The reason economists state that deficits are bad is because they reduce the value of money. Or, in other words, deficit spending causes inflation.

Richard,

You still never addressed how to bring jobs back to America and cut the trade deficit. I'm waiting.

And Sqrl -

America is indeed #2 in corporate tax rates in the developed world. Why would a company decide to set up shop here, or in Japan, when they can do it virtually anywhere else for a fraction of the price?

That is why jobs are going to India (30% vs. America's 39%) and China (15-25% vs. America's 39%).

As for Richard's assumption about raising income tax to offset corporate taxes:

You assume that is needed. It is a false assumption that need be the case. In actuality, studies have shown that when nations have reduced corporation taxes, new businesses/jobs are created which funnels more corporate taxes alongside income taxes. So its a very narrowminded view to assume that reducing taxes in one area always requires increases in other areas.

The truth of the matter is that corporate taxes make a very small part of the total American tax base. We could cut corporate rates in half, and most likely see a reduction in receipts by just 10% if that.

Ultimately, Richard asked the question 'why would someone build in America when they can do it in India/China?'. Well there are a few reasons: Tariffs, shipping, labor productivity, and other such reasons. The truth is, American workers are better than most counterparts. However, if excessive taxes are in place, then it is a really easy reason as to why you'd go overseas. Corporations must not only pay $20/hr for an American worker, but pay 39% taxes on profits, and another $10-$20 between pensions, and other government-mandated costs. If you get some of those out of the way, then it makes it easier and likelier for a corporation to come hire Americans in America.

Look at South Korea for proof. They have incredibly low tax rates, and have had massive growth in GDP, and standards of living. I'm not stating that taxes are the be-all end-all (as I've said before), but they are one part of the puzzle...Again, it costs a lot of money to keep a worker between the now-mandated insurance programs, unemployment, social security, medicare, and such things...Alongside of work-hampering regulations. If you get some of that out of the way, then businesses will hire, and people will make more money. It will also reduce the trade deficit, as more goods are available from American entities., as well as better exports from America.

Ultimately, until we fix the trade deficit, and make our regulations and tax codes more inline with aggressive nations, we're going to continue to ship jobs to them, and continue our imbalaced trade deficit.

*edit*

Found the data for federal recipts. If we reduced corporation taxes by 50%, we would see a reduction of 6% of tax recipts....Do you not think we could withstand a 6% reduction if federal receipts to see millions of jobs be created?

Im not sure that its even possible for any economy to achieve full employment. I suspect the fundamental issue is that human labour is increasingly becoming irrelevant to human prosperity. There are a lot of jobs in the first, second and third world which are just above a 'technology line' where if labour costs increased any more or technology got cheaper they will simply be replaced by technology. Already the greatest advantage a human labourer has over a machine which is the manual dexterity of his or her fingers is being eroded by the prosthetics industry. I suspect also that once the recession is over a lot of companies will realise that they were carrying too many workers and they can make do with the present staffing levels and theres no assurance they will rehire to the level they had before the recession.

If you write salary off your taxes, then the tax rate is irrelevant to hiring workers.  Actually, let me give you a case of where raising taxes would cause more employment.

If you were to raise taxes on businesses that don't hire more workers, and leave it as it if they do, then raising taxes would motivate the business to hire workers.  Of course, it could motivate itself to leave a country completely.

The problem now is that wages Americans need to be able to live is far higher than what people in China, India or other third-world nations are paid.  Because of this, businesses go offshore.  They do so, because labor costs are so high.  No amount of tax cutting or anything else will go around this.

In regards to creating jobs, there has to be developments in the economy that would be sustainable work, and drive people to go into new fields to get the needed training.  People won't go unless there is promise of work.  If an industry happens to treat workers as disposable, then they won't get people going into it.  And if new industries don't open up, and there isn't new technology that calls for new workers, then you don't get employment.  Slashing tax rates alone won't cause this to happen.  Research can, but research is a crapshoot, that has no guarantee of paying off. 

Also, here is a case for raising taxes, and it creating jobs, and improving economic activity more permanently.  If the tax dollars is channeled into research or building infrastructure, or improving law enforcement and regulation of bad business practices, this can create a climate that is more favorable for economic growth, and thus create jobs and increase economic activity.

