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The Wind in the Sails of the Economy

The more I ponder our economic woes, the more I come to the conclusion that everyday middle-class consumers are the wind that powers our economy.


Let me explain why I say that.


Certain politicians right now are making a big point of giving economic power to “job producers”. In other words, they want us to make sure rich people and big corporations can keep paying a lower percentage of taxes than a middle-class family, and be happy about that because of a belief that this means they will automatically create new jobs. However, I have not seen this happen. Instead, over and over, I’ve seen corporate executives say, “not enough people are buying our product, so we have no choice but to lay off workers.”


Bailing out the banks didn’t stop that behavior, tax loopholes didn’t stop that behavior, lower tax rates on corporations didn’t stop that behavior—and why should it have? If few are buying, paying more workers to make more stuff is not profitable. It could even reasonably be called wasteful.


Big business is all about profit. To a corporation, taxes are just a cost of business. If they can still make a profit, higher taxes on a business won’t convince them to stop participating in the economy.


Families, however, are about living and having a good life—now and on into the future. To a family, money isn’t an end—it’s a means. A means to food, shelter and clothing. A means to fun and beauty. A means to security.


If a family doesn’t have enough money to survive comfortably, they cannot participate meaningfully in the economy. If they don’t have enough to feel secure, even if they have a good surplus of income over basic costs they will dramatically cut back their participation in the economy, saving for a rainy day in the hopes that if they save enough, they will survive the next layoff, illness, or other disaster.


As a result, and in contrast to a business, taking more taxes from a family that's already scared or struggling has a dramatic effect on that family's ability and willingness to participate in the economy.


It’s not the “job producers” that drive the economy. They’re just the people at the wheels of our figurative sailing ships. With no wind to fill the sails the guys at the wheels may have power and prestige, but the ships drift. For the ships to move, you need to fill the sails with the wind of commerce. For the ships to move, you need millions of people buying things.


For the ships to pick up speed, you need the breeze created by money freely and joyously changing hands.


So sure—squeeze the middle class and the poor. Give the money to the steersmen, who will save it up hoping for a sunny day in the future when they can use that cash to make more profit. After all, we're doing just fine drifting around, right?


( 8 comments — Leave a comment )
Jul. 16th, 2011 06:44 pm (UTC)
As they say over your side of the pond - Word.

It's the same story here. The big are too big to fail, and go unpunished. The rest of us feel the squeeze.
Jul. 17th, 2011 12:45 am (UTC)
I wasn't talking about rewarding good behavior and punishing bad, though it does make me sad to have seen so many hard working families thrown out of their homes while bankers got bonuses big enough to save dozens of those families' homes despite creating a crisis.

But who listens to me?
(Deleted comment)
Jul. 16th, 2011 11:58 pm (UTC)
I sure hope it isn't 90%, but whatever percent it actually is, I agree it's too much, and also that it does cut into the joy people feel.
(Deleted comment)
Jul. 16th, 2011 11:56 pm (UTC)
I started reading your posts because you put enough effort into them to make me think. This kind of bitter cynicism hides your ideas rather than makes them shine.
Jul. 17th, 2011 01:35 pm (UTC)
Well put! Unfortunately, those who insist on "protecting" the corporations and the wealthy refuse to believe the common reality of the people they're SUPPOSED to protect. When I see reports on "consumer spending" and hear the woeful commentary that accompanies them, I wonder how economic analysts and pundits avoid jumping up and down, pointing and saying: You must give The People who buy this stuff a break! They can't buy when they have little "disposable income".

Just seems so obvious. . .
Jul. 17th, 2011 05:48 pm (UTC)
Yeah. Henry Ford had it right when he decided he must pay his workers enough to be able to buy his cars.
Jul. 17th, 2011 06:11 pm (UTC)
The problem is that this is common sense, while high management lives in a reality all of their own...
Jul. 17th, 2011 06:49 pm (UTC)
Yeah, well, you can't fool mother nature with rhetoric. The space shuttle can't lift off if it's covered in ice, and people can't buy stuff if they have no money. Pretending otherwise leads to spectacular crashes.
( 8 comments — Leave a comment )


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