Nashvillians, like Americans everywhere, are rightfully concerned about the current stock market plunge, our $14.3 trillion national debt, stubbornly high unemployment rates and the mule-headed impasse in Washington.
The Tea Party has a simple (or simplistic) solution: preserve tax cuts for the people and businesses with the most money while slashing spending on what they call “entitlements.” The idea is that as the rich get richer some of the profits will “trickle down” to the middle- and lower-income classes.
A big problem with this pie-in-the-sky “plan” is that we have been trying it for decades and it isn’t working. Why? Because cash-flush people and businesses are sitting on their wealth, rather than using it to create new jobs. MarketWatch recently explained the problem in easily understandable terms: “As economists and policy makers tear their hair out over ways to get money flowing through a stagnant economy, the nation's biggest corporations are clinging ever tighter to their cash.”
Many of those corporations are, of course, primarily owned and/or managed by super-rich individuals like Steve Jobs and Bill Gates, or by other rich people trying to keep up with the Joneses.
According to a FactSet Research review of second-quarter regulatory filings, the accumulated cash and short-term investments for 24 of the 30 companies that make up the Dow Jones surged 18 percent to $256 billion from the previous year. Companies like Apple, Caterpillar, Microsoft, Coca-Cola and Chevron are sitting on tons of cash.
Rather than creating new jobs, major American corporations often raise cash reserves by closing plants, moving jobs offshore and otherwise shrinking payrolls. The people who manage to keep their jobs often end up working longer and harder hours, without commensurate raises in pay.
While cash-rich corporate chickens sit on their golden eggs, U.S. unemployment, currently 9.1 percent, has barely budged since April.
In other words, the Tea Party is off its rocker. Slashing “entitlements” may shrink the national debt, but it will also shrink the economy, because most people on Social Security, Medicare and unemployment spend the bulk of what they receive. Corporate fat cats and well-to-do individuals have extra money, so we need to either tax it or get them to spend it.
Our government should give profitable businesses a choice: either create jobs here at home or pay higher taxes so that the government can stimulate the economy. This can be done through a simple formula: Subtract all executive pay and benefits from the total payroll and give companies that actually paid higher wages to regular workers a tax break. Then companies will face a simple decision: Is it better to pay higher taxes and get nothing in return or to create jobs and/or reward hardworking employees with higher wages?
It remains to be seen whether the Tea Party really wants to help all Americans. Wild anger, temper tantrums and voodoo economics are not going to help the majority. But a simple plan that rewards companies for paying higher wages and raises taxes only on profitable companies that don’t just might work.
Michael R. Burch is a Nashville-based editor and publisher of Holocaust poetry and other “things literary” at www.thehypertexts.com.