Let's talk business and other things

     My wife's niece seems to interested in politics and, to say the least, has a rather liberal viewpoint on some subjects. In a discussion on Facebook I posed several questions to her to see how she would answer. I found her response interesting and I thought I might try to respond. I think this kind of discussion is a bit much for Facebook, as it is essentially a social medium and is not intended for any meaningful discussion of anything. I decided to address this on my blog and share it with her. I find the subject quite interesting.
    I asked her to contemplate the questions: How are jobs created? Especially the middle income type jobs. And, what are the impediments to creating those jobs? I also stated that there is no such thing as a free lunch; somebody pays, always. 
    She answered that jobs were created  by the demand for goods and services and stated that middle class earning jobs were created from some form of contract.  She also stated, suspecting where I was going, that taxes don't kill jobs. That greed is responsible for stopping job growth. 
    The answer to the first question I find (while true in a sense) to be a little overly simplistic. In fact jobs are created by businesses. Very often businesses that require a huge initial investment to get them started. But, whether it's a massive investment to start or expand a large business, or to start one on a smaller scale the result is the same. An investment that carries with it the risk that the business will fail and the investment will be lost. That investment is the engine that drives the creation of the business for the purpose of making money if they succeed. Some call that greed.  It is businesses that are formed to meet the need or desires for goods and services, jobs follow. Sometimes there was no perceived need for a product or service until a business is formed and as a result of marketing strategies, a desire was established.  These businesses in turn hire people to design, produce and market the product or service. When you think about it a lot of the businesses operating today started that way.  Nobody thought they needed the dishwasher, clothes washer, electric toaster, the light bulb or radio until it was developed and the public found that they wanted those things. Now they are considered almost necessities. 
      Let us take a few examples of businesses that produced a lot of jobs. 
      In the case of the market responding to a built in demand we can take the automobile industry after WWII. In fact all kinds of manufactured products such as washing machines, refrigerators were in high demand. Following WWII the American manufacturing capability was totally intact and able to switch from war time production to peace time very rapidly. We kind of had the world by the tail. The manufacturers hired a ton of people to design, manufacture and market the goods we were making to meet this demand. We were almost  the only source of  produced goods in world for a number of years. The jobless rate stayed so low that an unemployment rate of over 4 1/2 percent was viewed with great concern. In this case, indeed, demand created jobs because industry responded to the demand. 
     This condition, however, was a two edged sword. Having no global competition and a ravenous market, the manufacturers did everything to feed that market. They produced cars with their bumpers literately falling off and depended on the dealers to fix the problems. That came back to haunt them later as they lost market share to foreign cars, especially Japans, on the basis of reliability. They capitulated to the unified labor unions ( the UAW) for almost every demand in order to keep the lines moving. The unions demanded and got work rules which, to say the least, were ridiculous. The unions did ever thing they could to expand the work force. They paid middle class wages for putting nuts on bolts. They only had themselves to compete with and the unions negotiated as a group. No outside players were as yet in the game. In a sense all the car companies were competing on a level playing field. 
     As everybody knows that condition slowly came to an end as the products from Japan and Europe begin to enter the market. Especially after the first great oil crises created by OPEC.  Many of the manufacturers went out of business because they couldn't compete and thousands of workers lost their jobs. Remember Studebaker, Rambler, Hudson, and Packard? And, still the unions, with strong government backing hung on to all the perks that they had gained during the plush times, in spite of the fact that they were making American manufacturing noncompetitive in the new emerging global market.  In the end, two of the remaining  three major auto makers had to declare bankruptcy and only Ford was spared because they had negotiated a large loan just prior to the recent recession. Only massive loans by the government saved GMC and Chrysler.  The failure of these companies would have resulted in thousands of American jobs lost.  The demand was there for cars, but that could have easily been satisfied by overseas industries. The demand for goods and services would be there but, that would not have resulted in any American jobs. Only saving the businesses did that. Under auspices of the bankruptcy court they restructured their contracts to reduce costs and with the money from the government loans, the car companies are now back in business and competing very well with the foreign made cars. They have paid back all the money they borrowed. 
