Your Opinion: Response to Stark on jobs, economy
Saturday, September 10, 2011
I must applaud Susan Stark (Sept. 3) for her admirably laconic response to a letter of mine.
My point was that payroll employees pay higher tax rates than do their employers and so the gap between rich and poor is growing.
Ms. Stark replied, “Mr. Garber, no one receives a paycheck from a poor man.” That was it. She offered no more.
If I were to attempt similar brevity I might say no one receives a paycheck from a rich man who doesn’t hire.
And that is the problem with our economy today, companies are not hiring. The recent jobs report issued by the Labor Department showed that net job creation for August was zero. We need to create about 200,000 jobs a month to start bringing the unemployment rate down from 9.1 percent.
Implicit in Stark’s observation is a belief in the trickle-down theory — give money to the rich and they will hire the poor.
As the jobs report shows that theory isn’t working. U.S. corporations are sitting on $1.8 trillion in cash, cash which is not trickling down in the form of new hiring.
Corporations don’t want to invest in new hires and new equipment until they can see enough demand to warrant producing more goods and services.
It is hard to see demand growing as long as unemployment remains high, average income grows at only 1.8 percent per year (CEO pay, however, rose 27 percent in 2010), 23 percent of home mortgages remain underwater (homeowners owe more than the house is worth), and stock portfolios and retirement funds remain far below their 2008 levels.
Somewhat related to the trickle-down theory is the notion that cutting taxes will create jobs.
That experiment was tried in 2001 and 2003 with the Bush tax cuts. They cost the government about $1.5 trillion in revenue and what did they lead to?
They were a major factor in the creation of the Bush recession, the worst recession since the 1930s. That recession officially started in December 2007 and its effects are continuing today.
The answer to the present mess is not to throw more money at the rich but to create jobs for the 14 million people who are trying to find them and can’t.
If the private sector is unable to create those jobs then government must do it by putting people to work on much-needed infrastructure projects.