Recently, Speaker of the House John Boehner commented on President Obama’s call to increase government revenues by saying that increasing taxes on “job creators” would be the wrong thing to do at this time. He might be half right.
It is possible that in our current economic climate, increasing taxes on the individuals who are responsible for creating jobs could further slow the already dismal job market. On this point, I am in agreement with Rep. Boehner. Where I disagree is on exactly who the job creators are.
Rep. Boehner seems to think that it is the wealthy who create jobs. He believes that the wealthy are the individuals who start or expand businesses and therefore it is the wealthy who are primarily responsible for job creation. This is where Rep. Boehner is incorrect.
A Wall Street Journal article by Robert Frank in August of 2010 could be used to make Rep. Boehner’s point about job creation. The article titled “U.S. Economy Is Increasingly Tied to the Rich” talks about the the increasing percentage of consumer spending coming from the wealthiest 20% of Americans. The statistics used by Mr. Frank show that the wealthiest 20% of Americans are responsible for 37% of the consumer spending in the US, while the bottom 80% of earners are only responsible for 39.5%. Spending is needed for job creation, and the percentage of consumer spending attributed to the wealthy has been increasing. However, saying that the wealthy are the primary job creators because of this increase is problematic. The first problem is that this recent spending surge has focused on luxury goods. Not food. Not diapers. Not economy cars. Not prescription medication. Much of this spending is on items, that while they are popular today, might not be tomorrow if the economy takes a turn for the worse and the wealthy decide to do a bit of belt tightening. This means that the jobs created by this spending are not terribly stable and could easily vanish and make our job troubles even worse.
The second problem is that even if the top 20% of earners account for 37% of our spending, they don’t make up the majority. The bottom 80% of earners are still spending more than the wealthy even though many of them are now unemployed or under employed, even though their real incomes have been dropping for years, and even though they find themselves caught up in a difficult credit market. Every time one of us in the bottom 80% goes to the grocery store we help create jobs. Every time one of us buys a new Ford or GM car we help create jobs. Every time one of us has our roof repaired we help create jobs. We may not be creating jobs at Tiffany’s which may make it hard for people like Newt Gingrich to understand how important we are for the economy. However, we, the poor and the middle class, are the real job creators. We create jobs in car factories and insurance companies. We create jobs in grocery stores and in construction. We even create jobs in offices and banks. The thing to remember is that it is the poor and the middle class still spend the greatest share and we still create the most jobs even though our wallets are running empty while corporations sit on piles of cash they refuse to spend.
We live in a political culture where money talks and politicians listen. For years the wealthy have received one break after another even though they aren’t the ones that need a break. Well it is our turn. If you want to see this economy turn around, we have to realize that trickle down is a fallacy. Our economy has always worked in more of a trickle up orientation. The poor and the middle class are the true creators of wealth, they just happen to also be the groups least likely to benefit from the wealth they create. Let’s start taking care of the people who really drive our economy. When the poor and the middle class find their economic standing on the rise, the wealthy will benefit as well.
In the mean time, we need to work on our budget deficit, and if anyone can afford to help with our revenue problem, it is the wealthy. After all, the rest of us have been boosting their revenue streams for years.