Read

Search form

Billionaire Debunks "Job Creator" Myth

Billionaire Debunks "Job Creator" Myth
Tue, 5/22/2012 - by Nick Hanauer

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 capitalist's 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.

Add new comment

Sign Up

Article Tabs

Jeremy Corbyn, MPs

The anti-Corbyn forces within Labour might very well have achieved the complete opposite of what they aimed to achieve.

shady financial practices, financial crimes, Dodd-Frank Act, Roosevelt Institute, too big to fail, Glass-Steagall Act, Gerald Epstein, Juan Antonio Montecino

The average U.S. household loses over $100,000 to destructive activities of bankers and financiers.

Bernie Sanders supporters traveled to Philadelphia from every corner of the country this week to show their enduring support for his candidacy.

This week, as the DNC rages on, we're talking state surveillance – digging deep into the past and present with surveillance expert, Chip Gibbons from Defending Dissent

"We are in a political moment where we can dismantle not only the racist neoconservative Republican Party, but also the racist and equally destructive neoliberalism of the Democratic Party."

Greek privatizations, transit privatization, Panhellenic Railway Association, TrainOSE, water privatization, Thessaloniki Water Supply & Sewage, Greek austerity policies

Late last month, the Panhellenic Railway Association took to the streets to protest a slew of public transport privatizations scheduled to take place later this year. "The government defiantly and shamelessly gives away the national wealth," it said.

Posted 6 days 14 hours ago
Democratic National Convention, DNC, DNC protests, Hillary Clinton, Bernie Sanders, Bernie supporters, Food & Water Watch, March for a Clean Energy Future

More than 10,000 people calling for a “clean energy revolution” filled the streets here Sunday.

Posted 3 days 18 hours ago
anti-fracking protests, Keep It In the Ground, protester arrests, undercover agents

Emails obtained through an open records act request show that the Lakewood Police Department in Colorado collected details about a BLM oil and gas lease protest from undercover officers as the event was being planned.

Posted 6 days 13 hours ago

“Reverse redlining” flooded communities of color with toxic mortgages, practically ensuring default.

Posted 6 days 23 hours ago
#WebOfDenial, climate denial, fossil fuel industry, Exxon climate lies

In the U.S. Senate, champions for climate action and accountability are loudly putting the blame on think tanks and denier-for-hire front groups that have created doubt about climate science.

Posted 6 days 23 hours ago

More than $50 billion in foreign aid is pumped into Africa annually – but did you know that roughly the same amount is illicitly siphoned out of the continent?

Democratic National Convention, DNC, DNC protests, Hillary Clinton, Bernie Sanders, Bernie supporters, Food & Water Watch, March for a Clean Energy Future

More than 10,000 people calling for a “clean energy revolution” filled the streets here Sunday.

“Reverse redlining” flooded communities of color with toxic mortgages, practically ensuring default.

marijuana legalization, cannabis legalization, legalized weed, Adult Use of Marijuana Act, AUMA, Monsanto, GMOs, seed patents, George Soros, corporate marijuana takeover

With the cannabis industry predicted to generate over $13 billion by 2020, there should be little doubt that companies like Monsanto are simply waiting for Uncle Sam to remove herb from Schedule I.

Greek privatizations, transit privatization, Panhellenic Railway Association, TrainOSE, water privatization, Thessaloniki Water Supply & Sewage, Greek austerity policies

Late last month, the Panhellenic Railway Association took to the streets to protest a slew of public transport privatizations scheduled to take place later this year. "The government defiantly and shamelessly gives away the national wealth," it said.