An honest question, why do Conservatives support business

I surf blogs.  If you’re a blogger you probably do as well.  You want to know what others are thinking.  Not just your own ideas.  At least I hope so.  Here I post a lot of opinions.  I strive to post stuff I can support and I hope for intelligent discussion.  Most people read but never comment.  That’s unfortunate because it creates a monologue rather than a dialogue.  If I’ve visited your blog you’ll more than likely know because 4 out of 5 times I’ll comment.  Unless you’re a pinhead who interjects the F-bomb every sentence, then there’s not much point, but again I digress.

Today I came across an interesting editorial from a political science major, who works as an accountant. An anonymous blogger under the moniker, Well Whiskey Friday. He was musing about the economy and wondering aloud what could be done about it.  He posed the question, “Why the blind faith in corporations to create jobs and innovation?”  Being a business major I thought it was self-evident.  Either you understand why and how business creates wealth and jobs or you are philosophically opposed to business as inherently “evil.”

Well Whiskey Friday began by stating his background and qualifications on the subject.  Since he was an accountant with a political science degree, I was surprised by his question.  On one hand being someone who deals with financial numbers he should understand business, but on the other hand as a political science major he might have been indoctrinated with a bit too much leftist thinking.  However, it was evident “Well Whiskey Friday” wasn’t an ideologue.  His question seemed sincere and it made me review my opinion.  Hey that’s what I live for – introspection and thoughtful debate.

After commenting I thought his question should be answered here.  What follows are my thoughts on why the private sector is the best place for sustainable economic growth.

My qualifications

I’m a business major, did very well in economics and overall finished my degree with a 3.9.  I have a well-developed interest in history and economics but hardly a theorist and certainly not an economist.

My perspective is colored by my knowledge of history and education, experience, and observations in business as well as government.  First the government.  Rarely has it done anything efficiently, aside from blowing stuff up and killing people.  It lacks fiscal responsibility because traditionally those in charge feel they can borrow or tax their way through anything.

Business is motivated by the desire for profit.  Not always but mostly.  Most businesses are not looking for outlandish profits because this would backfire since it would force their prices higher against the competition.  In fact, most businesses are looking for the minimum profit that will sell the most product while satisfying the stakeholders.  That is generally between 2 and 15%.  Granted some companies fare better but most do not.

Why the blind faith in corporations to create jobs and innovation?

Blind faith, perhaps not blind.  First one has to look at how economics work.

Public sector job creation without private job creation can be analogized like this.  Let’s say you have a closed community.  Everyone works for you and you collect money to pay them by taxing their pay.  They consume the products they create, There isn’t any outside profit generated.  How long could such a situation be sustained?  Can a bucket fill itself?

Business, however, works differently.  I hire workers who create more value for me than they cost.  My products are purchased by people from outside the company.  Money is flowing into, not simply around my company.  If my product sells well, I will need additional employees to meet demand.  I will require more resources, thus creating more jobs, not just internally but throughout my supply chain.

How government benefits from encouraging free enterprise

The more people I employ the more taxes the government receives.  More employees = more income taxes, property taxes, sales taxes, ect.  Get the picture?

BUT if there is some outside drain on my business, such as high theft, increased cost of resources, higher taxes, high regulatory costs, and the like, then I will be forced to cut costs as efficiently as possible.  Since labor costs typically are the largest percentage of my expenses I will look for the least productive employees to eliminate, I will not expand business, I will outsource to a low labor cost nation, or I may even shut down my operations.  The result is that the government gets less taxes not just from decreased payroll taxes but it ripples outward.

People default on loans, the government pays through bailouts.  The government pays unemployment benefits.  Unemployed people don’t pay property taxes, unlike the government, they must cut their budgets resulting in less sales tax revenue.

How should government respond to an economic slowdown?

Well we know how liberals in government respond.  They see less money coming in and more people suffering, so they raise taxes on the evil businesses.  Then businesses, who are really just people like us, trying to make a living and keep budgets, cut spending, cease expansion, outsource, and/or downsize.  Government suffers a larger decrease in revenue and is inclined to repeat the process.  All-the-while demonizing business even more brutally.

I believe the best answer is to encourage business.  Deregulate it?  Not necessarily.  Just regulate it wisely and tax it wisely.  Some wise person once said, “if you want more of something, subsidize it; if you want less, tax it.”

A big part of our problem is that we have been encouraging slave labor in third world nations and discouraging domestic manufacturing through free-trade policies that the Right sees as lowering business costs by leveraging competitive advantage and the Left sees as spreading the wealth to less developed nations.

I think:

  • Businesses that outsource to nations known to pay below cost of living wages should pay fees associated with that practice.
  • Encourage domestic employment through a payroll tax incentive granted to companies that hire new employees and keep them on for at least 180 days.
  • American manufacturing should be exempt from corporate taxes as American wages alone are a competitive disadvantage in global trade.

I could go on but I think I answered the question and then some.

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