Hanuaer's website links to his appearances on Charlie Rose last
month, and Ed Schulz more recently.
http://nick-hanauer.com/?page_id=88
He co-wrote a book with Eric Liu,
who is giving one of the talks at the State Democratic Convention Saturday.
Hanauer wrote an article for Bloomberg News last winter, which ran on
the Bloomberg News website. I've included two recent comments from readers.
There are plenty of the predictable stupid and blind commentators, too.
By Nick Hanauer
Nov 30, 2011 4:01 PM , Bloomberg News
It is a tenet of American economic beliefs, and an article of
faith for Republicans that is seldom contested by Democrats: If taxes are raised
on the rich,
job creation will stop.
Trouble is, sometimes the
things that we know to be true are dead wrong. For the larger part of human
history, for example, people were sure that the sun circles the Earth and that
we are at the center of the universe. It doesn’t, and we aren’t. The
conventional wisdom that the rich and businesses are our nation’s “job creators”
is every bit as false.
I’m a very rich person. As an entrepreneur and
venture capitalist, I’ve started or helped get off the ground dozens of
companies in industries including manufacturing, retail, medical services, the
Internet and software. I founded the Internet media company aQuantive Inc.,
which was acquired by
Microsoft Corp.
(MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in
Amazon.com Inc.
(AMZN) Even so, I’ve never been a “job creator.” I can start a
business based on a great idea, and initially hire dozens or hundreds of people.
But if no one can afford to buy what I have to sell, my business will soon fail
and all those jobs will evaporate.
That’s why 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 the feedback loop between customers and businesses. And only consumers can
set in motion a virtuous cycle that allows companies to survive and thrive and
business owners to hire. An ordinary middle-class consumer is far more of a job
creator than I ever have been or ever will be.
Theory of Evolution
When businesspeople take credit for creating jobs,
it is like squirrels taking credit for creating evolution. In fact, it’s the
other way around.
It is unquestionably true that without entrepreneurs
and investors, you can’t have a dynamic and growing capitalist economy. But it’s
equally true that without consumers, you can’t have entrepreneurs and investors.
And the more we have happy customers with lots of disposable income, the better
our businesses will do.
That’s why our current policies are so upside
down. When the American middle class defends a tax system in which the lion’s
share of benefits accrues to the richest, all in the name of job creation, all
that happens is that the rich get richer.
And that’s what has been
happening in the U.S. for the last 30 years.
Since 1980, the share of
the nation’s
income for fat
cats like me in the top 0.1 percent has increased a shocking 400 percent, while
the share for the bottom 50 percent of Americans has declined 33 percent. At the
same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007,
from 42 percent at the peak of U.S. productivity in the early 1960s, and about
30 percent during the expansion of the 1990s. In my case, that means that this
year, I paid an 11 percent rate on an eight-figure income.
One reason
this policy is so wrong-headed is that there can never be enough superrich
Americans to power a great economy. The annual earnings of people like me are
hundreds, if not thousands, of times greater than those of the average American,
but we don’t buy hundreds or thousands of times more stuff. My family owns three
cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like
most American men. Like everyone else, I go out to eat with friends and family
only occasionally.
It’s true that we do spend a lot more than the
average family. Yet the one truly expensive line item in our budget is our
airplane (which, by the way, was manufactured in
France by
Dassault Aviation SA
(AM)), and those annual costs are mostly for fuel (from the
Middle East).
It’s just crazy to believe that any of this is more beneficial to our economy
than hiring more teachers or police officers or investing in our infrastructure.
More Shoppers Needed
I can’t buy enough of anything to make up for the
fact that millions of unemployed and
underemployed
Americans can’t buy any new clothes or enjoy any meals out. Or to make up
for the decreasing consumption of the tens of millions of middle-class families
that are barely squeaking by, buried by spiraling costs and trapped by stagnant
or declining wages.
If the average American family still got the same
share of income they earned in 1980, they would have an astounding $13,000 more
in their pockets a year. It’s worth pausing to consider what our economy would
be like today if middle-class consumers had that additional income to spend.
It is mathematically impossible to invest enough in our economy and our
country to sustain the middle class (our customers) without
taxing the top 1
percent at reasonable levels again. Shifting the burden from the 99 percent
to the 1 percent is the surest and best way to get our consumer-based economy
rolling again.
Significant tax increases on the about $1.5 trillion in
collective income of those of us in the top 1 percent could create hundreds of
billions of dollars to invest in our economy, rather than letting it pile up in
a few bank accounts like a huge clot in our nation’s economic circulatory
system.
Consider, for example, that a puny 3 percent surtax on incomes
above $1 million would be enough to maintain and expand the current payroll tax
cut beyond December, preventing a $1,000 increase on the average worker’s taxes
at the worst possible time for the economy. With a few more pennies on the
dollar, we could invest in rebuilding schools and infrastructure. And even if we
imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those
at the top, the taxes on the richest Americans would still be historically low,
and their incomes would still be astronomically high.
We’ve had it
backward for the last 30 years. Rich businesspeople like me don’t create jobs.
Middle-class consumers do, and when they thrive, U.S. businesses grow and
profit. That’s why
taxing the
rich to pay for investments that benefit all is a great deal for both the
middle class and the rich.
So let’s give a break to the true job
creators. Let’s tax the rich like we once did and use that money to spur growth
by putting purchasing power back in the hands of the middle class. And let’s
remember that capitalists without customers are out of business.
(
Nick Hanauer is a founder of Second Avenue Partners, a venture
capital company in
Seattle specializing in early state startups and emerging
technology. He has helped launch more than 20 companies, including aQuantive
Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and
“The Gardens of Democracy.” The opinions expressed are his own.)
To
contact the writer of this article: Nick Hanauer at
Nick@secondave.com.
To contact the editor responsible for
this article: Max Berley at
mberley@bloomberg.net.
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