Hahahaha yeah it was government intervention that caused repackaged subprime mortgages and credit default swaps. Pull the other one.
Yeah artificially low interest rates and easy credit made possible by the Fed had absolutely *nothing* to do with the housing boom. I suppose the destruction of risk caused by "too big to fail" and other such nonsense also had no part to play.
Under the fair tax, nobody pays income or payroll tax at the time of exchanging labor for money. Everybody pays (a much higher than currently exists anywhere) sales tax when money is exchanged for goods or services. Every citizen who asks for one receives a $10k (or so) check from the IRS each year in lieu of reporting income tax and receiving a tax refund or accounting for a tax liability. Basically: every citizen receives a 10k stipend to account for poverty-level spending and for the switch from progressive tiered income tax to regressive flat sales tax.
Yeah I understand the consumption tax part of it. I was unaware of the $10k subsidy, which is an awful idea. It's similar to Milton Friedman's "reverse income tax." Such practices essentially subsidize poverty. What's worse is at this point it's not just poverty that's subsidized, but everyone. The net effect is that these sorts of things tend to increase the disutility of labor, making people less likely to pursue higher paying jobs or better productivity. Also, the money has to come from somewhere (or I suppose it could just be printed, thus marginalizing all of the rest of the currency). The last thing we need is higher taxes or more government debt; those are the only two mechanisms government has to acquire such funds. But wait! Tax the rich! Yeah, never mind that the rich (top 10%) already pay 70% of our income taxes. (But really, I would be more worried about the implications of subsidizing the poor than about taxing the rich.) Now, if this $10k replaced ALL other welfare benefits and was not based off of how many children people have, it might be better than the current system (more on this below).
Not simply wanting something, but wanting something, having the funds, and acting on it. The demand curve of econ 101 doesn't measure what people want, but what they are willing and able to spend. I want solar panels on my house: that doesn't mean I can just have them without taking a lot of other things into consideration. Minimum-wage worker X wants to feed and clothe his children, but he has to choose one or the other this month.
You keep speaking of minimum wage as if it's some sort of living wage. It isn't and was never designed to be such a thing. Furthermore, if it was a living wage (say $12-15/hr), it would further exacerbate our unemployment problem, as people who cannot provide $12-$15/hr worth of labor would no longer be employable. People working minimum wage jobs have no business having children; it is financially irresponsible. But people are far removed from financial responsibility when they know aid is always available, exacerbated by the fact that welfare benefits increase as financial irresponsibility increase (aka more children). What people generally fail to realize is that the vast majority of the time, people who work minimum wage jobs do not work them their whole lives; they move on, they move into more productive jobs that pay more. This brings me to another reason why I am against minimum wage laws and general poor subsidization: Once a certain level is reached, it incentivizes people to stay where they are and not strive to improve their skills and move into more productive areas. I realize you are not proposing this (I don't think), but one of my friends thinks every job should more or less pay the same. They should all pay, let's say, $50,000 a year. Let's ignore the vast market distortions this would cause and instead analyze the incentives this provides. Why would anyone want to invest in new skills (time-wise and monetarily) if there is to be no increase in their earning power? At that point, it becomes financially irresponsible to invest in human capital! Now, this is of course extreme, but I bring it up to point out that what you propose would have the same sort of affect, but to a lesser extent.
I think I've said this before now, but when you subsidize a market (even the poor), do not be surprised when that market grows.
As for the demand curve: Yes, of course. And if a business provides a good or service that not enough people are willing to prioritize funds for at that price, it means the price must come down. If the price cannot come down, the consumers have indicated that what good/service the business is providing is not desirable and thus the resources directed to it should be moved elsewhere. Of course, if we somehow just increase everyone's income so that they have more disposable income, then the business may receive more business--maybe enough to keep going for some time. But at this point, all we're effectively doing is subsidizing a business that did not bring enough utility to the consumers. The point is these resources should go elsewhere.
Until the wallets are all empty.
Why are you so pessimistic? Why would the wallets go empty? Voting with ones' wallet is generally done by *not* patronizing certain businesses, which tends to keep the wallet better stocked.
But my fellow man must be willing and able to pay for my goods and services. People are already, right now, willing to pay for more than they are able to afford. When more people are able to afford more goods and services, my contribution via production can increase to meet that demand.
I think what you're saying is that people want more things than they can afford. But this is always the case. There is an insatiable desire for consumer goods. People *always* want more. But, since we live in the reality of scarcity, not everyone can have all they want. And no, your contribution cannot increase afterwards to meet that demand, since the demand (aka wants) are already there (unless the product has not been invented yet and no one knows they want it). Your contribution via production can increase now if you're willing to make the investment to do so; but this is always a risk, since once you've made that investment the price at which the good/service you invested in may have shifted in an unfavorable direction. This is, of course, the service that capitalists provide to us: they speculate and risk their funds so as to increase productivity. Those who do a better job of it turn a profit and those who do poorly are forced into another line of work.
(The above may make it sound like I don't believe that demand for goods does not change; that is not what I mean. I mean simply that productivity does not increase with demand. Productivity increases with investment. Increased demand, all other things the same, increases prices, thus profits in a market will likely increase. This of course tends to draw more competition into a market; these factors may very well lead to more investment, thus productivity, but demand in and of itself does *not* increase contributions to productivity.)
Largely because of two factors: a) employees of such businesses are not paid enough to meet their needs, and they do not feel capable of asserting their needs and demanding higher wages or benefits on an individual level because of the enormous power differential between minimum wage worker with a lifeline job at stake and $billions profit multinational corporation with nothing to lose. b) their products are artificially food and artificially clothing. Imagine a minimum wage worker with $10 to spend on clothes this month, who needs a new pair of jeans. This worker can't afford to wait for 4 months to buy the $50 jeans that will last 10 years, so he buys the $10 jeans that will only last 1 year. This halves his economic efficiency. Similarly for food, with the added bonus of reduced nutritional value, leading to a vicious cycle of poor nutrition poor decision making.
These individuals have agreed to the wages provided. They are always free to increase their skills in their free time and fetch a better paying job. Even if they have no free time (say working 80 hours/week at minimum wage), simply having a resume that demonstrates consistency, stability, and good work ethic is enough to move someone to a higher wage rate (good employees are very hard to find). Once at a higher wage rate, the individual is freed up to spend more time increasing skills to fetch an even higher wage rate. There is no problem here, only people who expect something for nothing.
Your example of the $10 jeans is not convincing. You make the assumption that this person's earning power will remain the same throughout his or her life. But this is very rarely the case. It is very reasonable to purchase the cheaper pair of jeans for a season. If you removed these $10 jeans from the market, I'm quite positive these people will be very upset that you did so. The same holds true for nutrition. You are making value judgements for people whose situation you are not in. There is no way we can objectively say that these are examples of poor decision making. You could also apply this to Obamacare. You may say that it's poor decision making for a 25 year old to forego health insurance. But how do you come to such a conclusion? Most of the young people I know who do not have families are perfectly rational human beings but have decided purchasing health insurance is not a priority, since they almost never go to the doctor as is. They deem that they would be better off paying for emergencies out of pocket as they happen at this point in their life.