By Richard E Walrath and Patricia L Johnson
Steve Jobs came back to his company just in time to save it. Apple was floundering around like a fish out of water. The company lacked focus, a sense of purpose, but what it needed most was someone who could see what needed to be done. Steve Jobs put people to work doing what he saw needed to be done. That’s what this country needs today–get busy on all the things that need to be done.
Some people are spending their time scratching their heads and wondering what to do about the deficit. More than 20 million, unemployed and under-employed, are scratching their heads and worrying about how to get a job and something to eat.
By this time, most people, hopefully, know that GDP is made up of consumer spending (70%). That leaves just 30% for the rest of the components–business investment, government spending, and trade (exports less imports). We import more than we export, so that actually reduces GDP.
Business firms instead of investing are sitting on over $2 trillion dollars waiting for the economy to become more certain. The rich have everything they could possibly want or need, and haven’t been spending the way they were. The answer, clearly, is more jobs. If more people were working, incomes would be higher, people would be spending more and GDP would be growing.
Banks are sitting on hoards of money as a result of bailouts and aren’t lending to small businesses.
Cutting the deficit by reducing government spending also reduces GDP, which makes the situation worse.
We hear over and over again from the Republicans that “we have a spending problem.” No, we don’t. Where we have a deficit is in the revenues. There are dozens of companies that pay their executives more in salaries than the companies pay in taxes.
The chart below represents revenues for fiscal year 2011. Individual income taxes comprise the largest percentage, while social insurance [employment taxes] is second. Trailing in third place is corporate taxes.
While social insurance taxes [employment – FICA and SECA] have jumped from 10% of revenues in the 1950’s to between 35 and 45 percent in recent years, corporate and excise taxes have dropped significantly. In the 1950’s corporate taxes represented 30 percent of federal receipts, while excise taxes were 19 percent.
Investment spending is the immediate answer which can be achieved by companies and banks spending the funds they are currently hoarding. The long term solution, of course, is reviewing the tax loopholes that allowed taxes from corporations to drop from 30 percent of revenues in the 1950’s to a mere 8.3 percent of revenues in 2011.
© Richard E Walrath and Patricia L Johnson