“Capitalists Without Customers Are Out Of Business”: Raise Taxes On Rich To Reward True Job Creators
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.
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. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)
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.
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.
Theory of Evolution
When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.
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.
That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.
And that’s what has been happening in the U.S. for the last 30 years.
Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.
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.
It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France byDassault Aviation SA (AM)), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.
More Shoppers Needed
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 clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.
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.
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.
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.
By: Nick Hanauer, Bloomberg, November 30, 2011
As Newt Gingrich surges to the head of the GOP presidential field, he is running headlong into some of his former positions. Slammed by conservatives and competitors for previous support of the national health insurance mandate and universal coverage, climate change, and foreign policy, Gingrich is backpeddling towards more right-wing positions. It appears to be no different with women’s reproductive rights.
Revealing how far right the GOP has shifted, fellow contender Michele Bachmann and others blasted Gingrich for holding tempered and standard GOP positions on abortion, including supporting federal funding of abortions for victims of rape or incest, or to protect the life of a mother. Apparently feeling the heat, Gingrich is taking a major step to his right. Not only did he recently endorse fetal personhood, but he told ABC’s Jake Tapper he now believes that life begins at the implantation of a fertilized egg:
TAPPER: Abortion is a big issue here in Iowa among conservative Republican voters and Rick Santorum has said you are inconsistent. The big argument here is that you have supported in the past embryonic stem cell research and you made a comment about how these fertilized eggs, these embryos are not yet “pre-human” because they have not been implanted. This has upset conservatives in this state who worry you don’t see these fertilized eggs as human life. When do you think human life begins?
GINGRICH: Well, I think the question of being implanted is a very big question. My friends who have ideological positions that sound good don’t then follow through the logic of: ‘So how many additional potential lives are they talking about? What are they going to do as a practical matter to make this real?’
I think that if you take a position when a woman has fertilized egg and that’s been successfully implanted that now you’re dealing with life. because otherwise you’re going to open up an extraordinary range of very difficult questions
TAPPER: So implantation is the moment for you.
GINGRICH: Implantation and successful implantation.
Gingrich’s implantation position is not as radical or ambiguous as that of some “personhood” activists whose “life begins at conception” view could criminalize birth control. Still, his new-found idea that life begins at implantation is a sharp contrast to his previous positions. Implantation occurs 7 to 14 days after conception — well before most women even know they’re pregnant — and defining life at this point will essentially ban all abortions.
Gingrich’s radical step backward is still not enough for Bachmann. At her book signing in Rockville, SC this afternoon, she insisted that life begins at conception (even before implantation) and that Gingrich’s new view “will put a doubt in people’s mind as to his commitment to standing up to the pro-life cause.”
By: Tanya Somanader, Think Progress, December 2, 2011
After living in Massachusetts, I left the Northeast for the first time to go to grad school at the University of Minnesota. While I lived in the Twin Cities, the Democratic Farmer-Labor Gov. Wendell Anderson was re-elected to a second term. At the beginning of his new term, the governor created a crisis in the Land of Ten Thousand Lakes by making one of his money guys a member of his cabinet.
Coming from Massachusetts and being used to the hurly burly of Bay State politics, I found this scandal surprising. After all, back home there would have been an uproar if the governor hadn’t appointed his financial contributor to the cabinet. But Scandinavians brought a good government ethic to Minnesota. Massachusetts is Massachusetts. In the Bay State political deals are sealed with cash. The last three speakers of the Massachusetts House of Representatives have all been convicted of corruption.
In the last couple of decades, American politics has become a lot more like Massachusetts politics and a lot less like Minnesota’s. There was a time, long ago and far away when people frowned on the appearance of impropriety. Now politicians don’t even seem to care about actual impropriety.
Political pursuit of the almighty dollar is why voters have so little trust in Congress to do the right thing. As a radio talk show host, I hear over and over again from my listeners that legislators are in the tank with big business. I don’t share this skepticism since I have worked with many men and women of great integrity as a political consultant. But perception is reality in politics and as long as people believe that politicians are trading their votes for cash, Americans won’t have any confidence in Congress. And in a democracy, the process will only work if the people trust the system.
The only effective way to restore public trust in politics is to get big money out of the system. The best solution would be public funding of campaigns. But that’s not realistic now since the Supreme Court opened the financial floodgates last year in its infamous Citizens’ United decision. Because of the Court’s ruling, voters will be at the receiving end of a hurricane of violently negative campaign ads over the next year which will destroy whatever is left of public trust in government.
The next best remedy to restored trust in government is to force the networks and individual TV and radio stations to give free time to political candidates. The networks receive billions of dollars in federal freebies every fiscal year since stations do not have to pay for the right to use public airwaves. It’s time for the media to make the same kinds of sacrifices that working families are making to keep this country strong.
