Middle class tax cuts don't create jobs.
I disagree, because this is a wrong assumption (you clearly ignore the economical reality):
Middle class tax cuts increases the income the middle class can use for consumption => more consumption means that companies can sell more products => selling more products means that companies have to increase production levels (that means creating new jobs) in order to take advantage of the economic situation: make more profit.
basically there is a balance between:
supply <-> demand
or
production <=> consumption
(companies) (people)
This is why it is wrong to assume that if you cut taxes only for companies that you will create new jobs, YOU DO NOT: you re cutting costs for companies, the companies will make more profits but will not create more jobs because the demand for their product has not increased. Why would a company create more goods than there are needed? It is not logical because that would be inefficient and result in debt: no self-respecting manager would do that.
You seem to have the wrong idea that companies just create jobs out of nowhere: THEY DO NOT, the economical situation (more consumption, which leads to more production of companies) creates jobs.
I agree that putting more money into the pockets of consumers is a genuine economic stimulus. Some will pay down debts which is a good thing as it increases the money supply without artificial inflation. Some will spend it which spurs economc activity and growth. Some will save it which is also good because they will be able to provide for themselves and their families on rainy days and will also increase the monies available for others to borrow to buy stuff or expand their businesses.
I disagree that cutting taxes for business only serves to increase their profits though. When done right, it also gives them more money to invest, expand, increase wages paid, and hire to meet the increased demands of consumers with money to spend. As a result both spur economic growth and both will generate more taxes for the public treasury that will offset part or all of the reduction of tax rates.
Yes, but I only assumed this to be when demand isn't increasing => but decreasing. If demand does not increase (less people buy their products) than companies re not stimulated to invest, expand, increase wages paid, hire more people ...
I do not think that lower taxes for businesses are entirely innefficiënt, only if you assume that
only lowering taxes for businesses will save the economy. As a company that operates in a negative economic climate (decreasing demand for their products) will not invest, hire more people, ... as he is cutting his costs (as a result of a possible tax cut that is suggested).
Why I would support taxcuts for companies is because if it is combined with government spending, consumer taxcuts. Because then it can improve the economic perception, it will give companies multiple incentives: improved internal cost situation combined with increased demand from the consumers and the government (as a result of government spending).
Now I believe I ve said something very controversial and I ll explain why I think government spending is good in a desastrous economical situation:
In a ideal economical situation this happens
supply = demand
production = consumption
But now with the desastrous psychological negative reality as a result of a housing- & banking- & world economical crisis this has happened:
supply >>> demand
production >>> consumption
A really big gap between supply and demand: in a normal economical situation this would self correct (lower prices as a result of less sales would increase demand). But this is not normal decrease of consumption, companies can not bridge the gap on their own by pricing their way out of it because they didn't create the gap themselves by making too high prices. This is what makes this one of the rare situations where the government has to consume (spend) to close the gap between supply (production) and demand (consumption). The main reason for the government to step in: because the balance between supply and demand is BROKEN (there is a disproportional big gap between the 2 sides).
This temperarely spending of the government will keep people employed and change a their mindset: from "possibly loss of job" to "financial stability, because of no longer having to worry about losing their job" (no longer have to worry about paying the mortgage, ...), this will motivate them to consume (buy/spend products like gifts, ... they would otherwise not have done).
I understand why it doesn't really make sense for a government when looking at it from far away, because it doesn't seem logical: And this is because it just is not the same kind of logic that applies for most companies or individuals. On certain issues you simply can not compare the government with a company or an individual. The income of a government depends on a good functioning economy, more consuming means more tax-revenue for the government (this means that the "profit" of the government is dependant on the financial health of consumers and companies). So if a government can create an improved economic environment by temperarely spending money herself, to later take advantage as a result of more tax-income: I would say that this "spending" has been a good investment, because that is really how you should look at this. This is and INVESTMENT for future government "profits": that will benifit government, people and companies.
You would probably ask (and with good reason) why this would work and what proof there is of this theory: look at the government intervention in the financial crisis, the stock market has crashed. And it was the government that had created the bottom, by creating a sense of security (denying the failure of massive financial institutions and serious efforts from the FED). This has now saved the stock market, a lot of stocks have gone back to the value they had in 2008: WFC is a good example of this
WFC Stock Quote - Wells Fargo & Co Stock Quote - WFC Quote - WFC Stock Price
The same reasoning of the stock market would apply to the economy (but then again, some would say that the stock market is the ecomony), as it is not spending that the gov is doing: it s litteraly investing in the future (the government has already recupperated most of its own money because of the rise of the stocks of government owned corporations)
