The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age

    Question Re: Debunking the GOP's "Job Creators" Narrative

    By AmericanDreamer on Tue, 07/31/2012 - 2:01pm |

     

    Today's Republican party approach to the dismal US jobs situation they decry and say they have answers to remains what it has been since Reagan: cut taxes on very wealthy people and corporations and they will invest the money in ways that create jobs for Americans.
     
    Are folks here aware of any high-quality published studies that assess the evidence on whether that has proven true or not, dating back at least as far as the beginning of the Bush tax cuts?   
     
    I'm thinking of a study examining the trends in both particular Fortune 500 companies' US job-creation records in relation to what is known about the trends in their US tax burdens, but also at aggregate US job-creation vs. tax burdens numbers for, say, Fortune 500 companies taken as a whole.  
     
    There are anecdotes that I've seen fairly widely reported about a few companies, such as GE, paying no US taxes for particular tax years or multiple years, even as the number of US-based jobs they generate has shrunken dramatically (in their case, in absolute as well as relative terms).  I'm wondering if the data is available to look more broadly and systematically at this issue for many, if not all, of the Fortune 500 companies?
     
    There are many other factors besides relative tax burdens that affect the size  and composition (including, in addition to number of employees who live in the US vs. other countries, the proportion of US-based temp and part-time workers, often without inadequate or no benefits) of the labor force for large corporations. 

    Right now, as Krugman among many others has been pointing out, we have corporations sitting on gigantic piles of cash reserves--larger than those reserves otherwise would be on account of both lower relative corporate tax rates than we have had historically in the US, plus "successful" tax-evasion practices by those companies, as two factors--that they are *not* investing in ways that are creating US-based jobs.  Krugman suggests this is because their market research tells them there is not adequate purchasing power to enable ventures they might be considering to succeed. 

     
    But today's Republican party denies all of that in the narrative they continue to push to the American public. 
     
    It says there is one factor which overrides all of the other factors, leading in a causal way, they imply, to more US jobs: low or declining tax levels for very wealthy people as well as corporations themselves.    
     
    That seems to be the first falsity that needs to be debunked in a way that provides important factual information to ground more worthwhile consideration of this issue by the engaged and informed public. 
     
    Many members of the engaged and informed public, I surmise, don't necessarily want high unemployment.  They might even have some degree of concern about it, but they may not be giving much thought to the matter, including making connections between what amounts to the entire economic philosophy of one of our major political parties on this question, and what we are experiencing now and in recent years. 
     
    I find it not too difficult to imagine some powerful graphics that could be developed to illustrate ways in which either there is no relationship between low taxes on corporations and US employees, or even a negative relationship, if that's what the research shows. 
     
    One thing we know is that corporate taxes as an overall share of federal revenues has dropped dramatically in recent decades, even as the numbers of non-US-based Fortune 500 company employees, and their proportion, has risen dramatically.  A simple graph showing those two trend lines would, of course, *not* demonstrate a causal relationship between the two, for there is none.  But it would go some ways towards blowing up the reverse causal relationship claim that *is* made by the GOP and the right-wing, stating without nuance or qualifications whatever that lower corporate tax rates *will* lead to more US-based jobs. 
     
    I am making this inquiry elsewhere and will share anything helpful that I can find out.  I wanted to put it out here as well, in case anyone here has pertinent information on this.
     
    I'm thinking that it should also be possible--this thought prompted by ideas occasional dagblogger Erica offered here probably last year--for folks who, unlike me, have some creativity to deploy some well-crafted mockery on this matter. 
     
     
     

    Comments

    Fun factoids: Corporate profits in 2011 hit $1.977 trillion in 2011, an all-time high both in terms of absolute dollars and as a percentage of GDP.

    Pre-tax corporate profits averaged 9.3 percent of GDP between 1990 and 2009; in 2011 they were 13 percent, the highest figure on record dating back to at least 1947.  In a $15.3 trillion economy that 3.7 percentage point difference is $566 billion.*

    That's roughly half the federal deficit projected in the President's budget this year.  That's a big number, a large amount of money, relatively little of which is creating US jobs.

    Last August, U.S. Rep. Jan Schakowsky, from Illinois, one of the really good ones, introduced her Emergency Jobs to Restore the American Dream Act.  At a two-year cost of $227--wait, that's about 35% of the amount of historically unsurpassed corporate profits sitting around idly waiting for evidence of enough people with enough money to make potential investments profitable in 2011.  

