President Obama recently invited several CEOs of major corporations to the White House to encourage them to invest in America and create needed jobs.
Here is why that will not happen.
Large corporations now market their products around the world. They are constantly focusing their energy at developing growth markets, like China and India. America has become a flat if not deflated market, so why would they invest in this market for growth?
As labor unions have been crushed by exporting the work out of country and now with the Great Recession, we are seeing deflation of wages, rather than growth in wages. As wages decline at the same time as the cost of living climbs as we see with higher fuel costs, food prices, clothing prices, etc. The only necessity that has declines has been home values, but obtaining need loans has been a big problem, so home sales are low. We are still seeing large number of foreclosures that are putting people out in the street or in charity housing.
The end result of this Great Recession and the loss of disposable income is that the middle-class and working class have become poorer, thus their buying power has severely declined.
At the same time with China and India becoming the manufacturing capitals of the world have a rapidly growing middle class with larger amounts of disposable income. So large corporations have abandoned America to reap the profits it can obtain from these emerging markets. China economy is second to Americas and will pass it up very soon and become the number one economy of the world. This automatically provides great growth potential for any company.
That is why you are seeing very small growth in jobs in America and the wages for these new jobs are down 1/3 from what they had been before the collapse of the market.
This is also why corporations are posting the highest profits since the gilded age of the late 19th century.
This divergence between low wages, high unemployment and huge profits for corporations is not sustainable. America will slip from being a first world nation to a second world with a struggling economy and degraded infrastructure.
Once American labor becomes cheaper than China, India and other developing nations, then corporations will bring back the jobs to America. It does not make good economic business sense to bring the jobs back now, since we are not the growth market.
No matter what the Republicans say, they can't stimulate job growth. That is why you have not seen one job incentive bill presented in the House of Representative since they took over. They are passing non-economic conservative social laws. Their budget cuts will actually cause more unemployment and a slower economic growth at a time that could cause us to slip back into a recession. It may play well politically with their base, but it is not smart policy.
By also giving huge tax breaks to corporations and the very wealthy, you have to increase taxes on the middle-class to pay off government debt. There are no practical incentives to invest here. They get to make there money in China and India and keep from paying taxes here in America on that money. We go broke and the corporations win big time. This is not good fiscal policy that will save the country. Of course the Republicans do want to eliminate all social programs, including Medicare and Social Security. Large corporations are fine with this, as they would no longer have to contribute to those funds as they are required to today. This could add million of dollars to their bottom line and their share holders. To hell with safety nets for the people. They can just wonder out in the desert or forest and die.
Additionally the states have waged a competitive war with each other by offering corporations huge tax breaks if they bring jobs to their state. If the wages paid by these corporations were in the upper income brackets, it would make sense as the return in tax revenue over five or ten years would be greater than the taxes that would have been paid normally by the same corporation. But unfortunately, the majority of these tax breaks are for low paying jobs that will never return even the break-even amount in payroll taxes to pay for the tax break given to the corporation. Further, most local governments have given these corporations tax breaks on property tax that support the city and schools. Thus for each one of these given out, the state looses money that it does not have. It is totally insane.
The corporate welfare has gotten out of hand. But instead of correcting this behavior, governments are slashing education funding, funding for needed social services and funding for the basic services of law enforcement and fire protection. They are lowering wages to public employees, taking away promised retirement benefits and further destroying the overall economic health of the state and cities. I will bet that most state and local government will now start to sell off government services to private businesses, as they have with prisons and some other services. Schools will all become private with no funding from government at all. There will be no need for creating budgets for these governments, the legislative bodies will just concentrate on laws governing your personal behaviors. Law enforcement will be done by private corporations accountable only to their share holders, not the public. You will pay each of these companies monthly, like you do for your utilities. If you don't pay, no police service or fire protection or emergency medical services. Sorry, you die.(This sounds like many of the sifi movies I've watched about the future)
I do not have all the answers, but we do need smarter brains and pragmatic thinking to solve these problems. If it continues with such political ideology and hard-line attitudes, then we will not recover and America will be talked about as a once great country.
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