     Take a look at your appliances, clothes and shoes; where they made?  Not likely in the USA. High costs due to labor, taxes and regulations have driven almost all major manufacturing overseas. Your say they are greedy. But wait a minute, why did Americans stop buying home grown products resulting in the exodus of manufacturing?  For two reasons. They actually were made better and they were cheaper. Businesses either compete or say adios and kiss all their workers goodbye.
          Let's now consider the creation of a jobs where there was no demand for a product; ergo no business,ergo no jobs. Because there is no history or established Washington mafia these types of business are generally not regulated as much by government bureaucracies making it much easier for a start-up. Apple computer is a good example. There was no demand for personal computers. Two guys went into their garage and developed this technology specifically for computer geeks (the Apple I).  They got initial investment capital from a "greedy" investor who thought they might have a good idea and proceeded to market their creation.  It was more successful than they had imagined. This led them to  design the first true desktop stand alone computer, the Apple II.  The established computer powers such as IBM never conceived of a market for personal computers at that time. They thought the market was with the large main frames where they excelled. They questioned why the average citizen would ever want to have access to a computer. They thought the market was limited to Engineers, Science, big business,government and the like. But, some investors saw the product and took the risk that the Apple II would make money and invested in the manufacturing capacity to build the computer. Of course the Apple II was roaring success as ordinary people bought it in droves and it changed the computer landscape forever. The investors were rewarded for their faith and assumption of risk. Following that was whole string of Apple products that had no demand until they marketed it and created that demand. They produced a the IPad, IPod and all the other "I" products, most of which had no market until Apple marketing made one. Apple hired a whole bunch of middle and high end labor to keep at the forefront of the tech design. In this case business didn't respond to a demand, they created one. Out of that venture rose Microsoft, Intel, Dell Computers, a bunch of PC makers and a whole host of additional companies employing thousands of well paid people.  
      You can also look at Facebook, Tweeter, Google and a lot other so called dot-com businesses that were created before there was any demand for them. After all, who really needs any of the social media. They employ a ton of people. Some required massive investment to grow to their present condition others are small operations employing less that 100 people. Remember also, that most of the dot-com adventures, involving a lot of investment money went belly up and all the investment was lost. 
      Another example might be the type of business that took some service or product that existed in a limited way, usually only for the rich, and improved it so much that it became the standard for their industry from that point on. A good example of that might be creation of the Ford Motor Co.  
     Henry Ford envisioned a new manufacturing method that could revolutionize the way cars are built so that they could be owned by the average person and not just the wealthy. His ideas of mass production however, would require huge investments of capital to built the facilities required for his methods to work. He acquired the capital from individual and institutional investors who were willing to take the risk on his ideas. Of course the first mass produced car in the world was the Ford Model T. A roaring success. It seemed that everybody in America wanted one. As a result of Ford's ideas and foresight, thousands of workers were employed in making of the Ford cars. Of course it wasn't long before his assembly line methods were adopted by other manufacturing companies producing everything from toasters to automobiles resulting in hundreds of thousands of new jobs being created as the price of manufactured goods plummeted and ordinary people could begin to afford these luxuries. 
      Of course Ford was entering virgin territory with his venture and there were not yet a ton of government regulators breathing down his neck at every turn. Nor where there a large body of entrenched interests in Washington set to protect the then current industries. 
     And Ford wasn't only example of this type. There was Carnegie, who figured out how to produce steel cheaply and spawned a building boom never seen before; there was Rockefeller, who revolutionized the oil industry and made American the largest producer and exporter of oil for many years, Edison with his many inventions and the industries that came out of his ideas, Tesla and the electric power systems we use today. And the list goes on. 
     So again I reiterate that business creates jobs. Therefore, it should be clear that impediments to business development has a negative effect on the job market. 
     So what are the true obstacles that businesses have to face at their start up and every day of operation?  Mainly, if you are competing in the open market, it's controlling costs. The price you can sell your product or service for is dictated by market conditions. If the manufacturer of  the product or service can not meet the market price because of high costs and still make a profit, they will fail and go out of business with all the concurrent job losses that go with it. It follows then that an essential task for any business leader in a competitive environment is to control costs.
