posted December 01, 2011 04:34 PM            

By Nick Hanauer

Dec. 1 (Bloomberg) -- 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. in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc.

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 by Dassault Aviation SA), 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.

(Nick Hanauer is a founder of Second Avenue Partners, a venture capital company in Seattle specializing in early state startups and emerging technology. He has helped launch more than 20 companies, including aQuantive Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and “The Gardens of Democracy.” The opinions expressed are his own.)

--Editors: Max Berley, Stacey Shick.

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To contact the writer of this article: Nick Hanauer at Nick@secondave.com.

posted December 01, 2011 04:51 PM            

It is not a tenet of American economic belief or an article of faith for Republicans that if taxes are raised on the rich...job creation will STOP.

posted December 01, 2011 10:38 PM            

God, I just love it when leftists tell Republicans what's good for their public image and election or reelection of Republicans....considering that leftist demoscats lost 63 House Seats and 6 Senate Seats in the last election...the biggest swing in the House of Representatives in 70 years.

posted December 02, 2011 03:31 AM            

doctoring?

Oh, yea->

Madeira Beach!

thud

posted December 02, 2011 02:53 PM            

FROM THE LINK YOU DIDN"T LOOK AT:

Top GOP Strategist Admits He’s ‘Scared’ Of Occupy Wall Street Because It’s ‘Having An Impact’
by Zaid Jilani
The Republican Governor’s Association met in Florida this week and featured pollster Frank Luntz, who offered a coaching session for attendees about how they should communicate to the public. Yahoo! News’ Chris Moody was there, and captured some of Luntz’s comments on Occupy Wall Street.

Luntz told attendees that he’s “scared of this anti-Wall Street effort. I’m frightened to death.” The pollster warned that the movement is “having an impact on what the American people think of capitalism.” So the pollster offered some advice for them about how to fight back. Here’s a few snippets of what he said, according to Moody:

– Don’t Mention Capitalism: Luntz said that his polling research found that “The public…still prefers capitalism to socialism, but they think capitalism is immoral. And if we’re seen as defenders of quote, Wall Street, end quote, we’ve got a problem.”

– Empathize With The 99 Percent Protesters: Luntz instructed attendees to tell protesters that they “get it”: “First off, here are three words for you all: ‘I get it.’ … ‘I get that you’re. I get that you’ve seen inequality. I get that you want to fix the system.”

– Don’t Say Bonus: Luntz told Republicans to re-frame the concept of the bonus payment — which bailed-out Wall Street doles out to its employees during holidays — as “pay for performance” instead.

– Don’t Mention The Middle Class Because Americans Don’t Trust Republicans To Defend It: “They cannot win if the fight is on hardworking taxpayers,” Luntz instructed the audience. “We can say we defend the ‘middle class’ and the public will say, I’m not sure about that. But defending ‘hardworking taxpayers’ and Republicans have the advantage.”

– Don’t Talk About Taxing The Rich: Luntz reminded Republicans that Americans actually do want to tax the rich, so he reccommended they instead say that the government “takes from the rich.”