From Bloomberg.com op-ed:

I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software.. . . Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

http://www.bloomberg.com/news/2011-12-01/raise-taxes-on-the-rich-to-reward-job-creators-commentary-by-nick-hanauer.html

Well, if Hanauer says it . . . it must be true.

Oh wait. Not only is that the fallacy of appealing to authority, Hanauer didn't even get it right.

He says:

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

Let's look at it from a different perspective. If Hanauer is right, then how do jobs get created? The middle-class consumer buys a product from a non-existing corporation which has hired no people?

Now, he is correct when he suggests the consumer causes additional jobs, but if the initial capitalist does not create the corporation, hire the people, and produce the product, the consumer never has a chance.

He says:

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

Well, we've always had rich people, haven't we? Even in the Soviet Union, the Party elite were rich, comparatively speaking.

One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

Can we tax the "superrich" enough to give their money to the working class so that they goose the economy? How much would Mr. Hanauer like to pay? What percentage? Will that balance the budget? Provide free college for every American? Solve our infrastructure deficiencies? Create such aggregate demand as to create masses of new jobs?

If so, why hasn't the President spelled out massive tax increases instead of the piddly ones he's come out with?

In fact, how much revenue is Mr. Hanauer looking to raise? I found his answer:

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.

Well, there are 112M households, a bit more, but we'll rule them the .1%. So, what's 112M times $13K? Check the math, but I think it's a bit less than $1.5 trillion dollars. That's quite a tax increase on the wealthy. I wonder if this rich man spent any time with a $5 calculator?

In the end, I'm sure of two things: 1) this is a disingenuous op-ed by a rich liberal; 2) there is no chance that such a tax increase would be workable or that the average household would ever see it.

How do I know he's disingenuous? Look further:

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

So, we'd have to tax the rich at about 100% of their income! And, that money would go where?

To the government.

So, the $13K per year for the average household? The next group of "rich people" will have to take their turn in the stocks.

Class warfare and stupidity in the same column. Nice find.

He's not really interested in giving all his money away:

It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again. Shifting the burden from the 99 percent to the 1 percent is the surest and best way to get our consumer-based economy rolling again.

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.

So, he wants to tax the rich a little so the rest of us can pay less in payroll taxes. Already, 47% pay no income taxes, so why not eliminate all taxes on the poor and middle incomes and let the rich pay for everything?

This article is tripe. It assumes a static pie, as liberals are wont to do. He speaks of income equality, but then wants to raise taxes on the rich mostly for the benefit of . . . government.

No thanks.

Historically tax rates since WWII were much higher in the US, and during those periods the country ran surpluses and the economy was robust and expansive...
If one considered that changing the tax structure was "raising taxes on the rich" but returning taxation rates to normal rates ... perhaps it sounds a little less radical. And those higher taxation rates were normal. its the lower taxation rates that were radical departures from post WWII and after they ocurred what of the economy? Now, I'm not declaring a direct link but if cutting taxers, especially on the wealthies was such a boon then how did a recession ever occur? Obviously the radically lowered taxation levels weren't the "job creating" economic lever that everyone claims.

rickyp wrote:Historically tax rates since WWII were much higher in the US, and during those periods the country ran surpluses and the economy was robust and expansive...
If one considered that changing the tax structure was "raising taxes on the rich" but returning taxation rates to normal rates ... perhaps it sounds a little less radical. And those higher taxation rates were normal. its the lower taxation rates that were radical departures from post WWII and after they ocurred what of the economy? Now, I'm not declaring a direct link but if cutting taxers, especially on the wealthies was such a boon then how did a recession ever occur? Obviously the radically lowered taxation levels weren't the "job creating" economic lever that everyone claims.

Thanks for your cogent insights into the article.

Doctor Fate wrote:Well, if Hanauer says it . . . it must be true.

Oh wait. Not only is that the fallacy of appealing to authority, Hanauer didn't even get it right.

He says:

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

Let's look at it from a different perspective. If Hanauer is right, then how do jobs get created? The middle-class consumer buys a product from a non-existing corporation which has hired no people?

