Republican Myths: ‘Job Creators’

It is ‘conventional wisdom’ in America that our economy is heavily dependent on the esteemed ‘Job Creator”. The ‘Job Creators’, as the story goes, are the people we owe our deepest gratitude to for their noble duty of creating jobs. Not only do they need to be showered with constant admiration, but they also need to be adequately compensated by paying very little in taxes. Additionally, they also cannot be bogged down by any bothersome bureaucratic regulations that might monitor how many toxins they pump into the air. It is important not to upset these powerful super men, these titans of industry, because if you do…. they may not create the….. JOBS!

Of course, this tale is totally bogus. The idea that low taxes on the wealthiest members of our society will drive economic growth and job creation is patently false. There has been no evidence to ever substantiate this claim. It is pure fiction. It is taken on as faith and likewise it is the religion of the Republican Party. Unfortunately it is also an idea that goes unchallenged by Democrats.

It is in fact consumers who drive 70% of all economic growth, not rich people and, due to rising income inequality rates, consumers (the middle class) have less disposable income to spend on goods to drive the economy. An investment by the government of $1.5 trillion into the middle class, like that of the most recent GOP Tax cut which went into the coffers of the super wealthy, would do more to drive the economy than tax cuts ever could. In fact, the greatest economic expansion in the history of the United Sates occurred between 1950 and 1965 when the tax rate for incomes over $400k (or $3 million in today’s dollars) was taxed at 91%.

The wealthy do not spend their money. They stock pile it (a lot of it overseas) and therefore it hinders economic growth. An investment in consumers would generate activity. It works like this: If you give one thirsty person a $100, they’ll spend $1 on a bottle of water and hold on to the rest. If you give 100 thirsty individuals $1 each, they will buy 100 bottles of water. This is the activity that creates jobs. If 100 people are demanding water, someone else will seize the opportunity to supply and sell it to them. That is how jobs are created. Through demand.

Cutting taxes for millionaires and billionaires has adverse economic effects. Let’s dispel with this myth once and for all.