But what caught my interest was something Zuckerman said that, if explored in the proper economic context, is essentially an admission that tax cuts - especially tax giveaways for the wealthy - do not help the economy. He talked about how despite profits being up, the top line for business - that is, revenue - hasn't done as well as their bottom line, thus the increase in profits is mostly credited to cost-cutting measures, which includes shedding jobs. Here's the part I'm referring to:
ZUCKERMAN: I‘m not trying to defend big business. I didn‘t say that, OK. The big businesses are flourishing not on the basis of what the government is doing but on the basis of what business is doing. The fact is their bottom line is doing better than their top line. That is their revenue line is not increasing as much as they‘ve been able to cut costs. That‘s been a part of the problem, the problem is when they cut costs, they cut people. So, we have a huge level of unemployment.He refers to the "top line" again in the next minute:
ZUCKERMAN: Look, I‘m not going to have an argument with you over every word that I use, OK? What business has done primarily is to cut costs. Some of it is outsourcing, it‘s a small portion. They‘ve been outsourcing for decades. What we have done and we have seen the effects of it is they‘ve cut personnel because they were very worried about what was going to happen to their businesses, OK? Their top line which is the revenue line has not grown nearly as much. And that‘s the one that protects in a sense a lot of the employees that they‘ve had. So, they‘ve been forced to do that. Yes, they have done well, I don‘t disagree with that and Wall Street has done well but Wall Street isn‘t the whole business community.Full transcript available here.
But wait a second. Isn't it a conservative economic mantra that tax giveaways for the rich alone can invigorate the economy since the rich people will invest the money in businesses, causing them to expand business and hire more people? But throughout all this time, the Bush tax giveaways for the rich have been in effect. Why haven't they brought the economy back with vengeance?
Zuckerman answered that. The answer: top line. Businesses only hire and expand when their top line - that is, their revenue - increases. How does a business get more revenue? Easy: when people buy their products. When sale goes up, revenue increases. It really is that simple. If consumers don't spend money, revenue stagnates (or declines) for businesses, and they do not grow. There is an implicit admission from Zuckerman: it's consumer spending, not investment from the wealthy that is the real driver of our economic engine.
So the question really is, how do you get people to spend money? How do you spur consumer spending? As I explained in yesterday's column, you do that by pursuing policies that put money in the hands of those who have little to no disposable income. Targeted middle class tax cuts and extending unemployment benefits are the best ways of doing this. That money - especially unemployment benefits - goes right back into the economy because the unemployed needs to purchase the necessities of life - food, rent, clothes, back-to-school supplies for their children. They cannot save the money.
So if Mort Zuckerman is right that the only way to get the economy going is to improve business revenue, and in our economy, consumer spending is the only way to do that, it is in fact progressive economic policies of helping the poor and the unemployed that is the only hope for an economic recovery. Tax giveaways to the rich won't help.