The Republican nominee will be...

Now, I wonder what makes you think that I have a job guaranteed for life?

You failed to address the fact that your description of the way the market works is not reflected in, well, real life

Cycloptichorn

And you failed to explain why you think I was referring to 'maids' and not the employees of his business.

And what makes either of them less worthy of a job just because you want to raise taxes, in order to spend Other People's Money to make yourself look generous and compassionate.

Not that, sir; but to pay down some of our crushing deficit and debt.

Yaknow, that fiscal responsibility thing, you may have heard of it back during the last Dem administration when it went on from time to time.

Still amazing to me that you feel that cutting profits simply never will be an option. There's no historical proof that this is true. In the 90's when taxes were raised, there was no perceptible round of layoffs due to them. Actually when Reagan raised business taxes in the 80's there wasn't either. I think that this is a poor theory.

I put it right up there with the 'minimum wage will cost layoffs' theory. No evidence that has ever happened either, but you guys just keep plugging away with that same argument...

Cycloptichorn

Just as amazing to me that you never consider cutting federal spending as an option.

Don't stereotype so recklessly.

It will take both raised taxes AND cutting spending to get out of our financial hole. I support modernizing and making more efficient many gov't programs, and many that my fellow libs would disagree with me on.

And I'm of course willing to cut plenty of money from certain, extremely wasteful places: the Iraq war. The DoD. DHS. The Pentagon. Can't stray too far off the reservation.

Cycloptichorn

It's not all that complicated.

Business owners (small or large) accept greater risk for greater rewards. There is not much incentive to accept the greater risk if the reward (or at least the promise of reward) does not exceed what is available from a less risky occupation.

Sure, there are small number of people who will scratch out a living with poor performing businesses because they have a passion for the work: e.g. specialty retail stores, artists, family farmers etc, but many, if not most, of these people have to supplement their income through wages from a job as an employee. Even then, most of these businesses eventually go belly-up.

In the absence of pricing restraint imposed by government, these businesses will charge whatever the market will bear. If there are competitors charging less for the same product or service, the market will not bear the higher price, and the business owner will be forced to reduce it.

If the costs of operating the business increase, the owner has one of five choices:

1) Increase prices
2) Decrease costs
3) Accept a lower margin of profit
4) Some mix of the above three
5) Go out of business

There is a limit, especially for small businesses, to how much cost can be cut out of their operations. Whether it is "fair," or "humane," when a business has to cut costs it usually looks first to its labor costs. This is logical because labor costs are often the greatest portion of a company's operating expense, and reductions in labor force provide immediate expense relief.

In the overwhelming majority of cases, the goal of the owner is profit, not the creation of jobs for his fellow citizens. That the latter almost always comes with the former is a happy coincidence which has served us very well. Most business owners develop some sense of connection with their employees and many will do all they can, including lower their margin of profit, to preserve jobs, but in the end it is the owner who has the risk, not the employees. Without the business, the jobs wouldn't exist in the first place and without a promise of greater reward there would be no business.

A tax increase is just another operating cost (with the exception that it has far less of a contractive impact on profit than any other cost), and it
will trigger the same behavior as an increase in the cost of materials.

The free market operates systematically, but without character. It will operate in a certain consistent manner if businesses engage in stupid or corrupt practices, and it will operate in a certain consistent manner if businesses operate with intelligence and responsibility. At any point in time all businesses are not operating with the same character. This should be obvious but it certainly seems that there are a lot of people who believe that all businesses operate with the same character of corruption.

While free competition will always keep prices at their lowest possible levels, there will always be a pricing floor. Companies may drop below this floor for strategic reasons - to gain market share, or for stupid and corrupt reasons - an executive's bonus is tied to the top line rather than the bottom line. In any case, it's simple math that when the price of a product or service doesn't exceed it's cost there is no profit margin. Some businesses can last for a surprising long time without profit thanks to credit or injections of capital from parent corporations, but eventually the machine has to grind to a halt.

Some financial industry companies can accept a loss in operating income if their investments of the massive amounts of cash flowing through them are enough to cover the operating loss and still produce profit. This is just a variation on the common equation though, and if the costs of the company exceed operating and investment income, the end still comes.

There is a misperception (found largely among corporation bashers on the Left) that American corporations are reaping obscene profits, while the poor worker loses ground every year.

While it is true that profit margins have increased over the last several years (10.3% at the end of 2006), over the last 25 years the average profit margin is 8.3% and reflects the expected market cycles that raise and lower the figure over time. We are facing the downturn of this cycle right now.

The Health Insurance industry is thought to be one of the worst corporate plunderers, and yet its profit margin at the end of 2006 was only 3.9%

Another prime suspect is the Pharmaceutical industry. With profit margins in excess of 20% it certainly can appear that they are reaping unduely huge rewards, but before you put all the drug company CEOs in irons you need to consider some aspects of this highly risky, volatile business.

Only 1 in 500 new drugs make it to market, and even the failed drugs cost many millions of dollars over as many as 10 years in R&D. Only about 25 new drugs a year make it to the market and the estimate of bringing each of these drugs to market (including the costs of failed drugs and marketing) is $1.7 billion. Even when a company hits on a new product, it faces a horde of plaintiff attorneys lying in wait, hoping to make their personal fortunes convincing juries that the evil drug companies brought the drug to market too quickly and without sufficient testing.

With this much capital being put at a high level of risk, profits have to be high to attract investors. The greater the risk, the greater reward or no one will take the risk. We might not care if anyone was willing to take the risk of financing commercial space flight, but we certainly want someone to be willing to do it to create life saving drugs.

The facile notion that companies will be willing to take cuts in profits rather than cutting their costs (workforce), demonstrates not only an ignorance of how markets operate, but, more importantly, an alarming comfort level with the idea of the government establishing increasing control of the economy.

How does the process play out?

We need large sums of money to finance social programs that appeal to our sense of fairness so we increase taxation of "the rich" and of businesses for, after all, they neither need nor deserve the level of wealth they have attained.

Companies attempt to increase their prices to reflect an increased tax burden, we get the government to establish regulations that result in artificially reduced prices that cannot sustain profit.

Companies attempt to leave markets where the cost of tax and regulations make operations unprofitable. We get the government to tell them that if they leave the markets where they are losing money they will also have to vacate the ones in which they are profiting.

Since the companies cannot raise prices to offset the losses in unprofitable markets they seek to reduce costs through reductions in staff. We can't have this so we get the government to make it difficult for companies to lay off employees.

As each attempt to re-establish economic equilibrium is foiled by government intercession, companies go out of business. As the rate of insolvencies approachs terminal velocity, the government is forced to either bail out the failed companies or assume the role of providing their products and services.

The market will systematically react to governmental interference with politically unacceptable outcomes: soaring prices, dislocation, unemployment et al. If the original grand design is to be preserved, the government must respond with ever increasing levels of interference, until the government assumes complete control of the market.

This is the steady process of socializing America.

I see that you are willing to cut constitutionally mandated functions like defense and security, while 'modernizing' functions that aren't constitutionally required (or even allowed if we take the 10th amendment seriously.)

Yeah you're solidly on the Liberal reservation. No need to worry about you straying.

How did Walmart become the largest retailer and gross the most money? Certainly not by raising prices and operating cost, and by providing lousy service. Perhaps government could learn something from this, but I doubt it. They are a monopoly and don't have to compete.