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December 02, 2011 1:40 PM Raise Nick Hanauer’s taxes

By Steve Benen

Nick Hanauer’s op-ed this week on taxing the wealthy caused a stir, and with good reason. As Jared Bernstein put it, “This guy totally gets it.”

If Hanauer’s name doesn’t sound familiar, he’s a very successful venture capitalist, playing a role in the creation of companies like Amazon.com. This week, he took on a standard Republican talking point: the notion that job creation suffers if taxes go up on the rich. Hanauer explained very well why the GOP’s approach is backwards.

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.

It appears that Hanauer, unlike GOP policymakers, understands supply and demand, and that three decades of concentrating wealth at the top doesn’t create an economic base that ensures broad prosperity. Republicans can keep lavishing more and more money on the rich, but they’ll only spend so much.

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.

Hanauer’s advice? Raise his taxes, make public investments, and get some money in the pockets of middle-class consumers.

Digby’s take on this rings true: “This is a person who really doesn’t want to kill the golden goose of capitalism but would like to save it. It doesn’t speak well for the future of capitalism that there are so few entrepreneurs like him.”

Damn straight.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

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  • sick-n-effn-tired. on December 02, 2011 1:46 PM:

    This point was actually proved in the housing bubble . When the housing prices escalated, people were refinancing and taking out gobs of cash to buy big screen TEEVEES and cars. Things were booming everywhere for a while as consumers were flush with cash. Recessions don't affect millionaires and billionaires , they just go from obscenely rich to just filthy rich.

  • Mitch on December 02, 2011 1:54 PM:

    Sometimes I get the feeling that many of the very wealthy and the GOP in general are not actually interested in anything that can really be called capitalism.

    What they seem to want is neo-feudalism; a permanent class of corporate/financial "nobility" and a mass of serfs. Even if they don't "want" it (and I am sure most Republican voters do not want that) this seems to be the result of their ideology.

    In any case the Tickle Down hypothesis does not work. Anyone with half a brain and a bit of honesty can see that. Jobs are not created by business owners; they are made by consumers.

    Never been a fan of venture capitalists, but Hanauer deserves a pat on the back for this. Hopefully people like him can help spread the truth.

  • BigRed on December 02, 2011 1:56 PM:

    A great example of what Nick Hanauer is talking about is when Henry Ford in 1914 raised the wage of his auto workers to $5.00, an unheard amount . Part of the reason was so that his workers could by the cars they were manufacturing.

  • iyoumeweus on December 02, 2011 1:56 PM:

    As I have written several times, you do not tinkle water and fertilizer on the leaves of plants if you wish them to grow,but you do water and fertilize the roots. The roots of our economy, the middle class, has gone to long without water and fertilizer. Once this situation is corrected our economy will grow, prosperity will return, inequality will vanish and the rich will become even richer.

  • c u n d gulag on December 02, 2011 1:58 PM:

    Finally, and adult is allowed to speak.

    CUE THE WURLITZER!!!!!!!!!!!!!!!!!!!!!!!

    Soon, he'll be shouted down by the WATB's like Jamie Diamon, the Kochsucker Brothers, and the rest of the capitalists bent on suicide by starving off and killing off the rest of us.
    And then followed by their lickspittle turd-polishers, ball-washers, ass-kissers, and sphincter-lickers, in the MSM and the rightie blogospore (sic).

    God, but THAT was refreshing to hear!!!


    DEMOCRATS - DID YOU HEAR THAT?!?!?!?!?!?!?!?!?!?!?!

  • j on December 02, 2011 2:00 PM:

    John Boehner & Cantor's latest deal on the payroll tax cut -
    Obama must approve the keystone pipeline now, also gut environmental regulations, also a federal pay freeze and other wonderful goodies.
    Seems like the Koch bros christmas wish list to me!
    The rich would get much richer with the keystone pipeline-
    what a bunch of evil losers these republicans are!

  • June on December 02, 2011 2:01 PM:

    Eloquent, concise, powerful argument.

  • Butch on December 02, 2011 2:02 PM:

    re: BigRed

    That take on Henry Ford is a bit of a myth - he didn't raise wages so his workers could buy a car - he raised them so they'd have extra money in their pockets to buy food, clothing, and other goods - which meant that the grocer, the tailor, and the other merchants would make enough money to buy cars.

    So Henry was aware of the virtuous circle and how to tend it - it was just a bit more indirect than the myth makes it.

