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    Conservative tax/employment doctrine goes like this: the more money you give to the top income earners the more jobs will be created.   Besides the fact that from  2001 to 2011 we have seen the most wealth going to the top 2% in the last century while, at the same time, jobs have been destroyed at a rate not too far different from that during the Great Depression, there is another  reason that this policy does not reflect reality.
    The 2% are not those who determine employment numbers.    These are stockholders and bond holders, often times two, three or four generations removed from the founding of the corporations from which they now gain passive income.   With rare exceptions are they in the position to influence employment.  Those decisions are made far down the corporate pyramid of influence.  And even then, they are not in the positions to just arbitrarily go on a hiring binge.  Why?  

    The Human Relations Department has to answer to the CEO for any increase in employment.  And the question here is a simple one: How much net additional revenue will a new employee bring to the company?   Hiring does not automatically generate more revenue.   Nobody hires someone just to add a number to the employment column.   Long before hiring additional person is hired these questions would be asked:  (1) Can what they do be done cheaper by existing employees with enhanced technology (more and better computers, etc.) and  (2)  Is our low revenues due to a lack of manpower or a lessening of demand for what we sell across the economy as a whole?  
    Conservatives count on everyone ignoring the overall condition of the economy while demanding that we be cutting taxes at a time when the national debt is growing, while, at the very same time, assuming there is some immutable law compelling the 2% to be hiring at a time when the demand for more employees is at the lowest.   In what world is this cogent policy?  None that I know of.
    When we are talking about the 2% income earners, we are not talking about corporations where the lion shares of all long-term, high-paying jobs are created.  [Mrs. Got-Rocks hiring an additional gardener or mom and pop hiring holiday part-timers will not "put America back to work" in any significant way.]   We are talking about people who get their income from investments.   They have a vested interest is cutting HR costs, not adding to them.   As a stockholder in a corporation, how am I advantaged by hiring additional employees and how would I exert my influence to achieve that goal were I of the mind to do so?   Just what CEO would take kindly to a stockholder telling him or her how to run the company?   And what CEO would return the call of a stockholder who, most likely, had zero experience running a multi-billion dollar international corporation?
    So where did this idea come from?  It is the product of pure irrational thinking...the conflation of decisions made by mom and pot retail stores as to how many people they should hire during the holiday season... and how to justify, in the taxpayer’s eyes, providing the richest of the rich with access to more luxury while depriving members of the other 98% with the basic necessities of life.  It is a doctrine having nothing to do with jobs and everything to do with attempting to make a case for enriching the patrons of most of a significant number of  members of Congress.   It is highly distilled insanity aimed to con the 98% into advocating lessening their share of the income pie.  
    So where do we go if this idea is bogus?  We go to what Paul Krugman and many other rational economics have been telling us in so many words:  (1) Private sector employment is driven by a number of factors but ultimately consumer demand.  (2) The surest way to increase consumer demand, when the private sector is in recession, is to increase the disposable income of the other 98% of income-earners through the purchase of goods and services by the public sector.  (3)  The greatest bang for our public sector bucks spend – even if they have to be borrowed – is to purchase things that are domestically produced and delivered by American citizens.  (4)  An economy can no more be stimulated to grow through austerity than milk production can be increased by cutting back on cow feed.  

Originally posted to Steve Love on Sat Nov 20, 2010 at 11:22 AM PST.

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Comment Preferences

  •  Let all of the tax cuts expire... (8+ / 0-)

    ...then use the money for UI and infrastructure projects.

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Sat Nov 20, 2010 at 11:31:27 AM PST

  •  It's Not Insanity It's Simple Conquest (10+ / 0-)

    If they were rolling in on tanks nobody would have any trouble understanding the meaning of capturing assets, infrastructure, territory and government.

    We would at least be spared the madness of false equivalency of both sides being "equally" extreme.

