Nick Hanauer on consumers:
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 a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.
So when businesspeople take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around.
Anyone who’s ever run a business knows that hiring more people is a capitalists course of last resort, something we do only when increasing customer demand requires it. In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.
That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.
BOOM!!!
Can you proved a link to where this comment came from? Just curious to read the rest.
@Dan
see http://nick-hanauer.com/
Too bad he thinks raising taxes on the rich is the solution. Hint to Nick: that’s NOT the source of fiat currency.
Letter campaign to Nick, suggesting LOWER or no taxes on the poor? And higher income for the average American?
‘So when businesspeople take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around.”
Squirrels take credit for creating evolution? I’ve never once heard a squirrel do that. Or even admit to believing in evolution.
Consumers taking credit for creating jobs is a little like squirrels taking credit for creating the trees that grow the nuts that they eat. Eh – not so much.
And as Roger points out, this guy needs to read 7DIF.
I find it very interesting that the super-duper-pooper-scooper wealthy like this guy and Bill Gates’ father and Warren Buffett are so in favor of higher income taxes on the wealthy and on higher estate taxes as well. I think it’s not altruism that drives them, but selfishness. They’ve made their money already, and also prepared all of their trusts and foundations and tax-exempt investments with the help of their fancy pants lawyers and accountants, and what they really want to do is prevent other people from becoming as rich as they are. If you ever propose a wealth tax to these guys or propose getting rid of the charitable deduction (for either income or estate tax purposes), they would have a hissy fit.
@ESM,
“what they really want to do is prevent other people from becoming as rich as they are”
ESM, there were these 2 fisherman out in their boats, warren buffet in his yacht, and warren mosler in his yacht, and Jaws shows up about to eat them and thier boat, or was it orca the killer whale, or moby dick, well anyways Mosler starts cranking his engines up to flee and Buffett says you can’t outrun this killer fish, and Mosler says I don’t have to outrun him, I just have to outrun YOU and blasts away at 24 knots while buffet is eaten alive! LOL!
When the tax monster starts coming for these rich businessmen and hedge fund guys, they are gonna start turning on each other like you can’t believe!
Chuck Schumers Ex-Patriot act is just the tip of the iceberg.
@Save America,
It certanly makes more sense for the fish to each the Buffett. He’s richer too. I suspect our Warren is a bit too lean.
@ESM,
In fact, if squirrels did not bury nuts, acorns would all have been parasitised by acorn weevils and would not sprout. Squirrels are in fact responsible for the existence of forests, at least in part.
People should really look into biology before they make biological analogies.
@John Krehbiel,
“… at least in part.”
Yes, squirrels play a role in the ecosystem, and perhaps trees are dependent upon their nut burying behavior in part. That simply makes my analogy more apt, since I too believe consumers are a necessary part of the economy.
People should think things through before they post criticism.
@ESM,
I have been thinking it would be useful to distinguish between “organizers of production” and basically everyone else, like rentiers, ordinary labor and such.
“organizers of production” would include company management, technical desing, training, teaching and such, while not including those who receive passive income from their ownerships and those financial types whos job consist of trading paper wealth between themselfs all day, for example.
Raising taxes on the rich is not necessary for funding government, but it is useful for the goal of promoting greater income equality. In the context of price stability and full employment, higher taxes are ok as long as we increase spending by more.
@Dan Kervick, “higher taxes are ok as long as we increase spending by more.”
Has no one on this board heard of deadweight losses?
And often politicians want to raise taxes on one group in order to “pay for” benefits for some other group. What they miss is that these new benefits are so highly means-tested (i.e. they phase out as you earn more) that they end up raising marginal tax rates on two different groups of people: the people who are taxed and the people who receive the “benefits”!
@Dan Kervick,
A growing middle class relative to low and high income groups is of course desirable and highly conducive to a successful functioning democracy, but “income equality” per se seems like a utopian pursuit that seeks to achieve the objective via wealth re-distribution.
So regardless whether supply creates its own demand, or demand creates its own supply, the real objective should be productive economic growth because there are no socio-economic and/or political problems that this country faces that cannot be addressed with enough robust economic growth.