  • robert on December 02, 2011 2:05 PM:

    Well sure, if you are concerned with producing value for society and want to be able to face yourself when you shave in the morning then Hanauer is absolutely correct, demand drives business success to to increase demand 'all the little people' - the 99%- must prosper. let's call that the old fashioned honest model. But there is another model; the Mitt Model. Using that model you borrow money from your rich family-who used the old fashioned honest model to make it but with a few tax break we will talk about next time- and using your seed money you convince a bunch of banksters to loan you highly leveraged funds, which they will do because hey its not their money, and you buy a company for more than it is worth as a going concern -which is why the shareholders will sell it to you- and then you fire everyone and sell off the parts. If you do this 'right' you can destroy thousands of lives as well as a functioning business and walk away with a very very nice profit. Its theft, but its legal theft, and you don't need a thriving middle class to do all this. After a while you will run out of victim businesses to destroy. That's when you run for public office bragging about your 'jobs creation' record.

  • wvng on December 02, 2011 2:14 PM:

    Still waiting for Steve to weigh in on the Teflon President travesty. His commenters are in unanimous revolt.

  • Plenty of Reason on December 02, 2011 2:30 PM:

    Mitch: "In any case the Tickle Down hypothesis does not work."

    Well, sometimes it does, and sometimes it doesn't, as Herman Cain could tell you.

    Hee, hee!

  • Peter C on December 02, 2011 2:41 PM:

    It is the policies of the Repulbicans which is at the root of our current economic crisis. All of the Republican economic policies of the past 30 years have been aimed at (and wildly successful at) concentrating wealth at the top WHERE IT IS NOT USED. A top heavy wealth structure creates price bubbles as idle wealth looks for ever more places to 'store' the value of their holdings. They bid up tech stocks. They bid up real estate values. They buy into 'hedge funds' and gamble with their surplus, BUT THEY DO NOT CREATE VALUE.

  • Neil B on December 02, 2011 2:44 PM:

    Furthermore, it was a fallacy anyway to say that rich people created jobs because of their money. Money is fungible, even at best it is "money" flow that makes things work in the system (kind of like energy in a machine, but as Steve points out even that analogy is flawed.) So the money could come from many moderately wealthy people: 100 people putting up 10k apiece instead of one person putting up a million. Such smaller investors would also be more likely grounded in their community and not absentee wheeler-dealers.

    Heh, I kid you not: Captcha "community axahous". See, the rich speculators want to axe the house that the community built ...

    "Fine minds make fine distinctions."

  • john sherman on December 02, 2011 2:51 PM:

    According to Louis Adamic, in 1929 Herbert Hoover called a conference of economic bigwigs and explained to them that with wealth being concentrated in fewer and fewer hands there was nobody to buy the goods and services, so they should raise wages, put more people on salary and otherwise redistribute wealth to the workers who could then buy stuff to keep the economy going. The plutocrats then all looked at each other, pointed to the other guy and said, "Great idea, let him do it."

    It's sad that the current Republican leadership is economically clueless compared to Herbert Hoover.

  • Satanic Nihilist on December 02, 2011 4:32 PM:

    Nick Hanauer wrote: "... there can never be enough superrich Americans to power a great economy"

    No, but there are a couple of billion Chinese and Indians whose aspiration to live a middle-class American lifestyle can power a "great economy" for quite a while yet. At least until the capacity of the Earth's biosphere to support human civilization is destroyed.

    "Consumerism" -- the economic engine created after WWII to consume the Earth's resources and spit out pollution, garbage, cheap consumer goods for the masses, and incalculable wealth for the ultra-rich -- is being outsourced to China and India.

    The American middle class has outlived its usefulness and is being consigned to the toxic waste dump of history.

  • Malatesta on December 02, 2011 5:48 PM:

    A lot of conservatives are definitely in favor of looting the world for their own greedy purposes, even if it means ruin in the long run. Just so long as they come out on top of those ruins. That's not discussed enough, but obvious on reflection. But what I find interesting are the conservatives that really do think that giving the rich tax cuts will 'create jobs'.

    As you say, they are clearly missing some obvious facts about supply and demand. And it is mystifying - until you realize one key thing.

    Conservatives hold a Butler Theory of Employment.

    They aren't thinking of employment like employment at a firm. They are thinking of butlers. If the rich were richer, they would hire a butler. Or another maid and some more gardeners. In other words, they are thinking of jobs as if jobs were handed out because rich people enjoy having people do shit for them.

    And this explains why they miss the point on demand. The way they are thinking about jobs is that if you had even more money, you would hire yet more household servants. A driver and some footmen, for example. They are thinking about jobs as things that are demanded by the upper class, rather than things used to supply the goods and services that are sold to produce the wealth that makes the upper class upper in the first place. More money among the wealthy means more of those demands can be satisfied.

