July 21, 2010

Judd Gregg and the triumpth of the stupid

Yes, there's hope for stupid people... they can rise up to run for and win election to the US Senate. Just look at Judd Gregg. As proof of his stupidity, I'd like to offer his 'rhetorical' question to Fed Chair Bernanke regarding why businesses aren't hiring. He thinks it's all because of some vague uncertainty out of DC coupled with a lack of tax incentives.

Why's that stupid? BECAUSE NO BUSINESS IS GOING TO HIRE PEOPLE UNLESS THEY WILL BE ABLE TO CREATE ADDITIONAL PROFIT BY SELLING MORE. No mystery... Look at it this way...

I run a company that makes plastic bears. I sell 100 of them per year at $1 per piece. I have four employees who cost me (remember, these aren't real numbers, this is a simplified example to illustrate the point) $10 per year, each. My other overhead is about $40 which gives me a gross profit of $20 per year. My company, because of the ridiculous US corporate tax laws, pays only 25% on that which means I pay $5 per year in taxes making my net profit $15 (nevermind that most corporations pay way less than that, on a percentage basis, in taxes than individuals). I'm happy even though the economy is in the toilet.

Now, along comes Judd Gregg who says if I hire one more worker, he'll cut my taxes by 50%. Woo Hoo, right? If you think so, let me know where you are so I can beat you in the head, moron. Here's the math...

My cost went up by $10 per year (a new employee) which knocked by gross profit down to $10 because the economy still sucks and I can't sell an additional plastic bear because there's only demand for 100. I'm now taxed at only 12.5% (yay, me!) so I only pay $1.25 in taxes. However, my net profit is only $8.75, damn near half of what it was previously before Judd Gregg cut me that amazing deal.

Get it now? No one is going to hire people because of a damn tax credit. The only way they'll hire is if there is demand for their products. And the Government is all that's left to stimulate demand in this economic environment. We need it to build roads, jails, schools, courthouses, etc. We need infrastructure improvements. That'll create enough jobs to stimulate aggregate demand.

If only the Republicans would get the ideology out of their brains and start acknowledging economic reality.

Posted by mcblogger at July 21, 2010 03:06 PM

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Comments

But they are. This is where Reaganomics kicks in. After your little tax break (remember, all tax breaks are too small), you lay off two workers and replace them with two more at 5.00 a year or you outsource. If you played the game right, you would have received government assistance for hiring the new worker from a disadvantaged zone. Of course, you then tell the two older employees that they have to work harder or they can be replaced also. Now your profit is near 20.00. Super yay me. Isn't capitalism grand?

Posted by: Captain Kroc [TypeKey Profile Page] at July 22, 2010 07:01 AM

That's the problem... I can't hire at less than $10 per year. There's just no one willing to work for that little.

Then there are the hits for laying people off which are cash expenses far in excess of the tax credit:)

Posted by: mcblogger [TypeKey Profile Page] at July 23, 2010 09:53 AM

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