    It's a war, they mean to conquer the country, they've been working at it for over 40 years, and they've about got it sewn up. We have yet to have our party acknowledge the effects of what they were doing 30 years ago.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sat Nov 20, 2010 at 11:37:16 AM PST

  •  Outstanding diary (17+ / 0-)

    Anyone who has run a company, especially a small one, knows that the only thing that leads to hiring is increased demand (orders) for your company's goods or services.  Tax policy has virtually nothing to do with hiring decisions.  

    The last part of your diary is the part that conservatives don't want the people to figure out.  As you point out, only one thing leads to increased aggregate demand--and that is increased aggregate wages.  Unless there is gigantic intervention to put money into working peoples pockets again we may be in for a really bad time.  

    By the way, major consumer companies are making big capital investments these days.  I just read where Intel and Dell have announced they are making multi billion dollar commitments--in China.

    So we need to outlaw offshoring along with aforementioned intervention.

  •  This is not the top 2% (2+ / 0-)
    Recommended by:
    drewfromct, DBunn

    The 2% are not those who determine employment numbers.    These are stockholders and bond holders, often times two, three or four generations removed from the founding of the corporations from which they now gain passive income.   With rare exceptions are they in the position to influence employment.  Those decisions are made far down the corporate pyramid of influence.  And even then, they are not in the positions to just arbitrarily go on a hiring binge.  Why?  

    This is maybe the top .05%.  The top 2% is somewhere around household AGI of $250,000 or more.  That's very well off, certainly, but it's most often working professional couples and/or owners of a small family business.  They don't have passive income, they most often have earned income -- they work for what they earn.  They will be more affected by the increases in federal income tax rates.

    The people you are talking about -- those who are independently wealthy so that they earn what you called "passive income" and live off that are far fewer than the top 2%.  After all, the top 1% is household AGI of $380,000 and above.  Again, very very well off, but working professionals -- Doctors, dentists, lawyers, CPA's, engineers, architects, etc., often who own their own firm/practice (which qualifies them as the "small business owners" that the pundits talk about so much), and often two incomes. Again, they are more affected by federal income taxes than the uber rich because they have earned income.  

    If you want to get to those who live off their "passive income," as you termed it, you're talking about those with maybe $1 million a year or more, then you are probably talking about 1/2 of 1%, or the top .05%.  And when you are talking about "passive income," then these people aren't affected by big increases in federal income tax if they don't have much in the way of earned income.  They would be more affected by capital gains tax rates.  

    •  Steve is talking job creation (4+ / 0-)

      Although, your segmentation is accurate, working professionals like doctors still do not hire based on tax policy.  The uber wealthy do not hire at all.  

      Your are correct about the uber rich making money on investments.  If one wanted them to pay their fair share we could increase cap gains taxes or just make investment income part of ordinary income, but this diary is not about taxes per se, it is about the influence of taxes on hiring--which is virtually nill. Conservatives do not want anyone to know this.

      •  Sometimes they do (2+ / 0-)
        Recommended by:
        DBunn, Oh Mary Oh

        I'm a lawyer, a partner in a local law firm, and yes, we do consider tax policy when we decide, for example, whether to add an extra employee in the IT group or in our back office bookkeeping group or as part of our secretarial staff.  We consider general overall tax policy and other costs (including health care costs since we offer our employees health insurance).  It all goes into the mix of how many non-lawyer employees we hire.  

        •  Thanks you for this observation. You numbers are (6+ / 0-)

          closer to the actual populations than mine.  I was thinking more metaphorically than statistically.
          ***********
           I do have a question for you.  Is it not true that taxes are calculated on net revenues, so that all these costs associated with a new employee are tax-deductable?   If that is the case, would you be motivated to hire someone new for any other reason than to take advantage of potential new revenues?  In other words, if your taxes were zeroed out would you go out and hire someone who could not add to the productivity of your office?  Or put another way, is the best strategy to improve your take-home-pay depending to Congress cutting your taxes or finding a new good-paying client?  :-)
            I used to approach this issue asking the question: Which do you want to own, a company that pays a lot of taxes or one that pays a minimal amount of taxes and I have always felt that, when I was running a small corporation that the former was preferred to the latter.  Is that where you come out, too?

