Post by chang on Feb 13, 2008 2:08:48 GMT -4
There's this Obama commercial that's been running here that is really misleading.
He talks about how he's going to offer tax breaks for companies that invest/keep jobs in the US. The thing is, I don't think it's at all possible that will change a thing.
Think about it, if a company can pay $5 a day to a person for the same (And maybe even better) labor that you'd have to pay $60, which would they choose. Unless the tax break for those companies are humongous (I'm talking above 50%), it makes no sense for a business to invest in the US.
Take a huge American company like Nike. Nike can produce a shoe for about $12.50 or so. Unless those tax breaks are really big, the likely cost of production would go up to say $15-20 per shoe. Considering how many shoes Nike sells a day, that's a pretty big hike in lost profits. They aren't going to absorb that. As much as they could (com'on they make 90% profit on average), they won't because their obligation is to shareholders. If they wanted to, they would have years ago.
Take another company. The mighty Apple. Apple really is the true American company these days when it comes to technology. Apple has sold over 100 million iPods. Most (if not all of those iPods were produced in China). Chinese labor is significantly cheaper than American labor. Apple only donated $5 each (or was it 10) of the (RED) products sold. That's a miniscule amount and that money is actually going to a good cause. But even then, those products don't even exist anymore.
But let's say these tax breaks are huge. Wait a minute, if corporations have huge tax breaks, where does the government expect to get funding? I believe it's said that around 80% of taxes are paid by the richest 10% in the US (I'm assuming that includes companies). If we give huge tax breaks, how will we fund important social programs like welfare & medicaid? By allowing minimum wage jobs to exist via tax breaks, we're hurting the poor even more. Minimum wage doesn't add up to the poverty line. It's slightly below. So now, we have to pay for welfare with funds that no longer exist since we allowed John Smith to work at minimum wage.
OK let's consider raising taxes for those investing overseas in addition to lowering those investing in the US. Well, like I said, the company's priority is to satisfy the shareholder. Guess who would pay those extra taxes? It would instantly be passed on to the consumer (while tacking on a bit more for profit; who likes the sound of 26.99 when a company could just make it a nice, number with lots of 9s yet still under the full dollar of 29.99) or companies would just create a scarcity.
Now don't take this as saying as I'm supporting unemployment. But the fact is, without unemployment, the economy would not function well. 100% employment would lead to ridiculous amounts of inflation.
On the other hand, we do have companies like Toyota investing heavily in the US but Toyota is also cutting shipping costs by large amounts. And if I'm not mistaken, Toyota is on pace to beat US car manufacturers as the highest selling car company. It's easy for a company that sells products worth thousands to invest in the US because more than likely, it will save money since shipping something that big and not guaranteed to sell quickly over to the US is probably just as cheap as producing it here these days. But with a company like Apple or Nike that can ship thousands of products at once that they know will sell out in a few days, it's cheaper to ship in.
His theory sounds good but if you tried to put it into practice, there's no way it would be successful. It would hurt the economy even more than it is now.
Oh, by the way, these tax refunds, as good as they seem, I doubt will really help the economy. Right now, too much of the economy hinges on the health of the housing market. Without a turn around in the housing market, I don't foresee any quick turnaround to the economy. Even with interest rates as low as they are, people are simply afraid to buy houses. This tax relief should be used to help those facing foreclosures. If people are able to keep their house, they will spend money. I think it would do the economy just as much good if not more good. Trusting people to spend money on a whim when the economy is weak and with the dollar falling is just not a good strategy. I think people will want to save their tax break more so than spend it since most of us fear a full out depression.
Funny thing is... an almost surefire way to stimulate the economy is to start a war. But oh wait, we're in one already.
He talks about how he's going to offer tax breaks for companies that invest/keep jobs in the US. The thing is, I don't think it's at all possible that will change a thing.
Think about it, if a company can pay $5 a day to a person for the same (And maybe even better) labor that you'd have to pay $60, which would they choose. Unless the tax break for those companies are humongous (I'm talking above 50%), it makes no sense for a business to invest in the US.
Take a huge American company like Nike. Nike can produce a shoe for about $12.50 or so. Unless those tax breaks are really big, the likely cost of production would go up to say $15-20 per shoe. Considering how many shoes Nike sells a day, that's a pretty big hike in lost profits. They aren't going to absorb that. As much as they could (com'on they make 90% profit on average), they won't because their obligation is to shareholders. If they wanted to, they would have years ago.
Take another company. The mighty Apple. Apple really is the true American company these days when it comes to technology. Apple has sold over 100 million iPods. Most (if not all of those iPods were produced in China). Chinese labor is significantly cheaper than American labor. Apple only donated $5 each (or was it 10) of the (RED) products sold. That's a miniscule amount and that money is actually going to a good cause. But even then, those products don't even exist anymore.
But let's say these tax breaks are huge. Wait a minute, if corporations have huge tax breaks, where does the government expect to get funding? I believe it's said that around 80% of taxes are paid by the richest 10% in the US (I'm assuming that includes companies). If we give huge tax breaks, how will we fund important social programs like welfare & medicaid? By allowing minimum wage jobs to exist via tax breaks, we're hurting the poor even more. Minimum wage doesn't add up to the poverty line. It's slightly below. So now, we have to pay for welfare with funds that no longer exist since we allowed John Smith to work at minimum wage.
OK let's consider raising taxes for those investing overseas in addition to lowering those investing in the US. Well, like I said, the company's priority is to satisfy the shareholder. Guess who would pay those extra taxes? It would instantly be passed on to the consumer (while tacking on a bit more for profit; who likes the sound of 26.99 when a company could just make it a nice, number with lots of 9s yet still under the full dollar of 29.99) or companies would just create a scarcity.
Now don't take this as saying as I'm supporting unemployment. But the fact is, without unemployment, the economy would not function well. 100% employment would lead to ridiculous amounts of inflation.
On the other hand, we do have companies like Toyota investing heavily in the US but Toyota is also cutting shipping costs by large amounts. And if I'm not mistaken, Toyota is on pace to beat US car manufacturers as the highest selling car company. It's easy for a company that sells products worth thousands to invest in the US because more than likely, it will save money since shipping something that big and not guaranteed to sell quickly over to the US is probably just as cheap as producing it here these days. But with a company like Apple or Nike that can ship thousands of products at once that they know will sell out in a few days, it's cheaper to ship in.
His theory sounds good but if you tried to put it into practice, there's no way it would be successful. It would hurt the economy even more than it is now.
Oh, by the way, these tax refunds, as good as they seem, I doubt will really help the economy. Right now, too much of the economy hinges on the health of the housing market. Without a turn around in the housing market, I don't foresee any quick turnaround to the economy. Even with interest rates as low as they are, people are simply afraid to buy houses. This tax relief should be used to help those facing foreclosures. If people are able to keep their house, they will spend money. I think it would do the economy just as much good if not more good. Trusting people to spend money on a whim when the economy is weak and with the dollar falling is just not a good strategy. I think people will want to save their tax break more so than spend it since most of us fear a full out depression.
Funny thing is... an almost surefire way to stimulate the economy is to start a war. But oh wait, we're in one already.