By: Brad Bannon, U. S. News and World Report, December 2, 2011
The Communications Decency Act of 1996 is not a subject that Newt Gingrich likes to talk about on the campaign trail. For the new GOP front-runner, the episode also marks a notable exception to his record as a social conservative: the time when Gingrich took on his own base to keep the web open for pornography. Here’s how it happened.
With a few exceptions, the web was something of a foreign concept to Congress in 1995. (Gingrich, the lower chamber’s biggest web booster, didn’t even use email.) But the internet was quickly earning a reputation, especially on the right, as a den of immorality, awash in smut and sexual predators. Congressional leaders decided they needed the Communications Decency Act, which was folded into a must-pass Telecommunications bill.
Sen. Jim Exon compiled an album of images he’d found on the web—including one of a man engaging in intercourse with a German shepherd—and invited his colleagues to take a look.
“Barbarian pornographers are at the gate and they are using the internet to gain access to the youth of America,” warned Sen. Jim Exon (D-Neb.).
To fend off the barbarians, Exon introduced an amendment to the Communications Decency Act criminalizing the transmission of “indecent” materials over the internet. In case any stone remained unturned, it went after internet service providers as well: Email or distribute nude photos—or even just type one of the “seven words you can’t say on television”—and you could face a $100,000 fine or up to two years in prison.
To illustrate the danger of internet porn, Exon compiled an album of graphic images he’d found on the web—including one of a man engaging in intercourse with a German shepherd—in a blue binder with a red “caution” sticker, and invited his colleagues to take a look.
Exon’s measure passed the Senate with 86 votes. The appeal was clear: No elected official wanted to be seen as voting for smut. The Contract With America—Republicans’ promise to voters in advance of their landslide win in the 1994 elections—had even contained a provision vowing to crack down on child pornography.
That’s where Gingrich came in.
To the House speaker, the debate presented a clash between his desire to prepare America for the 21st century and his conservative values. Gingrich, by his own description, was a “conservative futurist.” He envisioned honeymoons in space and laptops in every classroom; the Exon amendment, by casting such a wide net, threatened that future.
Newt’s preferred web-surfing policy: Don’t ask, don’t tell. Newt Gingrich/FacebookGingrich was right that Exon’s bill was extremely broad. As Sen. Patrick Leahy (D-Vt.) pointed out in a particularly inspired floor speech, the law could even have criminalized the online distribution of Gingrich’s first novel, 1945, in which a “pouting sex kitten”—who is also a Nazi—seduces a White House aide in order to extract classified information. It would also have prohibited most non-Will Smith forms of hip-hop.
“[The amendment] is clearly a violation of free speech and it’s a violation of the right of adults to communicate with each other,” Gingrich said at the time. “I don’t agree with it…” In an interview with British journalist David Frost, he elaborated on his position. “I think there you have a perfect right on a noncensorship basis to intervene decisively against somebody who would prey upon children. And that I would support very intensely. It’s very different than trying to censor willing adults.”
With Gingrich’s support, Rep. Chris Cox (R-Calif.) and Rep. Ron Wyden (D-Ore.) crafted an alternative proposal that eschewed punitive measures for online wardrobe malfunctions and expletives, and instead emphasized private, parental education initiatives. The bill passed the House overwhelmingly.
Gingrich “talked out both sides of his mouth,” says Hustler magazine publisher Larry Flynt.
Although the Senate’s version was part of the law that eventually passed, it was overturned by the Supreme Court the next year in Reno v. ACLU. What remained was Gingrich’s language, a piece of legislation sufficiently ahead of its time that Jerry Berman, founder of the Center for Democracy and Technology, says it should be called the “Communications Democracy Act.”
Gingrich’s support for a hands-off approach set a precedent. Under his watch, the federal government opted against creating the equivalent of an FCC for the internet, helping it grow into what it is today. According to a report published last year by the IT security company Optenet, 37 percent of the internet consists of porn.
It also wasn’t the last time that Gingrich stood up for the internet’s biggest business: In 2009, his organization, American Solutions for Winning the Future, briefly named adult-film titan Pink Visual the “entrepreneur of the year” and invited the company’s CEO to a reception at DC’s Capitol Hill Club. Gingrich’s spokesman said at the time that Pink Visual had been honored “inadvertently.”
The speaker may have been an ally in the fight against the Exon amendment, but that hardly makes him a free speech icon. Gingrich “talked out both sides of his mouth,” says Hustler magazine publisher Larry Flynt. The free-speech activist (who currently has a $1 million reward for dirt on Rick Perry’s sex life) took on Gingrich at length in his book Sex, Lies, & Politics and hasn’t changed his views in the ensuing decade. “I wouldn’t vote for him for dogcatcher.”
By: Tim Murphy, Mother Jones, December 2, 2011