(12-05-2017 12:47 PM)Owl 69/70/75 Wrote:  

(12-05-2017 11:24 AM)Owl 69/70/75 Wrote:  

(12-05-2017 09:46 AM)RiceLad15 Wrote:  So to summarize, you think the best way to increase profits for a corporation is to reduce their taxes, so with those savings they can expand production to fill the same amount of demand that already existed for their products.

That may be an accurate summary of what he is saying (although I think not) or it may be an accurate summary of what you took away from what he said, but it's not a correct takeaway. Reducing US corporate taxes is not going to have any material effect on US corporate profits, at least not the big ones. Why not? Because multi-nationals don't pay a country tax rate. They pay a worldwide rate, and move operations around to achieve that. Look at it this way. The weighted average world rate, for developed countries, is 27%. US corporations pay an effective rate of 27%. Duh. It's basically a tradeoff that they plan at the highest level. They do some things in countries tat tax at 20%, they do some things in countries that tax at 15%, they do some things in countries that tax at 30%, and some things in countries that tax at 35%. And they pay taxes on those things at those rates in those countries. When all is said and done, it averages 27%. Some things like sales have to be done in the countries with 35%, so they do those there and they set up transfer prices to minimize the amounts of taxable income in those countries. The parts of their businesses that they can, they move to the 15% and 20% countries. If the US lowers the corporate rate to 20%, what that alters is the mix of what they do here versus what they do in the 30% countries, for example, plus probably taking away some of the things from other 20% countries (and maybe even 15% countries, depending upon non-tax factors). Because a component of that worldwide mix went from 35% to 20%, the worldwide rate probably drops a bit, maybe to 26%.

Your idea, that we increase worker salaries to grow demand, is good, but it assumes a closed system. If I increase worker salaries, yes I increase demand. The question is how to supply demand. In a closed system, I can't go anywhere else. In a global system, I can. Does it make more sense to produce the goods to supply that demand in the US at the higher salaries, or in Germany at lower salaries?

The problem with your Keynesian view of economics is that you look only at the demand side. You have to look at the supply side too. Keynes himself understood that, but most of his followers seem to have forgotten.

Quote:My thought would be that if you focus on reducing taxes for more people (i.e. the average worker) they will have more buying power, and thus more demand. Then corporations will use extra profits from extra sales, or loans, to expand their business to meet the new found demand.

But do they expand here, or elsewhere?

Quote:In my mind, it makes more sense to try to increase demand from the bottom up to lift all boats, then to hope that demand increases with an increase in supply. But I could be misunderstanding your point.

Again you are looking at demand only. You also need to look as supply and investment to understand the whole picture.

Quote:And to the labor market and wages, I maybe should have been clearer - I will reiterate the labor market does not STRICTLY follow the principle of supply and demand. The legal field is actually a really great example of this. There is a serious glut of lawyers right now, yet wages still remain very high for them on average. If wages followed supply and demand, one would expect wages in law to have bottomed out, but they haven't. The effect of supply and demand on wages is a bit more complicated than the fundamental Econ 101 theory (and I already outlined a bit of why it is). There is certainly a connection between the fundamental concept, but it is not strictly bound to it.

As tanq pointed out, there is a glut of lawyers from lesser law schools with lower GPAs. There is a shortage of lawyers from top law schools with high GPAs. So the latter group commands enough of a premium to drive the averages up, while the former end up starving or doing something else. I know a bunch of the former group who are now teaching school. The biggest waste of money is paying for the second best lawyer in the courtroom. So those aren't in demand.

Lad???

Yes? It's rather a long post that makes good points, some of which I've later expanded upon in other posts.

Is there something in particular you really want a response to?