Scott Brown was very effective getting one point across at last night’s debate: We can’t raise taxes on the super-wealthy, because they are the job creators. Unfortunately for him, the argument is the worst kind of sophistry. Unfortunately for us, Elizabeth Warren was not effective in exposing the argument as fraud.
Start with a basic understanding of a market economy: rich people and corporations don’t create jobs, customers create jobs. Nobody got rich hiring somebody else for the sake of hiring someone else. People get rich by investing in things and services that people want to and can pay money for. They hire people to create the things and services when it is necessary to meet some demand. Give corporations and rich people more money when there is no demand, they don’t hire people. They save the money. We know that, which gets to the second point …
We already know that the rich are not using incremental gains to hire more people. We have had some recovery. An amazingly top-heavy recovery. Exactly the kind of recovery that proponents of the rich-as-job-creators theory of economics would say leads to job growth. Yet, job growth has been anemic. Corporations are retaining earnings, not hiring more workers.
Giving the rich more money doesn’t lead to more jobs. Taking some of the money back from the rich isn’t going to lead to job loss, either.
The only way we’re going to have more jobs is to increase demand.
Unless I missed it (and I did have to deal with the kids during the debate), Warren never went straight at Brown on his job-creator assertion, challenging the assumptions. So, the debate left the impression that we have two equally valid approaches to job creation, both forcefully articulated. Except that one approach is fundamentally flawed, both theoretically and empirically.
Brown ends up looking like a guy who cares about the middle class, and only wants to protect the wealthy in order to better serve the middle class. Aaaaargh.
Clinton came in, raised taxes primarily on the wealthy, and the GOP said it would cost jobs. How did that turn out?
Bush came in, cut taxes on the “job creators.” Did they create jobs? Not even close. Private sector job growth was anemic (and far below Obama’s rates) even before the 2008 disaster.
The best answer to the argument that the wealthy will not “create jobs” if we return their taxes to Clinton-era levels is to simply look at what happened in the Bush years and beyond. We’ve had more than 10 years with these tax cuts and they put the money in their pockets. Right now sitting on $2 trillion in profits they won’t reinvest.
This is not surprising. Our experience shows that job creation is better with higher taxes on the rich. That’s not just empirical, it also makes sense. If excess income is going to be taxed highly, you might as well do something with it to make it generate more income. And money sent to Washington or in the hands of a poorer person will be spent, instead of sitting in someone’s bank account doing nothing. For those reasons there was no constraint on economic growth during the Clinton years or the four decades our highest marginal tax rate was at 70% or higher. In historical context, 39% (or even 42% or 45%) is hardly radical.
If you want to favor job creation through the tax system, how about a tax system that gives people breaks for actually creating jobs. You know, instead of just assuming the wealthy will create jobs once their taxes are cut enough. Trickle-down. Didn’t work in the 20s, didn’t work in the 80s, doesn’t work now.
By what benchmark has job growth been “anemic”?
Private sector job growth in the four years after the 2008 collapse is significantly outpacing private sector job growth during previous recoveries — especially in comparison to Bush I. Unemployment is persistently high because public-sector (federal, state, and local) jobs have been destroyed.
Driven by the unholy combination of media myth, right-wing lies, and Democratic cowardice, all sides of the political spectrum have embraced “austerity”, while refusing to raise taxes. As a result, federal, state and local governments have slashed payrolls at exactly the wrong time.
The “austerity” narrative is a myth and a lie, and our political system is failing because it is apparently impossible for elected officials to say so.
Tom, we are in total agreement. I said private sector growth was anemic under Bush, even without including the 2008 numbers when it fell off a cliff. And there’s no reason not to place the 2008 crash at Bush’s doorstep, but his policies weren’t even working before.
Obama’s private sector numbers, considering what he came into, have been pretty good. The public sector numbers have been bad. Under Bush public sector jobs grew quite a bit. So much for “small government” conservatives.
The austerity narrative is a lie and has been since the right suddenly woke up and cared about deficits in 2009. It’s a bitter irony considering
record-low rates on T-bills right now. Unfortunately Obama gave it traction then and continues to do so.
I’d love someone to say we have to first solve the major lack of demand problem we have now, then address the deficit/debt in the long term. Instead Obama’s agreed to major public sector cuts that make the overall employment picture look dimmer than it had to.
Third paragraph.
I think “anemic” is too strong for private-sector growth under Obama, though certainly businesses sitting on major profits instead of reinvesting them could hire even more.
Overall job numbers are not that great because of all the senseless public sector cuts. Still better than might be expected given what Obama inherited and the obstruction he’s faced.
If we care about our children, more important than debt burden is lifetime earning potential. We have to create job opportunities for young people. Without jobs now, it won’t matter what the debt is later. With jobs now, they will be able to handle the little bit of additional debt we create creating demand that will turn into jobs for them.
Zero debt is useless if you can’t make any money anyway…you’re still screwed.
Other than to say this is a great argument and I am shocked not even Warren or Sherrod Brown tried to make it. We need more progressives to arge for bigger stimulus which is the only way out of this as FDRs programs show.
I think its a hard sell to say that job growth isn’t anemic, plus if Democrats were too cowardly to stand up for job growth in the public sector, isn’t that Obama’s, as the head of the party, fault?
Here’s Business Week on why your numbers are wrong:
Never mind that the trend for public sector job growth is not on target to fix the problem long term:
And the Business Week data in graphical format:
to debunk the “job creator” line.
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is a paying customer. A job creator is someone with money in their pockets who wants to spend it — not someone with money in a fund who wants to put it away and watch it.