The truth may lie somewhere in the middle because while a well crafted tax cut will give consumers additional purchasing power, it also may incentivize entrepreneurs to put in the extra effort and take the risk to bring new products to market. Note that some of these products might be so new that previous existing demand did not exist except in latent form for in the eye of the entrepreneur. Bringing a new product or new production of an existing product to market is a gamble which might not take place on the margin if the entrepreneur does not believe the after tax return on investment is worth the risk.
@Ed Rombach, Yes, absolute income equality is impracticable and utopian. But dramatically reducing inequality and compressing the distribution curve is not, and can be approached through a variety of regulatory and fiscal policies.
Gross inequality is, in my opinion, economically wasteful, leading to a siphoning of national resources away from capital development, production and consumption into inert savings vehicles. It also undermines democracy and disempowers citizens.
Robust growth isn’t enough, I don’t believe. If the product of the growth is distributionally unbalanced, it sows the seeds of its own self-stultification by eroding the foundation of demand and building excessive household debt.
There are also issues of social choice here that have little to do with macroeconomics: questions about the value of social solidarity, mutual commitment and teamwork.
@Dan Kervick,
Dan – Not sure what you mean by “social solidarity, mutual commitment and teamwork”, but to me it has a collectivist ring to it. Speaking of which, both Adan Smith and Karl Marx were in agreement that human progress is predicated upon the accumulation of capital in ways that exponentially accelerate the potential for productive sectors of the economy to reproduce themselves. This suggests a fluid political economy with convection currents that provide uplift to those on the bottom of the economic totem pole as well as risk of loss to those at the upper end. Experiments in economic central planning have not produced good results in where that kind of management style has been applied.
@Ed Rombach,
Capital accumulation is necessary, but no one ever proved that it must be accumulated in a few hands.
Redistributive fiscal policy is no central planning of the whole market, which is what has failed in the past. It’s just adding constraints to the existing ones in which the market operates. I don’t think Sweden or the Netherlands have failed in any of the ways I think the US has.
@Dan Kervick,
@MamMoth:
“I don’t think Sweden or the Netherlands have failed in any of the ways I think the US has.”
Redistibution seems to work better in homogenous societies, just as it works better within families. Blood is thicker than water. With the influx of non-white, non-Christian immigrants to Sweden and Holland, resentments will build, and people there will begin focusing more on the deleterious effects of redistribution.
@ESM,
Which means redistribution is not an economic problem, but a political or philosophical one.
I agree those societies are more homogeneous, maybe because they have much smaller populations and they are older cultures.
The US on the other hand might be an optimal currency area, but not an optimal political area.
@Dan Kervick,
@MamMoTh:
For the record, I wasn’t saying that redistribution isn’t an economic problem. I think there are obvious inefficiencies that come with reditributive policies. I know that many progs have tried to argue that there are offsetting efficiencies as well, but I don’t find those arguments persuasive.
I was merely saying that in homogenous societies, people are more willing to accept the economic loss that comes with redistributive policies. In the end, it is always a political decision. But I do think there is a tradeoff between redistribution and average (or even median) wealth.
@ESM,
I also think there is a tradeoff between redistribution and average (or even median) wealth, and that too much or too little redistribution harms wealth creation. But I believe the US is in the too little camp.
@Dan Kervick,
US income inequality is just the finance sector. the finance sector rob america. reform finance as warren say, and income inequality problem go away.
also, we should let in fewer illiterate peasants. they make inequality problem worse too
@Dan Kervick, btw. there is no income inequality problem amongst Swedens or the Netherlands people who happen to live in usa
start by getting rid of unnecessary institutional structure like tsy secs that creates a lot of ridiculous maldistributions, etc
@Warren Mosler,
Nice to see this clarification by Warren
> “start by getting rid of unnecessary institutional
> structure like tsy secs that creates a lot of ridiculous
> maldistributions, etc
yet would paying interest on banking Reserves work as a T-Sec replacement … IF the Fed window wasn’t opened to each & every bank? AND if reserve requirements weren’t dropped to zero?
