Boehner’s Myth that Cutting Taxes for Top 1% Creates Jobs

The Myths Spun by John Boehner

Some folks are getting very riled up thinking that the only thing that will fix this country is if taxes are cut on the really really wealthy.

The mythmeisters funded by billionaire moguls like Rupert Murdoch have been busy selling this convenient election season myth about how tax cuts for the very wealthy create jobs. It is not based in any reality with facts to back it up. It sounds snappy for the media spots. Problem is that it is totally untrue.

DN! Obama Fights to End Bush Tax Cuts for the Wealthy

The fact checkers understand how the economy works and what really creates jobs that everyone wants for Americans, especially for those people who had jobs shipped overseas or just cut due to consolidation of businesses.

According to former Pulitzer Prize NYT columnist David Cay Johnston, there is absolutely no hard evidence that proves that cutting taxes for the very wealthy creates jobs.  As David Cay Johnston, distinguished visiting lecturer at Syracuse University, said on NPR’s Here and Now, Boehner is spinning untruths about the economy.

David Cay Johnston says in the above interview with Democracy Now! that:

A recession is by definition the collapse of demand. People don’t have money to spend.

If you own a small business you don’t care nearly as much about a tax cut as having more customers who can spend more money to buy your products and your services.

30 years of supply side economics have left us with American corporations having enormous amounts of capital of $1.8 trillion dollars in cash.

Johnston claims that 30 years of supply side economic policies have enabled corporations to drive down wages and simultaneously increase profits. Now corporations are sitting on huge piles of unused capital, approximately $6,000 for every person in the United States, and this is contributing to lack of jobs in this country. Johnston advises President Obama to put more money into the economy to create balance in the system where people have money to spend.

In addition, banks are currently hoarding money. They need to free up credit to lend to all kinds of businesses in order to expand manufacturing which will also create jobs. This has nothing to do with tax cuts. We need to spend money in order to fix the economy, not starve the economy.

What is the Antidote to the Mythmeisters of Voodoo Economics and Mythical Jobs Created from Tax Cuts for the Very Very Wealthy?

“Hedge Fund managers set new payout records in 2009″ according to Reuters News.

Together, the industry’s 25 best-paid managers collected a record $25.33 billion, more than double the amount they took home in 2008 when the financial crisis left many prominent funds nursing heavy losses.

The New York Times reported that Hedge Fund Managers still did very well in a Down Year in 2008.

25 top managers reaped a total of $11.6 billion

However in 2007, twenty-five (25) heads of hedge funds made over $1 billion/year or close to $1 billion for themselves for a total of $22.5 billion.

Gulp, gasp. How is that possible in this economic climate? Were many jobs created by these non-transparent mega-billion dollar Hedge Funds? No. This wealth was made for a select few who already have millions to invest.

Did the Hedge Funds create new jobs and services? No, mostly hedge funds bet against the market. So, what exactly are these Hedge Funds?

In order to even be part of a hedge fund, you have to be very very wealthy. Entry into most hedge funds requires that a person invest at least one million dollars to even get their foot in the door.

There are huge Hedge Funds that have very little oversight, especially in the derivatives area, since they are not required to register derivatives like a stock.  According to economist, Hernando de Soto, interviewed on the BBC, no one really knows the extent of derivatives worldwide. The Securities & Exchange Commission estimates there are approximately $680 TRILLION DOLLARS worth of derivatives!!! According to Hernando de Soto the amount of money invested in derivatives dwarfs the amount of goods produced by the entire world over eleven times more. He said in the BBC interview:

The whole world produces 60 trillion dollars of goods a year.

Hedge Funds, Big Banks and Derivatives: Very Cosy

Who actually has all these derivatives? Well, we do not know. Why? According to economist Hernando de Soto, derivatives should be treated like any other security, they should be tracked. It isn’t about right or left or to regulate or not regulate. De Soto said derivatives should be as transparent as stocks. There is no reason why they are hidden from view.

The problem with our economy is that fewer and fewer people have more and more of the wealth and they can only spend so much. As Robert Reich aptly said, the economy would do much better if more people had money to spend. That is exactly what President Obama’s tax cuts for people who make $250,000 or less will do. It will put more money in the hands of more Americans.

At the same time, by not extending the tax cuts for the very very wealthy — except for their first $250,000 (they get a tax cut on that part too), the government will be able to have more money to pay for what we have already spent – like the trillions of dollars of money spent on Iraq and Afghanistan that were spent from 2001 to the present.

According to Robert Reich, balancing the budget at this time will not create jobs. If anything, it will do the opposite, it will extend the recession and make it more difficult for average people to get jobs. What is needed now is more jobs programs to put people back to work. Also people laid off of their jobs because of the economy need to get new training for new jobs.

Fox News Fear Factor

The spinmeisters at Fox frequently use their position to scare people, especially older people into thinking everything will be OK if only the wealthy have their tax cuts forever and ever.

Where is the evidence that this is true? There is no evidence.

Just because John Boehner says certain talking points does not make them true. Perception may seem like reality but on closer examination with evidence-based data we can see that perception does not a job make. That goes for the faulty thinking that we can cut taxes on the very very wealthy and balance the budget and suddenly jobs will magically appear out of the ether.

Formula for Creating Jobs

 

Tax Cuts for the Wealthy Do Not Create More Jobs!, Photo Credit: Six is a serious kitty by ktylerconk on flickr cc

 

1.  Enable more Americans to have more money to spend beyond the 1% of very very wealthy Americans who make up 3.1 million people out of all 310 million Americans (and who now have 23.5 % of the wealth in the U.S.)

2.  Create jobs programs through government funded programs to improve infrastructure of roads, bridges, buildings throughout the U.S. This puts money into the economy.

3.  Create incentives for all kinds of businesses to hire more people, including payroll tax holidays.

4. Create incentives for banks to loosen credit to businesses and individuals so more people have money in the economy to spend on goods, to create jobs and to enable manufacturing in the U.S.

5. Paul Krugman suggests the government needs to spend more money in order to increase demand in the market place, not spend less and tighten the budget. We cannot starve the economy. We need to feed the economy with more money.

Paul Krugman said in his article, “It’s Demand, Stupid”:

Businesses aren’t hiring because of poor sales, period, end of story: (cites graph of sales figures)

And the best thing government could do to help business would be to spend more, increasing demand.

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