Sorry, Folks, Rich People Actually Don't 'Create The Jobs'

[Joecooool]

As America struggles with high unemployment and record inequality, everyone is offering competing solutions to the problem.

In this war of words (and classes), one thing has been repeated so often that many people now regard it as fact.

"Rich people create the jobs."

Specifically, by starting and directing America's companies, entrepreneurs and rich investors create the jobs that sustain everyone else.

This statement is usually invoked to justify cutting taxes on entrepreneurs and investors. If only we reduce those taxes and regulations, the story goes, entrepreneurs and investors can be incented to build more companies and create more jobs.

This argument ignores the fact that taxes on entrepreneurs and investors are already historically low, even after this year's modest increases. And it ignores the assertions of many investors and entrepreneurs (like me) that they would work just as hard to build companies even if taxes were higher.

But, more importantly, this argument perpetuates a myth that some well-off Americans use to justify today's record inequality — the idea that rich people create the jobs.





In the last 15 years, almost all of the income gains have gone to the richest Americans.

Entrepreneurs and investors like me actually don't create the jobs -- not sustainable ones, anyway.

Yes, we can create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy's job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.

So, if rich people do not create the jobs, what does?

A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend.

Over the last couple of years, a rich investor and entrepreneur named Nick Hanauer has annoyed all manner of other rich investors and entrepreneurs by explaining this in detail. Hanauer was the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion.

What creates a company's jobs, Hanauer explains, is a healthy economic ecosystem surrounding the company, which starts with the company's customers.

The company's customers buy the company's products. This, in turn, channels money to the company and allows the the company to hire employees to produce, sell, and service those products. If the company's customers and potential customers go broke, the demand for the company's products will collapse. And the company's jobs will disappear, regardless of what the entrepreneurs or investors do.

Now, again, entrepreneurs are an important part of the company-creation process. And so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of the company's customers' ability and willingness to pay for the company's products, not the entrepreneur or the investor capital. Suggesting that "rich entrepreneurs and investors" create the jobs, therefore, Hanauer observes, is like suggesting that squirrels create evolution.

Or, to put it even more simply, it's like saying that a seed creates a tree. The seed does not create the tree. The seed starts the tree. But what actually grows and sustains the tree is the combination of the DNA in the seed and the soil, sunshine, water, atmosphere, nutrients, and other factors that nurture it. Plant a seed in an inhospitable environment, like a desert or on Mars, and the seed won't create anything. It will die.

So, then, if what creates the jobs in our economy is, in part, our companies' customers, who are these customers? And what can we do to make sure these customers have more money to spend to create demand and, thus, jobs?

The customers of most companies are ultimately American's gigantic middle class — the hundreds of millions of Americans who currently take home a much smaller share of the national income than they did 30 years ago, before tax policy aimed at helping rich people get richer created an extreme of income and wealth inequality not seen since the 1920s.

America's middle class has been pummeled, in part, by tax policies that reward "the 1%" at the expense of everyone else.

It has also been pummeled by globalization and technology improvements, which are largely outside of any one country's control.

The prevailing story that justifies tax cuts for America's entrepreneurs and investors is that the huge pots of gold they take home are supposed to "trickle down" to the middle class and thus benefit everyone.

Unfortunately, that's not the way it actually works.

First, America's companies are currently being managed to share the least possible amount of their income with the employees who help create it. Corporate profit margins are at all-time highs, while wages are at an all-time low.

Second, as Hanauer observes, America's richest entrepreneurs, investors, and companies now have so much money that they can't possibly spend it all. So instead of getting pumped back into the economy, thus creating revenue and wages, this cash just remains in investment accounts.

Hanauer explains why.

Hanauer takes home more than $10 million a year of income. On this income, he says, he pays an 11% tax rate. (Presumably, most of the income is dividends and long-term capital gains, which carry a tax rate of about 20%. And then he probably has some tax shelters that knock the rate down the rest of the way).

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 his $9 million were instead earned by 9,000 Americans each taking home an extra $1,000 a year.

Why not?

Because, 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 cars 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.

Hanauer estimates that, if most American families were taking home the same share of the national income that they were taking home 30 years ago, every family would have another $10,000 of disposable income to spend.

That, Hanauer points out, would have a huge impact on demand — and, thereby job creation.

So, if nothing else, it's time we stopped perpetuating the fiction that "rich people create the jobs."

Rich people don't create the jobs.

Our economy creates jobs.

We're all in this together. And until we understand that, our economy is going to go nowhere.


Read more: Rich People Actually Don't Create The Jobs - Business Insider

[DJ_Critterus]

So, why do you liberals always blame the rich for not giving you jobs or enough money? Why don't you blame Obidiot and crew for the state of the economy since you claim the economy is supposed to provide jobs?

[Sea Six]

Well, I'm convinced.

Screw Capitalism. ON WITH SOCIALISM!!! 'Cause THIS time, Socialism is going to WORK.

[Joecooool]

Originally Posted by DJ_Critterus

So, why do you liberals always blame the rich for not giving you jobs or enough money? Why don't you blame Obidiot and crew for the state of the economy since you claim the economy is supposed to provide jobs?