I may be forgetting some of the details already. Point is that the exacting details about replacing T-Secs get lost on most people.
That makes it problematic to suggest in a Congress lacking the adequate attention span, and even more problematic to execute.
Like all recursive tuning steps, if not done EXACTLY to tolerance limits, the tuning attempts make things dramatically worse, not better – as the entire, sordid history of the euro illustrates.
It’s amazing to see so many bright people delegate things to such incompetent policy buffoons. Any person able to follow assembly guidelines from Ikea could do a better job in Congress, as a Gov, or a Pres.
Maybe that should be a litmus test & a monthly continuing education requirement for going into politics? 🙂
yes
@Ed Rombach,
Ed,
How can you have a growing “Middle Class”
I would also say that “Expanding the Middle Class” is in the same category as Illusory superiority and has the same problem as Garrison Keillor’s Lake Wobegon – “where all the women are strong, all the men are good-looking, and all the children are above average.”
The Middle Class by definition is the middle two quartiles of the income/wealth distribution.
From American middle class
Hence my comment about the middle two quartiles
However, the article also says
Dante Chinni’s 2005 article is well worth reading
@Clonal Antibody,
Not to get bogged down in the definition of “middle class”, but if everybody in society gets 20% poorer then of course there is still a middle two quartiles of the income & wealth distribution, but a lot of people in that sample middle class are going to be feeling like they are downshifting from middle class into working poor or worse.
My point is that erosion of middle class living standards is corrosive to democracy.
I think it is helpful to compare socio-economic stages of development along an historic time line. For example, relatively primitive societies spend almost all of their efforts scratching a living out of labor intensive subsistence style farming. What we call profit in capitalist economies or social surplus in socialist economies is minimal providing little scope for capital intensive development. Once upon a time the U.S. economy was about 97% agricultural based whereas now agricultural activity only accounts for about 3% of the economy.
For human progress to occur, the accumulation of capital, regardless whether you want to call it profit or social surplus, must rise exponentially relative to the constant capital investment required to maintain the existing economic infrastructure along with the consumption the productive working population requires to reproduce itself at its existing potential for productive output. From this rising level of profit/social surplus comes the investment in the new technologies that unleash human labor power to take civilization to the next new level.
@Ed Rombach,
My comment really had to do with the fact that income/wealth inequality has to be dealt with head on, rather than by what I consider to be weasel phrases like “expanding the middle class”
The problem in a country like the US lies not so much in living standards (it is a problem at the bottom quartile) but in the disparity of political power and access that this inequality brings. It also shows up in coercive laws that are passed to preserve that very same access to power and influence.
@Clonal Antibody, Ed Romabach, former secretary of labor Robert Reich says we are F*c*ed! Literally, all of us! He sees all these college grads with no jobs and that causing the downfall of all of society and sinking all the superyachts. I watched this program last night about veterans coming back from the middle east with the national guard, engineers who had built new roads and bridges over there with lots of experience, working as pizza delivery boys! I can’t imagine why iraq has new roads, and our roads are crumbling, and we put experienced engineers to work as pizza delivery boys, we are F*c*k*d Indeed! Talk abour misallocation of resources! Stargate Atlantis Cities would have been nice.
http://www.businessinsider.com/the-commencement-address-that-wont-be-given-2012-5?utm_source=readme&utm_medium=rightrail&utm_term=&utm_content=2&utm_campaign=recirc
@Save America,
That is what you get when you think that there are no public goods, but only private ones – when you think there is no public property, but only private property – when you think there is no public purpose, but only private purpose – when you think that there is no society, but only the individual.
@Ed Rombach,
Warren, my comment appears to be stuck in moderation – it had two links
see it now?
What is valuable here is the point about how misguided it is to look to individual businesses to be ‘job creators’.
No firm is ever rewarded for adding to the headcount as such. Hiring workers is never an end in itself. Even as a means to more output it is often rejected, precisely by the most successful firms, in favor of increased productivity.
