Ray From Cleveland
Diamond Member
- Aug 16, 2015
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Your forefathers also knew the dangers of letting corporations get too large. That's why they passed the anti-trust legislation at the turn of the 20th century, so that companies couldn't be so large that they priced the competition out of existence. Reagan abolished much of the anti-trust legislation in the 80's, and American corporations went on a spending spree, buying up companies, selling off their assets, and pocketing the profits. Thousands of jobs were lost as a result, but the short-sighted, bottom line managers saw their profits and their salaries rise.
I remember reading an economics piece back in the 70's which essentially said that the Harvard Business School model, which stressed bottom line management, and made higher profits the holy grail of business, would destroy the American economy.
Profit is important, but the Harvard model didn't examine the economic impact to entire communities of these decisions. No business can't operate at a loss for long. Profitable companies seek even bigger profits by driving out Mom and Pop stores, forcing them to close. Nobody goes into business and hopes to break even, or worse. But when profit is the only thing that matters, companies do things that, while legal, are certainly not moral, and which destroy jobs here.
America needs jobs which pay a living wage to all full time members of the work force, without the augmentation of food stamps, or other forms of social assistance for workers. And here's the thing of it. Wages paid are tax deductible for the. With a corporate tax of 35%, every additional dollar paid to workers really only costs the company 65 cents, because they'd be taxed on that money as profit otherwise.
Walmart is a prime example. Three or four years ago, Walmart was the second most profitable company in America, and paid out record dividends. But at the same time, Walmart was assisting its employees to apply for food stamps, medic-aid, and any other forms of social assistance they could qualify for. Walmart employees received so much aid, that every American taxpayer contributed $2,500 of their federal tax bill to the Walton Family, whether or not they ever set foot in Walmart. Walmart employees received $9 billion in federal assistance. How much money do the Waltons need? Wouldn't you like to get your $2,500 back?
Because Walmart is the largest retailer in the US, other retailers found it hard to compete price-wise, so they adopt similar practices to stay competitive, and wages in an entire sector were pressured downward.
MacDonald's put out a financial budgeting package for its full-time employees, which assumed the employee had a second job and was also receiving food stamps. That's pretty much an admission on their part that no one can live on their wage and benefits.
Companies need to be small enough that they can't control an entire industry and force an entire segment of the economy to have their profits augmented in this way. It may be legal but it's not fair to their employees or to the taxpayers.
This is what is driving food stamp usage during the Obama years. Which is it - higher taxes or cheap goods. You can't have both.
I think there are some things you really don't understand about American business.
First of all, a tax write-off does not mean if you write-off ten dollars, the government gives you that ten dollars back. What it means is that if you write-off ten dollars, you simply don't pay any tax on that ten dollars spent which is very little in the scope of things.
Secondly, American business does not run on profit. Their goal is growth.
As an example: let's say you inherited a good amount of money or perhaps hit a lottery or something. After taxes, you have a half-million dollars. All your bills are paid, so the smartest thing you could do with that money is to invest it.
Since you know little about investing, you contact somebody that does. He or she advises you on two choices for a conservative growth: Company one is a company that's been around a long time with a promising future. Their growth is 2.5% Company two also has been around a long time. But their growth is 5.8%. So which company would you invest your money in?
Before you answer, Company one earns a gross income of 1.5 billion dollars. Company two has a yearly gross income of 2 million dollars. Does this new information change your decision on where you are gong to invest?
Of course not. As an investor, you could care less about their gross earnings. You care about growth because the higher the growth, the more money you make.
American industry heavily relies on investors to operate and grow. It really doesn't matter how much they gross.
I spent my entire career in banking and law, the last 20 years of it spent on Bay Street in Toronto. I have a pretty good grasp of how the economy functions, both in Canada and the US.
If I'm investing, I'm looking at a lot of factors, including the company's environmental record, the salary ratios within the corporation, i.e. how much more are the executives making versus the employees, the age of their manufacturing equipment, and their competition and what they're up to. I'm looking at their R&D, and yes the potential for sustainable growth is a factor. But I may not be your typical investor.
Americans corporations have grown so large and powerful that the tail is wagging the dog. Corporations are there to serve the people and provide them with products, and should be doing what's best for the country, not just the corporation. It's called being a "good corporate citizen".
Wrong. A company or business does one thing and one thing only: creates products or services for profit. That's it.
If you want charity, there are charitable organizations. If you want social clubs, there are plenty of those around too. But a business is neither.
You are correct, you are far from the typical investor. Many of us have money in the stock market to support our retirement fund. In most cases, it's managed by professionals who are required by law to give the best return possible to their customers.
They are not looking at payrolls, environment records or what their CEO makes. They are looking to give their customers the best return they can. If they don't, people switch their retirement plans to a company that will provide them with a better return.