Do the 1 percent create jobs?

A friend of mine, AJ, posted this on his blog:

Open letter to Jamie Johnson, director of “The One Percent”:

Dear Jamie,

You are an arrogant idiot. Your perception of a “just” America is one that is far from free, and your efforts have hurt the poor much more than they have helped them. You foolishly talked to Milton Friedman in various clips from your documentary “The One Percent”, who gave solid reasoning for why we need wealthy people for job creation. He’s Milton Friedman! You just don’t argue with him when you’re an ignorant “non-economist”–especially disrespectfully. You’ve taken Kanye West as my least favorite person, and I sincerely hope you drop your disposition and ignorance and buy a simple economics textbook. Heck, I’ll buy it if you’ll read it. Let me know.

It’s as good as any example of a tendency I’d like to address again. The idea, at its heart, is whether cutting taxes on the wealthy will create jobs, and therefore the converse, will increasing tax rates on the wealthy (to finance a stronger social safety net) decrease jobs? No. A few reasons here. First you have the Stiglitz argument that Nick Hanauer has adopted: rich people need demand. But more importantly, the amount of investment in the economy doesn’t depend on tax rates, but how much investment there is to be had. At some point, cutting taxes is just pushing on a string. In a depressed economy with little private investments available, it makes sense to make public investments financed by taxes. But even in a non-depressed economy, there is no correlation between economic growth and marginal tax rates on the wealthiest.

Piketty_Blog

Piketty_Blog

I want to plaster this chart up on every subway on the nation, because it shows, empirically, what the left has been saying for decades: cutting taxes on the rich doesn’t stimulate the economy. Why is this important? Well I was talking to my dad over the break, and I asked him why he voted for Bush, given the tax breaks for the rich. Once I established that these tax breaks primarily helped the rich, and hurt him by giving the government less money for say, Social Security or college loans, he told me this:

I just figured that the money being in the hands of someone who could invest it and create jobs, rather than me, who would just consume it.

We now know empirically that this simply isn’t true. For one, my dad can invest, he can easily take out money in the stock market, he could help me and my brother go college (or grad school). More importantly, he can spend! That creates opportunities to invest! That creates jobs! The rich want to place themselves at the center of the economy, but it’s the middle class that is the engine for growth. Don’t forget that.

Let’s talk politics quick. What my father is expressing is a classic example of what Engels would call “false consciousness.” Generally speaking, we would expect people to vote for their class interests, but often they don’t. Thomas Frank proposes that they are swayed by social issues. Steinbeck, proposes aspiration as the motivation (I have frequently invoked this as well). Other political scientists suggest that when material standards cease to become an issue, people vote symbolically (i.e. Bush is just like me!). But all of these arguments understate the extent to which the middle class is entirely unaware how misaligned the interests of the wealthy are with their interests. I find it hard to believe that prejudice against gays, aspiration and symbolism can explain why the middle class would forgo $19,000 in yearly income (how much more money the median family would have if incomes had grown proportionally over the last 30 years). That is, voters have not made rational choices, because they were deceived.

So we are back to the Marxist explanation: the central feature of all capitalist societies is obfuscating class interest and exploitation. As my mother said, “Sean, you should really tell people about this.” So I am. The rich have been screwing you. Your interests are not theirs. It’s as simple as that.

P.S. My ideas on history (and my Christianity) prevent me from being a full-on Marxist, but we really need to start understanding Marx as a classical, Enlightenment economist. This would make our public discussion of his ideas far less prone to the vulgarity * it descends to today.

*Classic sense

 

6 thoughts on “Do the 1 percent create jobs?

  1. Pingback: The “donor class” and the minimum wage | Sean McElwee

  2. Pingback: “Inequality Perpetuates Inequality”: Conservatives Defend Inequality Out Of Self-Interest, Nothing More « mykeystrokes.com

  3. Pingback: Conservatives defend inequality out of self-interest — nothing more | Sean McElwee

  4. Pingback: The Tea Party’s perverse leftist fantasy | Sean McElwee

  5. Pingback: How Thomas Piketty and Elizabeth Warren Demolished the Conventional Wisdom on Debt | Omaha Sun Times

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>