The WMDs of job creation

by: Paul Rosenberg

Wed Dec 01, 2010 at 09:00

Is the conservative approach to job creation as deluded as attacking Iraq in response to 9/11?  Or is it even more deluded?  Either way, it's conceptually similar, in that rationale offered is an excuse, not a reason.  The neocons wanted a new Cold War, and in "Rebuilding America's Defenses" they frankly admitted that they needed a "new Pearl Harbor" (p. 63) to get public opinion stampeded into supporting them. On the economic side, Naomi Klein wrote a whole book, The Shock Doctrine
about how the "give the rich people all your money" scam works.  (Put people into a total panic, then hit them with an avalanche of pre-fab theories telling them "there is no alternative.")

But most particularly on job creation--and comparing the two issues that are up right now: millionaires tax cuts and unemployment insurance--the evidence is overwhelmingly against conservatives as this CBO chart (page 11, slightly modified for visual purposes) clearly shows (unemployment insurance at the top, income tax cuts at the bottom, about 1/6th as effective):

Last night, Rachel Maddow had a real economist on to refute this nonsense (although Rachel holds up a different, earlier CBO document, that has the same data in a table, not a chart):

Once again, that surreal clip from John Shaddeg's interview with Mike Barnicle went like this:

Paul Rosenberg :: The WMDs of job creation

JOHN SHADDEG: Reps don't want to tax the job creators, because that will bring revenue down.

MIKE BARNICLE: What about the fact that unemployment benefits, pumped into the economy are an immediate benefit to the economy, immediate....

SHADEGG: No, they're not! Unemployed people hire people?  Really, I didn't know that!

BARNICLE: Unemployed people spend money, because they have no money.

SHADEGG: Ah ha! So your answer is that it's the spending of money that drives the economy and I don't think that's right.  It's the creation of jobs that drives the economy.

BARNICLE: Unemployment checks?  People don't spend that money?

SHADEGG: No no. They'll spend as little of it as they can, 'cause they'll hold onto it as long as they can.

Of course the economist points out that no business-owner is going to hire people to make products he can't sell, because there's no one with money to buy them.  That's why demand--the spending of money--drives the economy.  This is one of the most basic of economic facts.  But in the 1970s, the Wall Street Journal editorial pages became the propaganda center of a different view, so-called "supply-side" economics, which George H.W. Bush insightfully dubbed "Voodoo economics"... shortly before converting to Voodoo himself.

Well, we've now had several decades of supply-side, trickle-down Voodoo economics, and every single budget year has seen an increase in debt-to-GDP ratio.  Every single one!

It. Just. Doesn't. Work.  In fact, it gives Vodun a bad name.

Shaddeg is relying on the myth of the heroic entrepreneur, creating wealth out of nothing.  Just like Bernie Maddof.  And the truth is that the only people who create wealth out of nothing are scam artists. Entrepreneurs "create wealth" by filling a need.  And even if it's a need that they themselves created (such as killing yourself with cigarettes), they still only make money if people have money to spend.  It's just that simple.

There's another problem with Shaddeg's loopy logic, which seems almost too trivial to mention after this enormous whopper at the foundation of supply-side idiocy.  But since it's so out front in the tax-cut debate, I figure I should mention it: tax cuts affect after-tax income.  Business-owners hire people out of pre-tax income.  Not only pre-tax income, but pre-tax business income, not personal income.

In the real world, business-owners increase their after-tax income by not hiring people until they absolutely have to.  They are not in business to create jobs to help the economy out of the goodness of their hearts. That's why they outsource every last job they can.  If anything, reducing income taxes on small business owners increases their motivation not to hire new workers, since they get to keep even more of the money they save by not hiring them.

But Saddam had WMDs.


Experience is a dear school, but fools learn in no other. --  Ben Franklin.

Franklin was a wild-eyed optimist.

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There's really nothing to say in response to this, (0.00 / 0)
that Atrios hasn't already pithily penned over the past several months.  But, I would capture this one, for the record:

As Digby says, the fact that right before an election the Professional Left had to spent their time worrying about defending Social Security given that we had a Democratic president and huge Dem majorities in the House was a complete travesty.

People can take the "they're incompetent" or the "actually they do want to gut Social Security" positions, but you don't actually have to choose between them.

We have known for some time what the GOP's position was on the economy, and their feelings about the people who attempt to provision their lives within.  Now we are learning what the Democrat's think, and it's utterly appalling.  As Digby notes, Kevin Drum even sputters, and he's quoting Thomas -'effin'-Friedman.

Our "best and brightest" may have been systematically schooled to think and act as they do.  But, I would argue that the dissenting exceptions - similarly schooled - ought to call any impulse to generalize into question.

hey Paul (0.00 / 0)
can you please explain/expand this a bit? I'm trying but I don't get it

If anything, reducing income taxes on small business owners increases their motivation not to hire new workers, since they get to keep even more of the money they save by not hiring them.


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