It’s an endless refrain. If only the wealthy had the resources, they could stimulate the economy by investing in new business and hiring workers to satisfy consumer demand. There’s just one glaring problem with this scenario; consumer demand decreases in hard times. And without consumer demand, there is no compelling reason for entrepreneurs, venture capitalists, or current business owners to ramp up production. In fact it’s often prudent to scale back until such demand warrants further investment.
But that’s a double edged sword, isn’t it? There isn’t any reason for consumers to create demand unless the economy is such that they are able to shop for more durable goods. So which comes first, the chicken or the egg? This has long been an economic argument where there are no clear winners. Essentially, you can’t have one without the other. But business owners argue for the supply side economics while the public argues for the demand side of the equation. There are merits for each side of the coin.
What happens in an economic downturn is that everyone tends to hoard. Banks, investors, citizens, they all start stuffing the mattresses with assets in case the crap hits the fan so that they will have something to fall back on. Confidence fails. It’s what is happening in Europe right now. The problem is that when confidence fails the value of the money being hoarded is devalued. We all go down when that happens.
Austerity measures sound good in theory. But in reality, they ultimately do more harm than good. It’s investment that brings prosperity. It’s also precisely the thing banks are reluctant to do in times of financial distress. Austerity measures are tearing the European Union apart. Republicans in this country are trying the same strategy. It’s actually an old strategy from the Milton Friedman school of thought. Tear down the current systems and let unfettered capitalism fill the void. The ultimate laissez-faire orgy. It has never worked before and it won’t work now.
At a recent TED conference, millionaire Nick Hanauer shoots holes in the whole job creator mythos. He claims that it’s the middle class who are the job creators. We stimulate the economy by creating the demand. He points out that the last priority for business owners is to hire new employees absent consumer demand. He further goes on to make the argument that taxing the rich at equitable levels to help invest in programs for the middle class is not only fair but also good for the middle class, businesses and ultimately profitable for business owners. The rich could not exist without us. But the thanks that the middle class gets is that we should pay them more for the disingenuous promise that we might be thrown a few scraps.
Rich people and corporations claim that giving them tax incentives will fix our economy as though some beneficent being has bestowed some honour upon them. But here’s the thing; These people aren’t job creators: they’re wealth creators and that usually means it doesn’t apply to most Americans. All that tax breaks have done is burden the economy and be a boon to corporate bottom lines and the people in the top one percentile where the most wealth ever in history is concentrated. If the resposibility of being a ‘job creator’ has been to stimulate the economy by creating jobs, there’s no evidence that it has worked. Yet they insist that we give them even more as they earn ever obscenely increasing bonuses for wrecking the economy. But, by not creating jobs, these so-called job creators have essentially failed to do their jobs. Under any normal circumstance people who fail to do their jobs shouldn’t get a raise; they should be fired.
Why has this not happened?
(Ed. note: Kudos to my friend and fellow guitar maker, Paul, for the inspiration behind this article)
- The Wealthy Do Not Create Jobs (revolutioninmedia.com)
- Nick Hanauer debunks the ‘job creator’ myth (The Last Word)
- TED Refuses to Post Talk By Venture Capitalist Who Says Rich People Don’t Create Jobs (crooksandliars.com)
- TED Censors Presentation on Inequality and Jobs They Solicited (news.firedoglake.com)
- Here’s The Most Embarrassing Part About TED Silencing That Report On Inequality (businessinsider.com)
Bruce Bartlett, who worked on economic policy for Presidents Reagan and Bush 41 has a good piece on this in the NY Times blog today. (search Bartlett Clinton on the site) Mr. Bartlett should be hired by the Obama administration to lecture his fellow Republicans in Congress and then go on speaking tour of Rotary Clubs in swing states. It is best summary I’ve seen of the fiscal and economic effects of under-taxation of the wealthy.
Under the current tax system in which Warren Buffett pays 11% of his investment gains in total (federal, state, local, and corporate) taxes and a single minimum wage worker pays in excess of 30% of her wages in total taxes. (See http://fairsharetaxes.org for spreadsheets). The top 1% already hold 40% of the nation’s wealth up from 22% 30 years ago when Reagan started cutting their taxes. The bottom 50% holds only 1%.
Corporations and the wealthy investing class (the so-called “job-creators”) have more money than ever in our history. Where are all those jobs? Perhaps the “job-doers” (workers) should go around calling themselves the nation’s “wealth-creators” and demand more of a share of the wealth they are creating. Perhaps it’s time for all workers to take a month off and see how much of investment wealth the ultra-rich have left. (or how many clean bathrooms they could find).
To see more of this and a proposal for a really simple, economy-fixing, nation-saving Fair Share Tax reform proposal, see http://fairsharetaxes.org.
Reblogged this on PORTAFOLIO. BITACORA DE UN TRANSFUGA. 2000.2010.