Actually, “the Rich” Don’t “Create Jobs,” We Do May 14, 2011Posted by rogerhollander in Economic Crisis, Labor.
Tags: Adam Smith, capitalism, dave johnson, democracy, economics, job creation, jobs, karl marx, labor, labour, roger hollander, taxation, taxes
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Roger’s comment: the article below correctly debunks the false notion that capital creates jobs; it is a philosophy that is aggressively promoted by … you guessed it … those who own and control capital. Interestingly, it was not Karl Marx but rather the founder of capitalist ideology, Adam Smith, who first developed the “the labor theory of value,” that is, the notion that new value is created by human labor. Marx built upon Smith’s work to show that capitalists who employ living labor skim off from the sale of goods and services what they call profits, what Marxists call “surplus value.” Since all value is created by labor, this skimming off is nothing less than pure and simple theft. But what, you ask, of the poor capitalist who takes the risk of starting a business, using his capital to employ workers? The answer is that the capital owned by the capitalist belonged to the workers who created the value in the first place, what Marx called “dead labor.” He explained that the present era of capitalist relations in production was ushered in by the “primitive accumulation” of capital.
Here is how he explained it: “The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalled the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief moments of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlandsfrom Spain, assumes giant dimensions in England’s Anti-Jacobin War, and is still going on in the opium wars against China, &c. The different moments of primitive accumulation distribute themselves now, more or less in chronological order, particularly over Spain, Portugal, Holland, France, and England. In Englandat the end of the 17th century, they arrive in a systematic combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g., the colonial system. But they all employ the power of the State, the concentrated and organised force of society, to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with the new one. It is itself an economic power.” (Karl Marx, Capital, Vol. ?, Chapter 31).
Adam Smith saw it differently: “In the midst of all the exactions of government, capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress ofEnglandtowards opulence and improvement in almost all former times. …
It is the highest impertinence and presumption, therefore, in kings and ministers, to pretend to watch over the economy of private people, and to restrain their expense. … They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.” (Adam Smith, Wealth of Nations, Book II, Chapter II [cited in Toronto Globe and Mail, April 5, 2008])
It is no wonder that the fat cat capitalists and their running dog Republican pimps love Adam Smith’s way of looking at the picture. Unfortunately, it is pure unadulterated BS.
You hear it again and again, variation after variation on a core message: if you tax rich people it kills jobs. You hear about “job-killing tax hikes,” or that “taxing the rich hurts jobs,” “taxes kill jobs,” “taxes take money out of the economy, “if you tax the rich they won’t be able to provide jobs.” … on and on it goes. So do we really depend on “the rich” to “create” jobs? Or do jobs get created when they fill a need?
Here is a recent typical example, Obama Touts Job-Killing Tax Plan, written by a “senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth,”
Some people, in their pursuit of profit, benefit their fellow humans by creating new or better goods and services, and then by employing others. We call such people entrepreneurs and productive workers.
Others are parasites who suck the blood and energy away from the productive. Such people are most often found in government.
Perhaps the most vivid description of what happens to a society where the parasites become so numerous and powerful that they destroy their productive hosts is Ayn Rand’s classic novel “Atlas Shrugged.” …
Producers and Parasites
The idea that there are producers and parasites as expressed in the example above has become a core philosophy of conservatives. They claim that wealthy people “produce” and are rich because they “produce.” The rest of us are “parasites” who suck blood and energy from the productive rich, by taxing them. In this belief system, We, the People are basically just “the help” who are otherwise in the way, and taxing the producers to pay for our “entitlements.” We “take money” from the producers through taxes, which are “redistributed” to the parasites. They repeat the slogan, “Taxes are theft,” and take the “money we earned” by “force” (i.e. government.)
Republican Speaker of the House John Boehner echoes this core philosophy of “producers” and “parasites,” saying yesterday,
I believe raising taxes on the very people that we expect to reinvest in our economy and to hire people is the wrong idea,” he said. “For those people to give that money to the government…means it wont get reinvested in our economy at a time when we’re trying to create jobs.”
“The very people” who “hire people” shouldn’t have to pay taxes because that money is then taken out of the productive economy and just given to the parasites — “the help” — meaning you and me…
So is it true? Do “they” create jobs? Do we “depend on” the wealthy to “create jobs?”
Demand Creates Jobs
I used to own a business and have been in senior positions at other businesses, and I know many others who have started and operated businesses of all sizes. I can tell you from direct experience that I tried very hard to employ the right number of people. What I mean by this is that when there were lots of customers I would add people to meet the demand. And when demand slacked off I had to let people go.
