Darrell Berkheimer: Time for a ‘bottom-up theory’ to save Nevada County businesses | TheUnion.com
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Darrell Berkheimer: Time for a ‘bottom-up theory’ to save Nevada County businesses

Darrell Berkheimer
Columnist

Some of the wrangling over the economic relief packages is almost laughable — if it would not be so important to get that money where it’s needed most.

Unfortunately, too many conservatives are still pushing the “trickle-down theory” initiated during Ronald Reagan’s presidency. Yet it obviously fails to work as more and more of our citizens continue to lose purchasing power, a trend that’s been quite evident since the 1980s.

Meanwhile the inequality gap continues to grow as more middle-class households are pushed into near poverty, often with mounting debt. A recent report noted the average household debt now tops $7,000.

One of the latest issues that disturbed me is the wrangling that occurred over the relief package for small businesses. It’s almost a joke to read that the federal definition of a small business includes businesses with up to 500 employees.

It is the entrepreneurs who create small businesses that are the backbone of our economy.

Other folks agree with me when I observe that a small business is one with no more than 20 to 25 employees. And even if we really stretch the issue for certain types of businesses, how could anyone believe that an employer with more than 100 employees is a small business?

It is the entrepreneurs who create small businesses that are the backbone of our economy. They are the biggest job creators and they need the most help in a floundering economy — to keep them from having to close their doors.

Small businesses and self-employed workers are the ones who place the orders for products and services that keep the big businesses going.

Isn’t it time for us to see the need for the “bottom-up theory?”

We have two perfect examples with the current situations in both the oil and auto industries. There is such a glut in the oil market that some gasoline producers are willing to give it away as storage facilities reach capacity. And just look at all the new autos sitting on jammed-full dealer and mwanufacturing storage lots.

Without the bottom-up buying, their businesses collapse.

If people won’t travel, or can’t travel, and can’t buy or won’t buy — for whatever the reason — all businesses suffer. It’s a bottom-up damage that affects everyone, starting with small retailers. And it takes a bottom-up remedy to fix the situation.

The COVID-19 pandemic has served to emphasize this situation. Why give money to the big businesses and corporations like the auto makers and oil and gas producers, when the real problem stems from consumers who are not in a position to buy their products? People want a stable income before spending their money.

But wasn’t that the approach taken in the 2008-2009 recession, when the banks “too big to fail” were bailed out while many citizens lost their homes, businesses and jobs?

When consumers can’t use buying power to support small businesses, and small businesses aren’t placing orders with distributors and manufacturers, the economy collapses. And that’s exactly what we’re facing now.

We’re heading into a depression — not just a bad recession.

For workers who lost their jobs, $450 a week in unemployment compensation is not enough. And too many are reporting they have not yet seen a nickel of unemployment or federal relief money.

In addition, a one-time payment of $1,200 doesn’t go very far for millions of workers who have seen their earnings drop to a mere trickle — such as self-employed and gig workers, those on temporarily furlough, and others who have seen their hours severely reduced. They need at least twice that much income every month just to maintain a bare existence, with more than half of it going for housing alone.

That’s a little less than $30,000 a year. I wonder how many big business executives and stockholders would like to try existing on that amount.

But our Republican-controlled Senate sees a pressing need to pour more relief benefits into helping millionaires.

The Week magazine has called attention to a provision inserted into the coronavirus relief legislation “that will help millionaires avoid $90 billion in taxes this year alone,” according to the federal Joint Committee on Taxation. The magazine reported, “Last month’s $2 trillion relief package included more than $500 billion in tax cuts — some with little link to the pandemic. Among those is a rule suspending the cap on losses taxpayers can deduct from ‘pass through’ businesses to reduce their overall tax liability.”

The report noted that the tax commission’s analysis “found that 82% of the benefits of that change will go to 43,000 taxpayers who earn more than $1 million annually — giving each of them about a $1.6 million break.”

Meanwhile, “less than 3% of the benefits will go to Americans earning less than $100,000 per year,” the report added.

Wow! Isn’t that a great trickle-down benefit for everyone?

If my calculations are correct, that $90 billion in lost taxes — that the millionaires are saving — would provide another 75 million payments of $1,200 each, which is needed so much more by the nearly 35 million workers who lost their income.

Tax cuts do nothing to help our poor and unemployed. They need stable incomes and benefits they can spend to keep our economy from collapsing.

Maybe Andrew Yang’s proposal of a universal basic income of $1,000 per month for every American adult is not such an outer-space idea. Perhaps it’s gaining traction as a result of COVID-19.

Darrell Berkheimer, who lives in Grass Valley, is a frequent contributor to The Union. He has seven books available through Amazon. His sixth, Essays from The Golden Throne, includes 60 columns published by The Union, plus a dozen western travel and photo essays. Contact him at mtmrnut@yahoo.com.


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