Flat out here, the rule isn't as simple as just cut tax rates.  Things do need to get paid for, and cutting revenues from taxes below what is needed to sustain a certain standard of living and quality of life, brought about by government services (like court systems to resolve contract disputes and protect property rights), you are going to cause problems later.

By the way, there was a study a few years ago, that showed that over 25% of large corporations paid NO taxes:

http://www.reuters.com/article/idUSN1249465620080812

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

How does cutting taxes for a business that pays no taxes work?  The case you can argue is that you end up cutting tax rates, but also eliminate loopholes, and have businesses shift spending to where it will maximize profits for businesses, rather than try to play a tax avoidance game.  This will cause a business to be driven to optimize better, than this can increase revenues.  It, of course centers on the belief that somehow markets alone are magical things that happen to fully know where they need to go, and wouldn't mess up and harm large numbers of people.  Well, markets are prone to bubbles, and people should know by now the harm bubbles cause.

Ugh.

I have tried to respond to your post twice, and it has not allowed me to do it. I hate the new VGChartz. I will try to respond shortly.

There seems to be a delay to when you can post a second time on here.  The buttons vanish.

Its not that. I've had my post 70-90% completed, and it erases everything I had, and returns me to this screen.

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If you write salary off your taxes, then the tax rate is irrelevant to hiring workers.  Actually, let me give you a case of where raising taxes would cause more employment.

If you were to raise taxes on businesses that don't hire more workers, and leave it as it if they do, then raising taxes would motivate the business to hire workers.  Of course, it could motivate itself to leave a country completely.

The government has tried that before. It was called Smoot-Hawley. Read up on it. It didn’t work. Instead of bringing jobs back to America, it destroyed massive amounts of wealth and led us into the Great Depression.

The problem now is that wages Americans need to be able to live is far higher than what people in China, India or other third-world nations are paid.  Because of this, businesses go offshore.  They do so, because labor costs are so high.  No amount of tax cutting or anything else will go around this.

But why did the jobs go there in the first place? The jobs weren’t naturally there. We shipped them there, along with Mexico, and many other nations. The fact is, we reached a tipping point in the cost-benefit analysis of having factories in these developing nations.

We could bring back the jobs through more competitive tax structure, better regulations, and simply a more business-friendly environment. A great example is my state of Ohio versus more business-friendly Ohio. In the past 15 years, Ohio has lost a net 200,000 jobs, while Texas has gained a net 600,000 jobs. Texas ranks #13 for business climate (a combination of work laws, taxes, and regulations) whereas Ohio is #48. Many other states are like that.

In regards to creating jobs, there has to be developments in the economy that would be sustainable work, and drive people to go into new fields to get the needed training.  People won't go unless there is promise of work.  If an industry happens to treat workers as disposable, then they won't get people going into it.  And if new industries don't open up, and there isn't new technology that calls for new workers, then you don't get employment.  Slashing tax rates alone won't cause this to happen.  Research can, but research is a crapshoot, that has no guarantee of paying off. 

You argue that certain conditions must be met to create jobs, yet offer no real path to achieve them. I’ve stated that many of these goals (which I agree with) can be met with allowing businesses to have more investment capital via lower/better tax laws, more efficient regulations, and easier business creation laws.

Also, here is a case for raising taxes, and it creating jobs, and improving economic activity more permanently.  If the tax dollars is channeled into research or building infrastructure, or improving law enforcement and regulation of bad business practices, this can create a climate that is more favorable for economic growth, and thus create jobs and increase economic activity.

You assume our government has the potential to do that. Given how they’ve spent taxpayer money for the past 2 decades, I really question if they have the capacity to do such things any more. For example, my county was the recipient of a multi-million dollar stimulus funded project…It is fixing a road that was already there and in good working order. All it has done is create traffic congestion, and mowed the grass for 6 months prior to any work.

Flat out here, the rule isn't as simple as just cut tax rates.  Things do need to get paid for, and cutting revenues from taxes below what is needed to sustain a certain standard of living and quality of life, brought about by government services (like court systems to resolve contract disputes and protect property rights), you are going to cause problems later.