If I had extra money I wouldn’t just hire people to sit around and read the paper. And if I had more customers than I could handle that — the revenue generated by meeting the additional demand from the extra customers — is what would pay for employing more people to meet the demand. It is a pretty simple equation:
you employ the right number of people to meet the demand your business has.
If you ask around you will find that every business tries to employ the right number of people to meet the demand. Any business owner or manager will tell you that they hire based on need, not on how much they have in the bank. (Read more here, in last year’s Businesses Do Not Create Jobs.)
Taxes make absolutely no difference in the hiring equation.
In fact, paying taxes means you are already making money, which means you have already hired the right number of people. Taxes are based on subtracting your costs from your revenue, and if you have profits after you cover your costs, then you might be taxed. You don’t even calculate your taxes until well after the hiring decision has been made. You don;t lay people off to “cover” your taxes. And even if you did lay people off to “cover’ taxes it would lower your costs and you would have more profit, which means you would have more taxes… except that laying someone off when you had demand would cause you to have less revenue, … and you see how ridiculous it is to associate taxes with hiring at all!
People coming in the door and buying things is what creates jobs.
The Rich Do Not Create Jobs
Lots of regular people having money to spend is what creates jobs and businesses. That is the basic idea of demand-side economics and it works. In a consumer-driven economy designed to serve people, regular people with money in their pockets is what keeps everything going. And the equal opportunity of democracy with its reinvestment in infrastructure and education and the other fruits of democracy is fundamental to keeping a demand-side economy functioning.
When all the money goes to a few at the top everything breaks down. Taxing the people at the top and reinvesting the money into the democratic society is fundamental to keeping things going.
Democracy Creates Jobs
This idea that a few wealthy people — the “producers” — hand everything down to the rest of us — “the parasites” — is fundamentally at odds with the concept of democracy. In a democracy we all have an equal voice and an equal stake in how our society and our economy does. We do not “depend” on the good graces of a favored few for our livelihoods. We all are supposed to have an equal opportunity, and equal rights. And there are things we are all entitled to — “entitlements” — that we get just because we were born here. But we all share in the responsibility to cover the costs of democracy —
with the rich having a greater responsibility than the rest of us because they receive the most benefit from it.
This is why we have “progressive taxes” where the rates are supposed to go up as the income does.
Taxes Are The Lifeblood Of Democracy And The Prosperity That Democracy Produces
In a democracy the rich are supposed to pay more to cover things like building and maintaining the roads and schools because these are the things that enable their wealth. They actually do use the roads and schools more because the roads enable their businesses to prosper and the schools provide educated employees. But it isn’t just that the rich use roads more, it is that everyone has a right to use roads and a right to transportation because we are a democracy and everyone has the same rights. And as a citizen in a democracy you have an obligation to pay your share for that.
A democracy is supposed have a progressive tax structure that is in proportion to the means to pay. We do this becausethose who get more from the system do so because the democratic system offers them that ability. Their wealth is because of our system and therefore they owe back to the system in proportion. (Plus, history has taught the lesson that great wealth opposes democracy, so democracy must oppose the accumulation of great, disproportional wealth. In other words, part of the contract of living in a democracy is your obligation to protect the democracy and high taxes at the top is one of those protections.)
The conservative “producer and parasite” anti-tax philosophy is fundamentally at odds with the concepts of democracy (which they proudly acknowledge – see more here, and here) and should be understood and criticized as such. Taxes do not “take money out of the economy” they enable the economy. The rich do not “create jobs, We, the People create jobs
Tags: ge, General Electric, immigrants, mike elk, roger hollander, taxation, taxes, undocumented
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Our guest blogger is Mike Elk, a freelance labor journalist and third generation union organizer based in Washington, D.C. You can follow him for more updates on twitter at @MikeElk.
This past month, there was much outrage over the fact that General Electric, despite making $14.2 billion in profits, paid zero U.S. taxes in 2010. General Electric actually received tax credits of $3.2 billion from American taxpayers.
At the same time that General Electric was not paying taxes, many undocumented immigrants, who are typically accused of taking advantage of the system while not contributing to it by many on the right, paid $11.2 billion in taxes. A new study by the Institute for Taxation and Economic Policy shows that undocumented immigrants paid $8.4 billion in sales taxes, $1.6 billion in property taxes, and $1.2 billion in personal income taxes last year. The study also estimates that nearly half of all undocumented immigrants pay income taxes.
ITEP bases its figures of what immigrants pay taxes based on the following factors:
- Sales tax is automatic, so it is assumed that unauthorized residents would pay sales tax at similar rates to U.S. citizens and legal immigrants with similar income levels.
