Thursday, August 25, 2011


Republican politicians, by claiming that businesses won't invest in their businesses until they have certainty about their taxes, don't make a convincing case that taxes must be cut. They do prove, however, that they don't know anything about business.

Businesses never have certainty about anything, and when things are most certain for businesses, consumers and workers suffer. The greatest degree of certainty in business exists when a company has a monopoly, so that it is the only supplier of a good or service. Monopolists, knowing they have no competition, can produce inferior products and charge exorbitant prices. That is why monopolies are illegal.

Relatively high levels of certainty are also found when the marketplace is corrupted, as when government officials take bribes in exchange for contracts. This also is illegal, because it leads to shoddy goods and high prices. It also stifles competition, because honest businesses learn they can't succeed in a crooked marketplace.

Business in a capitalist, free-market system is all about uncertainty. Uncertainty is what leads businesses to innovate and take risks. Uncertainty about whether a product will be chosen over the competition leads businesses to improve their products and reduce their prices. Uncertainty about whether valued employees will quit and take their skills to another employer leads businesses to entice their employees with higher wages, benefits, training, and opportunities for advancement. Uncertainty about future expenses prompts businesses to hedge, creating liquidity in the marketplace, and to innovate, so that the value of their businesses will outpace inflation.

Amazingly, some politicians who claim to have been private-sector entrepreneurs are pleading for certainty. Amazing, because entrepreneurs are lauded as risk-takers. The ability to take advantage of an uncertain marketplace is one of the defining characteristics of a real entrepreneur. A real entrepreneur would never argue that businesses need certainty.

The call for certainty is not just nonsensical, it is offensive, because the plea for certain tax-breaks for businesses is being made by the very same politicians who are busy destroying the little bit of security which workers still have. Working people have no certainty that they will be able to keep their jobs, and if they lose their jobs, they have no certainty that they will be able to find others. They have no certainty that they won't lose their pensions if their employers go bankrupt, and they have no certainty that their savings and investments will not decline in value. They have no certainty that they will continue to have health insurance, and no certainty that the laws against age discrimination will be followed or enforced. Until recently, workers could at least feel certain that their Social Security would be there for them when they retired, but the Republicans have been trying to get rid of Social Security. And it shouldn't go unnoticed by the Republicans, who claim that certainty for businesses is a good thing, that workers have no certainty that their taxes won't go up or their wages go down.

The truth is that businesses will invest in their businesses when they think they have to in order to survive, or when they think the investments will make them more money, regardless of whether their taxes are a little higher or lower, and regardless of how much certainty they have about their taxes. The plea for certainty is a ruse. The only thing that is truly certain is that, whether or not businesses get the tax cuts they are asking for, they will be back asking for more later on, with the help of politicians who are willing to say anything if they think it will help their careers.

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