Tuesday, June 12, 2012

American Idle: The Failure of Austerity and the Myth of the Job Creators

The May jobs report came out recently and the findings are not pretty. The U.S. job market added an anemic 69,000 jobs last month. The unemployment rate increased to 8.2 percent in May, from 8.1 percent in April. Even worse, the rise in unemployment negated most of the gains made earlier this spring. As the report notes, this is the third consecutive month in which job growth remained stagnant. Put more bluntly, the economy still sucks.

A few observations in light of these numbers:

First off, the Republicans’ insistence on maintaining tax-cuts for the wealthy, slashing state social services programs, and focusing exclusively on the federal deficit have proven an abject failure. President Obama’s economic stimulus package, on the other hand, was too small, and too timid.

As economic philosopher John Maynard Keynes understood, curbing spending during a recession is not the way out of an economic crisis. Quite the reverse, Keynes in his seminal work, The General Theory of Employment, Interest and Money advocated increased government spending during an economic slump in order to stabilize the economy and mitigate the suffering of the unemployed.

And austerity has failed overseas as well. The French showed their disdain for the country’s harsh austerity measures by giving conservative President Nicolas Sarkozy the boot. Greece now seems poised to do the same to their austerity-pushing government. Guardian writer, Will Hutton (6/02/2012) calls the right-wing austerity measures which have crippled the countries of the Eurozone, “one of the biggest financial and intellectual mistakes ever made.”

Second, we need to retire this bogus concept that wealthy business owners create jobs.

This myth has been so hammered into the American public (thanks, in no small part, to celebrated right-wing author Ayn Rand) it is now as readily accepted as other “truisms” like “The media is liberal,” or “The ‘surge’ in the Iraq war worked.” Indeed, during a recent “debate” between Maine Republican candidates for the U.S. Senate, this fiction of the rich as society’s “job-creators” was repeated ad nauseam by every candidate. 

Business owners do not create jobs--consumer demand does. It’s pretty simple, really. If a local business (let’s say, Coffee by Design) is very busy, and has more customers (or demand) than its small staff can adequately serve, the owner will hire more people in order to keep up with the increased demand. But if the store is going through a particularly slow period (i.e. a lack of consumer demand), and the owner finds too many of his employees sitting around gossiping, or staring at the clock, he may have to let some people go.

Either way, Mr. Coffee by Design is not going to just use his money to hire people willy-nilly, for no reason. He is not, in other words, creating jobs out of his own benevolence. There has to be a demand. Therefore, the rich do not create jobs, but consumers like you and I do.

And contrary to the protests of free-market conservatives, business tax-rates do not affect this basic logic of consumer-capitalism in the least bit. For instance, conservatives will often argue businesses are forced to cut staff in order to “cover” their taxes. Not only is this nonsense, but it seriously calls into question its proponents’ understanding of remedial supply-side economics. Quite simply, taxes have absolutely nothing to do with hiring. The two are not at all related.  

A business only pays taxes when it is making a profit. If your business is not profitable, then your taxes should be the least of your worries. (Then, of course, there are large corporations that are immensely profitable and avoid paying taxes entirely, but, alas, that’s a topic for another day.)  

Taxes are determined by subtracting your costs from your revenue. Any profits you have made after covering your costs are considered “taxable income.”

As finance blogger, Dave Johnson explains in a piece for Truth Out (5/14/2011):

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!          

As it is, in the last half century businesses have done more to destroy jobs, and prevent overall job growth. In an effort to maximize profits, businesses and large corporations have gone to great lengths to reduce jobs through outsourcing and mega mergers that result in mass layoffs. According to Jeff Clements, author of Corporations Are Not People, “By 2009, fewer Americans worked in manufacturing jobs than at any time since 1941.”

So, even ignoring the basics of supply-side economics, the mantra of “the rich create jobs,” is not true in practice. And yet, not once during the aforementioned Republican debate, did MPBN host, Jennifer Rooks challenge any of the candidates on the accuracy of this baseless talking point.

Then again, many of Rooks’ peers in the corporate media seem to view the very concept of job creation as a joke. And Obama and Mitt Romney remain exclusively focused on the “middle-class,” ignoring the plight of the poor and unemployed. Rather than focusing on job creation, Romney claimed over the weekend the country does not need any more teachers, firefighters and police officers.

Like I said earlier, the economy still sucks. And given the country’s austerity-obsessed, free-market zealots in Washington and the media, things are not likely to improve any time soon.

No comments:

Post a Comment