     Of course government does not operate under those restraints. There is absolutely no incentive for government departments to worry about controlling costs. They have no competition.  
     There are a number of factors that go into the cost of providing a product or a service.  The cost of the material they have to purchase, their faculties costs (likely a nearly a constant),  labor, including executive salaries, taxes and adherence to government and collective bargaining regulations and restrictions are some of them.  Companies have some control over most of the costs involved with the exception those that are government imposed. I.e. taxes and regulations. 
     Of all the things government does to hamper job growth, the more onerous is probably the abundance of regulations they have created for a business to get started and to operate. Potential businesses have to spend a large amount of money and time doing all kinds of studies to show the potential new businesses impact on everything. They must show the impact on the environment, wild life, ancient tribal sacred grounds and their compliance with local zoning and long term objectives of local planning commissions among other things. And none of the studies are cheap. If a company gets over the initial hurdles and starts to operate, they now have a prolific set of laws and regulations that must be met concerning workers safety, access for the disabled, working hours, product safety, and other regulations. An over abundance of these types of things results in companies fleeing to less onerous locations. 
       One should also be very clear that the cost of a company complying with a government regulation is, by necessity, passed on the consumer in form of a higher price. It is almost impossible to conceive of a regulation that doesn't cost money to implement. That is not to say that all regulations handed down by a myriad of government bureaucracies are all bad. But, they do cost money. And, the originating agency never seems to consider cost of implementing their brain burst.     
     On the subject of taxes.  Let's be clear. Who Pays All Taxes? And I do mean all taxes. The answer: the consumer. That's in addition to the up front taxes the consumer pays in the form of income tax, sales tax and any special tax that local government has imposed. When you buy that new Chevy you are paying GMC's corporate taxes. You are also paying their workers compensation in all forms. The company contributions to pensions, Social Security and Medicare, vacations and sick leave for their workers are factored into the selling price of the car. That's in addition to the taxes that their subcontractors had to pay in order to sell their own product, which the final manufacturer  has to absorb. Taxes are just another expense to the manufacturer. If the manufacturer is competing on a global scale then higher taxes mean higher costs and thus they are
less competitive. If they are less competitive they sell less of their product, therefore don't need as many employees; loss of jobs. The average corporation pays something like eighteen percent of it's net profits in taxes. That's money that is not there for reinvestment in R&D, expansion and hiring more workers as a result and payment of dividends to it's stockholders. The company has to offset those expenses somehow and the only means they have is to reduce hiring to a minimum to reduce labor costs.  
      If there is one thing the economists all agree on is that taxes are bad for the economy. What they don't agree on is the effect of a tax cut on Federal Revenue. Historically as taxes crept higher the economy suffered and unemployment rose. When the tax rate was lowered an economic resurgence occurred almost always occurred with lower unemployment, a growth in the GNP, and the government actually took in more money. A good example was the Revenue Act of 1964, an across the board tax reduction championed by JFK and carried through by LBJ. In 1964 and again in 1965 unemployment fell, the GNP increased and the Federal revenue increased. That is a story that was repeated under Reagan in 1984. 
      To the statement that "greed" is what hampers job growth, just doesn't stand up. "Greed" i. e. a desire to make money, as a matter of fact creates jobs as a myriad of  examples would show. What hampers job growth are factors which effect businesses ability to produce products at a price the people are willing to pay. People are willing to pay only so much for their widgets. If the price gets to high, or the quality gets too bad, they will slow down on their widget purchasing resulting in the lose of jobs in the widget industry. Produce a high quality widget at a good price and the mob will beat a path to their door and the widget manufacturer will hire lots of people to make more widgets. 

The Republican's Party Future?