If you want more jobs, make more paying customers.
Let’s take a look at this from a public policy perspective.
The Mitt Romney approach. When he became Massachusetts governor, the first thing he did was cut funding to cities, towns, and public school districts. He solved his budget problem by pushing it down to the local level. This is consistent with his public statements that we need to cut teachers because his priority is lower taxes for someone like Mitt Romney.
It’s hard to call this a policy that protects job creators. It’s a policy that protects people who send their money to the Cayman Islands, to Switzerland, and who profit from outsourcing.
A tax policy that diverts more of this outsourced money to the public sector, that’s the job creation strategy. If you send money to your local school committee, they will hire teachers. Send it to your local municipality, they will hire first responders, they will fix streets, they will open libraries during hours curtailed by budget cuts. Money will end up on Main Street, instead of wired abroad.
Job creators? Don’t look at Romney’s friends. Look at your local school committee.
A number of commentators spoke about how the Republican National Convention was full of talk about entrepreneurs. Those of us (the vast majority) who are not entrepreneurs, well, we may work hard but we didn’t even merit a mention on Labor Day.
It is oddly as if they want to create a dreamy romantic story of a Rugged Individual who has an Idea. He is scoffed at. He encounters failure. He has to battle confiscatory taxes, but, all on his own, he turns the idea into a Thriving Business, hires hard-working sympathetic minions and remakes the town in which he lives. He does this all on his own — or maybe with some help from Gramps in a particularly touching scene.
Needless to say, this is how few people live their lives, accomplish things, or celebrate their achievements. The Republican narrative often sounds to me like people who have just left a movie theater and haven’t yet realized that what they just watched was fantasy.
This reminds me of Brown’s answer re: tax breaks for oil companies: “”I’m no friend of big oil, I’m a friend of the motorist. It cost about 70 dollars to fill up the truck the other day.”
Oy. As if the oil companies set their prices based on how much they pay or don’t pay in taxes. If that were the case, gas would be cheap — now!
The GOP wants to help the middle class by helping the rich first. Seems to me if you want to help the middle class, help the middle class.
One might look at Wikipedia’s article on tax incidence, for example. Depending on price elasticity, we expect at least some burden to be transferred to the consumer.
If we had the kind of conservatives we need on this site, they would make an even better counter-argument.
If we’re talking about adding $0.10/gal to gas, then yeah, price will go up, although at an equilibrium of less than a ten cent increase.
But if we’re talking about balance sheet taxes — taxes which aren’t really a function of the quantity of widgets sold — then it’s not so clear.
in the current economic environment big companies are sitting on a lot of cash that they’re not investing. The federal government would actually do a better job of making that cash productive.
That’s exactly the point. They charge what the market will bear.
Or if not … I would love to hear Scott Brown make an affirmative case that the tax incidence will cease to fall on drivers if we give oil companies even yet still more tax breaks! I’d like to know how that would play.
During vacation time, Americans do a lot more voluntary driving than they do, say, in October and March. I believe that steep increases in gasoline prices do depress demand then. However I’d be surprised if a 5% increase, for example, would cause much decrease in driving under more typical conditions. If that’s so, small increments can, in fact, be mostly passed onto consumers because consumers aren’t going to buy any less gas.
The first time gas hit $4 a gallon, I noticed fewer Hummers and Escalades, etc. during my daily commute. Then the price went back down and they came back. I’d like to think that the people who have a choice of vehicles do react to high gas prices by driving, and maybe buying those ridiculous vehicles less often. I have no data, but it wouldn’t surprise me if that’s why they aren’t making Hummers any more.
http://economics.about.com/od/priceelasticityofdemand/a/gasoline_elast.htm
Your anecdata would suggest that it takes a while for consumption to decrease — given that no one buys cars once a week. I would expect that lots of people would find it easier to drive a more fuel efficient car than drive more fuel efficiently.
I also felt that traffic slowed down some during the high-gas-price period, but that’s even harder to confirm. That effect, even if it was real, has certainly evaporated; even at ten mph over the speed limit, I’m always in the slower component of the commuting herd.
I really wish there were practical public transit options to get me to work. I could get there by bus and foot, but it would take hours longer.
…much it was unheard of in my youth, the ”two car household” (or N-car household) is the norm today: I’ think we’re actually approaching the N cars per occupant, rather than 1 car per household. So, while you are correct that people don’t purchase cars once a week, it’s entirely possible that they can go several weeks in a different car each week. In some instances (hummers and other land yachts) it’s probably less costly to actually lend someone a fuel efficient car than it is to lend them the gas money to fuel said land yacht.
We’ve been lucky in my school system, and I suspect the state, but other states have cut hundreds of thousands of employees in the Great Recession. The efficient cause of these cuts may have been the economic downturn, but at least part of the final cause was Grover Norquist’s shrinking bathtub.
ought to be the conservatives’ wet dream: Government is shedding jobs. Private sector is gaining them.
And yet they’re complaining! Funny that.
Why is it that no-one wants to talk about that? Is it because too many influential people earn their money that way? I know that people think that investing in Wall Street is investing in Main St., but that just doesn’t seem to ring entirely true anymore. The publicly traded companies will do anything to make their stocks more appealing to investors, including cutting jobs, lowering wages, and reducing benefits in order to keep money redistributing dividends flowing to those who already have a ton of money but want a ton more. I think it would be a great idea to change dividend and capital gains income into earned income and tax it accordingly, with a progressive tax rate.
don’t even know what capital gains are.
Washington’s hockey team scores goals?