Tuesday, December 11, 2012

The Demanders: Another Way to Look at Job-Creation

I hate the term "Job Creators."

I mostly hate it because it's palpably falsely applied.  It smacks of the same kind of Madison-Avenue Political Speech in which Frank Luntz specializes (e.g. the Estate Tax as "the Death Tax").  What Republicans tend to mean by "Job Creator" is "rich person."  And mostly, when Rs call rich people that, they are saying that we should give rich people tax breaks because then they will take pity on the rest of us and create more jobs.

But here's the thing: economic theory does not say that tax cuts create jobs or rich people create jobs.  It says that demand does.

Let's follow that idea through.  Demand creates jobs.  Okay, where does demand come from?  It comes from [need/want] for a [product/solution] + [money].

So why are we in a slow economy?  Because the housing market and banks took the security out from under people - tightening lending, foreclosing houses, and making houses (the biggest asset almost all families have) worth way less almost instantaneously - and thereby made it so that many people didn't have the money (and credit - more on that in a minute) to demand anywhere near what they were demanding before.  Then came lay-offs, as a result of that lack of demand.

A Brief Note on Credit:  On a large scale, we (and by "we" I mean government, banks, financial institutions, AND individuals) were playing fast and loose with credit, spending and consuming too much, driving up real estate prices with bad lending policies - lending to people who couldn't afford to pay it back, using reverse mortgages to undermine people's investments in their homes, and just too much credit all around.  That's what people are talking about when they say "bubble."

It's a Small World, After All.

But on a small scale, people were also using credit stupidly.  We were consuming way too much, and the things we were (and still are, those of us who can afford it) buying are largely underpriced, cheaply-made, crap that isn't useful and clutters up our lives.  Crap that is mostly made in countries whose names are not "USA."

...and here's where I bring it back...

My, they look Demanding.

Middle- and Lower-Income Americans are hereby christened "The Demanders."  Demanders = people who can create significant economic demand, if they have the money to do so.  

There are simply a whole lot more middle- and lower-income folks than wealthy folks.  So even if wealthy people are spending ridiculous amounts of money on stupid things (which some of them are) - as a percentage of income and as a percentage of overall demand in our economy?  They are chump change.

That's right: rich people are chump change at creating economic demand.

Yes, raising taxes on rich people gets you some money.  And that's important, because if you have to get money from somewhere, getting tax money from rich people actually places less of an obstacle on growth.  Because as a percentage of income, rich people don't spend all that much.  And also because rich people are rarely making their decisions to buy consumer products based on tax policy.  They may change what they buy to avoid tax, but rich people aren't the big demand issue.

The big demand issue is when middle- and lower-income people decide to eat at home, give home-made Christmas presents, choose not to go to the doctor, not to buy that new car, etc, etc.  And middle- and lower-income people may make that decision based on: tax breaks that directly put more in their pocketbook, or unemployment insurance being extended, or raising the minimum wage to allow for more purchasing ability, more breathing room for The Demanders.

Which is why it's nice to see this speech:

(Incidentally, watching the guy over the Prez's left shoulder (on your right-hand side of the screen) is pretty funny.  He goes on a gum-chewing evolution.)

Look, if you don't like unions, okay.  Maybe you had a bad experience with them.  Maybe you don't like to deal with strikes.  Fine.

But if you don't like unions because they are made up of people who are trying to build economic and political power for themselves in a partly-capitalist society?  Well then, be consistent.  

Because there are a lot of other groups of people who band together to build economic and political power in a partly-capitalist society.  For example,

  • Lobbying Groups: often whole industries are represented by a lobbying organization, like the Home Builders or the Corn Growers or the Realtors.  Those guys are lobbying for things and making huge contributions to politicians - right now.  The things they lobby for?  May or may not be in your interest.  The Home Builders have opposed environmental changes in building materials and building codes.  They've also pushed development plans that don't include planning for increases in population or environmental impact studies... which is how we get overcrowded schools.  That's happening, right now.

  • Or Professional Groups: the ABA (lawyers), the AMA (doctors), and every Republican's favorite: ATLA (the trial lawyers who help large groups of people band together to hold corporations accountable when they do bad things - and yes, sometimes they don't win much for the many people, but that's another discussion and post for another time).  The APA (psychiatrists) are using their power to revamp their diagnostic manual, which will have a large impact on how millions get treated and whether they are given drugs and whether they are diagnosed with illnesses and how those things will be treated by insurance and the government.  Those changes may or may not be in your interest, but they are happening right now.

  • And then there are the groups of people we like to call "Corporations." 

    • Like the Corporations that grow large and then use that economic power to undercut prices and drive smaller corporations out of business, then raise prices and lower benefits... you know, like Walmart.  

    • Or Corporations that grow large and then move all of their operations offshore to avoid paying taxes to the country that helped them grow.  

    • And Corporations that grow large and then ship production to poor countries because Americans demand living rather than starvation wages.

Unions - whatever their limitations - are at their heart about lower-income people trying to build economic and political power in a partly-capitalist society.  And when they succeed?  We get more actual Demanders.  And the economy grows.  

We should be building consumers.  That's what both the government and businesses should want.  Demand.  It's a real thing.  And it creates jobs.


  1. Please define "rich," "wealthy," "middle-income," and "lower-income." Is "high-income" (not mentioned in your post) the same as "rich" or "wealthy?"

  2. Well, median household income hovers around 50k, and the 50th percentile of taxpayers is about 42-43k, so that's the neighborhood of middle-income. Lower income I was thinking people below that who work, though it's reasonable to add in retirees and those on unemployment insurance. There's an argument for anybody below that who buys consumer goods, though. "Rich" gets more political, because of where people live, how much debt they have (from school, for example), and how much accumulated wealth they have, but for the sake of conversation, let's say "rich" probably starts in the $200k-500k neighborhood.