Here is the full statement of Nick Hanauer, venture capitalist billionaire, given on June 5th of this year before the Subcommittee on Economic Policy (Senate Committee on Banking, House, and Urban Affairs).
For 30 years, Americans on the right and left have accepted a particular
explanation for the origins of prosperity in capitalist economies. It is- that
rich business people like me are “Job Creators” - That if taxes go up- on us
or our companies, we will create fewer jobs. And that the lower our taxes
are, the more jobs we will create and the more general prosperity we’ll have.
Many of you in this room are certain that these claims are true.
But sometimes the ideas that we know to be true are dead wrong.
For
thousands of years people were certain, positive, that earth was at the center
of the universe. It’s not, and anyone who doesn’t know that would have a
very hard time doing astronomy.
My argument today is this: In the same way that it’s a fact that the sun, not
earth is the center of the solar system, it’s also a fact that the middle class,
not rich business people like me are the center of America’s economy. I’ll
argue here that prosperity in capitalist economies never trickles down from
the top. Prosperity is built from the middle out.
As an entrepreneur and investor, I have started or helped start, dozens of
businesses and initially hired lots of people. But if no one could have
afforded to buy what we had to sell, my businesses would all would have
failed and all those jobs would have evaporated.
That’s why I am so sure that rich business people don’t create jobs, nor do
businesses, large or small.
What does lead to more employment is a “circle
of life” like feedback loop between customers and businesses. And only
consumers can set in motion this virtuous cycle of increasing demand and
hiring. That's why the real job creators in America are middle-class consumers. The
more money they have, and the more they can buy, the more people like me
have to hire to meet demand.
So when businesspeople like me take credit for creating jobs, it’s a little like
squirrels taking credit for creating evolution. In fact, it’s the other way
around.
Anyone who's ever run a business knows that hiring more people is a
capitalists course of last resort, something we do if and only if increasing
customer demand requires it. Further, that the goal of every business- profit-,
is largely a measure of our relative ability to not create jobs compared to our
competitors. In this sense, calling ourselves job creators isn't just inaccurate,
it's disingenuous.
That’s why our current policies are so upside down. When you have a tax
system in which most of the exemptions and the lowest rates benefit the
richest, all in the name of job creation, all that happens is that the rich get
richer.
Since 1980 the share of income for the richest 1% of Americans has tripled
while our effective tax rates have by approximately 50%.
If it were true that lower tax rates and more wealth for the wealthy would
lead to more job creation, then today we would be drowning in jobs.
If it was true that more profit for corporations or lower tax rates for
corporations lead to more job creation, -then it could not also be true that
both corporate profits and unemployment are at 50 year highs.
There can never be enough super rich Americans like me to power a great
economy. I earn 1000 times the median wage, but I do not buy1000 times as
much 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, we
go out to eat with friends and family only occasionally.
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 cars or enjoy any meals out. Or to make up for the decreasing consumption
of the vast majority of American families that are barely squeaking by,
buried by spiraling costs and trapped by stagnant or declining wages.
This is why the fast increasing inequality in our society is killing our
economy.
When most of the money in the economy ends up in just a few
hands, it strangles consumption and creates a death spiral of falling demand.
Significant privileges have come to capitalists like me for being perceived as
“job creators” at the center of the economic universe, and the language and
metaphors we use to defend the fairness of the current social and economic
arrangements is telling. For instance, it is a small step from “job creator” to
“The Creator”. When someone like me calls himself a job creator, it sounds
like we are describing how the economy works. What we are actually doing
is making a claim on status, power and privileges.
The extraordinary differential between the 15-20% tax rate on capital gains,
dividends, and carried interest for capitalists, and the 39% top marginal rate
on work for ordinary Americans is just one of those privileges.
We’ve had it backward for the last 30 years.
Rich businesspeople like me
don’t create jobs. Rather, jobs are a consequence of an eco-systemic
feedback loop animated by middle-class consumers, and when they thrive,
businesses grow and hire, and owners profit- in a virtuous cycle of
increasing returns that benefits everyone.
I’d like to finish with a quick story.
About 500 years ago, Copernicus and his pal Galileo came along and proved
that the earth wasn’t the center of the solar system. A great achievement, but
it didn’t go to well for them with the political leaders of the time.
Remember that Galileo invented the telescope, so one could see, with ones
own eyes, the fact that he was right. You may recall however, that the
leaders of the time didn’t much care, because if earth wasn’t the center of the universe, then earth was diminished-and if earth was diminished, so were
they. And that fact- their status and power- was the only fact they really
cared about.
So they told Galileo to stick his telescope where the sun didn’t
shine –and put him in jail for the rest of his life. And by so doing, put
themselves on the wrong side of history forever.
500 years later, we are arguing about what or whom is at the center of the
economic universe. A few rich guys like me, or the American Middle class.
But as sure as the sun is the center of our solar system, the middle class is
the center of our economy. If we care about building a fast growing
economy that provides opportunity for every American, then me must enact
policies that build it from the middle out, not the top down.
Tax the wealthy and corporations-as we once did in this country- and invest
that money in the middle class-as we once did in this country. Those polices
won’t just be great for the middle class, they’ll be great for the poor, for
businesses large and small, and the rich.
Since when did investing in our country's infrastructure becoming communism?
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