No Money No Buying No Demand No Jobs

Demand-side economics - photo by Tobias Higbie

Tax breaks to the 1% – who Republicans like to call job creators – is not the best way to create jobs. In fact, it’s not even clear one job would be created with this failed idea. If demand for products increases it is a near certainty that companies will create more jobs. On the other hand, more money in the form of a tax break will not lead a company to create more jobs if nobody can buy the increased products or services that those jobs would produce. 

The largest part of the U.S. economy is consumption by the lower and middle classes. In other words, people buying shit. Companies don’t have a reason to create more shit if people aren’t able to buy more shit. Even though the 1% have massive wealth, because they are only 1% of the population they don’t have as big an effect on consumption as the 99% do. The lower and middle classes are responsible for most of the consumption. Therefore, if you are going to give a tax break to anyone that tax break should go to the 99%.  The increased consumption – or stated differently, demand – is what creates jobs, not the other way around.

Do you still think tax breaks to corporations creates jobs? Let me take it a step further and throw an argument Republicans like to use right back at them.

Republicans like to say tax cuts don’t need to be paid for because the economic growth that is the result of a tax cut creates increased tax revenue that makes up the difference. I don’t argue that if you find a way to increase economic activity that it would also increase tax revenue. However, the Republican position assumes that you get $1 of increased tax revenue for every $1 of tax cuts, which to me requires suspension of disbelief.

If it is true that increased economic activity leads to increased tax revenue – a point I believe everyone can agree to – then it must also  mean increased economic activity leads to increased revenues for corporations. After all, increased economic activity means increased consumption of goods and services. Therefore, if companies are seeing increased revenues that means they have the money to create jobs to meet the increased demand for products. It means demand is what drives job growth, not supply. Sorry Republicans, you are simply wrong. The sooner Republicans wake up and realize this the sooner we can begin the government policies necessary to significantly increase economic growth.

Giving tax breaks to the wealthiest is a colossal waste of money that only serves to create a bigger divide between the 1% and the 99%.

photo by Tobias Higbie via Flickr

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Economy

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