- Similar to sales tax, property taxes are hard to avoid, and unauthorized immigrants are assumed to pay the same property taxes as others with the same income level. ITEP assumes that most unauthorized immigrants are renters, and only calculates the taxes paid by renters.
- Income tax contributions by the unauthorized population are less comparable to other populations because many unauthorized immigrants work “off the books” and income taxes are not automatically withheld from their paychecks. ITEP conservatively estimates that 50 percent of unauthorized immigrants are paying income taxes.
While it’s impossible to estimate exactly how much in taxes undocumented immigrants paid, it is clear that undocumented immigrants are paying more taxes than General Electric, which paid absolutely nothing. This raises the question of who really is leaching off the American system: undocumented immigrants who pay their taxes and are typically too afraid of being deported to receive public assistance or corporations that pay nothing while receiving billions in credits
Ditch the Smooth Transition: The People Voted for Change November 16, 2008Posted by rogerhollander in Economic Crisis.
Tags: $700 million Wall Street bailout, Add new tag, Bailout failure, bank mergers, banks, Barack Obama, Bush, deregulation, Federal Reserve, financial institutions, Henry Paulson, Larry Summers, naomi klein, Rahm Emanuel, renewable energy, roger hollander, taxation
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Friday 14 November 2008, www.truthout.org
by: Naomi Klein, The Guardian UK
President-elect Barack Obama’s selection of Rahm Emanuel as his Chief of Staff sends a reassuring message to Wall Street. Naomi Klein believes Obama’s selection of Emanuel is part of a “market-coddling logic” that could undo the public’s vote for change. (Photo: Getty Images)
Instead of accepting the corrupted bail-out and reassuring Wall Street, Obama’s team must start doing the hard stuff now.
The more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bail-out is not merely incompetent: it is borderline criminal.
In a moment of high panic in September, the US treasury pushed through a radical change in how bank mergers are taxed – a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140bn in tax revenue, legislators found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that “[the] treasury had no authority to issue the [tax change] notice.”
Of equally dubious legality are the equity deals the treasury has negotiated with many of the banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals: “Any use of these funds for any purpose other than lending – for bonuses, for severance pay, for dividends, for acquisitions of other institutions … is a violation of the act.” Yet this is exactly how the funds are being used.
Then there is the nearly $2 trillion that America’s central bank, the Federal Reserve, has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg news service believes this secrecy violates the law and has filed a federal suit demanding full disclosure.
Yet the Democrats are either openly defending the administration or refusing to intervene. “There is only one president at a time,” we hear from Barack Obama. That’s true. But every sweetheart deal the Bush administration makes threatens to hobble Obama’s ability to make good on his promise of change. To cite just one example, that $140bn in missing revenue is almost the same sum as Obama’s renewable energy programme. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.
Yes, there is only one president at a time, but that president needed the support of powerful Democrats – including Obama – to get the bail-out passed. Now that it is clear the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right, but a grave responsibility, to intervene forcefully.
I suspect the real reason the Democrats are failing to act has less to do with presidential protocol than with fear: fear that the stockmarket, which has the temperament of an over-indulged two-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the market to bet against those banks. Question the legality of equity deals, and the same thing will happen. Challenge the $140bn tax giveaway and mergers could fail.
More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for “change,” the mantra abruptly shifted to “smooth transition” and “continuity.”
Take Obama’s choice for chief of staff. Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked if Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.
This same market-coddling logic should, we are told, guide Obama’s selection of treasury secretary. Fox News and MNSBC explained that Larry Summers, who held the post under Clinton, is the man “the Street would like most.” Let’s be clear why. “The Street” would cheer a Summers appointment for the same reason the rest of us should fear it: because traders will assume that this champion of deregulation will offer a transition from Henry Paulson so smooth that we will barely know it happened. On the other hand, someone like Sheila Bair, the chairman of the banks’ insurer of last resort, the Federal Deposit Insurance Corporation, would spark fear on the Street – for all the right reasons.
One thing we know for certain is that the market will react violently to anyone likely to impose serious regulation, invest in people, and cut off the free money. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent poll found 60% strongly favour “stricter regulations on financial institutions,” while just 21% support aid to financial companies.)
There is no way to reconcile the public’s vote for change with the market’s foot-stomping for more of the same. Any moves to change course will be met with market shocks. The good news is that once it is clear the new rules will be applied across the board, fairly, the market will stabilise and adjust. Furthermore, the timing for this turbulence could not be better. Over the past three months, we’ve been shocked so often that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that predates him, or fault him for honouring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories will fade.
When transferring power from a functional, trustworthy regime, everyone favours a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign.