The Role of Consumers in Job Creation

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 indeed shaped much of the economic

landscape.

But sometimes the ideas that we are certain are true are dead

wrong. Consider that for thousands of years,

humans

believed that the Earth was the center of the universe.

It's not, and an astronomer who still believed

that it was would do

some pretty terrible astronomy.

Likewise,

a policymaker who believes that the rich are job creators

and therefore should

not be taxed will do equally terrible policy.

I have started or helped start dozens of companies

and initially hired lots of people.

But if there was no one around who could afford to buy what we had to

sell, all those companies 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.

Jobs are a consequence of 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 consumer

is more of a job creator than a capitalist like me.

That's why when business people take credit for creating jobs, it's a little

bit like squirrels taking credit for creating evolution.

It's actually the other way around.

Anyone who's ever run a business knows that hiring more people

is a course of last resort for capitalists.

It's what we do if and only if rising consumer

demand requires it. And in this sense, calling ourselves

job creators isn't just inaccurate, it's disingenuous.

That's why our existing policies are so upside down.

When the biggest tax exemptions and the lowest tax rates benefit the

richest, all in the name of job creation,

all that happens is that the rich get richer.

Since nineteen eighty, the share of income for the top one

percent of Americans has

more than tripled, while our effective tax rates have gone

down by fifty percent.

If it was true that lower taxes for the rich and more wealth

for the wealthy led to job creation, today we would be

drowning in jobs.

And thank

you.

And yet unemployment and underemployment is at record

highs. Another reason that this idea is so

wrong-headed

is that there can never be enough super rich people to power a great economy.

Somebody like me makes hundreds or thousands of times as much as the

median

American, but I don't buy hundreds or thousands of times as much

stuff.

My family owns three cars, not three thousand.

I buy a few pairs of pants and shirts a year like most American men.

Occasionally, we go out to eat with friends.

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 cars, any

clothes, or enjoy any meals out. Nor can I make up

for the falling consumption of the vast majority of middle-class

families that are barely squeaking by, buried by spiraling

costs and trapped by stagnant or declining wages.

Here's an incredible fact, that if the typical

American family still retained the same share of income that they did in

nineteen seventy, they'd earn, like, forty-five thousand dollars more a year.

Imagine what our economy would be like if that were the case.

Significant privileges have come to people like me, capitalists, for being

perceived as job creators at the center of the economic universe.

And the language and metaphors we use to defend the

current economic and social arrangements is telling.

It's a small jump from job creator to the creator.

This language obviously wasn't-- This language was not chosen by

accident. And it's only honest to admit that

when somebody like me calls

themselves a job creator, we're not just describing how the economy

works,

but more particularly, we're making a claim on status

and privileges that we deserve.

Speaking of special privileges, the extraordinary differential between the

fifteen percent tax rate that capitalists pay on carried

interest,

dividends, and capital gains,

and the thirty-five percent top marginal rate on work that ordinary Americans

pay is kind of hard to justify without a touch of

deification.

We've had it backwards for the last thirty years.

Rich people like me don't create jobs.

Jobs are a consequence of an ecosystemic feedback loop

between customers and businesses.

And when the middle class thrives,

businesses grow and hire, and owners profit.

That's why taxing the rich to pay for investments that benefit all

is such a fantastic deal for the middle class and the rich.

So ladies and gentlemen, here's an idea worth spreading.

In a capitalist economy,

the true job creators are middle-class consumers.

And taxing the rich to make investments that make the middle class

grow and thrive

is the single shrewdest thing we can do for the middle class, for

the poor, and for the rich.

Thank you.