The management of a company is rewarded, instead, for making sales. And sales that are strong enough to call forth additional output are the ultimate drivers improvement in both productivity and employment. This is common sense.
When business people ask one another ‘How’s buiness?’ they never mean ‘How is your hiring?’ They mean ‘How are your sales’.
The overwhelming importance of sales, and hence of demand for whatever is for sale, is such a banal and inescapable fact of life in the day-to-day world of business, that it takes a truly significant amount of ‘continuing education’ in bad economic theory to make it seem like something exotic and dangerous.
@Amileoj, Yes, Amileoj, demand for what is for sale. What seems odd is that there appears to still be investor demand for CD swaps and various other derivative products, but not much demand for other things that better serve the public purpose. Why is that? Greed? Laziness? Gambling addiction? Karma?
I would point out that 300 years ago, consumers would have loved to purchase automobiles, iPhones, and antibiotics, but no one had invented or produced them. Consumers weren’t the problem. Someone had to invent these things and create a business to sell them at a reasonable price. And when that was done, there were consumers ready to trade for them. But they were there the whole time! Crediting the consumer is just silly.
MMT is good for understanding short-run fluctuations in the economy, but a lot of people here seem to believe that consumers are what create wealth over the long run.
And yes, some people demand derivative products. That’s because they can serve a legitimate hedging purpose. Would you like to explain to oil and gas producers that they should shut down their hedging programs? The blind hatred on this board of anything financial is just embarrassing sometimes.
@Coupon Clipper,
The demand is only there is people have the means to signal it to the production system.
And that means is possession of money. No money, no economic demand, no invention.
People 300 years ago may have wanted to fly, but they had to buy bread instead – so given that is what was *demanded* that is what was produced.
@Coupon Clipper, Neil, 90 million surplus chinese men probably are going to demand wives and girlfriends to soothe the beast within, how do we produce the 90 million women in time to meet this powder keg before it blows up? realdoll is a start I guess, will it be enough? From president clinton to Dominique strass khan to obama’s secret security staff, it seems there are not enough women in this world who like to be with a man, why can’t we produce more? Where is the failure in the system? Is this the best the greatest economic empire to ever exist can do? I have watched the violence against women congressional debates with great interest, so many unhappy men not getting thier needs met and blowing up with violence, the demand is LEGENDARY, but no supply.
@Coupon Clipper,
Save America said: “90 million surplus chinese men probably are going to demand wives and girlfriends to soothe the beast within.”
Let’s hope that when they come looking for wives and girlfriends that they’re not carrying guns.
@Coupon Clipper,
“Let’s hope that when they come looking for wives and girlfriends that they’re not carrying guns.”
Good thing that we elected our first gay president four years ago to show them a different way.
@Coupon Clipper,
@Neil:
“And that means is possession of money. No money, no economic demand, no invention.
People 300 years ago may have wanted to fly, but they had to buy bread instead – so given that is what was *demanded* that is what was produced.”
The detractors of this idiotic post understand the basic point that if there is no consumer demand (or government demand!) for a product, the product won’t be produced. And that the use of fiat currency is the best way of greasing the wheels of commerce so that consumers have the wherewithal to express their desires with the fewest unnecessary constraints, but your analogy is inapt.
First of all, there would have been a big market for manned flight 300 years ago, despite the fact that most of the world lived at subsistence level. There were rich people after all in control of countries fighting near constant wars (see, war is a good thing – it provides demand for new products!).
Second of all, if there was a demand for food, how come nobody invented industrial farming techniques? I mean the demand was there. Why didn’t those consumers get cracking and invent the jobs in industrial farming that the world needed?
@Coupon Clipper,
This is as stupid a post as I have seen on this site. demand without supply is useless, and the opposite is true as well. Each requires the other. If mere demand was enough, the Soviet Union would be around still. If supply were enough Borders would still be in business
In addition, the notion that the richest have the lowest rates and the most exemptions is ludicrous. It’s as if the writer believes that saying it will make it so.
Not helpful in advancing MMT or in educating anyone.
@Coupon Clipper,
@JCD:
Agreed. I’ll point out, however, that supply often creates its own demand out of thin air. Demand cannot do that to supply. It can only stimulate the production of supply for which the capacity already exists.