You assume that 100% of tax monies goes towards noble, workable uses. I disagree. I believe the government is like a kid with a credit card – much of the revenues goes towards useless projects and endeavors that do not help everyday Americans out. I would rather the money not be spent (reducing the size & scope of government) and in some cases, given back to taxpayers in the form of reduced taxes.

Here are some examples that would reduce government without drastic changes in our way of life, or how our government works:

·         End the wars in Iraq & Afghanistan – Saves $150 billion/yr

·         Withdraw US military bases from Europe entirely (who are we protecting? The Europeans from the reds?) and reduce Asiatic bases in Japan and Korea (as they are spending far less to protect themselves due to our bases) – Save $100 billion/yr

·         Reduce welfare payments & projects by 25% - Save $100 billion

·         Promote school vouchers for all US students to make schooling better/cheaper – Save $100 billion

That saves $500 billion USD from federal and state expenditures without massive changes to our way of life.

By the way, there was a study a few years ago, that showed that over 25% of large corporations paid NO taxes:

http://www.reuters.com/article/idUSN1249465620080812

The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.

How much of the article did you read? It stated that many of the companies lost money during the year (2008) and didn’t have to pay. Over 40% of all Americans didn’t pay income tax this year, either. I digress, though, some of these businesses got off because of tax credits, which I am not a fan of. We should end government subsidies in businesses, as it can favor certain lobby groups and business entities.

How does cutting taxes for a business that pays no taxes work?  The case you can argue is that you end up cutting tax rates, but also eliminate loopholes, and have businesses shift spending to where it will maximize profits for businesses, rather than try to play a tax avoidance game. 

The US government published a study that showed a correlation between the Reagan-era tax cuts, and a reduction of tax evasion. So I think that it does indeed work to help reduce tax evasions (of course, with corporations, as stated, many didn’t pay due to losses, or the usage of tax credits). I do agree we need to cut loopholes and ensure that businesses do not avoid taxes through illegal, or at least shady means.

 This will cause a business to be driven to optimize better, than this can increase revenues.  It, of course centers on the belief that somehow markets alone are magical things that happen to fully know where they need to go, and wouldn't mess up and harm large numbers of people.  Well, markets are prone to bubbles, and people should know by now the harm bubbles cause.

You assume that people, and businesses are stupid. I believe that businesses, moreso than government entities, have the structure in place to ensure that bad business models change. The company I worked for was going in the wrong direction, and was hemorrhaging money. They fired the CEO and hired someone smarter to change the business model. We’ve changed staff a lot in the name of getting the right people to fix what doesn’t work.

The truth is, business cycles are a good thing, despite some harm being involved. If a business employs a bad model, slothful workers, or simply treats customers/employees bad, it will end up causing losses for that business. The company must either fix its ways, or go under. Is that a bad thing? I don’t believe so. I worked for an atrocious company that treated its workers like slaves. Its lost about 70% of its business since I left...Yet to some, that would seem ‘bad’ because they lost money, and have nearly went under. The same could be said for Citigroup and the other cronies that involved themselves in giving out bad mortgages to questionable people, and employed credit default swaps to cover their tracks. I don’t think those companies should of got away with what they did, and were propped up with government money, because it didn’t fix the problem – merely prevented the actual fix.  

Ahh that.  The pop up to enter text vanishes from time to time.  I know, it is annoying.

Ok, let me comment on several things here:

* I did NOT discuss raising tariffs to create jobs.  I said you raise taxes on income taxes, and structure the tax code to make it more advantageous to employ workers.  If also, take another example, workers got their training paid for through free college education, and didn't carry debt.  Employers would then be able to pay the workers less money, because they don't have the debt load.  Also, if the tax dollars raised fund basic scientific research, and it leads to breakthroughs in innovation that can employ others, then raising taxes can create jobs.  You saw far more job creation under the Clinton administration, than the Bush administration.  The economy grew better also also, and the deficit went down.   The reality is that you can't just say you slash taxes and miracles happen.  It didn't happen under the Bush administration at all.

* There are other factors into why Texas is more favorable than Ohio for business.  Texas has had revenues from oil production, which drives costs down for oil, and gives them extra revenue (a bit why Alaska also pays its citizens kickbacks, rather than tax them).  It also has a lot of land.  You can also argue that it has a large influx of illegal immigrants who work under the table to keep wages down.  You can see similar in Las Vegas, when it is a tourism mecca.  When you have this, you can afford to keep tax rates low, and things go well enough that you don't need to regulate as much.

