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Jay Evensen: Recessions perpetuate the problems

Laugh at Laffer | 9:36 a.m. Sept. 27, 2009

Marginal tax rates were 25% between 1929-1931, 69% in 1932-1935, 75% starting in 1936 and progressed even higher thereafter. In the U.S. the Great Depression started with Black Tues. Oct. 1929 when the Stock Market crashed.

So, I don't see how Laffer's claims are correct. When the Great Depression started income tax rates were lower than they had been previously.

Anonymous | 10:03 a.m. Sept. 27, 2009

Recessions perpetuate the problems?, wrong Jay Evensen, people perpetuate the problems. I am glad I can be the first to comment on this story. To set the record straight.

Mike Richards | 2:04 p.m. Sept. 27, 2009

@ 10:03,

I don't agree. Look beyond the surface when the economy slows down.

Take the auto industry as an example. Why did people stop buying G.M. cars? Were they too expensive when compared to other cars? What made them too expensive? Obviously, it had to be more than the basic features on every G.M. car. Were there Government mandated "features" on every car that increased the selling price? Were there Government mandated fuel efficiency costs? Were there Government mandated wages and benefits in that selling price? Is it possible that the corporate tax much higher in America than the tax rate in other countries?

Is it possible that labor unions, whose wages and benefits averaged $150 per hour, added to the cost, at least when compared to auto workers in Japan whose average wage and benefit package is about $80 an hour?

Government control kills business. Government control causes recessions. Government control destroys the economy.

Restrict all government to its authorized duties. Let companies compete without governmental interference and the economy will thrive.

Comments continue below

When oh when? | 4:00 p.m. Sept. 27, 2009

When will we get a conservative journalist clocking in at the offices of the Deseret News?

Taxes are the problem it is true. Reduce them significantly (say by a third) and we will have more to spend, after paying our bills. For some people it will mean they CAN pay their bills.

Why are people spending less? Because they have less to spend. What can government do? Let us keep more of our income.

Wrong Mike Richards | 6:13 p.m. Sept. 27, 2009

I, like many others, stopped buying American cars because we got tired of shelling out money fixing them. Toyotas, Hondas, and other Japanese automakers made cars which could last well beyond 100,000 miles without ANY major repairs--but they weren't cheaper than American cars.

Too much govt. control caused the recession?
Thanks for the laugh.

Eric Samuelsen | 6:31 p.m. Sept. 27, 2009

For what it's worth, Arthur Laffer is not an economist. He's the founder of supply-side economics, which essentially all professional economists regard as laughable. And the greatest period of economic growth in our nation's history, from 1951-1958, coincided with the highest marginal tax rates in our history.

@613 pm | 6:57 p.m. Sept. 27, 2009

My Ford truck already has 150,000 miles on it and has had no major repairs.

Ford is an a American car isn't it? And Ford didn't take a bailout. And people still buy Fords. It's GM and Chrysler that took our taxpayer money.

Earl | 7:30 p.m. Sept. 27, 2009

The cause of recessions and depressions begins and ends with a fiat money system. Eliminate the Federal Reserve banking system and the FDIC and you'll never see these problems again.

6:13 | 7:35 p.m. Sept. 27, 2009

And I had a Ford Taurus with 70,000 miles on it that needed a new transmission. That was the last time I bought an American car. My Toyota has over 120,000 miles on it and all I've done is the normal maintenance--oil changes etc.

Mike Richards | 7:51 p.m. Sept. 27, 2009

American cars inferior? I've never had that experience. I've owned three Mazda pickup trucks that each got between 150,000 and 175,000 miles before they needed serious attention. All that I did was change the oil every 3,000 miles.

I've also had three Chevy S-10s. One was totaled at 175,000 miles. It had had no problems. Another was totaled at 275,000 miles, again with no problems. The third is still going at 410,000 miles. I replaced the engine at 375,000 miles due to my negligence in keeping the radiator clean of debris. Nothing was done to any of the S10s except an oil change every 3,000 miles.

Currently, I own a Dodge Dakota that has 170,000 miles. I has required two new ball joints, but nothing else except routine oil changes every 3,000 miles.

My experience has been that if you change the fluids regularly, you'll be just fine with American made cars. Granted, I never the first one away from a stop light but I've driven well over 2,000,000 miles.

Earl | 7:54 p.m. Sept. 27, 2009

@ Eric Samuelsen: Arthur Laffer earned his PhD in economics from Stanford University in 1971. So what does that make him, an auto mechanic? I don't agree with much of what he says, but he's wrong no more often than Paul Krugman. Neither of them saw the recession coming, and neither of them knows how to get us out of it. As for "professional economists," what credibility do they have? Are these the geniuses who advocate spending ourselves into prosperity?