My favorite recent example is the iPad, especially since Apple is the only corporate behemoth that progessives like.
When the iPad was first unveiled, I admit I said “me wants.” But it received a decidedly lukewarm reception from analysts and product critics alike. Few people realized that they desperately needed one until it appeared. Same goes for a lot of recent stuff, including eBook readers and eBooks. The world of fashion is completely supply driven.
“My favorite recent example is the iPad, especially since Apple is the only corporate behemoth that progessives like.”
But that micro example falls foul of aggregation. To get an iPad, something else was foregone out of current income.
It was a distributional switch at the aggregate level in the short term.
So it wasn’t supply creating its own demand at all. It was Apple feeling that there was sufficient expected demand for something and enough spare disposable income in the system that they could attract to justify the investment. The investment spend then injects, in aggregate, the disposable income into the system that allows the expected demand to materialise.
That then leads to the virtuous cycle on which all industrial progress relies.
You get what you invest, as long as your expectations of the number of “I wants” turns out to be correct.
Its when you have entrepreneurs not seeing sufficient expected demand for products and services, or enough spare disposable income that can be attracted that you have problems. The risk reward trade off becomes too great to justify the investment. Then we’re in trouble.
So its a complicated interaction of demand, supply and the expectations of both that triggers the necessary investment – which is what really allows the product or service to succeed.
@Coupon Clipper,
@Neil:
“To get an iPad, something else was foregone out of current income.”
That’s not true. People could have dis-saved to acquire an iPad. In fact, revolutionary new products can have a significant impact on helping the economy climb out of a recession.
Hadn’t thought about it before, but perhaps the Great Depression didn’t really end with WWII. Perhaps it ended with the explosion of consumer goods that were created out of the technologies that had been developed but not used for producing non-military stuff.
But in general I agree with the mechanisms you describe.
@Neil Wilson,
But that micro example falls foul of aggregation. To get an iPad, something else was foregone out of current income.
A better example is the iPhone (and Samsung’s Galaxy), and the effect they had on Research in Motion and Nokia.
@Coupon Clipper,
@MamMoTh:
That’s a different effect. iPhone and Blackberry are competing products, and the iPhone is better. You don’t need both. Neil was asserting that the sale of an iPhone would make it less likely for that consumer to buy, say, a refrigerator, even though he continues to need one.
I claim that this isn’t necessarily true either. If the consumer thinks the iPhone will improve his life dramatically (and maybe even make him more productive to boot), he will be comfortable going into debt to acquire it. Revolutionary products can spur private credit expansion, all by their lonesome.
different points entirely
Misguided. Evolution didn’t create the squirrel. If consumers don’t have anything worthwhile to buy, they won’t buy it. Consumers inspire, but do not create, interesting things to buy. Circle of life is certainly correct, but SOME businesses do create jobs.
@Vincent,
You guys are confused about both evolution & creation.
“Evolution” isn’t some distinct lab that churns out specific products for testing. The causality chain is very drawn out, both in biology & the tiny segment of it that we call market economics. They all run together.
An evolutionary process creates the ability for squirrel-like critters to sense a niche to exploit, and the same process creates the ability for consumers to sense the need for various product niches. The same squirrels/consumers compete to provide options which the rest of the squirrels/consumers select from.
The process of creation has an incredibly long tail. There’s no ownership of it at any distinct point.
It is, however, operationally useful for Warren to point out that the general direction of the causality chain is from prior to emerging. Demand for more options drives invasion of new niches & product niches. With insufficient demand, it doesn’t matter how much adaptive value a new product offers. There won’t be people to purchase it, because the aggregate is contracting instead of expanding.
@roger erickson
I do know the difference. I was merely pointing out that the writer (not Warren) apparently does not.
Of course, what you say about demand is obviously correct; however, if there is nothing worthwhile to buy, or if people realize (correctly)they don’t actually need most of the junk that’s for sale, demand will be less, no matter how much money you throw out there for people to use. Rather, they will pay down their debt, as many have done.