          ...toward a better tomorrow.

          by Steve Love on Sat Nov 20, 2010 at 01:53:48 PM PST

          [ Parent ]

          •  For us in a law firm (3+ / 0-)
            Recommended by:
            J Orygun, DBunn, Oh Mary Oh

            additional non-legal personnel (secretaries, accounting, IT, support staff) are not profit centers.  They are things that make it easier for lawyers to do what they need to do to earn money.  If we are making a lot of money, relatively speaking (compared to what we have done before, for example), it's an easy sell to ask each lawyer to give up a bit of profits in the name of a better functioning office, or additional ease in practicing law.  If taxes go up and our lawyers take home less -- especially if it is noticeable -- no, we won't be able to convince our lawyers to exchange some dollars for additional convenience and for additional support staff.  If for every hour they work our lawyers take home less, they are not inclined to give up even more per hour they work in the name of convenience or more free time (support staff can free up a lawyer from having to do the "business" side of a law firm).  If the lawyer is taking home less, he'll be less willing to give up more dollars and more willing to take on a few extra tasks himself so as to keep his take home pay at the level he wants.

            So, in our case, increased taxes on the owners of the business may well mean fewer hires.  I'm not saying that is the case for all small businesses.

            •  If your client base shrank or grew (2+ / 0-)
              Recommended by:
              Oh Mary Oh, radical simplicity

              would that have a greater impact on hiring than a few extra K of personal taxes?

              What could BPossibly go wrong?? -RLMiller

              by nosleep4u on Sat Nov 20, 2010 at 08:47:33 PM PST

              [ Parent ]

            •  This is probably the only time.. (1+ / 0-)
              Recommended by:
              radical simplicity

              I've seen a rational explanation of why higher taxes on wealthy individuals might mean fewer jobs.  I wonder how wide-spread this situation is though. The circumstance is a small business that would hire additional staff to make life easier without anticipating any increase in revenues.  That is, they decide to reduce profitability and productivity so they can work less.  I've had a little experience in business, and I can't imagine hiring someone I didn't really need just because I could.  I hired people I had to have to support the business.  

              It's an interesting theory though.  Wish we could get some decent projections about what the numbers really are.

              Frankly, I blame everything on Nixon.

              by J Orygun on Sat Nov 20, 2010 at 10:04:08 PM PST

              [ Parent ]

        •  Wow! (0+ / 0-)

          I was first a CFO, then a CEO in several mfg, and software companies and tax policy was not a factor in our hiring decisions-ever. It was always market activity that drove the decision.  I should have known that there were law firms out there who were organized as partnerships.  I suppose tax policy could make a difference then because partner takehome is being traded off against productivity.  But I would contend that the current debate--how to deal with a 3% increase in marginal tax after $250,000, is a small factor in your partner meetings.

    •  If couple earns 300K, they only pay $1500 more (6+ / 0-)

      Let's say you do have a professional couple who are earning 300K. Even if the top tax rate does increase from 33% to 36%, their extra tax because of this increase would only be $1,500 per year. Are you going to seriously tell me that this upper income couple could not afford to pay $1500 more in taxes?

      It is absurd for me or anyone to feel sorry for someone making that much money who would scream bloody murder about such a relatively small boost in the taxes they pay. It is a huge slap in the face to the fifty percent of us who earn 1/8th or less than that total.

      I'm sick of people trying to defend these high earning people when the rest of us are being killed in this economy. Screw the rich. They have certainly been doing it to us all these years.

      Everything I write is within a margin of error of precisely 100%.

      by Bailey Savings and Loan on Sat Nov 20, 2010 at 08:16:23 PM PST

      [ Parent ]

    •  "1/2 of 1%, or the top .05%" ? (1+ / 0-)
      Recommended by:
      Oh Mary Oh

      surely you mean 0.5%?

      .05% is not 1/2 of 1 percent - it is 1/20th of 1 percent

  •  Let's let the draft exempt status for the rich (4+ / 0-)

    expire also ....

