Wednesday, January 4, 2012

J. L. Johnson: The Job Creator Myth

  Let us assume that the Republicans who tell us that they do not want to raise taxes because doing so would hurt the "job creator" just do not know what they are telling us. We would otherwise have to say they are liars. To begin to understand the reality of the "job creator" myth, begin with an understanding that only the top 5% of income earners realize tax savings that make it possible to create a job above a poverty level income with their tax savings, and the small businesses that are the job creating engines of our economy are not among them.

  When Republicans say that small businesses would be hurt by tax increases, they appear misinformed at the very least. The fact is that no increase on the incomes or tax rates on small businesses that create jobs is even under consideration. There are wealthy small business owners, most of whom are corporate attorneys and doctors whose specialties afford them with the leverage to earn phenomenal incomes. They are however not likely to provide new jobs or lay off employees who handle the routine work, and do the work their employees perform themselves! Nor are all of the higher income small business owners under consideration for a tax increase. Only 1% of small businesses have revenue over $1 million, while the remainder earn well under a million dollars.

  Venture capitalists are also among the "small businesses" that might be affected by tax increases on the wealthy, but do they create jobs? When Mitt Romney mentions his private sector experience creating jobs, he is referencing his time with Bain Capital, the private equity firm that earned him his millions. As his former business partner put it: "I never thought of what I do for a living as job creation." Bain's model for creating profit was to buy up companies and maximize profits "by firing workers, seeking government subsidies, and flipping companies quickly for large profits."

  The truth about small business is that "small business owners with less than one year of experience in running an organization earn an annual salary ranging from $34,392 to $75,076. Those with more than 10 years experience, on the other hand, earn upwards of $105,757 per year."

  There is no evidence to the "job creator" myth, nor simple logic to it. The phrase is simply a rhetorical slight of tongue, a red herring intended to distract people from contemplating this fact. What are the salient facts and logic that should be considered?

  One fact is that a net 1.1 million jobs were created in our domestic economy under the Bush tax cuts, while 1.3 million jobs were created in India, the Phillippines, China and elsewhere. Another fact is something that can be understood only through simple logic, coupled with the basic understanding of economic principle. Products are produced only if a demand exists, and jobs are created to produce the products in demand. Therefore, without demand, neither the product nor the job necessary to produce the product are a necessary expense for a capitalist enterprise to make the profit that motivates it. As Nick Hanauer, a wealthy venture capitalist, puts it, "Rich businesspeople like me don't create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit."

  There are two other salient facts that should point out the absurdity of the "job creator" myth. Most consumers are now scaling back their consumption, and focusing on lowering their personal debt. Ten million other former consumers are now unemployed. Logic should now suggest that the cumulative effect of this on an economy that reached its apex on the back of consumerism will not sustain rapid job growth.

  Yet another fact is that people who earn just several hundred thousand dollars per year spend a lower percentage of their income than someone who earns only as much as $100,000 per year, let alone the working poor family working for him, whose income is under $20,000 per year. The well-to-do and wealthy invest the greater part of their income to build wealth. Moreover, despite their expenditures, their participation as consumers in the economy is dwarfed by the consumerism of the 95% of the population with lower incomes.

  The simple logic, which alone should debunk the job creator myth, is that no one who receives a tax cut will create a job just to create a job. Nor has anyone. Jobs are created to fill a need for a business to maintain a level of productivity necessary to fully meet demand for its product or service. Consumer demand creates jobs, not tax cuts. Whether the "job creator" myth is a lie or rhetorical nonsense used to cover up their ignorance, Republican politicians do not deserve our vote!

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