            
     Is there a future for the Republican Party at the national level or is destined to become irrelevant; remember the Whigs?  It seems that every time the party seems to be written off, it comes bounding back. However, the resurgence is usually just a rebellion against the Dems and some particular unpopular law that they have rammed though congress and got signed by the President. Currently that's Obama care (Affordable Care Act) and it's impact. It seems now that most of the Democrats running for office never heard of it. That issue may result in the Republicans taking control of the Senate as well as the House. It seems to me that this gain may be only temporary as the pain of the ACA is absorbed by the population. I'm afraid that the Democrat's basic constituency will regain the upper hand and the liberals will come back into power. 
     To my eyes the Party has a couple of  issues that must be addressed, and somehow come to terms with, or they will become the loyal opposition party in perpetuity. They must deal with the advantage the Democrats hold with women, and the huge support for the Democrats from the African-American and the Latino populations. The Republicans must approach and develop a plan and approach to convince these groups that the Republicans are not their enemy.  These are the three cornerstones the Democrats have used to move into the White House in the last elections and will ride these groups into power in the foreseeable future unless the party wakes up and makes some fundamental changes in some of it's positions. To make matters worse for the Republicans, the Latino and African-American populations are an ever growing group of voters that will determine the future of national politics in America in the coming years, especially the Latinos.         
       The way our system of government is set up leads to a two party system.  There really is no viable alternative. That is largely due to the fact the our President is separately elected by the electoral college and must receive a majority vote from that body.   One of the downsides of that system is what would be third or fourth parties in a parliamentary system, end up having to find their way into one of the major parties if they are to have a voice. And, if they are vocal enough and have a fairly large following in a few key states, they can end up having an out of proportion influence on the parties platform and election process. A quick view of history will tell you that a few third party candidates have had an influence on the election; the Bull Moose Party, Ross Perot's run for the White House, comes to mind, but they have never placed a candidate in the White House. In addition there have been few third party members of congress over the years. All this leads to a party whose core members are socially and fiscally liberal and a party whose members tend to be fiscally conservative and attracts the socially conservative as well. 
        The Democrats core base is generally comprised of a couple of groups consisting of the overtly liberal constituency (think San Francisco) and the ever growing receivers of the entitlements championed so liberally by the Dems. I'm not sure that the Republicans really have much of a chance of luring that group into a Party that preaches self sufficiency, fiscal responsibility, national defense as a top priority and independence from government control to the extent possible. The conservative Republicans and the liberal wing of the Democratic Party have little in common and it's likely to stay that way. They are on opposite ends of the pole on such items as defense spending, infrastructure development, government intrusion into private business, the proliferation of entitlement programs, and whole host of other issues. 
       The religious right occupies a unique position in the Republican party. They view themselves as a great strength, but to me they are the Achilles heel of the party. The Republican candidates have a problem, stemming from the strong influence the religious right has captured in the party, and the political clout they wield in a number of states, especially the southern states. The candidates believe that to be nominated they must embrace the religious right, or at least not alienate them. However, in the general elections they must now move toward the social center to appeal to the voters at large. The nation, as a whole, is not in sync with the religious rights position on some key social issues, especially on abortion, which is the anchor on which the Democrats hang their "War on Women" banner around the Republicans necks. The two biggest issues the religious right champions are both religious in nature. Anti-abortion and anti-gay marriage.     
     From all the polls it is clear that the majority of the American people agree, in general, with the Republicans stand on fiscal issues. They believe in fiscal responsibility in government and the goal of a balanced budget.  And, like their family finances, the government shouldn't spend money it hasn't got. However, there is a condition to this; they don't want to balance the budget by sacrificing whatever perk the government hands out to their own person or clan.      

      One of the biggest problems the Republicans have is overcoming the hard right position held by the religious fundamentalists who would totally outlaw abortion. That position has found its way into the Republican platform and is a millstone around any candidate running for President in the general election.  In many ways the abortion issue parallels the fight during the prohibition era between the "Dries" and the "Wets".  It is considered by many that the hard position of the "Dries" for the total ban on all forms of intoxicating drink let to the revolution against the Volstead Act resulting in it being repealed. They believe if the "Dries" had modified their position to some extent the Act would still be in place. 