Now, he is correct when he suggests the consumer causes additional jobs, but if the initial capitalist does not create the corporation, hire the people, and produce the product, the consumer never has a chance.

Umm, without demand the corporation is useless. With demand, another corporation (or SME) has a purpose.

You can't create much demand by creating companies, although increasing demand will lead to more opportunities for existing or new businesses. You seem to think that the movie based on "If you build it, they will come" is a viable economic programme.
In fact, how much revenue is Mr. Hanauer looking to raise? I found his answer:

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.

Well, there are 112M households, a bit more, but we'll rule them the .1%. So, what's 112M times $13K? Check the math, but I think it's a bit less than $1.5 trillion dollars. That's quite a tax increase on the wealthy. I wonder if this rich man spent any time with a $5 calculator?[/quote]I wonder if you read what he wrote properly. 'The average family' is not the same as 'every household'. It's also not the same as 'on average across all families'. Look up the difference between Mean and Median averages to see where your assumption went off track...

So, he wants to tax the rich a little so the rest of us can pay less in payroll taxes. Already, 47% pay no income taxes, so why not eliminate all taxes on the poor and middle incomes and let the rich pay for everything?

Because that's not what he's saying. While 47% may not pay Federal Income Tax, there are other payroll taxes that affect a larger number of people.

This article is tripe. It assumes a static pie, as liberals are wont to do. He speaks of income equality, but then wants to raise taxes on the rich mostly for the benefit of . . . government.

Actually, it does not assume a static pie. He's saying that the pie can get bigger if you add to demand, not through continuing to allow a growing disparity.

I saw this little graph:



Which shows that when the marginal rate on the top taxpayers is lower, national GDP grows at a slower average rate than when it's higher.

Which does kind of suggest that the mantra that 'taxing the rich destroys economic growth' is based on a lack of evidence.

(hat-tip)

danivon wrote:I saw this little graph:

Which shows that when the marginal rate on the top taxpayers is lower, national GDP grows at a slower average rate than when it's higher.

Honest question: what kind of empirical data does the right use to support the high-taxes-leads-to-lower-growth orthodoxy? I know there are bunches of economists out there that promote this theory, but when did raising taxes on the rich hurt the economy in the past? Danivon's chart suggests that it doesn't, and that, historically anyway, that they go up and down together? Could that be right?

It also challenges Steve's bluster:

Doctor Fate wrote:This article is tripe. It assumes a static pie, as liberals are wont to do. He speaks of income equality, but then wants to raise taxes on the rich mostly for the benefit of . . . government.

Looks to me like we are actually well aware that the pie can change size, and that the cutting of taxes for the rich has not helped the pie grow as fast as it could. It may well be that there are other factors at play, but I can't see evidence to back Steve's assumptions up (let alone his ad hominem attacks on straw man liberals).

You all can do whatever you want. What is clear is that the original article George used is full of holes. He proposes income redistribution in a most dishonest way, then shifts the goalposts. Why do I say he shifted the goalposts? Because he talks about income inequality (that the middle class has been shortchanged by $13K a year, counting back to the same percentage as in 1980, then he proposes a surtax on the rich which doesn't go to make up this shortfall, but to . . . the government. I am in "the middle class" and I would prefer, if he's going to tax the rich at 100% (which is what it would take according to his own figures), that the money go to me, not the government.

Mind you, I am not in favor of such taxes. I believe we are a capitalist society, not a Marxist one. I understand not everyone agrees and that's fine. I believe income inequality is a myth. Work harder, spend less, save more, and you will succeed. That is what is great about America.

If you, George, want to show that raising taxes leads to higher employment, knock yourself out. I'll tell you what: if the government is in control of all income, I'm sure the unemployment level will be zero . . . officially.

steve

Thanks for your cogent insights into the article.

You're welcome.

