Does Demand Create Jobs? Well Sorta

Discussion in 'Economy' started by Wiseacre, May 15, 2011.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    I hear the left saying it all the time - tax cuts for the wealthy doesn't create jobs, demand does. Which is fine, except it isn't the whole story. I think more demand is the primary driver, without that nobody hires more people. But then the question becomes how do you create more demand and then how do you create more jobs to satisify it.

    The liberal approach is to redistribute the wealth - take money from those who earned it and give it to those who haven't, specifically the lower income folks. Sounds great, they'll spend the money and create demand and we get more jobs. Except for one thing, it doesn't work. Tax rebates have been tried, big stimulus has been tried, but it never works because it's temporary. I remember getting a couple of tax rebates during the Bush years, but IMHO it never moved the needle.

    So, what about a tax cut? Now that's more permanent, and it did work for Reagan and also for Bush in 2003. The economy and employment picked up very nicely thank you, until the recession hit in 2008. Some say those tax cuts lead to the recession, which is total nonsense IMHO, there were several reasons why the recession happened, but the Bush tax cuts were not one of them.

    So would tax cuts mean we'd get more jobs now? I think that's debateable until and unless our leadership comes up with a bi-partisan plan to deal with the debt and deficits, nobody is going to be overly optimistic about starting new businesses. Which is where about 75% of all new jobs come from. Gonna have to de-regulate somewhat too, it's too damn hard, expensive, and time consuming to startup a business in this country.

    And one more point about new jobs - you need capital. Demand is the first priority, but you gotta have some money behind you, and tax cuts make that money more available. Tax hikes on the other hand make that capital less available, and in today's global economy money flows to where it gets the best ROI.

    So, demand does create jobs, but not by itself. Oh yeah, the local supermarket or merchant will hire more people when more customers start coming in to spend money. But we need more than that, we need new businesses and expansions to existing businesses. And that means attracting more capital.
     
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    Last edited: May 15, 2011
  2. xsited1
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    xsited1 Agent P

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    True. Here's a great quote to sum it up:

    That's what the Obama Administration has done. It's a job-killing machine.
     
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  3. expat_panama
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    expat_panama Silver Member

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    Sounds like the leftists are saying demand and tax-cuts are 'either-or', that we can't have both at the same time.
     
  4. rdean
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    rdean rddean

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    Hate to break the news to you guys, but if there is no demand, there are no jobs. Try to figure out why.
     
  5. Care4all
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    Care4all Warrior Princess Supporting Member

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    a tax cut on SS taxes would work as well as a rebate check for a demand stimulus etc.....

    the poor and middle class SPEND their 'stimulus' tax savings the fastest, is what all the studies have shown....stimulus is not really a stimulus if it is not all spent and concentrated within a short period....yep, the obama stimulus was definitely not all stimulus....because it was spread out and piece-meal.

    *rebate check would be more effective, but tax cuts could work too
     
  6. expat_panama
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    expat_panama Silver Member

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    If anyone cares we can study this for ourselves by looking at how tax-rate cuts have affected demand in the past. That could tell us a lot about how much we want tax-cuts now.
     
  7. Care4all
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    Care4all Warrior Princess Supporting Member

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    well, I could have spoken too soon....a tax break, if it is an SS tax break of the whole sum of SS taxes for 3 months or 4 months, could possibly work....but it still would not be as fast as the "in your hand tax rebate or stimulus'' that could be spent all at once....IF given to the middle class and below... I presume?
     
  8. The Rabbi
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    The Rabbi Diamond Member

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    This has been explained many times.
    Sending people money does nto create demand or jobs. There is no "multiplier effect."
    We have just had about 3 years of this experiment (again) and the results are that such thinking is wrong, totally wrong.
    The truth is that investment creates jobs. How much demand was there for a Kindle before the first one was sold? Answer: Zero. Same with an iPhone or any other gadget. first there was an idea, then an investment to develop, produce and market. Finally there was demand.
    But unless companies perceive a business atmosphere that is favorable to risk taking, they won't do it. And that is what we have right now.
     
  9. Care4all
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    Care4all Warrior Princess Supporting Member

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    Kindle was not created in a vacuum Rabbi....you are just clueless on this and should stay out of these conversations.....

    Most all products are not created out of the clear blue....Kindle was an idea that extended from customer demand and use of other products..... kindle improved on what was happening with the demand of computerized reading products and it was TESTED to see what kind of demand it would create BEFORE the company invested in it from here to high heaven.

    NO ONE, no one just creates something out of the clear blue, and spends all of their money stocking it, UNLESS they have a pretty good reading on what it's demand will be. It is FOOLISH to do otherwise.
     
  10. The Rabbi
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    The Rabbi Diamond Member

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    You are a total idiot. We will repeat your familiar pattern: I make the arguments and you abandon the discussion.
    I'll repeat: There was no demand for Kindle before one was produced. Marketers and engineers might have gotten some indication it would be a good product. But there was no actual demand.
    Demand came after investments of time and money in research, production and marketing.
    That is certainly clearer than the supposition that if you send people money they'll spend it and save the economy. We have tried that twice and both times it didnt work. It is the most discredited theory of the left's many discredited theories.
     

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