The point has been made in this column before, but it needs to be made again: It’s funny how the staunchest defenders of the free-market economy often seem to understand that economy very little. If they understood it well, you wouldn’t keep hearing this refrain in the logic of people who oppose tax cuts for the superrich—the chorus of “Don’t overtax the rich, they’re the people who create the jobs.”
Years ago, conservative syndicated columnist Cal Thomas joined that chorus. Thomas had never gotten a job, he wrote, except from someone richer than himself. Hence it was self-evident that the rich were the source of jobs, and it was in the interest of the rest of us working stiffs to protect them.
Bosh. When I got work at the Valley Advocate in the 1970s, I was getting it from people who had less money than I had—less, that is to say, than my family [read husband’s] income. The Advocate was started up in 1973 by two fellows in their twenties who had $3,000 between them to invest in their new weekly paper. This is not unusual; small businesses, often started on a shoestring or partly on credit or with a loan from somebody’s aunt, are known to be “the engines of job creation” in American society.
In past ages it was often true that anyone who wanted to be something besides a farm worker had to curry favor with the nearest wealthy patron. But by the time our ancestors reached the Massachusetts coast, trade guilds, joint stock companies and other harbingers of a rising middle class had begun to erode the old dependence on the upper echelons. The industrial age and the growth of American-style capitalism gave birth to a dynamic marketplace in which sources of capital and/or commodities needed to start a business were almost unlimited except by the imaginations of would-be entrepreneurs.
If it’s one thing most of us have known since we were old enough to buy our first bubble gum or baseball trading cards, it’s that people with all levels of capitalization start businesses here. Why didn’t Cal get the memo?
Yet the right wing won’t stop using the misleading euphemism “job creators” as a synonym for the rich. The phrase is not only disingenuous but dangerous, because—reason one—studies show that a financially solid middle class, a middle class with buying power, is just as important a component of a working economy as an investor class. That’s because nobody can sell if somebody can’t buy.
Reason two, what rich people buy—the way they use their purchasing power—doesn’t nourish the economy across the board like the purchasing power of a broad-based middle class. A wealthy woman may shop for her clothes in Paris; a wealthy man may vacation in Africa. The less wealthy will do their spending closer to home.
Even worse, the rich may shut down their spending. “An economy… dependent on the spending of a few is also prone to great booms and busts,” writes economist Robert Reich. “The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations.”
Pundits on the right have a way of talking as though they are the owners of American history when in fact their view of history is often a tissue of illusions. During the World War II they glorify, the very rich were taxed between 70 and 94 percent. The free market they constantly invoke in contrast to what they decry as “socialism” long ago made dependence on the very wealthy obsolete; that was one of the most socially responsible things it accomplished. That was how, as they so often point out, it became the economic doppelganger of what in the political realm we call democracy.
Do they really believe in that free market, or don’t they?