Assumptions

At the Vice Presidential debate a lot was said about Rep. Ryan's plan to reduce the national debt with a combination of tax cuts, removal of tax loopholes, and slashing of government programs. His assumption is  that the cuts would stimulate the economy, thereby creating jobs and profits that will pay off the debt in 20 years. Vice Pres. Biden countered that the math shows this plan will not work and will actually increase the national debt. His assumption is that there are not enough savings in the loopholes and programs to offset the loss in taxes.

It is not the math that is out of whack in this scenario. It is the assumptions. The evidence of the effects of the Bush tax cuts throws cold water on the assumption that these new tax cuts will stimulate the economy enough to pay off our debts. Instead of creating a boom Pres. Bush's cuts generated stock manipulation and overheated the housing market, causing a crash. And at the consumer level a lot of money from the cuts was spent in multinational megastores on foreign goods with very little benefit trickling down to our local businesses.

The effects of throwing money at the economy to stimulate it have been lukewarm at best. The fact is that if we put more money in the pockets of our citizens by means of tax cuts we have no idea what they will do with it. If they spend it on goods from China this will not increase employment in the US and will provide no incentive for our corporations to invest in increased production. A lot of the wealth that has been created in the US is now being spent on a frenzy of political "speech" but that boom will soon end.

Another unexamined assumption is that the jobs lost through cutting government programs will somehow be replaced by private sector jobs. So far that has not happened. States and communities in particular have had to cut many jobs in education, road and bridge maintenance, police and fire departments, and the social safety network. And jobs in parts of the private sector such as manufacturing and banking continue to be lost to better machines and robotics. The bailout of our domestic auto industry did save some jobs but it probably would not have succeeded without substantial investment in tooling that replaced workers. How do you think Japanese and Korean auto plants do it? Any assumption that depends on creating jobs has to take into account changes in the way we do business such as automated tellers, electronic shopping, word of thumb or phone advertising, and growing food in "factories" that automatically feed, pluck, collect and slaughter the stock.

I predict that we never will return to the level of employment we had. We simply don't need that many man-hours of  production or service. What we could do is to spread the existing employment by reducing the standard workweek and workyear. But that will not substantially increase the money available for consumer spending. It will simply spread it thinner. That is my assumption.