GET YOUR DIPLOMA FROM THE "GOP SCHOOL OF ECONOMICS". BUT DON´T EXPECT IT GETTING YOU A JOB.

In math, "1+1=2". In Republican economics, "lower taxes = more jobs". Well, at least the math equation is correct.

...GOP Speaker, John Boehner, Mr. "We can't raise taxes on job creators".

As the gap continues to widen between the GOP and the Democrats, both sides continue to argue whether or not lowering taxes does, or does not, create jobs.

The Democrats continue to rightfully state that George W. Bush´s "tax-cuts-for-the-rich" produced fewer jobs in 8 years than Obama has produced, (in a down economy), in the past 3 years. But they keep saying that, "we can´t increase taxes on the job creators", which we all know is a bunch of bunkum. But the conservatives keep preaching that to an apparent economically ignorant American public.

So, how can we convince the American public that higher taxes on the rich will not only "not" stop job creation, but will actually increase job creation?

Well, first we must get the people to understand that the US is the most "Consumer Driven" nation in the world. This statement means that 60% of this nation´s is based on the buying of consumer items to drive the nation´s economy. The US is the world´s "most" consumer driven because, of the other industrialized countries, most of their consumer economies are driven by about only 40% consumerism.

And just why is that?

Well, many other nations have fewer citizens and they don´t purchase as many items from "for-profit" companies as do Americans. As an example, most all health care in the US is "for-profit", where in other countries, "for-profit" health care is against the law. In addition, all student loans for higher education in the US are "for-profit" loans from private banks. In other countries, higher education costs are paid by higher taxes and their higher-education is free for all of its citizens. But these are just a couple of examples.

The point is that what the conservatives keep trying to sell is, "By raising taxes on the top 1% of the nation´s wealthy, we are considering destroying the very mechanism that makes our economy the strongest and biggest in the world: The incentive for entrepreneurs and investors to build companies in the hope of getting rich and, in the process, creating millions of jobs."

But the truth, as stated by a current billionaire, Mr. Nick Hanauer, "the theory that rich people create the jobs is absurd". And Mr. Hanauer is the founder of the online advertising company aQuantive, which Microsoft bought for $6.4 billion.

There have long been many problems with this argument that the wealthy create jobs, starting with:

>>> Taxes on the rich today are, relative to history, low, so raising them would only begin to bring them back in line with previous prior prosperous US periods

>>> Dozens of rich entrepreneurs have already gone on record confirming that a modest hike in capital gains and income taxes would not have the slightest impact on their desire to create companies and jobs.

>>> In addition, when taxes are closer to the 50% level, that many times encourages the company´s management to keep the money invested in expanding the company, instead of paying the money out in large taxable dividends.

As Mr. Hanauer states, and as it is for consumer driven economies, "rich people do not create jobs, even if they found and build companies that eventually employ thousands of people". What creates the jobs, Hanauer astutely observes, is "a healthy economic ecosystem surrounding the company, which starts with the company's customers".

The company's customers that buy the company's products, which, in turn, create the need for the employees to produce, sell, and service, those products. That´s what creates jobs. If those customers go broke, or lose their jobs, the demand for the company's products will collapse. The jobs will then disappear, regardless of what the entrepreneur or the company does. This is today, and always has been, the basics of what creates and keeps jobs.

As is demonstrated with the more than $9 million a year that Mr. Hanauer keeps, he buys lots of stuff. But, more importantly, he doesn't buy as much stuff as would be bought if that $9 million were instead earned by 9,000 Americans each taking home an extra $1,000 a year.

As a very wise man once said, "To be a very rich man, in a very poor country, that country´s economy will eventually fail, as fewer people have the necessary spending money for maintaining the nation´s consumer driven economy."

Yes, it´s basic math, not "Republican economics".

Now regarding entrepreneurs, such as Steve Jobs, of Apple Computer, Mr. Hanauer states, "Now, of course entrepreneurs are an important part of the company-creation process. And so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of customers' ability and willingness to pay for the company's products, not the entrepreneur or the investor capital." He is suggesting that saying that, "rich entrepreneurs and investors create the jobs is like suggesting that squirrels create evolution".

Or, to put it even more simply, it's like trying to say that "a seed creates a tree". The seed does not create the tree.

The seed starts the tree. But what creates the tree is the combination of the DNA in the seed and the soil, the sunshine, the water, the seed´s environment, the nutrients, and the other factors that nurture it. Plant the seed in an inhospitable environment, and it won't create anything. Instead, it will die.

The point is that entrepreneurs and investors are very important to our economy. The Steve Jobs in the country keep the economy vibrant and nimble, and they help the "gale of creative destruction" that creates innovation and progress and wealth and allows the economy to remain competitive. And they all deserve credit for that. But if they create any jobs, it´s only temporary if the customers for their products do not appear.

We are all in this together.

What "creates" most of the jobs in our economy is due to a healthy economic ecosystem for the 99%, not a 1%, privileged part of it. Without healthy and plentiful customers, with good paying jobs and the ability to "consume", entrepreneurs, investors and manufacturers are eventually "dead in the water".

It´s really that simple.

Copyright G.Ater 2011

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