Monday, December 12, 2011

Rich People Are Not Job Creators Sez Business Week

Taxes on the rich stimulate economies. If you don't believe me, maybe you'll believe a non-communist billionaire entrepreneur who's started several successful companies, writing in the certifiably non-socialist magazine Bloomberg Business Week.

Hanauer has this to say: "I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

"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 the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be."

Not only is the term Job Creators a lie, it is a lie that kills jobs. It protects and rewards the idleness of capital and impoverishes the average consumers who actually do create jobs in their millions by buying stuff and paying for services. Impoverish the average consumer and you put capital to sleep in the pockets and closets and jewelry drawers of the very rich. By lowering the taxes on the rich, especially the rich heirs who've never worked or created a job in their lives, and you incentivize the idleness of wealth and penalize the hiring and paying of workers.

Henry Blodget does a great job of explaining the dynamics of what Hanauer is talking about on the website Business Insider, another non-anarchistic non-socialist business publication.

Blodget: "For a specific example, Hanauer points out that his family owns 3 cars, not the 3,000 that might be bought if his $9+ million were taken home by a few thousand families.

"If that $9+ million had gone to 9,000 families instead of Hanauer, it would almost certainly have been pumped right back into the economy via consumption (i.e., demand). And, in so doing, it would have created more jobs.

"Hanauer estimates that, if most American families were taking home the same share of the national income that they were taking home 30 years ago, every family would have another $10,000 of disposable income to spend.

"That, Hanauer points out, would have a huge impact on demand — and, thereby job creation."

As I've pointed out before a multi-millionaire CEO who justifies his raises by lowering his employees' pay and benefits doesn't take his five million or hundred million dollar paycheck and buy a thousand refrigerators or a hundred cars as his employees would do. He buys another company and makes it leaner and meaner, or he buys his wife or mistress a $50,000 tennis bracelet. Tax cuts to rich people do not create jobs because lower taxes disincentivizes investment in the factory or the employees. Rewarding up and taxing down kills economies. It rewards rich people pocketing their gains, what I prefer to call hoarding. It certainly ain't job creating.

If you prefer, I first heard Hanauer's story on NPR. Consider this, if taxes are lowered on rich people they have less incentive to give money to public radio.

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