I'll note that on discussions on this board we've often demonstrated that taxation levels in the US reachd their lowest point ever in 2003. That taxation levels on the wealthiests began a precipitous drop in 1980 through to today. And during that time wealth began to migrate out of the pockets of working class and middle class into the hands of the top 1 to 2%...
That was a radical redistribution of wealth. What was particular harmful is that it disrupted the demand that was created by working class and middle class having more income to spend. For a time, with the housing and credit bubble this was masked by the accumulation of debt.. However with that bubble burst, the end of the demand created by a large middle class and a comfortable working class lead to a diminished domestic economy.
The question really has to be, what would be better for the economy as a whole? A return to the levels of taxation under which the US prospered, combined with fiscal restraint (surpluses) OR the continuation of huge deficits whilst sheltering the wealthy. These seem to be the two extremes represented by the competing political visions. (and surely the answer lies somewhere in the middle.)
- Cutting govenrment spending makes sense where that spending isn't crucially bouying the middle class or working class right now. Great examples of that might be the big pharma big oil and big agra subsidies and favorable taxation. If the markets are working properly in these areas, and there is real competition, then the elimination of these subsidies shouldn't result in higher prices, but may effect the corporations profits. However they would definitely contribute to lower government spending.
I think its ironic that so called conservatives like Gingrich and Romney support the continuation of these kinds of subsidies.... but suppossedly believe in the markets..At the same time they say that they are going to cut government spending on "entitlements" which largely benefit the working poor and middle classes... Exactly the wrong kind of cut if one wants the domestic economy to continue to demand products and services...

steve

I believe income inequality is a myth

Interesting that you offer no evidence to support this assertion. Whilst those who assert the oppossite have shown all kinds of evidence...
And yet you use the term myth.

It's proof by repetition, demonisation, supposition and 'because I say so'.

When Steve presents data as evidence, he'll be worth the time countering in the detail you try to, Ricky.

Until then, we have his myths against reality.

rickyp wrote:steve

Thanks for your cogent insights into the article.

You're welcome.

Hint: I was using sarcasm. You've still said nothing directly about the article.

rickyp wrote:steve

I believe income inequality is a myth

Interesting that you offer no evidence to support this assertion. Whilst those who assert the oppossite have shown all kinds of evidence...
And yet you use the term myth.

I need no evidence. Why do I say that?

Because income is not distributed. No central part of the government determines who gets what. That some people get more and others get less is not, in and of itself, unfair.

Again, this is a country of unparalleled opportunity. If some people want to simply whine about it, that's their problem. I'll just keep plodding along, working hard, spending less than I make, and living the dream.

Dispute these facts: America is the single country that offers the most potential for vertical rise in terms of wealth and status; America is the place where people from around the world flee for economic opportunity and political freedom; America is the place where, in a generation or two, an entire family can go from impoverished immigrants to the middle class or higher.

If we compare a four person household over the contentious timeframe, we find that income for this demographic as risen almost as much a percent as the aggregate rise in national income -- far different than the stagnant claims of the envious. Stated differently, the "drop" in household income seems to a large degree to be the result of single adult households.

Source

Anyway, I love how George can start a thread called one thing, post an article that I shoot full of holes, and all of the sudden, I have to defend my opinion? Why? Why not have George explain why he posted a lame article?

Oh, because you agree with his premise?

Nevermind.

Doctor Fate wrote:Anyway, I love how George can start a thread called one thing, post an article that I shoot full of holes, and all of the sudden, I have to defend my opinion? Why? Why not have George explain why he posted a lame article?

I thought the article was interesting. There are many rich folk that are saying things like this and it's a perspective that needs to be heard, especially since so many of the political class like to talk about the "job creators," including, if I'm not mistaken, even yourself.

You addressed some of the article, but there were things that he wrote, and were repeated in these forums, that you have ignored. Here's the first two paragraphs:

It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.
Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.

My biggest complaint about Republican Orthodoxy is that appears to be faith-based. There are things that are just taken as truth on faith alone. I essentially repeated as a question what these two paragraphs state, and you told me to find my own evidence. But this assertion seems to be at the heart of any economic argument Republicans make, so why is it true? What's the empirical evidence that supports it? Sure you have economic theories, but what about hard data, examples? Or must Americans accept this argument on faith alone?