Truly Conservative Economics

October 15, 2010
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More cash available equals more cash spent, for what good is money if you don’t use it? This is a basic, universal principle of economic theory. Now, how can the government make more cash available for citizens? The answer does not lie in Cash for Clunkers or Social Security, Those are merely temporary solutions that result in national debt and unproductive citizens; the answer lies in lower taxes, especially for all business owners, with the goal of encouraging entrepreneurship.
Encouraged entrepreneurship will have the result of more people trying to start their own businesses. Follow the logic here, say you have a dissatisfied corporate employee, we’ll call him Mike, who has always dreamed of starting his own business. He has the will to do it; but he’s always been afraid that the taxes he’ll face as a small business owner will put him under his first year. Then one day Mike is surfing the internet and sees that the taxes on small-business owners are now being lowered to a much smaller level than they are currently at. Suddenly, Mike has nothing to stop him from going out and starting his own small business. There are thousands of Mikes in the United States. Some of these Mikes will fail, in fact many of them will; but some will succeed. Those that do succeed will need people to help them pursue their dream, and they will hire people to help them do so, thus lowering the unemployment rate. Even if they only hire one person, that means that that is one less unemployed person, one more productive citizen who is making and spending money.
In addition to hiring people; people who want to start small businesses will need capital to do so. Now, where will they get this capital? They might get it from private investors, which will result in that single investor by himself, on his own, taking responsibility for himself, a) making money, in which case they will spend it, thus re-circulating it and benefiting the economy, b) they will lose money and go to the other end of the pyramid and do beneficial labor for another company, or c) they will lose their money and not go to work, so if they end up hurting, it is their own fault. It should be noted that two of these three outcomes are favorable; and according to Maslow’s Hierarchy of Needs, it is doubtful that many will choose the third, simply because the need to eat will keep them going and keep them working.
So they might get the capital from private investors, or they might get it from the banks. Now, once these lower taxes for business owners are well-publicized enough that the general public knows about them, there will be a mass of people going to the banks for loan capital. If and when this does happen, people will begin looking for a deal on their loan interest rate. Banks will realize this; and they will still want people’s business; so they will lower their interest rates. Lower interest rates mean that more people will be able to borrow money to start their business. Throughout this process, it is imperative that banks retain their say in who can borrow money and who cannot. They are a business institution that has the right to refuse service to anyone, and they must retain the right to deny loans to those who have a history of not taking care of their money. If the banks do not retain this right, the result will be negated by the banks (rightly) trying to protect themselves against loss by charging higher interest rates on the customers that they do have so that if one of their loans goes bad, their loss will be covered by the money that they have made off of their reliable customers; and thus the people who have made the effort, done well, and taken care of their money end up paying for the mistakes of those who have not. This is an injustice, and injustice is bad for the economy.
Now, if the government does what it is supposed to and lets the banking industry keep the right to deny service, thus keeping the interest rates low, lenders will not be happy. They won’t want to go to the banks; but they still need to put their money to work somewhere. So where is the most logical place for them to put their money? The stock market, because there it is going into a corporation that doesn’t have fixed interest rates; so the investor is not limited to making 3% back on their investment. On the company’s end of this process; this will give the companies more resources to put into production, which will create a product that people will buy, thus increasing circulation of cash; or they can put the money on the human side of things and give people jobs, which will take one more person off the unemployed list, thus giving them the ability to circulate cash, thus stimulating the economy that much more. Now, this may seem small, but it must be kept in mind that this will not be happening with just one person but on a large scale; and on a large scale this process would work wonders for the economy.
“But” One might cry, “You said ALL companies! Why let the big companies have the tax breaks? They can afford to pay it; why not let it just be Joe the Plumber and people like him that gets the tax breaks? They’re the ones that really need it.” And the answer to these people is that they need to stop thinking like Joseph Stalin and start thinking like an American. No matter how big or how small a company is, they all have three things in common: 1.They produce a product and/or provide a service. 2. They employ people. 3. They have limited resources. Even McDonald’s doesn’t have an unlimited supply of money to put to use. So, if the government will stop taking such a large percentage of McDonald’s money…Hey presto, they suddenly have a lot more money to spend!
“But,” one might argue, “what if this money doesn’t go into the company? What if it goes toward expensive goodies for their CEO?” And the answer to this is ‘What does it matter? Someone, somewhere is getting that money. No matter what the CEO does with that money, it benefits the economy. If he spends it on his private helicopter, some mechanics get to eat this month. If he spends it on a 2 million dollar car, then a lucky car salesman gets a bonus. If he takes it and hides it in his basement, than that means there is less cash in circulation, and so according to the law of supply and demand, it will do just that much to increase the value of the dollar. The only unproductive thing that could happen with that money would be for the government to take it.
Now, just to cover all the bases, we will go into what happens if the money does go back into the company. No matter what department it goes into, whether it be Research and Development, Human Resources, Accounting, Production, Suppliers, no matter where it goes, they will do something with it. If they hire new personnel, that’s a new person with a job. If they buy new computers, that’s money going to the computer company for them to spend. If they go to synthesize a new product, that’s scientists they’ve got to pay, materials they’ve got to buy, equipment to buy or rent, it doesn’t matter. When money is being spent that is good, but money will not be spent if the government takes it all in taxes.
Here is another thing that Congress might want to consider; now if taxes on all companies and corporations are lowered, what reason do companies have to hide their money in offshore banks and accounts? The only reason that is done now is that it is less expensive to hide their money than to let Uncle Sam have his share. If taxes on businesses were lowered enough that that were no longer the case; then the logical thing for corporations to do would be to do what they are very good at, take the cheap and easy road, and move their money back to the States, where the government can place it’s now-reduced tax on it. Now, I think that most would agree that it is better for the government to have a smaller percent of something than a much larger piece of nothing; which is what it currently does have.





