Wednesday, August 17, 2011

Ron Paul, Warren Buffet, and job creation voodoo.

This past Saturday through the excellent technology of DVR I spent about an hour and 40 minutes in that bizarre alternate universe that was the R presidential candidate debate. Sponsored by FOX News and originally airing the Thursday evening prior to the Iowa straw poll, the event had a surreal atmosphere throughout, and even when a candidate was saying things that were relatively sane I felt a general uneasiness, as if I was peeking into someone's window and seeing something not meant for public view. For the R presidential nomination process is very much akin to watching sausage being made, and for this left-leaning moderate the phrase "In the land of the blind the one-eyed man is king." came to mind very often. While it would take much too long to go over all of the inaccurate, misleading, and hypocritical statements that were made during the course of this unsettling affair, my personal favorite was hearing Rick Santorum of all people chastise Iran for "trampling on the rights of women and gays". To say that the debate had a "winner" would be unfair to both the candidates and the viewers, since in a forum that included eight hopefuls there was no space to give any of them enough airtime to make a coherent statement of their platform (though the Bachmann-Pawlenty snipe-fest was definitely entertaining for this Minnesotan), but to me the one-eyed man was Ron Paul. While, as is the case with anyone who would seek the R endorsement, he and I agree on very little, he seemed the most genuine of the people on stage and earned points with me for his more thorough understanding of the U.S-Iran relationship (he cited the 1952 CIA-led coup against the democratically elected Mossadegh) when that topic was being discussed. A shame that he is the Rodney Dangerfield of the R field.

Of the many topics that were discussed at the debate, the economy was at the top of the list. Recently I wrote about how there has been, nearly three years after the 2008 financial crisis, and the huge rise in unemployment that it triggered, little movement on the most pressing problem this country faces: getting those unemployed back to work. While in the weeks since the debt deal there has been a bit of an uptick in the mentions of the job issue in political rhetoric, I have yet to see anything resembling a coherent plan from any part of the spectrum on the issue. But listening to the R candidates pontificate on this during the debate, it is clear to me that they are stuck in their own echo chamber, and epitomized the adage that if you keep repeating a lie enough times, eventually people will believe it. I don't know where they got this notion (Grover Norquist, maybe?), but they all appear to think that job creation is somehow inversely tied to tax rates. Judging by their statements, they believe that a business person makes the decision whether or not to hire a new worker based solely on how lightly or heavily their profits are being taxed. Market considerations are apparently not a factor, nor are the internal needs of the firm. While maybe the debate was not the best forum to display a nuanced and sophisticated understanding of the economy, the talking points uttered are pretty much the same things we've been hearing from the Rs for several years. So please forgive me if my estimation of their potential to do something positive with the economy is virtually nonexistent.

Now don't get me wrong, I am well aware that tax rates do influence business decisions (all those tax incidence problems in grad school did get the message across), but I have never heard of any business person passing up a good investment opportunity just because they think the taxes on any money they make from it will be too high. Warren Buffett's editorial in Monday's New York Times states this quite eloquently, and he deftly exposes the hypocrisy of R calls for "shared sacrifice". The way I see it, people like Buffett who are already well off and are successful within a system that is designed to help them continue being successful are not the ones that need help. Nor, in contrast to much R rhetoric, are they delicate flowers who's purchasing power will wilt at the slightest movement in their tax rates back toward the historical average (although some might throw a hissy fit). Not to mention, quite a few of the wealthiest people in this country are on the record saying they wouldn't mind paying more in taxes, what with the crumbling infrastructure, hard-pressed schools, rising rates of child poverty and such. And any wealthy person who does whine that they are paying too much in taxes is either not paying attention or willfully ignorant. Last I checked, effective tax rates for the highest earners were near their historic lows, so what is there to complain about? And if, as the Rs say, low taxes are the key to job creation, then WHERE ARE THEY? Taxes on the very wealthy have been down and going down for the better part of a decade, yet net job growth has been near zero over that stretch. True, quite a bit else was happening in the economy, much of it enabled by lax regulation in the financial sector, but the R trope about how any raise in taxes will hinder "job creators" simply doesn't hold water when one looks at how the economy has actually been functioning (or not, as the case may be).

When I look at R statements about "job creators" I get the impression that they must believe that job creators are synonymous with very wealthy people and large corporations. While it is true that the demand for goods that wealthy people create inspires other people to cater to that demand, and that large corporations do hire people on occasion, most of the data on actual job creation shows that new jobs come primarily from small, young firms, aka start-ups. I take this to mean that the "job creators" are not people (or corporations) with money, but rather people with ideas. While it definitely takes money to put an idea into practice, as stated above good ideas should not have trouble obtaining funding no matter what the tax situation happens to be at the time. The much more murky question is that of the regulatory environment. Rs would have us believe that there is too much regulation across the board, but to me the pertinent question is who is doing the regulating, and for a long time the answer to that has been large corporations through the strategy of agency capture. This has happened gradually over the course of both D and R administrations, but by now almost every agency that regulates either a specific sector of the economy or a cluster of industries is for the most part filled with people who have worked for, lobbied on behalf of, or otherwise benefited personally from, the largest firms in those sectors or industries. As such it is no surprise that a lot of regulation favors large firms and leaves any potential start-ups at a huge disadvantage should they choose to enter the market.

Solving this particular issue will require a good deal more effort than tweaking any particular tax rate, and is thus a tougher nut to crack. Also, since there is no single source to target for action on regulatory reform, and any proposed action is likely to affect different parts of the economy in different ways, gains on one front will be diminished by losses on another. So, unfortunately for the soundbite and talking point obsessed media and the candidates who kowtow to its sensibilities, there are no easy answers and no one magic bullet that will get things back on track. But for a plan to have any chance of success it must focus on helping the people with ideas. Those with money are doing just fine, thanks.      


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