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Taxes, Regulations, and Spending

 
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PostPosted: Mon Feb 29, 2016 2:07 pm    Post subject: Taxes, Regulations, and Spending Reply with quote

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More government spending isn’t the answer. Most college graduates and those with no college degree end up with low-paying jobs, while some college graduates with the “right” degrees end up with high-paying jobs. Since prices have been depressed from so many low-paying jobs, the high-paid workers have benefited at the expense of the low-paid workers. To reduce that gap, the minimum wage should be increased, e.g. to $15 an hour, and to compensate for greater unemployment, or the greater burden on businesses, regulations and taxes should be reduced.

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Bruce Hall, when wages are too low, you don’t destroy anything correcting for a “market failure.”

If the costs of regulations are too high, or too much, then it becomes destructive. Regulations and GDP should grow together.

Cutting taxes raises growth. When growth is achieved, then raising taxes can slow growth to a sustainable rate.

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Anyway, wages can be raised, while lowering other costs of production and raising productivity.

Regulations (and lawsuits) have costs in time, effort, and money. Imposing regulations too quickly slows growth, until the economy becomes large enough to absorb those regulations.

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Bruce Hall, I answered your question above. We need to correct the structural problems of too low wages overregulation, and more progressive taxes on the “middle class,” along with reducing lawsuits.

We need to make it easier to start and expand a business, create demand through higher low-end wages, which will also attract idle labor into the workforce, to create even more demand. Consequently, taxpayers will be created, rather than spending on the unemployed and underemployed, including through tax credits (where there’s real fraud). Higher wages will make capital relatively cheaper, to raise productivity and create skilled jobs (in capital equipment).

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The (positive) income effect may be stronger than the (negative) employment effect, up to some wage level, other production costs are reduced (e.g. turnover), and productivity increases. The increased demand can generate employment and attract idle labor generating more demand. The economy may move towards full employment.

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Productivity has a negative effect on prices and with higher wages, demand increases. Moreover, high-skilled jobs are created in capital equipment.

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Of course, an entire industry can move to another country where labor can be easily exploited, there are too few regulations, and taxes are too low.

In effect, one country allows another to exploit it and the exploiting country has no control over the other country’s (poor) economic policies.

Yet, the exploiting country can compete with a foreign country with much higher wages, regulations, and taxes, because it’s much more productive with efficiencies in production.

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