I continue to be amazed by people who believe that lowering the top tax rate will result in jobs being created. I understand why the congressional Republicans support that idea -- they've been bought and sold by the giant corporations, and they are just trying to fatten the bank accounts of their corporate masters. What amazes me is that a lot of poor, working-class, and middle-class voters have been fooled into believing this is true.
This idea has been supported by the Republican Party for many decades, and it has never worked. It didn't work in the 1920s -- it just made the rich much richer and everyone else poorer, and led to the Great Depression. That disaster woke people up, and for about the next 50 years they supported a saner (and fairer) economic policy. But the Republicans are nothing if not persistent, and in 1980 they realized most people did not remember what that policy had wrought in the 1920s -- so they again began to preach it (calling it "trickle-down economics this time), and they convinced many people it would work this time.
The idea is that if we lower taxes on the rich and the corporations, they will spend that extra money to create new jobs (which will benefit all Americans). It's a silly idea. It didn't work before the Great Depression, and it's not working now. The Bush administration followed this "logic" and lowered taxes for the rich and corporations to the lowest they have been since World War II. And once again, it didn't work. It made the rich much richer, while the job creation during the Bush administration was the lowest of any presidency in modern times -- and it led to the most serious recession since the Great Depression.
Compare that to the 1950s, a time when the economy was booming and huge numbers of jobs were created -- and the top tax rate was 90%. It should be obvious to any thinking person that the top tax rate has nothing to do with job creation. All it does is make the rich richer.
Why is this true? Because it is just good business to hire only the number of employees a business needs to make its product or provide its service. Hiring more just cuts into the business profits. Corporations and rich people know that (which is why they didn't increase hiring when Bush cut their taxes). They just hope you and I don't realize that.
So, what does create jobs? The only thing that creates new jobs is an increase in demand for the goods/services of businesses. When demand goes up, businesses hire to meet that demand (and when demand decreases, they lay off workers they no longer need). How can we increase demand? It certainly won't be done by giving more to the rich -- since they already have enough to buy whatever they want to buy.
Demand is only increased when the bulk of the population (the 80% to 90%) has more money to spend. Their spending increases demand, and that increases the hiring of workers (so businesses can meet that demand and increase their profits). And this can be done in numerous ways -- raising the minimum wage, strengthening unions, tying CEO compensation to a percentage of worker wages, stopping the offshoring of U.S. jobs, providing more help for the poor and disadvantaged, lowering taxes for the working and middle classes, etc.
The one thing that won't work is the lowering of the top tax rate. That just robs the government of needed funding and fattens the bank accounts of the rich -- and anyone who believes it will work is either rich or very foolish.
Beautifully explained.
ReplyDeleteFor the umpteenth time: companies do not base their prices on the cost it takes to make something. If you lower their taxes, they will not lower their prices, they will just increase their profits. It is true that in an economy at full employment, the money would have to go somewhere. But conservatives are very much against full employment because they are terrified of inflation. So we get what we are seeing now: corporations sitting on piles of money and spending it only on stock buy-backs.
In as much as trickle down economics makes any sense, it applies at least as well as trickle up economics. Give money to the rich and they will spend it creating jobs. Or: give money to the poor and they will spend it creating jobs. Sounds like a no-brainer to me.