Rich People Don't Create Jobs...

Actually.. rich people do create jobs.. My bro created a company that paid his sales people $100K for starters plus commission.. and ultimately sold the company for 60 million.. He created over 150 jobs at five locations in the US.

 

Commercial lending to businesses by banks is rising at a rate that far outpaces the loans they’re making for mortgages and home equity lines of credit.

Yet bank lending for commercial loans is setting new records. It’s nearly outpacing mortgage lending for the first time since the 1980s, the Wall Street Journal reports, and it accounts for 21 percent of all outstanding loans from banks. That's the highest level in 13 years....source Inc.

Firms are investing in their future?

Why do some companies have lots of cash...for peace of mind in an ever-changing economy, a reduction in capital spending due to volatile economy, to maintain healthy balance sheets, etc. How much cash is too much...one years operating expenses? Two years?

 

Firms are sitting on cash because aggregate demand is low. Why invest into new products when it is clear that there is not enough demand? I bet you that if demand would pick up, these cash reserves would vanish in no time.

 

Proving the case the rich people don't create jobs is a stepping stone to justifying forcibly taking their money and redistributing it to where it can "do more good".

It's all about justifying the use of force to violate people's person and property.

 

Nearly two thirds of all this cash, or a whopping $1.1 trillion, is sitting abroad somewhere. This is up from 58%, or $950 billion, a year earlier. Companies like Microsoft, Cisco and Oracle have 90% or more of their cash piles abroad. Why? By bringing profits home, the IRS gets a slice. By leaving it abroad, they don’t.

Yet even as cash piles have grown, so too has spending. Capital spending, dividends and stock buybacks all climbed to record highs in 2014. Acquisition spending rose 20% to $322 billion, reflecting a corporate shopping spree.

Either this statement above from Forbes in May, 2015 is incorrect or you are incorrect?

Your president and the IRS are preventing lots of this cash from coming back into the USA. This is income earned on sales outside of the USA so why should it be taxed again in the USA? I say again because there are varying corporate taxes in all nations which US companies must abide by.

 

I call them unnatural acts against the economy and industry and it's citizenry. It sickens me that so many are greedy and self-serving, and that politicians pander for votes, but I can live with this. What I can't live with is these same idiots so greatly and negatively and unnaturally effecting industry and the economy that the end result is a declining US economy on a one-way ticket to the abyss. Today industry and wealthy people have options around the world to achieve equal to or more than what they can achieve in the USA. The more adversarial this becomes the more it pushes industry and people to seek those other options. Like the $1.2 trillion in cash reserves of US companies being held outside of the USA...if politicians and the IRS does not change the tax codes, most all of that money will be invested outside of the USA...

 

Money goes where it's treated best.

 

That sounds like an excellent reason to shift taxes off of production and trade and onto land values. No matter how high you levy a land value tax the land will never leave and there will never be less of it. Landowners are already paying some rent to the state – always have been – so why not raise the rent and abolish taxes.

 

Investments are not a "sin" but they are parasitic on an economy because the profits on the investment are derived from the GDP without contributing to it. That doesn't necessarily make them "bad" or a "sin" because some parasites are good parasites as we know from biology but they can also be harmful if they take too much from the host.

Yes, some wealthy high income individuals spend like there's no tomorrow and can actually spend themselves into bankruptcy but most do not. For most in the top 1/10th of 1% it's virtually impossible for them because their income is simply more than they can pragmatically spend. We also need to understand what they're spending their money on. If it's for something like a classic Dusenberg automobile, that they might drop a cool million on, it doesn't contributed to the economy because the car was built in the 1930's. The same would be true if they purchase an existing mansion because the house was previously constructed and is not new construction. Real estate purchases of vacant land don't add to the GDP because the land wasn't produced by anyone. Now if they purchase land and then build a home on it the construction of the home benefits the economy because that is a "product" being produced by labor.

The only spending that benefits the economy is the purchase of new goods and services that are provided for by "people" because that adds and sustains jobs. When investments pay dividends or return on investments that the holder of the investment spends in the economy on goods and services then that spending benefits the economy because the money is being re-introduced into the economy. So long as it's held as an investment it's not contributing to the economy.

I don't know why that's so hard for some to understand.

 

Unknowlingly you actually point to the problem we see today. With the economic collapse the Federal Reserve released trillions of "new dolllars" into the economy that should have created inflation (and eventually will) but it hasn't and we know why. Between 2009 and 2012 the top 1% that are highly "invested" had their personal income increase by over 30% while the median income of America declined by 5% (and much worse for many households). The "median income" of the middle and low income households is the primary driver in "demand" and with less income the demand decreased so inflation has not matched the increase in the money supply because the extra money is tied up in investments.

Had the increase in the money supply ended up in the hands of consumers (not investors) then we would have seen sky-rocketing inflation as demand for goods and services increased but it didn't end up in the hands of consumers.

In 2008 the production capacity of the US auto industry was 18 million new cars but by 2009 the demand dropped to only 9 million new cars in the US and it drove GM and Chrysler into bankruptcy. Demand, not supply, drives the economy.

 

Profits are a component of GDP.

GDP = W + R + i + PR

Wages + rental income + interest income + profits.

 

In a market, it is impossible the the demand for any good or service to be "too low". If there is insufficient demand for any good or service to clear the market, that good's price will drop, raising demand and reducing supply, until supply equals demand and equilibrium is reached.