Because Obama doesn't have the constitutional authority to raise taxes. That lies with Congress. And that is EXACTLY who I blame for the sluggish economy.

[Madmikeee]

When rich business owners make more money, the company makes more money therefore they can, and usually do, hire more people. Or they purchase new items/equipment for their company which stimulates the economy which in turn increases the hiring rates in other companies to keep up.


It's basic economics.

Unlike Odumbo economics...like his wanting to raise the minimum wage to absurd levels thinking that it will allow people to "live off of minimum wage" when all it REALLY does is create a false economy temporarily until everyone raises their prices to meet demand and we are back to square one AND paying some moron 15 bucks an hour to mop a floor or do some other job a trained monkey could do.

[Bill]

Wait. The article posted actually states that the rich DO create jobs:

Yes, we can create jobs temporarily, by starting companies and funding losses for a while.

The article then goes on to say that a strong economy (having a strong middle class with money to spend) sustains those jobs created by the rich.

A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend.

The article just DISPROVED the thread title.

If the article had related a story about how Joe Blow had cashed in his food stamp card to hire Suzie Smith and start a new business, then maybe we'd have something to talk about.

[Madmikeee]

Originally Posted by Joecooool

Because Obama doesn't have the constitutional authority to raise taxes. That lies with Congress. And that is EXACTLY who I blame for the sluggish economy.

Pease, like he gives a flying feck about the constitution. He has already proven that he would wipe his ass with it if given the opportunity. He just happened to find a way to weave his agenda through a hundred loopholes to get it to work no matter what. He has no problems proving the point that he and the rest of the government do NOT work FOR the people, the work for THEMSELVES and will do anything they want as long as it lines their pockets.

[mrvette]

Phil's hero up top there dunno shit about the economy, the man is flat stupid....

[DukeAllen]

[DJ_Critterus]

Originally Posted by Joecooool

Because Obama doesn't have the constitutional authority to raise taxes. That lies with Congress. And that is EXACTLY who I blame for the sluggish economy.

And yet you ignore the fact that when Reagan pushed Congress to lower taxes, and they did, the economy suddenly came roaring to life. Funny how you ignore that.

[Cybercowboy]

If only we gave Obama dictatorial powers, which he would use to raise taxes on those who make money, and give that money (after filtering through the 1,328 layers of bureaucracy) to those who don't make any money. Then he could nationalize all those evil profit-seeking businesses. Then everything would be good.

[Joecooool]

Originally Posted by DJ_Critterus

And yet you ignore the fact that when Reagan pushed Congress to lower taxes, and they did, the economy suddenly came roaring to life. Funny how you ignore that.

The rate that Reagan lowered them to is significantly HIGHER than they are today. Funny how YOU ignore that.

[Doug28450]

Originally Posted by Joecooool

The rate that Reagan lowered them to is significantly HIGHER than they are today. Funny how YOU ignore that.

You are ignoring the fact that when the rate went down the economy grew.

[DAB]

top rate under Reagan was 28%.

top rate today is 39.6%, and can be more with the Obamacare taxes.

[Sea Six]

Originally Posted by Joecooool

The rate that Reagan lowered them to is significantly HIGHER than they are today. Funny how YOU ignore that.

Socialism has never, ever worked anywhere.

Funny how YOU ignore that.

[Bill]

Originally Posted by DAB

top rate under Reagan was 28%.

top rate today is 39.6%, and WILL be more with the Obamacare taxes.

Fixed.

[Millenium Vette]

Originally Posted by Joecooool

Over the last couple of years, a rich investor and entrepreneur named Nick Hanauer has annoyed all manner of other rich investors and entrepreneurs by explaining this in detail. Hanauer was the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion.

America's middle class has been pummeled, in part, by tax policies that reward "the 1%" at the expense of everyone else.

So what this Nick Hanauer dude is saying is "fuk you, I got mine".

And where did this "1%er" shit originate? And, what qualifies as being a 1%er? Is it net worth or income?

[Blademaker]

You're right.

I always told my employees that I didn't give nor create their jobs.



You keep telling yourself that, Sunshine......puff, puff, pass........

[Millenium Vette]

Originally Posted by Sea Six

Socialism has never, ever worked anywhere.

Funny how YOU ignore that.

Actually, socialism has worked in many places. It only becomes a problem when you run out of other people's money.

[Joecooool]

Originally Posted by DAB

top rate under Reagan was 28%.

top rate today is 39.6%, and can be more with the Obamacare taxes.

So yea, that's a bunch of bullshit.

For the first six years of his presidency, it was 50 percent or more. And every year that Regan was in office, the bottom tax bracket was higher than the current ten percent.

And MOST IMPORTANTLY - long term capital gains taxes were raised under Reagan from 20% to 28%. Today its back to 20% having just been raised from 15%.

And in 1987 when the new income tax rates came into effect, he compensated by raising tax rates on corporations.

And finally, what all of you conservatives ALWAYS fail to remember is that the Reagan tax cuts helped TRIPPLED the national debt under his presidency.