    Belief in butler-based employment explains a bunch of stuff, actually. Not just the idea of 'job creators' handing out jobs because we've made them happy or they have extra money to burn. But also things like conservative hostility towards unions. Unions are not properly subservient to their betters. They are insolent and not at all grateful enough for the jobs they have magnanimously been allowed to have. They violate the proper social order, you see, and refuse to be the workplace servants they are supposed to be. How dare they!

    Essentially, Butler Theory fits with the generally monarchistic and authoritarian thinking that goes into making somebody conservative at all. It blends perfectly with their worldview. So well that they don't even actively work it out themselves - it comes from the gut.

  • Peter Pitchford on December 02, 2011 5:59 PM:

    The right wing blogosphere is going nuts over this. They think its hypocritical because anyone who has the money and feels they should be taxed can just give it to the Government. In other words, they can't respond to the many good solid reasons that taxes on the rich should go back to what they were when the economy was healthy, so they fall back on mindless religious mantras that are so stupid and completely imbecilic its hard to respond to. They didn't think up that response in their own brain, they heard it on TV or the radio. They don't actually believe that taxes should have to depend on charity, but pretending its true because someone told them what to say is the political equivalence of putting their hands over their ears and going nananananananananana. Unfortunately it works.

    And the reason it works is because no one in the media is making an issue of it. But the conservative right wing propaganda is just so completely stupid and insane, so dangerous, at some point its going to have to become an issue in itself - people are going to have to discuss it. The deliberate mass injection of mass stupidity into our consciousness by people whose only motive is the accumulation of ever increasing wealth and the never ending perpetuation of the lies that go with that whole criminal philosophy, no matter what it does to everyone else, is the mother of all political, economic, scientific AND spiritual issues. Its the stupidity stupid, the deliberate manufactured idiocy.

  • square1 on December 02, 2011 7:50 PM:

    Conservatives hold a Butler Theory of Employment.

    I really like this.

  • Doug on December 03, 2011 7:38 AM:

    "Conservatives hold the Butler Theory of Employment" Malatesta @ 5:48 PM

    Certainly fits all the known facts...

  • Hur on December 03, 2011 6:38 PM:

    I just lived through one of the worst storms I have ever experienced in a lifetime of expecting devastating Santa Ana Winds every fall in Southern California.

    You probably didn't hear about it. It didn't make the national news. 100 mph winds that took down 120+ year old trees didn't make the news for one reason -- public servants were out in those winds, keeping traffic moving, keeping people safe, and returning power to the nearly 1/2 million households that lost power in the storm.

    In short, our tax dollars allowed "job creators" to get back to work in one of the wealthiest areas of the country.

    Wouldn't it be nice if public discourse recognized the sacrifices our public servants make on a daily basis, instead of spending even a moment on the hot air coming out of politicians mouths, encouraging us to cut "government waste?"

  • Hur on December 03, 2011 6:40 PM:

    I just lived through one of the worst storms I have ever experienced in a lifetime of expecting devastating Santa Ana Winds every fall in Southern California.

    You probably didn't hear about it. It didn't make the national news. 100 mph winds that took down 120+ year old trees didn't make the news for one reason -- public servants were out in those winds, keeping traffic moving, keeping people safe, and returning power to the nearly 1/2 million households that lost power in the storm.

    In short, our tax dollars allowed "job creators" to get back to work in one of the wealthiest areas of the country.

    Wouldn't it be nice if public discourse recognized the sacrifices our public servants make on a daily basis, instead of spending even a moment on the hot air coming out of politicians mouths, encouraging us to cut "government waste?"

  • Marve on December 08, 2011 10:13 AM:

    This is such BS. There has to be a merger of the person wanting to start a business, the person willing to fund the startup, and the consumer. Failure in any of those 3 areas means the company will fail. To focus exclusively on the consumer is foolish, and for a "venture capitalist" to write such an article means he is either an idiot or putting politics above reality.

  • Luis D. Rey on December 15, 2011 1:22 PM:

    Marve, thanks,

    This C. Sucker Nick H. millionaire or billionaire, is talking from both sides of his mouth, he must be A BLEEDING HEART LIBERAL/DEMON-RAT living in UGLY SEATTLE, I was there visiting in 2006,
    He sounds very much like that Fat Bagel Moore, after having made so much money and still ripping the system wants to show his compassion for us the have nots !!
    What a joke is this Nick, he is a Dick, no doubt about it,

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