In a former post, I asked if we had learned how to raise the minimum wage. Lessons of the past have proven how to raise wages and take home pay through policy designed to allow you to retain more of your money and increase economic expansion. This course of action, I contend, is preferable to government policy that increases the minimum wage through artificial enhancement and government spending to prop up a sluggish economy. I lost count of how many businesses have provided bonuses to all employees and increased the minimum wage for their organization. In addition, millions of people across the country have looked at their paycheck recently and the Federal withholding has decreased, thereby increasing their bottom line. Apple is the first to announce the repatriation of funds held overseas. Reports detail they expect to pay $38 billion in taxes and invest billions in their business.
So to review: more take home pay, bonuses for employees, huge new investments creating new jobs, minimum wages set by the private sector based on tax/business conditions, repatriation of funds for investment in this country, stock market continues to climb. Did I miss anything? After all its been a WHOLE month since the legislation was signed! Some politicians call this crumbs. Interesting take for sure. Especially considering these same politicians would never allow government to do with less. Us? Yes we can always do with less in their view. In their view, there is something scary about us keeping more of our own money. I want to hear more about enabling everyday Americans to achieve their fullest potential and less about how we need to “sacrifice” as we pay more fees and taxes. Fear and Guilt are constantly used to move public policy and it is tiring and hopefully will become ineffective.
I view these topics as financial conversations-not political. If you despise the President and anyone who voted for the legislation and therefore it was a terrible move that is your right. I will stick with talking about economics.
Unfortunately everything is politicized these days. Economics, markets, the weather and many other topics are constantly shaped for the next narrative of the day through the lens of politics. Then we can always find “news sources” that make us comfortable our view is correct. There is nothing wrong with competing views. But, some things, just are. That is why I have always been drawn to economics and markets. When not prostituted by government policy, numbers and markets are real. They don’t lie. There are certain policies that are sure to provide desired outcomes. And the results occur every time based on the established policy.
Lets take the example of “Trickle Down Economics.” This set of policies was deeply tied to the Reagan Administration. What really is Trickle Down? It IS economics in a free economy based on Capitalist principles. Lets use the recent Tax Cut Package as an example. Company A announces pay increases and business investments. The employees of Company A, with more money and additional confidence in their job security, increase their personal spending. That washing machine that is getting old is replaced. The family goes out to dinner an extra couple of times a month. General spending around various Holidays increase 10-20%. You get the idea. The companies that are the beneficiary of the additional spending hire more people and order more goods from manufacturers. The manufacturers ramp up production and hire more people. The Tax cuts and accelerated depreciation incentivize the manufacturers to order new equipment and upgrade their business. The employees of the manufacturers make more money and OT is now available. And like the old shampoo commercial said- and so on and so on and so on…………… Trickle Down is simply the general order of things in a system that allows the private sector to flourish. Winners and losers will be determined by the marketplace, not politicians.
I expect the economy will grow at a higher rate in 2018 and us crumb crunchers in the hinterlands will benefit. Interest rates will likely rise and undervalued assets in the economy will increase in value. Companies will move operations from other countries to America, in addition to the repatriation of funds. The Tax Cut Package is a worldwide disruptor that will change the American economy and have wide reaching affects on the economies of the world. Leadership of foreign companies will praise the move. Foreign political leaders will not speak kindly of the new policies. The new policies also place the US in a very strong bargaining position regarding trade agreements. And we will continue to hear that although we are benefitting from the results, we are actually getting screwed. In essence, don’t believe what your eyes are telling you. The Fear and Guilt parade can march on by. It wont work here.
Clifton Park and Beyond 