Semi-OT: No … really … no …

This is an economic thing.

If I sell my house, in my suburban neighborhood, and I make a profit from that activity, should I be required to share my profit with my neighbors, who don’t own my house?

The answer to this is, obviously not.

If my business makes money, and makes a profit, should I be required to share my profit with others, who don’t own a portion of my business?

Again, the answer to this is, obviously not.

Then why is the president of the united states saying that we should?

“If we’re fighting to reform the tax code and increase exports, the benefits cannot just translate into greater profits and bonuses for those at the top. They have to be shared by American workers, who need to know that opening markets will lift their standard of living as well as your bottom line,” President Obama told the Chamber of Commerce on Monday morning.

This isn’t an out of context quote. The guy still believes in redistribution.

Once the threshold is crossed, that an additional effort will not only net us no additional profit, but actually a loss of profit, you will see such a profound and unprecedented reduction of economic activity … why work harder if you are not going to earn more, or if someone will take it away from you?

Mr. President, if anything, you should be encouraging companies to go out and take more risks, clear the way to enable these risks to be taken (e.g. work to loosen the credit markets for small companies), because increased profits are the motivating factor behind business growth AND HIRING. Nothing else.

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8 thoughts on “Semi-OT: No … really … no …

  1. I do not think those words mean what you think they mean. My read of your quote is that the *benefits* of tax reform and increased exports need to be shared by the workers. Not a specific benefit, but a bland, general statement.

    The profits and bonuses don’t appear to be the shared bit, although I certainly would agree that translating tax cuts and increased income into higher wages isn’t necessarily a bad thing. Being forced to do so is, of course, but I don’t see him ever asking for that. The President is not a leftist by any stretch of the imagination.

    (The health care bit is so screwed up that I suspect it was intentionally screwed up.)

  2. Joe, there’s not a word in there about redistribution. There is no statement, or even remote implication that I see, that you will be asked to give your profits away to anyone. Of course, you have to pay taxes, as we all do. (Well, most of us, anyway.)

    The president’s message is completely consistent with the success of your business being shared by the workers whom you employ, by dint of the salaries you pay them. That is something you would scarcely disagree with. In fact, his statement is a rather bland restatement of the Reaganesque adage that “a rising tide lifts all boats”.

  3. @Jason

    Unfortunately the bland statement with a proscribed (or a strongly suggested proscribed) action was followed by a general statement on what should be shared. Had he said something more along the lines of “business as a whole, top to bottom, stake holders, and wage earners, should benefit from the increased economic activity surrounding a decrease in barriers to doing business”, then yeah, thats something I am quite happy with.

    Telling a CEO or other execs that you can’t get rewarded for doing well by the company owners (and note, he used the word “cannot”), by growing business doesn’t sound quite right to me. Economic reward is economic incentive. And thats what creates jobs up and down the scale. Will a CEO or others open more positions if they get a bonus? Probably not. But if they also cannot (using the president’s words) reap the benefit of their own hard work, by increasing value of the company for the shareholders … they why would they work harder to do so?

    Standards of living are raised when wealth is created. Or temporarily when a kleptocracy is in power, though this tends to be only for one subgroup. Bottom lines are raised when wealth is created. CEOs and other should only get bonuses when wealth is created. This creates a positive feedback cycle, and a growing company.

    So the most important thing is to remove barriers from wealth creation. Not to inhibit bonuses.

  4. @Peter

    I disagree that he did not say “share”, which I think is a form of redistribution in the context he used it. I did construct my examples carefully, with an eye towards his wording.

    Its ok if we disagree on this, no issue.

    I am concerned that he seems to be saying “companies cannot get profits and execs cannot get bonuses” unless standards of living are raised. Ignore the bonuses for the moment. Just focus upon the company profits. Not all companies with increasing profits can hire more workers. A fair number of companies with increasing profits have fired workers (HP, Microsoft, et al come to mind), simply to reduce their on-going liabilities.

    Yeah, it sucks. We (employees) are liabilities. Or our salaries/benefits are.

    Reducing that liability load is one way to improve the bottom line. Increasing profits is another. Combining the two appears to be a common practice these days, as Wall Street rewards better company fundamentals, and punishes companies that don’t work to improve upon their balance sheet.

    Stock price is in part a measure of the valuation of a company, for a public corporation. A better balance sheet (higher profits, reduced liabilities) makes for happier wall street, and higher stock prices.

    Standard of living increases tend to be a wealth effect. When there is enough wealth and capital flowing in an economy, jobs tend to be formed faster. When there is demand for labor, wages increase. When there is competition to supply that labor, wages decrease (though in some polities, it cannot decrease below a certain legal lower bound, which causes jobs to exit that polity).

    Parsing what the president said, its pretty clear that he says companies cannot and execs cannot gain the benefits from their hard work, without effectively guaranteeing that others will benefit as well. The benefits must be shared. Standards of living must be raised.

    Its impossible to guarantee these benefits, without taking the wealth from the companies who earned it.

    My example was my house. If I sell my house and I earn a profit on my sale of my house, do I get to keep my profit? Ok, switch this to the company. We develop a super-duper widget. We sell it. We make money. Do we get to keep the profit from this venture? Remember, the president proscribed this. With words to the effect of “benefits cannot just translate into greater profits and bonuses for those at the top. They have to be shared by American workers”. Do we get to keep our profits, or do we have to share them?

    Full context of the quote is “If we?re fighting to reform the tax code and increase exports, the benefits cannot just translate into greater profits and bonuses for those at the top. They have to be shared by American workers, who need to know that opening markets will lift their standard of living as well as your bottom line”

    The requirement to share something is what bugs me. Its going to happen, but not on the time scale or in the way they want it to happen.

  5. We’re reading “cannot just” where you are reading “cannot.” We’re probably all over-parsing this. We’ll see. (I trust *no* politicians. They’re people who want power for some reason. That always worries me.)

  6. @Jason

    Yeah, I am the first to admit I could be blowing my stack as it were over the parsing of this.

    I too, rarely trust politicians. Thats why I am glad to see real people get into doing some of these jobs, to get a job done, and then get out.

    I am a huge fan of balance of power and forces, and not all that happy when we have an effective monopoly on power (in industry, in business, in politics). Such monopolies often badly distort what the real stakeholders want, and do so to the detriment of all.

    Thanks for noticing the meta-discussion was delving into parsing more than intent, and trying to infer intent from parsing.

  7. @Joe

    He said the benefits of tax codes and other reforms should be shared. He didn’t say anything else should be shared. Certainly I agree (and you probably do too) that the benefits of national initiatives should be shared by the nation as a whole.

    And he said the benefits “cannot *just* translate into greater profits” for those at the top; he did not say they cannot or should not translate into greater profits at the top. Of course they should. But changes in the tax code and the opening of export markets should benefit workers as well. And wouldn’t you expect they would?

    Looking at the wording, I see no implication of the concepts you are inferring. And I agree more than I disagree with your view of those concepts. But I don’t think they are present in that quotation — not even close!

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