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This article has 5 comments. Post your own now!

KidB1963 said...
Oct. 22, 2010 at 7:40 pm
Well, first things first, if you want to go into politics you might want to be more conservative with your article length - Americans aren't valued for their long attention spans.  But otherwise, good arguments, and this is coming from a raging liberal.  They're all wrong, of course, but thats besides the point.  I'd argue with you forever, you Texan you, but its worth noting that behind 'the economy' is people.  While lowering taxes on the rich would help, well, the rich (if... (more »)
 
Treefiddy replied...
Oct. 23, 2010 at 3:00 am

KidB1963, you have bought the Marxist line of your pseudo intellectual counterparts. In a truely free market, you trive by serving your fellow man; you don't have to like them, but you provide goods and services that they need. Businesses have done more to eliminate poverty and widespead misery than all of your cries of greed thoughout all ages.

That computer you're typing on, the house you live in, the food in your refrigerator, the car in your garage, the clothes on your back, are al... (more »)

 
KidB1963 replied...
Oct. 24, 2010 at 6:58 pm

Um...

Well, if I wanted to argue with you I'd say businesses have done more to create poverty than my... cries of greed (?), that you really shouldn't argue the merits of a system based on greed while calling someone greedy, that the rich were born that way, the people check political interest while no one checks economic interest, etc. etc., but that really wouldn't change anyone's mind.  So instead, thank you for calling me a Marxist pseudo-intellectual - I guess?

 
Treefiddy replied...
Oct. 25, 2010 at 4:12 am

Who is to say that you wouldn't change my mind? Perhaps your arguments would be so well thought out and so riveting that I would rethink my entire basis of individual freedom, laissez-faire capitalism, and the need for a limited government. But the problem with liberals is that they emote. You see two ends- a rich man and a poor man, and the conclusion you draw is that the rich man stole it from the poor man, and that the only way the poor man can become rich is to steal it from the ri... (more »)

 
KidB1963 replied...
Oct. 25, 2010 at 4:24 pm
Dave, this conversation can serve no purpose anymore.  Goodbye.
 
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