OK, so the premise is that “job creators” do not actually create jobs and giving them more money does not improve the economy. There are two different aspects to this that Hanauer is discussing. The first is the myth that the wealth of the rich will trickle down. This flawed premise has been debunked by thirty years of empirical data. The rich became obscenely rich and things got worse for everyone else. The Trickle Down theory fails because, as Hanauer says, the rich can never spend enough to make up the loss of spending by a ravaged middle class. This is the explicit argument that the right makes: that the rich spending money on luxuries like yachts and diamond toilets will stimulate the economy. It doesn’t and it never will.
The second myth is that the rich will take their extra money and expand their business. Expand it how? The only thing that causes a business to expand is consumer demand. No demand, no expansion. Corporations are sitting on trillions of dollars. They’re not spending it on anything and this is one of those few times I agree with corporate America. Why in TED’s name would corporations hire more people if the level of demand is currently being filled? To stimulate the economy? Any CEO will tell you that’s not their job, that’s the job of the government. Republicans know this but a weak economy makes it easier to push their agenda.
Further, Wall St. doesn’t create jobs in the first place. Moving money from one place to another and selling commodities (like oil) at artificially inflated prices doesn’t create anything except more money to be moved around. Usually at our expense.
But, in an effort to discredit this simple message, Forbes writer Bruce Upbin took some time to dismiss the talk in the vaguest possible way:
Jobs, he says, are not created by rich people or by business large or small. They’re created by “a circle of life-like feedback loops.” Say what? Companies big and start-up size almost always hire people before they have a clue if they’re going to sell X quantities of something.
I can’t imagine why Upbin is confused. The feedback loop is economics 101. If demand drops, businesses reduce output. If output drops, jobs are reduced. If jobs are reduced, people spend less and demand drops further, etc. That’s a recession. Reverse it and you have an expansion. Each part relies on the other. This is not rocket science here. I thought Forbes was supposed to have smart people writing for it?
But it’s the last part is truly astonishing. “…always hire people before they have a clue if they’re going to sell X quantities of something.” Is he serious? Nobody operates like that. At least nobody that wants to stay in business. When a new product hits the market, large corporations already have a reasonable idea of how it is going to sell based on past performance of similar products and a ton of market research. Large corporations do not make blind gambles. By the way, if there is no demand, corporations WILL hold off until there is. A prime example of this is, oddly enough, the video game industry which has weathered the recession fairly well. Both Sony and Microsoft delayed the launch of the next generation of consoles by at least one year because of a soft market. Seven years between system launches is abnormally long. There’s a reason corporate America is sitting on trillions of dollars: They have nothing to spend it on. the right’s fairy tale of “uncertainty” is bupkis and it always has been.
Small businesses may have less of a clear idea of how much they are going to sell but they don’t hire willy nilly and keep their fingers crossed. Upbin’s reasoning is just as “shoddy and dumb” as he accuses Hanauer of being. Perhaps if he had addressed the meat of Hanauer’s contention that Trickle Down does not, and has never, worked or that demand drives the market, Upbin might have had something to contribute. Instead, he gave the standard boiler plate partisan response.
Hanauer has pointed out, correctly and in a simple fashion, how the entire worldview of the right is completely wrong. Is it any wonder they don’t want to discuss it?