    Schakowsky projects her bill to create 2.2 million jobs, lowering the US unemployment rate by about 1.3%.  She proposed to pay for it, in full "through separate legislation such as Rep. Schakowsky’s Fairness in Taxation Act, which creates higher tax brackets for millionaires and billionaires, and eliminating subsidies for Big Oil and tax loop holes for corporations that send American jobs overseas." http://schakowsky.house.gov/index.php?option=com_content&view=article&id=2976:schakowsky-announces-bill-to-create-22-million-jobs&catid=22:2011-press-releases

    Or: we could enact a one-time tax to redirect the historically unprecedented corporate profit "surplus" of $566 billion (from 2011) to fund Schakowsky's jobs bill, leaving corporations with historically average profits left over for that year but generating more consumer purchasing power to encourage them to invest more of it, to private-sector job-creating effect.  On the simple, accurate view that if our private sector cannot create jobs given current levels of demand, perhaps in view of the individual and collective misery our current situation produces we might want to consider other ways to help ourselves.  

    We could use the remaining 65% or so of the tax for any number of desirable social investment purposes, such as averting school, police, fire and other social service cuts.  Or we could use it to reduce the deficit.  Or some of both.

    How does it make sense for a society confronted with a deep un- and under-employment problem to fail to exercise the minimal imagination and vision measures along such lines require?  Or fail even to talk about it?

    *Facts in this and preceding paragraph taken from page 51 of Bob Dean's 2012 brief Reckless: The Political Assault on the American Environment.  ​This book is essentially a combination jeremiad about, and plea to, the House Republicans in particular to return to their party's previous longstanding support for many pro-environmental policies; or, alternatively and perhaps more hopefully, to the American public to take notice and force it to by its actions, including at the polls.  The ace in the hole point for those arguing the case for re-electing Obama has so far been the Supreme Court and other judicial appointments issue.  One could do a whole lot worse making the case to vote for Democrats and against Republicans at the presidential and congressional levels in November drawing from the environmental records of the parties as succinctly described in Dean's book.  

    (The point I am trying to make here was prompted by the above information which happened to be in Dean's book.  Dean works for the Natural Resources Defense Council.  Mine is not his point, or the purpose of his book, whose aim is to promote the restoration of historic bipartisan support for strong environmental policies.)    


    by AmericanDreamer on Wed, 08/01/2012 - 6:38am

    I am way behind the curve on recent studies of this topic but I was impressed by Robert Lynch's review of tax cuts as an economic stimulus.  In addition to underlining the point you make regarding how letting people keep more cash doesn't mean they will plow that money into new enterprises, he focuses on how gaining a private sector job at the expense of a public sector job is not a net gain in the quest to generate more purchasing power which "economic expansion" requires.

    The studies he refers to were mostly made in the nineties and I haven't kept up with that sort of thing lately. But his detailed look at what businesses lose when we cut public services is one of the best answers to Norquist I have read.


    by moat on Wed, 08/01/2012 - 8:57pm

    The Bush tax cuts were enacted, followed by anemic job growth that failed to keep pace with population growth.  That's pretty much all you need to know to dispense with GOP mythology.  That is, of course, so long as things facts actually inform your worldview.

    Here's a rundown Jared Bernstein did in charts at the end of 2011.  If you believe that the wealthy are automatically "job creators," then chart number one should assure you that they've been getting all the incentive they need to create more jobs.  Chart number four shows that the tax burden on the wealthiest has been steadily declining, while chart five shows that higher tax rates in the Clinton era were not a barrier to economic growth.  Charts number six and seven show what the Bush tax cuts did to the deficit and debt.

    Then there's this chart.  The Bush era produced ​no net increase in private sector employment​.  That's pretty much all you need to know.  He kept his numbers up by increasing public sector employment, which has suffered under Obama as we've suffered through the era of "50 little Hoovers" at the state level.  Despite the ARRA stimulus, states have been cutting extensively and simultaneously.

    Of course, to hear the right-wing froth you would never know that Bush blew up the Federal budget, that Bush swelled the size of the Federal government and that Obama has presided over a massive reduction in public sector employment.

    Firms hire until the marginal benefit of hiring a new employee equals the marginal cost of hiring a new employee.  Firms that are sitting on cash won't find any additional incentive to hire simply because they're given bigger tax breaks.  Supply is there, but the US economy is 70% consumer spending.  Too bad the consumer is broke.

    Rich assholes don't create jobs, demand does.  The incentive is profit.  There is no additional profit in hiring additional workers because there is a lack of demand.  Firms are not going to be moved to hire more workers currently just because their marginal tax rate is reduced.


    by DF on Wed, 08/01/2012 - 9:31pm

    Just for kicks, here's Dana Perino, former White House Press Secretary for Dubya, totally explaining exactly how the Bush tax cuts created jobs.

    So Clinton's efforts (???) that fueled the Internet bubble forced​ Dubya to cut all those taxes on the rich - which still created not enough jobs to keep pace with population growth.  But the point is that it's definitely Bill Clinton's fault somehow.  Got that?


    by DF on Wed, 08/01/2012 - 10:48pm