If you read nothing else today—nothing else this week—read this oped by Nick Hanauer on job creation and tax policy.
He’s a successful venture capitalist who both understands and is able to explain in compelling terms the relationship between investment, growth, and job creation:
…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.
The policy implications of this are stark and fly in the face of most of today’s debates. If market outcomes return most of the growth those at the top, that feedback loop between economically healthy consumers and growing businesses is broken. Same with tax policy:
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.
To me, this little piece is the most convincing attack on the logic of trickle-down, supply-side economics that I’ve seen because it doesn’t just invoke fairness or the squeeze on the middle class.
Hanauer’s insights point towards a different model of growth, one that has at its core the interdependence between those throughout the income scale. Entrepreneurs, venture capitalists, the very rich must recognize their inherent linkages to the broad middle class if we are to build a sustainable economy. Any policy architecture that fails to reflect those interdependencies will ultimately topple under its own top-heavy weight.
And we’re looking awfully top-heavy these days.