@Vincent,
“Of course, what you say about demand is obviously correct; however, if there is nothing worthwhile to buy, or if people realize (correctly)they don’t actually need most of the junk that’s for sale, demand will be less, no matter how much money you throw out there for people to use. Rather, they will pay down their debt, as many have done.”
That is not true, after saving enough people will consume because there is nothing else to do with money. You either save it or spend it. And saving desires will get satisfied.
We don’t need most of the junk we buy anyway, but we buy it nonetheless, just because can afford it. Production volumes are not determined by how much we need more stuff but by how much we want to work and by doing so feel that we are doing useful thigs.
@roger erickson,
Did consumers say to Steve Jobs–we need an Iphone? No, Steve Jobs said to consumers–here’s the Iphone. And the consumers bought and bought.
I’m not saying Nick Hanauer’s argument is completely wrong, but it sounds to me like the cardiologist who says the heart is the most important organ in the body. Tell that to the liver and kidney.
@Vincent, You’re re-proving your own confusion. The origin of the GUI goes back way beyond Apple or Steve Jobs.
http://en.wikipedia.org/wiki/History_of_the_graphical_user_interface
Everything post that was incremental delivery, based on existing demand, AND available purchasing power.
Apple/Jobs created lots of things they had to trash for lack of demand. Jobs didn’t create jobs, just helped fill in one part of the supply chain.
@Vincent,
I think you’re missing my point from the beginning. Without consumers there would not be producers, and vice-versa. In the Soviet Union, they had plenty of demand, and enough money for the average person, but they had nothing to spend it on.
@Vincent,
?? Then I’m glad we agree that you were overstating the balance in your original statement. Funny how it often turns out that way.
Semantics is a continuous gradient. 50% of the time (or more), what authors are thinking when they write something is not exactly what audiences perceive is being said, at the time they’re listening.
It pays off to be careful and exact in what you mean to say … in those instances where it really is important.
This is sort of like trying to find the beginning of the circle but I think its clear to most people that what we are experiencing in aggregate RIGHT NOW is lots of excess capacity. So excess capacity must either be sold or destroyed. How do you sell it? Find people with money to buy it.
Using an analogy with human physiology, usually our acid base regulatory mechanism works beautifully with the kidneys, lungs and blood bicarbonate system working in tandem to keep our pH at 7.40. Any of the three can go out of whack slightly and the other two compensate for a while to keep our pH normal. Prolonged imbalance leads to an in ability of either the lungs, kidneys or blood to make up the difference. They are not “designed” to operate out of range for prolonged periods without serious adjustments which affect overall health. In extreme circumstances doctors must intervene and add whats missing or remove whats building up (or both).
I see the supply /demand question similarly in that they work in tandem til they dont, and the last thirty years we have operated under the notion (false I believe) that the supply side was the most important to take care of. Not just most important but the only side that mattered. How this came about is the subject of much academic discussion but it boils down to ( in my view) increased political power of “suppliers” and diminishing political power of demanders (or workers). So AT THIS TIME I believe Mr Hanauer is correct, which really is all he is saying. The discussion has been about what to do right now and we are not lacking in 1) Extra money (money not already buying something) 2)Industrial capacity 3) Willing and able workers
What we have too much of is private debt. Money owed to banks for previous activity so present activity is suffering. Deliberately making it harder for people to satisfy their prior debts (by choking of UI payments, lowering wages and laying off public employees) is akin to a doctor putting a drinking straw in a patients mouth and telling them to breath through that while they are hyperventilating.
@Greg,
I realized my last post was incomplete
” akin to a doctor putting a drinking straw in a patients mouth and telling them to breath through that while they are hyperventilating”
The hyperventilating is a primary way a person adjusts their pH, thus the straw would make that harder if not impossible
@Greg,
Agreed. But where to draw the line? Who exactly should pay a higher tax. Warren says repeatedly our taxes are too high relative to services received.
@vincent,
Vincent I dont necessarily think that anyone SHOULD pay a higher tax. An “in paradigm” world wouldnt increase taxes right now on anyone. An in paradigm world would see that consumers are the ones having trouble and make it easier on them by lowering their taxes.