  •  Outsourcing consultant (4+ / 0-)

    One of your best chances at getting a well-paying job is to become an expert in the field of shipping jobs overseas. I'm not saying this in a satirical way, this is the literal truth. Back in the 70's many of the top 2% were greedy jerks. Yet today's plutocrats make the rich folks of my youth seem like spiritual Franciscans. Today the sense of entitlement is staggering. The whole world exists only to serve them.

  •  Excellent diary (10+ / 0-)

    This is the argument I always have with people. The belief that if the corporate bigwigs were just given a little more money, then they would hire more people implies CEOs operate on a basis of either:
    a) Charity
    b) Blatant Stupidity;

    neither of which is justified.

    We lose the debate becuase we allow the debate to go on on those terms. Even Rachel Maddow last week when she had the woman from CNBC (forget her name), they kept talking about whether small business owners fell under the top 2%, and therefore whether those people would get tax breaks and then hire more people. Somehow the fact that having more money doesn't equal hiring more people gets completely left out fo the debate.

    It's the four pillars of the male heterosexual psyche. We like: naked women, stockings, lesbians, and Sean Connery best as James Bond.

    by RIP Russ on Sat Nov 20, 2010 at 12:30:13 PM PST

    •  Small business owners are not hiring because they (7+ / 0-)

      can't get loans.  Because of the business cycles(light in spring and heavy in fall), they need those loans to smooth out their cash flow.  Without them, they have to conserve cash and that means no hiring.  If you want to know what it really causing the jobless recovery.  

      IT IS THE BANKS...STUPID.

      "When fascism comes to America, it'll be wrapped in a flag and carrying a cross." Sinclair Lewis

      by lakehillsliberal on Sat Nov 20, 2010 at 04:06:25 PM PST

      [ Parent ]

    •  Whenever someone brings up small business owners (4+ / 0-)

      remind them that small business owners pay taxes only on the money that they take out of the business. Any revenues put back into the business (say, by hiring people) don't become part of the owner's personal income and therefore the owner doesn't pay any income tax on them.

      If a small business owner makes hiring decisions based on how much he can take out of the company, either we're talking about a very small business (say, going from a one-person to a two-person operation) or what's essentially a hobby. Neither scenarios are going to affect hiring on a national or even regional scale.

      Even sillier is the notion that if executives "get to keep more of their paychecks" they'll hire more people. CEOs don't pay their companies' employees out of their own salaries! There's a pseudo-rational argument that if CEO taxes are cut, then corporations can provide their CEOs with the same take-home pay by spending less money, which then becomes available for hiring lower-level people. The problem is that the world doesn't work like that; at the CEO level, the size of one's gross pay is a status symbol more than anything else and CEOs won't sacrifice it, even if it has no purely economic effect on them.

      The schools will probably teach kindergartners to play nice with everyone. — Will Phillips, on how marriage equality would affect education

      by ebohlman on Sun Nov 21, 2010 at 07:00:30 AM PST

      [ Parent ]

      •  Plus, if you own a business (0+ / 0-)

        how much of your salary can be expensed as business related? Automobile, clothing, education, etc. You can earn tens of thousands per year above 250k before you jump into that tax bracket.

        Or, you can place your spouse and kids on the payroll as consultants.

  •  Shorter answer... (2+ / 0-)
    Recommended by:
    Oh Mary Oh, radical simplicity

    ...ther are no job creators in the top 2% any more.

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Sat Nov 20, 2010 at 12:37:16 PM PST

  •  I'm leaving as marking comment. Want to (0+ / 0-)

    read this thoroughly when I'm not so tired.

    Looks good so far.  

    Kos Katalogue for the besstest stuff

    by maybeeso in michigan on Sat Nov 20, 2010 at 08:18:43 PM PST

  •  Let's just call a lie a lie (5+ / 0-)

    The whole idea that tax cuts to the wealthy creates jobs is just a convenient lie.  It goes like this:  The public wants jobs.  The rich want tax cuts.  The Republican politicians (and, alas, a handful of Demorats) need the votes of the public.  So they simply put the two together and make a false connection:  Give the rich tax cuts and you'll get jobs.  Repeat a big lie often enough and people start to believe it.

