In switching channels looking for a football game, the Watchdog encountered a Conservative talking head repeating a popular mantra: “We have to recognize that job growth is going to come from private enterprise, not from the government.” So what does that mean?
Is he suggesting that during this steep recession when stimulus funds are made available for highway repair that they will be government workers planning, surveying and constructing? They will be private companies that have bid and won government contracts. In turn, those middle class workers will have purchasing power that will generate jobs for others.
Is he suggesting laying off police, firemen and teachers is going to improve the economy? It will simply put more people on unemployment compensation and their reduced purchasing power will cause still more to be laid off.
The current recession is in large part due to inadequate effective demand for goods and services because the middle class earnings have been flat for decades and 40% of all corporate profits has gone to financial institutions to create a super rich class of 0.01% of the population. The super rich only spend a small portion of their mass earnings, even if they indulge in yachts and private airplanes. The rest is invested. But in a recession, there are few business opportunities and thus little demand for borrowings. Hence the record low interest rates.
Government stimulus packages and also the reduction of pay roll taxes are ways to stimulate the economy. Reducing the tax rate on incomes over $250,000 and reducing the maximum estate tax over $5 million dollars from 55% to 35% only tends to benefit that top 0.05% of the population and further depresses consumption and investment, making a double-dip recession or possibly a depression all the more likely.
