Wednesday, October 1, 2014

The Job Creators

“Don’t tax the Job Creators.”  So the bumper-sticker rallying cry emerges whenever there is a discussion  about increasing the taxes paid by the wealthier among us.  The anti-government conservative Congresspersons  who advocate this posture for their wealthy donors would have us believe that, by paying more of their income in taxes, the rich will not be able to create more jobs in the American economy.  Jobs that are needed by many of our citizens.  The argument presumes that the wealthy are on a noble mission to employ the middle and lower economic classes, and such a mission would be unwisely threatened by the punitive specter of higher taxes.  And it plays upon the fears of those in our middle and lower economic classes that their future success, indeed their very survival, would thereby be jeopardized.  Such understandable fears can potentially cause us to support some very counter-intuitive proposals to secure our well-being.

It is all, of course, pure nonsense.  There are few new or existing jobs in jeopardy due to any increased tax payments by the wealthy.  Virtually every responsible economist acknowledges that our American economy is driven by “consumer spending.”  Around 70% of our economy, to be somewhat more precise.  And jobs come from a strong and growing economy, not the supposed social benevolence of the wealthy person.  So if “the wealthy” easily constitute less than 5% of our distribution of income (depending upon your definitions), how much are they likely to contribute to that 70% consumer spending?

One might be tempted to argue that, given the margin of their “excess income” over basic survival necessities, the wealthy have far more consumer dollars to spend.  But that argument falls apart because the wealthy do not buy in volume proportional to their wealth.  Instead, they generally buy small quantities of high cost items – which generates only a few specialized jobs.  The Kardashian sisters may spend enormous sums of money on their status toys, but it results in the creation of very few jobs.  Wal-Mart, Target, and Lowes employ thousands of workers, who then support millions of customers.  But the wealthy do not shop in those venues.  So who contributes more to our economy, and thereby to our national employment: the 500 Chevrolet buyers paying $20,000 per car, or the 150 BMW buyers paying $70,000 each?  A first-class plane ticket can cost perhaps four times or more than an economy seat.  Does the airline hire any more pilots or flight attendants because of those 12 expensive seats versus the 100-200 economy seats?  It is millions of units of washing machines, sofas, chain restaurant meals, summer vacation trips, and electronic gadgets and smartphones that drive our economy and jobs.  It is in the middle and lower economic classes where you find those millions of needed buyers.

The whole social framework of “living wealthy” is to live differently than the average American.  I.e. buying goods and services that are an exception to the average purchasing.  Former Microsoft CEO Steve Ballmer is spending $2B to buy the Los Angeles Clippers NBA team, which the disgraced Donald Sterling bought 30 years ago for $12M.  This will certainly make Mr. Sterling very, very rich.  But this purchase certainly will not reduce the cost of courtside seat tickets for a family of four; instead, higher ticket prices are inevitable for the same basketball performance on the court.  In the end, Ballmer’s $2B purchase will create hardly a single new job.

Perhaps one might assume that it is from their investment money, not consumer spending habits, that the wealthy will create jobs.  As officers in major business and financial organizations, the decisions of the wealthy will no doubt affect employment offerings.  But rarely anymore is a wealthy person’s personal fortune at stake in those business decisions, just company money – i.e. someone else’s money (stockholders).  Over history, for most company officers jobs – and their attached salaries – are just another cost line item.  And profit is very much about reducing costs.  This is why corporate America has largely been sitting on so much cash profit these past several years: extracting more “labor efficiencies” from its existing workforce through more time and output for the same (or less) pay, while waiting for more customer demand to show up before hiring more workers.  Such a strategy ignores the reality that more demand comes from more people working and more employee disposable income to spend.  (Which is why Henry Ford designed and priced his Model T to be affordable by each of his assembly-line workers.)  Hence the stalemate catch-22 that inhibits job growth.  A stalemate unlikely to be broken by those supposed Job Creators.

This is not about “bashing the rich” or “soaking the wealthy.”  Americans have often stood on that dangerous precipice; such a stressful we-versus-them internal conflict will never be in our best interest.  Rather, our objection should be the shameful attempt by some politicians to throw extra caviar to the one group that has done well economically over the past five years of extreme recession.  And then trying to justify it by ennobling them with the entirely undeserved and untrue mantle of economic saviors.  Even if we set aside the longstanding American taxation principle of graduated income tax rates – the American tradition of “giving back” by those who have done well under America’s promise and opportunity – we need not reverse that tradition and say that the wealthy should not only not give back, but should keep even more!

In this debate, I would be happy if these wealthy individuals, and John Boehner and Barack Obama and all Senators and Representatives, would simply pay the same effective tax rate as I pay.  Without all of the exemptions, exclusions, schemes, and special set-asides that decimate our tax code.  Increasing the taxes on the rich is not about treating them unfairly.  It is not about stifling the creation of fictional jobs that they are not going to create.  It is in fact about treating them the same as everyone else – the fundamental American principle that justice does not vary due to wealth.  Afterwards, there will still be plenty of money left over for all those expensive toys waiting to be bought.

Creativity, inventiveness, and entrepreneurship are all fundamental components of the American Promise, and we should all celebrate each time that that Promise is realized.  But Fairness is the real American tradition, in some regards even more so than Equality.  It is about earning wealth, not buying wealth.  Earning it under the same rules applicable to all.  And then enjoying the success of the wealth you have earned.  Wealth that has been bought is not admirable.  That kind of wealth creates no jobs.  So let us not protect the mythical “Job Creators” for what they do not create.

©  2014   Randy Bell              www.ThoughtsFromTheMountain.blogspot.com

2 comments:

Anonymous said...

One of my pet peeves......

Anonymous said...

YEEESSSSS! Right on the money (no pun intended).