Acme makes cell phone batteries, acme charges 100 dollars each for them. Acme pays its employees 100 dollars a day to make those cell phone batteries. Each employee makes 200 cell phone batteries a day.
OtherCompany makes cell phone batteries too. Other company charges 100 dollars each of them. Other company pays its employees 100 dollars a day to make those cell phone batteries. Each employee makes 200 cell phones a day.
Taxes are increased for both companies.
In response to the tax increase, Acme raises what it charges for cell phone batteries to 110 dollars each for them.
OtherCompany just absorbs the cost by earning slightly less per cell phone battery on the hopes that they will make it up in volume as they have the cheaper product now.
Acme now has the following options:
- It can absorb the costs too.
- It can outsource its production somewhere else.
- It can attempt to find cheaper labor.
- It can take measures to increase production.
- It can try to build a better significantly better battery than OtherCompany and create a market for that better product.
One of those five is going to happen pretty much every time.
If costs were always passed on to the consumer, median wages would increase at a higher rate than inflation and wealth would not trend to the top. That has not happened though. We have an anti-inflationary economic policy. We trade increased production, higher unemployment, longer hours, and slower median wage growth for lower inflation. Prior to 1980 that was not the case. Then we traded higher inflation for lower unemployment, more equitable wealth distribution, and strong median wage growth.
Moreover, you don’t seem to get my original point. It doesn’t matter how you run your business if an economy does not support the consumption necessary for you to sell what every product or service that you sell. Without adequate consumption in an economy, there is no reason for anyone with means to invest in any company. That is why consumption is over 2/3 of the economy, not investment. If you don’t have a strong middle class, you have a third world economy. That is why Supply Side Economics is completely dismissed by almost every single economist in the nation as a pie in the sky idea. It did not work in the 80s. Bush Sr. completely departed from that policy while he was in office, and he and Clinton returned the nation’s economic policy to a traditional conservative economic policy. Now current president Bush is trying to revive the old Supply Side model. What have we gotten out of it. Flat median wage growth, increased poverty rates, huge deficits, and historically below average job creation.
And that is the turd you are trying to polish for everyone in the thread.