Earl | 8:02 p.m. Sept. 27, 2009

Is this the Car Talk column? I would've sworn it was concerned with recessions and taxation.

Mike Richards | 8:40 p.m. Sept. 27, 2009

Earl,

As usual, the liberals would try to divert attention from government intervention into private industry as a major cause of our current recession. They would try to prove that the cause of Detroit's failure is because of the quality of its cars and not because government added thousands of dollars of costs to each "made in America" car sold.

The "car talk" portion of this thread shows that the liberal left has no basis for claiming that quality is the problem. The "car talk" portion of this thread places the problem back on the government, where it belongs.

Earl | 8:57 p.m. Sept. 27, 2009

You're right Mike. Americans are quite capable of making cars with the best of them, as they are with electronics, clothing, you name it. Government intervention in the economy has turned us into a second rate economic power. It's government, after all, that has turned the auto industry over to the unions, which in turn has driven the car business into the ground. All we're good for anymore is sales and service of foreign products. Government needs to give us a stable currency and then get out of the way. We'll be back on top so fast it will make everyone's head spin.

The Facts | 9:06 p.m. Sept. 27, 2009

Automakers say that the average wage earned by its unionized workers is about $29 per hour.

The average GM, Ford and Chrysler worker receives compensation — wages, bonuses, overtime and paid time off — of about $40 an hour. Add in benefits such as health insurance and pensions and you get to about $55. Another $15 or so in benefits to retirees (known as "legacy costs") brings the number to roughly $70.
In 2006, at Toyota's Georgetown, Ky., plant, workers averaged more in base pay and bonuses than UAW members at Ford, General Motors and Daimler Chrysler, according to the Detroit Free Press. The difference was due to profit-sharing bonuses.

Labor costs only account for about 10 percent of the cost of producing a vehicle. And it's not the cost of American cars that people complain about; they're already often thousands of dollars less than their Japanese counterparts.

RE: Anonymous | 10:03 a.m | 9:18 p.m. Sept. 27, 2009

WRONG,

it is government that causes problems, perpetuates problems.

The People, are the solution.

When government gets out the way they can solve the problems.

Mike Richards | 9:44 p.m. Sept. 27, 2009

@ 9:06,

Let's use your numbers. $29 per hour in average wage is $58,000 per year in base pay. $40 per hour, including wages, bonuses, overtime and paid time off is $80,000 per year. $55 per hour, when you add in health insurance and pensions is $110,000 per year per worker. $70 per hour, when you add in the "legacy costs" of other retired workers, is $140,000 per year.

$140,000 per year is still twice as high as the costs per worker in Japan.

If only 10% of the cost of a car is labor and if the labor costs in America is twice as high as the cost in Japan and if the average car costs $30,000, then the cars made in Japan have an automatic $1,500 advantage over cars made in America.

In today's rough economic times, if you could save $1,500 on a quality automobile, would you? If the sales figures are any indication, America is choosing lower cost foreign automobiles. G.M.'s sales are rock bottom. Because of Mr. Obama's takeover of G.M., sales will not likely improve.

@Mike | 12:15 a.m. Sept. 28, 2009

Have you owned any American cars or just trucks?

Many manufacturing jobs have left this country due to wage rates. What is amazing is that there are any manufacturing jobs left in the U.S.

Lew Jeppson | 7:47 a.m. Sept. 28, 2009

Most don't appreciate that the Keynesian cure includes tax cuts at the Federal level as an option - either Federal expenditure increases, or Federal tax cuts - funded with short term debt. The Reagan recovery was not a supply - side recovery a la Laffer, rather it was a classic Keynesian recovery. Let Arthur Laffer put that in his pipe and smoke it.

Mike Richards | 8:01 a.m. Sept. 28, 2009

@ 12:15,

I've owned five G.M. cars. All of those cars cars lived much longer than I would have ever expected. None of them had any serious problems when I gave them away to my extended family after we put at least 175,000 miles on them.

Of course now that G.M. has been taken away from its legal and lawfull owners and has been given, in part, to the autoworkers union, I will not buy another G.M. car. It looks like Ford will have my future business.

@Lew | 9:26 a.m. Sept. 28, 2009

Somewhere in Keynes degenerate career, he said something about lower taxes? And you are going to extrapolate that to Keynesian economics were at the heart of Reagan fiscal policy? Amazing.

Earl | 10:11 a.m. Sept. 28, 2009

Lew is correct. The Reagan boom years were caused by a Keynesian recovery. That's why it eventually collapsed, as all Keynesian recoveries do. They're based on an expanded money supply and excessively low interest rates. Keynesians have even attributed the Reagan defense expenditures to the recovery. Any spending at all, especially by government, is positive according to Keynesians. Supply-side economics is not that far removed from Keynesianism. That's why neither of them work over the long term. They both result in very avoidable booms and busts.

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