* Why have jobs gone to Mexico originally?  Well NAFTA put a third-world nation like Mexico into the same footing as the United States.   It also has poorer environmental regulations than the United States, so business are free to dump their polution in rivers, kill off the ecosystem, and basically make the air far less breathable than in the United States.  Also, the workers are generally uneducated and have poorer standards of living.  I guess if you are in favor of driving down the quality of life for Americans, in a race towards the bottom, that is awesome.  Well, guess what?  Apparently China, which is even in worse conditions than Mexico appeared to be a better deal, so business went there.  Yes, you can get job creation, if you feel it is excellent that Americans should be able to do manufacturing jobs for less than $2/hr, while living where the water is garbage, and the air will shorten your life expetency by at least 5 years.

In all this, if the lack of regulations and taxes is such a big deal for doing business, why don't business relocate to Alaska in large numbers, or set up shop on oceans, or in Antartica?  There is FAR more reasons why businesses go places than regulations and tax rates.  Business WILL set up shop in NYC, for example, because it has natural advantages over other areas, particularly if you are in the financial industry.

Where I am, near Poughkeepsie, NY, they have tried everything from enterprise zone taxation, to not having a lot of regulation.  Well, businesses don't come up here.  You have a number of low salary jobs working fast food and the service industry.  You also have part time work.  There is really NO reason to set up shop here, and suffers due to IBM offshoring its IT work (I got downsized as a result of this).  It was actually heavily IBM territory, and GM thought of even setting up a Saturn plant in the area, but found the unemployment rate was too loow at the time, and were concerned they couldn't find sufficient labor.  So, they didn't set up shop here.  Outside of a nice range of weather, and the leave being pretty, the area doesn't offer much at all.  There is a bit of a push for green jobs in the area, and if it ever comes through, and the area creates a center for green manufacturing, do you think this would do less than mindlessly cutting tax rates?

And you would argue, as other, "Well, we need to just slash tax rates, and all will be fine".  Look at business for a second.  Exactly what happens to businesses when their only option is to cut costs?  Does the cutting costs alone make its balance sheet healthier?  The same goes for regions where businesses can set up shop.  If the idea is to cut costs alone, how does it end up having better features?

And you said you want to slash welfare payments by 25%.  So, you are in favor of dumping a large number out on the streets to become homeless and live in shacks?  You want America to set up Obamavilles made of shanties and look like some third-world nations?  Are you even close to the welfare system?  I have had to deal with it.  I was at a situation where I could of lost my car, and Internet access, and phone, and had any chance to find work, outside of maybe something I could walk to from a shelter area... if they had any.  If I didn't have family I could stay with, I would be there.  So, you want to drop payments by an additional 25%. And that would result in more people without medical coverage.  In my case, I haven't had a chance to see an eye doctor or dentist in years, because I can't afford to.  I have over $1000 needing to be done with my teeth, and I can't afford it.  Same with my likely needing new glasses.  But I don't have coverage.  And you want to slash this by 25%.  I guess causing people to live in shanty towns would be a fine.  Anyhow, that will likely be coming anyhow.

By the way, do you know what the total deficits being run by states and governments are now?  Try over $500 billion.  So, have anything else you want to cut out?  How about installing some death panels that can decide which of the elderly should live and die, so they don't tax the system?  Actually drive them all to hate life so much they want to die, and then implement it.  I am sure, for a fraction of the costs, we can execute those who are a burden on society, including the poor.  And shoot, we could also harvest their body parts and solve the needs of those looking for viable organs.  Big medicine could actually make a profit off this.

* As far as slothful workers go, America has had the top GNP productivity, in part due to workers working extra long hours. The policy of business is to fire people and make their workers work longer.  They also like to consolidate work conditions, and close places down, like IBM has done.  A prior contract position I was working got eliminated and the helpdesk happened to move to Colorado.  This happened months after they cut headcount to the desk.  The manager of the helpdesk took his life, by the way, after spending years at IBM, and not sure he could find anything else to do.