Billionaires Are Not Job Creators
One of the biggest and most destructive economic myths of today is that the Wealthy Are Job Creators. We can’t tax them, inconvenience them, or demand the slightest shred of human decency from them, because then they might not save us with their precious, precious jobs. This myth (not the reality) is the mighty justification for politicians to keep cutting taxes on the rich and on big corporations, cutting regulations on business, cutting environmental protections, and cutting workers’ rights. We must all bow before our all-seeing, all-knowing, all-job-creating masters.
Which is why this trio of related articles that blow that myth to hell are all so welcome.
The first is an editorial in Bloomberg Businessweek by entrepreneur/venture capitalist Nick Hanauer, called “Raise Taxes on Rich to Reward True Job Creators”. The second is a commentary on that editorial by Henry Blodget, editor of the website Business Insider, called “Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs”, and the third is another article by Blodget that defends one of his key arguments in the previous article, “No, Entrepreneurs Like Steve Jobs Do Not ‘Create Jobs’ By Inventing Products Like The iPhone”.
This trio of articles makes two key points: 1) raising taxes does not, as we are so often told, discourage business people from creating new companies or hiring more employees, and 2) the real job creator in America is the average consumer, not any businessman or entrepreneur.
The first part makes plenty of sense. If you’re a millionaire, and you can start a new business that will make you millions more dollars a year, would a small increase in your tax rate make you say, “nah, I don’t need those extra millions”? Probably not. This trio of articles makes that argument, as does this earlier one by a businessman who says that the tax rates have NEVER entered his head when starting new business.
The second argument is a little less obvious, but still rings very true. If you invent a brilliant new product like the iPhone, and get enough financial backing to bring it to market, you have created some jobs, BUT:
those jobs are all TEMPORARY if people don’t buy your product.
So Hanauer and Blodget are arguing very compellingly that entrepreneurs get the ball rolling, but that they only create a relatively small number of jobs for the country. It is the purchasing dollars of average Americans which make those jobs permanent, and allow the companies to sustain, grow, and become much larger job creators.
They then make the argument that our current economic inequality is itself a barrier to job creation. As an example, they talk about Hanauer’s post-tax income of $9 million a year:
With the more than $9 million a year Hanauer keeps, he buys lots of stuff. But, importantly, he doesn’t buy as much stuff as would be bought if that $9 million were instead earned by 9,000 Americans each taking home an extra $1,000 a year…
Despite Hanauer’s impressive lifestyle — his family owns a plane — most of the $9+ million just goes straight into the bank (where it either sits and earns interest or gets invested in companies that ultimately need strong demand to sell products and create jobs). 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.
That’s the reality for you. YOU are the job creators, not THEM.
(Or you would be, if you had any money)
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