If demand does not exist, they wont hire.

Discussion in 'Economics' started by KINGOFSHORTS, Jul 12, 2011.

  1. Tax cuts are not the silver bullet to the problem.

    Companies are not going to hire people just to employ them. It makes no business sense. American corporations will hire when the employees they have are insufficient to meet the demands of the consumer, so they hire more to increase output.


    No company will hire people so they can just sit around and watch TV.
     
  2. LEAPup

    LEAPup

    General Motors would...
     
  3. General Motors is not a company; it's a subsidiary of the U.S. Treasury. :)
     
  4. somebody has to start consuming more. can a US consumer do that? an average american appears to have an endless supply of $$. i don't know where they get them but the fact remains. could they get even more disposable $$ with the currently high unemployment?

    probably easier for china to consume more. will they buy american stuff?
     
  5. pupu

    pupu

    Gov'ment prints endless amounts of cash>give some to Americans in the form of welfare, bailouts, tax breaks, pensions etc->endless consumption power as long as the dollars is still worth something.
     
  6. yes this is the failure of supply side economics. Also the myth that rich people or corporations create jobs so we must cut there taxes. American companies sit on 1.8 trillion in cash and yet some how a small tax cut will add just enough to the coffers to create a hiring boom. Only the consumer middle class create jobs when they demand goods. A company like Best Buy will not hire because they get a tax cut no more then they'll hire on an increase in profits.The only reason they will hire is when such high demand occurs that they must hire or lose business. The bankrupt theory infesting economics would have us believe that a company or a rich person spends all there surplus capital on job creation. The money will more then likely go into speculation and other gambles other then production.

    There is not 1 country that has prospered without a consumer class. You don't see a best buy in every city in countries that have no taxes on income and wealth. In fact these are the backwards counties we give aid to. I'm all for tax breaks for jobs , but not to a assume these folks create jobs. Especially since 80% of there money goes into speculation.
     
  7. Yes and no. Corporate taxes are built into retail prices. Ultimately, it's the end consumer that pays the Corporate tax via higher prices at the checkout. It's for that reason zero corporate taxes stimulates growth, albeit indirectly: under a zero corp tax environment, competition drives down retail costs an amount equal to the tax break, margins stay the same, purchasing power increases, consumers buy more product, output increases, which stimulates higher employment = higher GDP.
     
  8. That's cool.

    But I think some corporations are actually paying negative taxes (there was a GE story recently I think).

    Is there a hiring boom at GE?
     
  9. More than there would be if GE paid a 40% tax rate....

    Your point is well taken, tho. Tax cuts must be homogeneous for end consumers to benefit. If a particular Golden Boy like GE gets a cut or subsidy, and Phillips, Seimens and Northrop don't, GE won't drop their pants much. Why should they? But if everyone gets a tax cut, then market share objectives dominate, prices drop, consumers buy more etc.
     
  10. I think there is a gray area there in that it is not necessarily so that the tax break is transferred anywhere near whole to the consumer. Even then, the more competitive industries might, but the faux competitive ones (inelastic demand) won't.

    Still, if tax breaks are supposed to increase consumer demand, why not give the tax break directly to - consumers? That is a bottom-up approach rather than top-down, and since consumers are the base of the pyramid, why not there?

    The ones on the lowest economic level will be spend most or all of it hand-to-mouth, with less spending occurring up the chain as the marginal propensity to spend diminishes.




    (The answer is, of course, "globalization". In a closed system, the spending would produce a virtuous cycle of more hiring to stimulate the national economy. But in a system where manufacturing jobs are off-shored, the system has a big "leak", and the jobs that are created end up being in Asia.)




    So - back to the virtue of tax breaks.....
     
    #10     Jul 13, 2011