     The Democrats have used this plank in the party platform to fling an accusation at the Republicans that they wish to dis-empower women. They have made this central to the women's rights campaign, "War on Women", and they have been very successful.  This position, and the Democrat's exploitation of it, has resulted in a lot of women, a big majority of young women, voting Democrat. With women constituting roughly half the voters, that is a big hurdle to get over. 
     The Republicans must recognize that there will never be a constitutional amendment; the right wings fond hope, to place a ban on any form of abortion.  Not now, not ever. You will never get the three fourths approval to accomplish that from the states, even if you elect a congress that would pass it; and not very likely. And until then, the courts will hold sway on this issue.  Neither the congress not the President will have the final say. 
               The Party should develop a strong position to address the issues facing the modern American women, and not some fanciful idea of the June Cleaver stay at home mom as the typical woman. The Party should address and support measures which help the modern woman achieve all she is capable of along with the requirements of the family. The issues of the single mom, child care and other issues need to addressed in a realistic manner that somehow stays within the confines of a balanced budget. Some of the bias for women to vote for the Dems may be modified in the future as more and more women enter the work force and become the taxpayers that have to support the liberal programs.  
     Another, and maybe biggest,  problem the Republicans have is the immigration issue and the Latino vote. The fact of the matter is that the Hispanics have become so numerous in the past few decades that they can, and do in some cases, become the deciding element in any close election.  In fact the Mexican vote, almost alone, has swung the biggest state in the union solidly into the Democrat's camp.  The people of Latin American heritage, especially Mexicans, in general, do not want any tight immigration laws on the books.  Nor to have the ones on the books enforced.  Almost all of them are only removed from illegals by one or two generations and they want their relations and friends to be able to enter the country at will.  Not only to enter the country, but become voters fairly quickly. The Republicans stance on illegal immigration has pushed these people into the Democrats camp. The Democrats are glad of the support and the large number of votes they bring.  Consequently the Republicans lose big time to the Latino vote, something like 90% in the last election.  
     Within the Republican Party there is fair number of members that want to close the border and kick every illegal out of the country, and do it now. They actually don't represent the majority of the membership which are open, in a limited way, to the idea of providing a path to stay in the country legally and eventually to attain citizenship. But, in general the Republicans would like to see the borders strengthened  and  recent border crashers caught and deported. But, people that serve in the military with honor, teenagers that grew up in this country and know no other should perhaps be given consideration. Such a position is the only chance that the Party has of gaining back some of the Latino vote. 
      And, like a lot of issues in the Republican plank on social issues that ship has sailed.  Look around today and you see Latinos as Mayors, Governors and other high political positions throughout the border states and beyond.  Pretty soon they will be the majority group in many states, including California and Texas, the two largest states in America. A certain pragmatism must enter into party politics. And, after all, this issue isn't what the Republican Party is all about is it.  
     So where should the party sink it's roots.  I would suggest that the model of Theodore Roosevelt  provides the kind of thinking that should become one of the bedrocks of the Party. The recent meltdown of major banking and financial institutions caused by questionable, likely illegal practices of it's top executives is a case in point. Theodore would have come down on these people like the hammer of Thor. But, nothing has happened to the people who engineered this breakdown. In fact these same people have received bonuses and raises as a reward for getting the government to bail them out. I don't think the party addressed the issue at all.  A few Senators and Representatives did, but they got no support from their party that I could see. 
       Anyone that has been keeping up with the business news of late is well aware of the stampede of mergers that have been taking place. It seems we are moving into a position where very few companies will dominate the entire market, especially the most critical markets. Government does have a role in making sure that markets remain free and open to competition.  Small business should be encouraged to the maximum extent. No industry should be dominated by just a few companies so that they can set the conditions and dictate the prices for the the services and goods they provide.   
     The basic message of fiscal responsibility along with the commitment to a strong military, a sound infrastructure, assuring  a free market for goods and ideas, improving our global commerce positions, a rational approach to the nations health care, welfare of it's citizens and Social Security should be at the core positions of the party, and either rise or fall on that platform.