    So Scott Brown recently whined that Congress should get back to "jobs", and thus should a) extend the Bush tax cuts to everyone, and b) cut taxes more.  That's how it's done.  Repeat over and over, tax cuts create jobs.  It's bullshit, but it's politically useful.

    Too many Democratic politicians are too wedded to the Marquess of Queensberry rules to fight back.

  •  They so DON'T believe in their own idiotic meme (5+ / 0-)

    That they don't even bother to influence hiring numbers to try to skew the facts into supporting them. They don't care about jobs, they care about their money. I know you know, Steve Love.

    Thanks for writing this. Glad your diary was rescued, and thanks again to the Rescue Rangers!

    "The opposite of war isn't peace, it's CREATION." _ Jonathan Larson, RENT

    by BeninSC on Sat Nov 20, 2010 at 08:55:31 PM PST

  •  IIRC (reading from a few years ago), (1+ / 0-)
    Recommended by:
    radical simplicity

    small businesses create the bulk of the jobs across America (and most countries), not the mega-corporations. It is true that the mega-corps have been sucking up as many smaller companies that they can over the years, but there is still substantial job creation via small business — or would/will be once money starts being available again for those small businesses. (Note to banks: thanks so much for sitting on your assets...)

  •  Going to extremes (1+ / 0-)
    Recommended by:
    radical simplicity

    You can't save your way into wealth. You can't get rich by just cutting expenses. That only works if you have a working economy in the first place, one that's actually generating some kind of revenue.

    There's a saying the conservatives are conveniently leaving out of the conversation: You have to spend money to make money.

    And it has to be intelligent spending. Spending money on hookers and blow doesn't get you anything except a hangover and STDs. Spending money on wars of choice doesn't get you anything either (unless you're a defense contractor.)

    Spending money on schools, research, human capital, new technology - all of that is spending that creates jobs and revenue.

    To use another analogy, our economy is now running by the same logic that cut down all of the ancient forests that used to cover this land. Maximum profit in minimum time. Sustainable logging harvests trees at a rate that allows the forest to keep regenerating itself. The money doesn't come as fast or in as big chunks - but it doesn't have to stop if done right.

    We don't do that anymore because the people running the economy don't give a damn about the future. They figure they'll be gone before the bill comes due. Meanwhile, they'll continue to clear-cut everything in sight.

    Easter Island used to be covered with a dense forest typical of Pacific islands. The inhabitants cut it all down to the last tree. The difference between us and them is this: at least they left some weird statues behind. Lord only knows what will be left after the Masters of the Universe finish sucking every last nickel out of the country.

    "No special skill, no standard attitude, no technology, and no organization - no matter how valuable - can safely replace thought itself."

    by xaxnar on Sun Nov 21, 2010 at 12:37:27 AM PST

  •  Digestible sound bytes for last paragraph (3+ / 0-)

    So where do we go if this idea is bogus?  We go to what Paul Krugman and many other rational economics have been telling us in so many words:  (1) Private sector employment is driven by a number of factors but ultimately consumer demand.  (2) The surest way to increase consumer demand, when the private sector is in recession, is to increase the disposable income of the other 98% of income-earners through the purchase of goods and services by the public sector.  (3)  The greatest bang for our public sector bucks spend – even if they have to be borrowed – is to purchase things that are domestically produced and delivered by American citizens.  (4)  An economy can no more be stimulated to grow through austerity than milk production can be increased by cutting back on cow feed.

    Dems won't win this until the messaging puts the above in ADD-digestible sound bytes and 30-second ads, then bombards the air waves. An alternate to FreedomWorks and other conservative messaging machines is needed. Could this be what Soros was alluding to?

    There has never been a protracted war from which a country has benefited. The supreme art of war is to subdue the enemy without fighting. - Sun Tzu

    by OHeyeO on Sun Nov 21, 2010 at 05:17:04 AM PST

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