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A hopeful note to start your Friday

It’s always encouraging when fabulously rich people have the guts to speak the truth about their own privileged position and the disgraceful growth in American inequality. To this end, please check out this recent speech by a fellow named Nick Hanauer.  It’s reproduced below from an article in the National Journal. As the article explains, Hanauer is a Seattle venture capitalist who got rich investing in Amazon.com. Interestingly, the speech has been deemed too controversial by the folks at TED.com who commissioned it. See what you think. 

“It is astounding how significantly one idea can shape a society and its policies.  Consider this one.
 
If taxes on the rich go up, job creation will go down.  
 
This idea is an article of faith for Republicans and seldom challenged by Democrats and has shaped much of today’s economic landscape.
 
But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were sure that earth was at the center of the universe.  It’s not, and an astronomer who still believed that it was, would do some lousy astronomy.  
 
In the same way, a policy maker who believed that the rich and businesses are “job creators” and therefore should not be taxed, would make equally bad policy.  
 
I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.
 
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me. 
 
So when businesspeople take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around.
 
Anyone who’s ever run a business knows that hiring more people is a capitalists course of last resort, something we do only when increasing customer demand requires it.  In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.
 
That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.
 
Since 1980 the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.  
 
If it were true that lower tax rates and more wealth for the wealthy  would lead to more job creation, then today we would be drowning in jobs.  And yet unemployment and under-employment is at record highs.
 
Another reason this idea is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the median American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally.
 
I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.
 
Here’s an incredible fact.  If the typical American family still got today the same share of income they earned in 1980, they would earn about 25% more and have an astounding $13,000 more a year. Where would the economy be if that were the case?
 
Significant privileges have come to capitalists like me for being perceived as “job creators” at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from “job creator” to “The Creator”. We did not accidentally choose this language. It is only honest to admit that calling oneself a “job creator” is both an assertion about how economics works and the a claim on status and privileges. 
 
The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification 
 
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they are a consequence of an eco-systemic  feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
 
So here’s an idea worth spreading.  
 
In a capitalist economy, the true job creators are consumers, the middle class.  And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.
 
Thank You.”

 

12 Comments

  1. jlp75

    May 18, 2012 at 8:40 am

    Great speech. I am sure Frank and Frances will be along shortly to assure us that in fact the earth is the center of the universe.

  2. Rob Schofield

    May 18, 2012 at 8:48 am

    No doubt…

  3. Alex

    May 18, 2012 at 10:18 am

    What a stupid argument ! Poor people create no jobs other than a few government jobs to hand out the dole, so simple logic tells you that people with some financial assets (mostly small business ) have to create most of the new jobs. It’s been like that forever in this country, and we stop prospering if we continue to make this ridiculous argument.

  4. Jack

    May 18, 2012 at 10:30 am

    Sad the truth is controversial.

  5. Jack

    May 18, 2012 at 11:13 am

    All jobs in the private sector are dependent on the consumer. Strong spending – more jobs, weak spending – fewer jobs.

    In a free market demand by the consumer requires more supply. (This is why consumers are always right.) To deliver the increased supply to the consumer translates into increased production of supply, delivery of supply, sales of supply and so on.

    In other words: the demand for jobs is created by consumer demand because it is the nature of business to supply the demand and as a result jobs are created. As soon as demand for supply dies so does business and therefore the jobs.

  6. Alex

    May 18, 2012 at 12:25 pm

    The problem with your argument Jack is that we don’t produce many of the consumer goods so increased demand simply increases our trade deficit, and really does not greatly increase the number of jobs. Relying on 70% of our GDP coming from over-leveraged consumers has basically gotten us into the current economic problems. We are currently bleeding almost $50 billion a month in trade deficits which is slowly sapping the wealth in this country , and moving it offshore.

  7. Jack

    May 18, 2012 at 3:45 pm

    So Alex, tax breaks for the wealthy doesn’t encourage the creation of jobs as we’ve been told by conservative right. Fascinating.

  8. Frank Burns

    May 18, 2012 at 3:57 pm

    The more tax revenue we give to the government, the more they spend and the more that they want. An agency gets formed and remains forever. Nobody ever goes back and reviews the need for that agency. All these non profits groups spring up and their “studies” always conclude more money needs to be spent. I’m personally fed up with them and I don’t trust any non profit to give a truthful assessment of anything. The conclusion is always we need more tax revenue, without ever investigating government spending. We really need to change the way we think with declining resources and begin challenging funding requests.

  9. david esmay

    May 18, 2012 at 8:12 pm

    Frank, you really love your Irving Krystol, the reason revenues are down is unemployment, the number of working age people in this country is dropping, and the Bush tax cuts of ’01,’03,’04,’06. Eliminating them would go about solving the deficit problem the Bush administration created. The buying power of the middle class is what fuels our consumer driven economy, not welfare for the rich, where’s the proof? The Gop is nothing more than a bunch of cheap labor conservatives intent on dragging down the middle class with their more money for millionaires fiscal policy. Conservatives just hype the canard of budget cuts as the only solution in order to weaken the governments position. Traitors all.

  10. Frank Burns

    May 19, 2012 at 7:23 am

    David, Don’t be so quick on the draw to blame Bush for deficit problems. There was a Democratic majority Congress involved.

  11. Alex

    May 20, 2012 at 7:06 am

    Pull david’s string , and you get the same old tired Bush arguments of 10 years past. Why don’t you talk about what is happening now ? Talk about the huge deficits, 15 million unemployed, a $600 billion trade deficit, savings worth absolutely nothing at 0% interest, an incomprehensible energy policy, a downgraded credit rating, a divided country, etc. etc.- that’s what I want to talk about !

  12. Doug

    May 20, 2012 at 8:06 am

    David lives in the past because he really can’t defend Obama’s current economic record, or the lack of a plan going forward.