this.


Paul, you are correct. Everything should increase fear of inflation. Just like being alive should increase fear of breathing.

Posted by: Bryan AJ Kennedy at January 9, 2007 11:49 AM
Comment #202191

KCTM
You really might want to consider what others make. Henry Ford did for example. After all else fails we are in a consumer driven economy. If you are in the widget business it is vital that there are people around that can afford widgets. If you are retired you most likely have some investments in a widget maker that also needs people around that can afford widgets.Never forget that even the wealthy only need so many widgets,even if they are a serious widget collector, so you need a broader market.

Posted by: BillS at January 9, 2007 4:41 PM
Comment #202198

1LT B said: “I have an honest question regarding your arguments about tax cuts. When Bush and the Republicans voted in the tax cuts, I’d heard it would cost the Federal government billions in lost tax revenues.”

It did. Bernanke, Greenspan, and the U.S. Comptroller have all admitted this. Tax cuts raise GDP, but, the amount of new taxes collected from increased GDP, in this economic environment, did not equal what would have been collected without the tax cuts. The difference of a couple billion vs. many billion is debatable depending on the yardsticks used.

One of the flaws in Republican thinking was that increased GDP would equal cent for cent equal or better revenues. The more profitable corporations get, the more tax loopholes they can invest in learning about, which happened. Additionally, the more profitable business gets, the more powerful they get in lobbying politicians for tax dollars through a variety of other mechanisms, which raised the cost of government (Big Pharma and the Medicare Rx drug program and continuing subsidies of energy companies during a period of record profits, are two examples).

Posted by: David R. Remer at January 9, 2007 5:32 PM
Comment #202282

1LT B wrote:

I have an honest question regarding your arguments about tax cuts. When Bush and the Republicans voted in the tax cuts, I’d heard it would cost the Federal government billions in lost tax revenues. I’m presuming that this model would be for the same level of economic activity, spending, etc at the lower tax rate as compared to the original tax rate. However, Bush’s tax cuts have actually grown Federal revenues, primarily from the rich cashing in on these same lowered tax rates. My question is two-fold. First, did the lowered tax rates increase government revenue above and beyond what was projected with the old tax rate? Second, if this is the case, than how did the tax cuts “cost” anything if they resulted in more revenue?

You can find the Internal Revenue Service figures here:
http://www.irs.gov/pub/irs-soi/05db07co.xls

Looking at the total individual income tax collections for the years 2001 through 2005 the revenue from this source has clearly not returned to year 2001 levels.

You can find total Federal revenue collections at:
http://www.whitehouse.gov/omb/budget/fy2007/sheets/hist01z3.xls

In 2005 Federal revenue, unadjusted for inflation, exceeded that of 2001 for the first time. Adjusted for inflation, they are predicting 2006 will exceed 2001 receipts.

Posted by: Arm Hayseed at January 10, 2007 2:41 AM
Comment #202318

Stephen,

I think few would disagree with this statement, “In the end, a more systematic, fundamental view of the business is better. Business operate in the real world, and the numbers must be such that they tell us about what’s really going on.” It’s why most are interested in what Warren Buffet has to say about business.

But I find your cynical view of “big business” not to match any of my experiences. You’ve mentioned several times that you are not yet to the point in your life where you are investing. Are you working for big business? If not, where are you getting your information?

Your posts on “big business” are filled with statements like this:

“The corporate executives have had no shame about inflating their own compensation while the people they pay have to pay for more and more with stagnated wages. At some point, they have to recognize that you cannot forever support a consumer economy on such profound inequality. At some point, it’s in your interest to keep people well paid.”

They seem so cynical and so generic that I find it difficult to respect what you have to say about the situation. I’m left instead with the impression that you have taken the corporate scandals that were uncovered during the first few years of this decade and extrapolated them to all “big business”.

Are there any good big businesses? Are there any that provide valuable services to the world? Are there any that treat their workers fairly? Are their any that treat their investors fairly?

Btw, what is “big business” to you? My company has several hundred employees throughout the U.S. and revenues of a couple hundred million a year. Are we big or are we small?

Posted by: Rob at January 10, 2007 11:34 AM
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