In addition, we would recognize that we are not dependent on rich peoples savings as our “source” of new investment and be looking for ways to reduce the cost of their returns.
Ive said repeatedly however that as long as we are functioning in this faulty paradigm of “paying” for our budget with taxes then it is the rich, those making $500,000 or above who need to pay more. They are the only ones with the capacity.
My point was less about taxation though and more about Hanauers point that it is consumer demand that is needed now to create more work opportunities.
The lack of an income tax other that FICA on such a large portion of the population is the cause of so many economic and political problems. It is human nature to want what others who have more than you have. It is also human nature to support tax increases to punish those who have more than you. Too many people in the current political environment, and apparently on this website, support higher taxes for all the wrong reasons. If all Americans were in the same boat such that the government couldn’t play us off each other, nobody would be supporting a tax hike now. Taxing the rich at this point weakens our economy even further. It reduces reserves in the banking system, reduces aggregate demand, and undermines investment. Increasing taxes so that the supply of Treasury securities declines doesn’t help anyone.
i also see taxing the rich as the result of flawed institutional structure that causes them to be rich in the first place. Like having a massive treasury securities industry.
@WARREN MOSLER, And thank God for that structure!
@WARREN MOSLER,
You keep mentioning a flawed institutional structure that favors the rich. But the only concrete example I have seen you give is the Treasury market, which is obviously unnecessary, but is not without some benefit (it’s nice to have a risk-free yield curve, for example).
Can you a) quantify how much the existence of the Treasury market benefits the rich and/or b) give a couple more examples of things you would change? And please don’t write “read the proposals on this website” or “read 7DIF.” Just give me the examples in a reply, because a lot of the stuff in the proposals is simply a better way (in your opinion) of doing things, not eliminating a specific subsidy for the rich.
there is no benefit to having the risk free tsy curve that I know of. especially with a permanent 0 rate policy.
heck, when I first started the Tel 7 1/8th were the ‘benchmark’ for pricing and it all worked just fine.
The treasury market creates an entire breed of ‘the rich’ that wouldn’t otherwise exist.
my ‘narrow banking’ proposals eliminate remaining large chunks of the financial sector.
and not letting publicly insured pension funds buy equities eliminates a bunch more
as does my healthcare proposal
and my real estate tax proposal
etc.
Within the income inequality argument, it is important to recognize the following:
1) Closing the gap from the bottom up is preferable to closing the gap from the top down. If our poor have a standard of living greater than the middle class in most other countries, I don’t care how much the top 1% have. In the old Soviet Union, there was a great deal of income equality. Is that what some here prefer?
2) There is constant turnover at the top and the bottom and the measures of income inequality don’t capture this fact. To truly determine the gap, it would be more relevant to compare how the rich of 20 years ago have done relative to the poor of 20 years ago.
@Ivan,
“Closing the gap from the bottom up is preferable to closing the gap from the top down”
I agree.
“If our poor have a standard of living greater than the middle class in most other countries, I don’t care how much the top 1% have”
The problem with that is that political system in the US is such that money rules. So, once too much income goes into too few hands, so does the power, and then the power is used to pump even more income into those few hands, and so it goes, until the system becomes highly unstable.
“In the old Soviet Union, there was a great deal of income equality. Is that what some here prefer?”
The problem with Soviet Union was not greater income equality (which by the way did not prevent some people getting very rich by doing things outside the system) – but total restriction of personal initiative and private business practices. If they just relaxed that, and still kept the social safety net and state industries (and attempted income equality with taxing, instead of direct wage control – which introduced bribe culture) – it would be a rich and happy country by now. Something between Sweden and China.
Soviets for all their faults had built quite good lifestyle for millions of people – it was safe – relatively stress free, with free and good education and healthcare. They build cities everywhere that were planned for living and that made American suburbs look like rural backward country (destined to become slums with appreciation of oil).
you are entitled to vote in line with your own self interest. no need to be defensive and compromise your reputation for logical thinking. 😉