 

Ignoring the fact Congress has consistantly been reducing benefits for those 55 and older since the Bush adminstration by increasing the retirement age and changing the COLA benefits so it pays less in the future let's run some numbers based upon the Bush proposal based upon my understanding of it.

A person at age 54, that would have qualified for privatization, with income of $90,000/yr (the FICA cap in 2005) would have been able to contribute 6.2%, or $5,580/yr, to private investments. At an 8% ROI for 11 years of contributions (age 54-65) they would have about $1 million in their investment account and at 5% distribution rate would have $50,000/yr in income for the rest of their life. It basically doubles their retirement income from Social Security.

A minimum wage earner with $15,080 in income would also be allowed to contribute 6.2%, or $935/yr, to private investments. At an 8% ROI for 11 years of contributions (age 54-65) they would have about $16,808 in their investment account and at 5% distribution rate would have $840/yr in income for the rest of their life. That basically cut their Social Security benefit by about 90%.

Obviously the high income earner wins under this comparison.

As noted under the Bush proposal that minimum wage worker, at retirement could still opt for the $9,000/yr Social Security benefit but according the the MIT Living Wage Calculator it would be about $10,000/yr less than what it costs them to survive. So they live their entire lives in poverty with less income than it costs to survive and then we cut their annual income from $15.000/yr to $9,000/yr so they have to live in even worse poverty when they're too old to work any longer than they did while working. They still lose.

But let's try a different example for the minimum wage earner. Let's assume they begin participation at age 20 as opposed to 54. The minimum wage earner with $15,080 in income would still be allowed to contribute 6.2%, or $935/yr, to private investments. At an 8% ROI for 65 years of contributions (age 20-65) they would have about $390,276 in their investment account and at 5% distribution rate would have $19,500/yr in income for the rest of their life.

Yes, the minimum wage earner would be better off (assuming no inflation) than the existing Social Security program but they would barely be able to meet the minimum cost of living based upon the MIT Living Wage Calculator. Basically, after living their entire life in poverty, they would remain borderline poverty for the rest of their life. They still lose.

The only individuals that actually benefited under the Bush proposal for privatization were those with above median income because they made out like bandits under his proposal. Not only could they double their Social Security retirement but they could also fund additional private investment accounts that the low income earner can't afford to fund. They're retirement income soared while the low income worker was still stuck in poverty for their entire life.

http://www.webmath.com/retire.html

http://livingwage.mit.edu/

 

Partially true but the price of the commodity or service cannot be lowered to below the cost to produce the commodity or provide the service with one notable exception.... employee compensation where the employee is contracted to provide a service to the enterprise but capitalism relies on unemployment where the demand for jobs always exceeds the number of available jobs creating a labor surplus. Capitalism, based upon economics, requires about a 5% unemployment rate and that forces individuals to accept employment for less than it costs for them to survive.

According to the MIT Living Wage calculator a single person needs to earn about $10.85/hr to meet their minimal expenditures (costs) while the median hourly wage in the United States is only $10.55/hr (the last time I checked). Basically 1/2 of all hourly workers in the United States are selling their labor for below the cost of that labor.

This has nothing to do with investments of course because pure investments don't provide any goods or services nor do they consume any goods or services. Goods and services are provided for by workers and consumed by workers. Effectively the workers exchange their labor for goods and services. Investors expend no labor, don't create goods or provide services, and don't consume anything with their investments (i.e. less than 0.0005% of investments result in consumption of goods/services).

 

In point of fact the GDP attempts to measure the annual wealth creation and all wealth originates from that which is either mined or grown. Of course the "raw material" of wealth isn't worth the same as the products we produce from the raw materials. So the annual wealth created increases based upon the human labor that produces the goods and provides the services necessary to convert raw materials into usable products. Obviously the amount of labor required to convert raw materials into goods, including the services provided in this process, are a component of the total "wealth" creation. Additionally "profits" are also a component because that's the difference between the "costs" and the final market price of the goods being provided (that includes the costs of services to bring those commodities to market).

The wages and profits do not change the amount of wealth created from that which nature provides from minerals and plants but is a component of that wealth based upon the final sales prices of those commodities. For example if Company "A" sells a product for $100 that is the "wealth" (GDP value) of that product and it includes all of the different components of that price including wages and profits. We don't add the "cost of labor" to that $100 sales price. That would be double-dipping on the value of the product because the cost of labor is already included.

 

According to http://www.bls.gov/news.release/wkyeng.t01.htm, the median weekly wage is $803, or about $20/hour for a standard workweek.

Incorrect, based on BLS figures.

What is a "pure investment"?

 

GDP is an attempt measure the value of all final goods and services. Intermediate goods are backed out so as to not double count.

And contrary to your original statement, profit is a component of GDP.

 

I would call the stock market heavily inflated. The bond market, as well.

So, basically, consumers would have felt wealthier, but their purchasing power would have remained the same, or even reduced by inflation. Why is that a good thing?

If we are going to throw out examples, then why is Venezuela struggling so much? The people have money. In fact, they have money with huge numbers of zeroes. Yet they can't buy any of the things they are demanding.

Production of goods drives the economy. People don't buy things with money, they buy things with production. Generating new money does not produce wealth, which is what you are arguing.

 

Lefties think poor people create jobs. They must be looking at the (*)(*)(*)(*)hole called Detroit to prove it. lmao.

 

Thank you everyone, but this thread has reached its post limit. Feel free to start a new one

Cheers