Layoffs are about Economics Not Revenge

A number of companies are threatening job layoffs. Applebee’s restaurants and Papa John’s Pizza Company are coming under liberal public pressure by calls of a boycott. The boycott advocates are assuming that the layoffs are about “revenge” because President Obama won reelection. Let’s say it is revenge. Isn’t that what Obama said elections were about?

In reality, it’s not about revenge; it’s about economics, something liberals do not understand or believe they can overcome by the force of their liberal will. When companies are taxed or forced to comply with draconian healthcare regulations, something’s got to give.

Liberals will say, “Just raise prices.” Easier said than done. People make purchasing decisions based on price. Eating out is a luxury for many people. If prices go up, a percentage of people will cut down on eating out. This will mean layoffs.

Those boycotting will also bring about layoffs since business at these companies will slow. The very thing the boycotters want to avoid – layoffs – they will cause – layoffs.

The way to increase job creation is to lower taxes, cut government spending, and get government off the backs of business.

Consider the luxury boat business. When Congress wanted to raise some money, it decided it would go after rich people who could afford a luxury item like high-priced boats. If the rich have a price threshold, then poor people and the middle class also have a price threshold on lower priced items.

Congress believed it could painlessly raise taxes and help the middle class by applying a 10 percent luxury tax on yachts priced at more than $100,000 and on private planes that cost more than $250,000. The 10 percent tax applied to the amount of the cost above $100,000, so that a boat selling for $300,000 carried a $20,000 luxury tax in addition to any state or local sales tax. Keep in mind that these luxury items were purchased with after tax income. Even rich people will say no to a purchase when the cost exceeds a certain price threshold, a threshold that cannot be determined by bureaucrats and congressmen.

Congress believed that rich people who can afford the 10 percent tax would be helping the average tax payer and pay down the debt (which never happens). But it didn’t work the way Congress had hoped. The boating business was hit hard with numerous layoffs and bankruptcies. The people who could afford to purchase high-ticket items kept their money, bought something else, or invested it while “Overall employment in the industry, including the makers of smaller, less-expensive boats, . . . dropped to 400,000, from 600,000 in 1988.” ((Agis Salpukas, “Tax Plan Lifts the Yacht Business,” The New York Times (February 7, 1992), C1.))

In their rush to fix something, Congress created innumerable other problems. In the end, the people the new tax legislation was designed to help ended up being hurt.

Who was hurt most by the tax? The people who built the boats since many of them had to be laid off when boat sales dropped.

As they say, you can’t fix stupid and liberals are economically stupid or they are economically malicious. They don’t really care about the economy. They are mostly concerned about the elusive elixir called “equality” of outcome.

President Obama calls this “the rich paying their fair share,” as if they don’t already pay the majority of taxes.