Bob is a responsible businessman in Omro, Wisconsin. Omro is a small town, just over 1,000 people, due west of the county seat of 70,000. It is landlocked and has a single state highway in and out, and only one traffic light. But Bob opened a factory here in 1957 to make lamps.
As one of the more affluent in society, Bob was still paying 91% of his income in taxes to repay the debts incurred during the depression and WWII. But Bob was a patriot and he was doing his civic duty.
Bob's lamp factory was going smoothly. Production was booming. Since Bob lived in the city he spent most of his time there. He shopped at the local grocery, and when he decided to buy a Cadillac he bought it from the local dealership. He paid a fair wage to his workers and when the energy crisis in the 80's hit, he refused to cut wages, instead dipping into his profit margin.
Around that time Bob's income tax dropped from 91% to around 41%. Bob now had the money to reinvest and expand. He openned stores in other cities around the country, and expanded his factory. The 80's saw huge expansion for Bob. He hired more workers, and people even came from neighboring towns to work for him. Bob was making more money than he could spend and decided to buy a yacht. So he moved seventy miles east to the shore of Lake Michigan, and built a new three story villa on the water with its own mooring.
Now Bob's property taxes are being paid to a different city in a different county. In addition, when he decided to upgrade from the Cadillac to the Corvette (because he's having his mid-life crisis) he bought it off the showroom floor in his new city of Sheboygan. Bob's factory was still in Omro, but its population was getting older, like Bob. They assumed they would be working there for the next fifteen years until they could all collect their pension and go home.
Thanks to Nixon, the door was open to China again. Bob didn't appreciate it when others moved their factories to Mexico after NAFTA was passed. But slowly he started seeing his lamps outsold by his competetors. Bob cut his prices a bit, but it still wasn't enough. If things kept going he'd have to close down. So Bob opened his company to trading on the local stock market and a few investors joined him on the board of directors. The additional boost in capital from the stock sale would keep them afloat a while longer, but something needed to be done or profits would continue to fall.
Then Bob received a phone call from a man in Hong Kong who spoke very good English. In fact, he was an American businessman who offered Bob the chance to join him in a deal. He would open a new factory in China and manage it, and all Bob had to do was provide the specs for his lamps. Even with shipping it was cheaper than anything Bob had going here. But he thought the claim was rather dubious.
Bob decided to visit China. After all, a responsible business man would want to know that his products won't be mae by children, illegal Thai, Korean, or Vietnamese imigrants, pregnant women, or folks so old they should be in a nursing home. Sure enough, he visited one of the man's other factories and none of this was going on. He signed the deal and closed his factory in Wisconsin.
Omro was sunk. With the income from the factory gone the town's retail economy dried up fast. The car dealership closed, the local grocery store lost out to a Walmart Supercenter, and it remained a one-traffic light town. Worse, the aging population no longer had a pension to rely on, and they were only five to ten years away from retirement. Their children were just about to enter college, and those that had already graduated still had hefty loans to repay. Meanwhile Bob's two children just finished their most recent semesters at Harvard and Northwestern respectively.
But Bob was a responsible businessman. His shareholders were happy with the change. What Bob didn't know that most of his lamps were being made in a factory somewhere in Qinghai province by children as young as five and as old as fifteen. Children who should have been in school, but because they weren't receiving an education were probably going to work in those factories the rest of their lives.
Bob received another tax cut a few years ago, so he and his fellow shareholders decided to expand opperations. After all, the purpose of the tax cut was to boost the economy, especially in places like Omro which were faltering. The logic was that by pumping money into the pockets of the rich they would invest in more business opportunities. And invest they did.
They opened a second factory in Malaysia, but now Bob was too old to make the trip and relied on his trusted associate in China to oversee matters. They also began openning stores in Berlin, Munich, and Moscow. They hired an international CEO to handle the European operations. It was hard to find a home in America that didn't have one of his lamps, and soon Europe would be the same.
With the rest of the money he decided he would move elsewhere. Bob decided to move to Door County, a popular place with the tourists in Wisconsin during autumn. He bought three acres of waterfront property to build his estate on. There was no road, sewage, or power access for twenty miles, but that was no problem. Bob could afford to have the road and utilities constructed and agreed to repay the city.
He still had some money left. Bob decided to buy a new Dodge Viper, but instead of buying locally he decided to order it directly from the manufacturer. So Bob got his custom interior and exhaust, and a tape deck pre-installed because he never quite caught on with this CD thing, and he had an impressive collection. The money for the sale of the car wasn't collected by any dealer as commission, or by the dealership as revenue. It went straight to some other dealer in some other dealership in some other state.
Of course, Bob's liver and colon were shot at this point, and he's not getting any younger. He needed an opperation, but he'd have to travel over 300 miles to reach a hospital large enough to be able to manage the procedure. Instead he decided to fly to India to have the surgery. Their doctors had been doing that specific procedure a little longer and it was cheaper, even with the plane ticket. Of course, he flew with Thai airways because AA and United charged nearly twice as much for international travel.
The surgery was a success and the doctor sent Bob back to the US with a new liver and a repaired colon. Meanwhile one of Bob's former employees died of the exact same complication last year because he was waiting on a liver and only had Medicaid to cover the costs.
Of all the money from the tax cut, not a dime went back to Omro, which continued its downward spiral into economic irrelevancy.
Bob is entering the autumn years of his life secure in the knowledge that he has the money to weather any storm regardless if it is education, health, or social services. Meanwhile Bob's aging employees had no marketable job skills, less education, poor health care, and less access to social services, even when those are provided by the government. Bob hadn't been shouldering his portion of the burden all these years and those programs had been cut as a result.
It is not fiscally irresponsible to ask the wealthy to sacrifice the same way as the rest of us. Sacrifice does not mean a nominal sum that, while almost 50x greater than the average household tax burden, is still a drop in the bucket for the rich. It should be an amount that forces them to sacrifice the same way everyone else sacrifices for the benefit of the nation.
The fact is, Bob isn't a real person. Nor is it a real situation for Omro. But it has happened all over the country. If Bob and his fellow shareholders received a tax cut now in order to boost the economy, where would it go? Trade partners, overseas investment, and tax shelters. The reason supply-side economics doesn't work now the way it worked in the 40's and 50's is because globalization makes it faster and easier to produce goods elsewhere. This isn't a bad thing, but it means that this kind of economic policy is quickly becoming inappropriate as we move forward.
America cannot be left on the wrong side of history. We aren't talking about Robin Hood wealth redistribution. But we do need to commit to improving infrastructure(Northeast power outage? Anyone remember that?), hiring and training skilled public servants(FEMA, Police and Fire, Nat'l Guard), improving our education system (Properly funded schools, instructor pay raises, grants and subsidized loans) and energy independance.