Warning: Rant ahead.
So, today I was reading an article on bloomberg.com and read a quote that… I just cannot leave alone:
“Tearing down the rich does not help those less well- off,” said the chairman of New York-based WL Ross & Co. LLC. “If you favor employment, you need employers whose businesses are flourishing.”
So, Mr. Ross, what causes a business to flourish? Is it cutting the personal income taxes of the business’ owners? Or is it having lots of customers patronizing that business?
Scenario: You’re a billionaire. You own a large retail chain with hundreds of stores. What do you want? More money of course. That’s generally the point of owning a business… filling a need in a way that lets you make money. How do your stores make money? People shopping there. Specifically when those people buy high-margin impulse items. How do you get more people shopping there and buying more impulse items? Well, you want them to have more money of course… so lets look at how to do that… So, do you cut the taxes to the wealthy people who… don’t really shop at your stores, and probably own their own businesses? Cutting taxes for the wealthy wouldn’t do anything… they mostly already have more than enough money to buy everything they want, and really, they don’t shop at your stores. Even if they cut your taxes, it doesn’t mean your stores can suddenly afford to pay people more or hire more workers… your shareholders would be upset by the lower profits, meaning lower dividends for them. Cutting the taxes of the people shopping at your stores, the ones who shop at your store hoping to save money on inexpensive goods, that’ll help drive more people into your stores with more money in their wallets that they can spend on those profitable impulse purchase items. We can also cut the expenses for your customers, to give them more money to spend. What’re some ways to accomplish that? Providing better, cheaper mass transit, providing free healthcare, subsidizing food costs, etc… but that has to be paid for somehow? We could raise taxes on the wealthy… you don’t like it, it’s less money for you, but it doesn’t really hurt your bottom line because you already make far more than you spend with your needs and wants combined… and it means you can help cut expenses for the people shopping at your store, so they can spend more money. Really, if you cut their expenses enough, they might shop so much more often and buy so many more impulse items that you ultimately make even more money despite your taxes being significantly higher. Now THAT makes business sense.
Really, how do you create a business? Do you come up with a product/service, build a whole business around supplying that product/service, and hope people come buy it? Or do you find a demand for a product/service, develop a profitable means to provide that product/service, and then build the business around supplying it? Hint: One of these ways is far more successful than the other.
Smart business owners find the demand for a product or service first, then profit from filling that demand. Supplying a product or service without any customers demanding it is a great way to go nowhere. Economies are always driven primarily by demand, not by supply.
We’ve seen governments give us the kind of economics that fiscal conservatives say they want… small, efficient government with low taxes. It was known as feudalism. All of the wealth was at the top… but it didn’t trickle down. It stayed at the top, and kept the nobles wealthy and in power for centuries while there was no middle class and 99% of the population was lower class. C’mon, is that REALLY what you want? Because the odds are not in your favor to be in that upper class…