Shut Down Simple-Minded Tax Cut for Job Creators Rhetoric

American Workers ButtonThe simple-minded arguments promoting tax cuts for so-called job creators are misleading, incorrect, and frankly very stale.   For the most part, they do not fit the current economic environment and reflect a level fiscal irresponsibility that is in large part a cause of our national budget mess.  Smart tax policy has been absent for too long and it is time for that to change.

No smart business owner is going to hire people simply because he has more money.  If you manufacture widgets and you have a warehouse full of unsold widgets, what incentive do you have to hire more people to make more widgets?  You don’t have any incentive to do so.  What will you do with the additional widgets and the added costs needed to produce them?

The anti-tax movement argues that we need to ensure that “job creators” have the resources – i.e., money – to hire workers.  This argument has justified decades of increasingly unbalanced tax policy which favors the so-called job creators.  It is the “trickle down” or supply-side model that is not working, especially in our current depressed economy.

If the trickle down model did indeed work, we should be awash in jobs now.  The wealthiest among us are doing well.  They have money to invest.  Why are they not investing those resources here to create jobs here?  Because there is no demand for the goods and services in which they might invest.  Corporations likewise are sitting on record cash reserves.  Again, they are not investing here because it is not justified by demand.

trickle-downIf we want to stimulate growth, we need policy that puts more money in consumer bank accounts.  Often by sheer necessity, they spend the cash they have which then pushes up the demand we need.  Misleading rhetoric about “makers” and “takers” is unfair and incorrect.  One can make the argument – especially in the current market environment – that the middle and working class are the job creators.  Without growth their spending stimulates, we will be locked in stagnate economic growth.

Of course there is some investment underway.  However when businesses do invest, it is increasingly likely that they are investing in cheaper labor markets in the global economy.  We have a systematic labor and demand problem in the United States.  Maintaining tax cuts, subsidies, and other financial incentives behind the argument that it will spur growth has been proven a failed policy in the status quo and does not address the decline of our comparative advantages in the world economy.  We are poorer, less educated, and most importantly lagging behind other countries in our infrastructure and research investments.

Depression Workers Soup LineOur remaining global stronghold is our financial sector – and to some extend our nation’s monetary system and reserve, although Republicans are determined to undercut that – but this sector serves a very small number of Americans.  Even American workers investing in 401(k)s see less from the financial sector as they have less income to invest and suffer most from the current era’s boon and bust market cycles.

We cannot expect to compete in old manufacturing sectors where we can no longer compete on the labor market, unless we want to undercut the middle class prosperity that has been a part of the American way of life for generations (which in fact is happening now).  We should instead be investing in future economic opportunities, maintaining a secure and educated workforce, and investing in smart infrastructure to sustain future growth.  But we are not doing this.  We are giving tax cuts instead and expecting something magical to happen.

Unfortunately, nothing magical is happening.  That’s obvious to anyone paying attention to our country’s economic trends over the past couple decades.

My two cents.

 

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2 thoughts on “Shut Down Simple-Minded Tax Cut for Job Creators Rhetoric

  1. Pingback: Focus on Wages First, Hiring Second? | A Little Tour in Yellow

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