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We Are All Job Creators

Henry Ford had it right - 'the middle class is the greatest job-creating machine the world has ever known.'

 

I’m a job creator. So are you.

We create and sustain jobs every time we grocery shop, send our kids to school, eat out, buy a car, purchase a washing machine or clothes, and when we call a plumber or electrician.

I mention this because, as the rhetoric ratchets up in the heat of the 2012 presidential campaign season, those who want to shield the wealthy from higher tax rates seem to be trying to create a protected class – entrepreneurs and those who have millions to invest. 

The thought is that if the top tier of the federal income tax rates goes from the current 35 percent to 39.6 percent (which it was in the prosperous '90s)  droves of innovators and entrepreneurs will either move to places such as Mexico (top tax rate 30 percent) or invest elsewhere.  

That’s hogwash, according to billionaire investor Warren Buffett. In a 2011 op-ed piece in The New York Times, Buffett wrote:  "I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77 -- shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off."

Surely, investors and entrepreneurs are not going to relocate to most of Europe, where the marginal income tax rates are much higher. Among 96 nations surveyed in 2011 by the tax and auditing firm KPMG, the U.S. ranked 23rd in terms of the top marginal tax rate.

What entrepreneurs and investors need is a healthy middle class to buy their products. Journalist Hedrick Smith pointed out Sunday in a New York Times op-ed piece that in the early 1900s, Henry Ford understood the importance of paying his workers a good wage because they would be able to buy his Model T cars.

I asked Stephen Herzenberg, an MIT-trained economist and executive director of the Keystone Research Center in Harrisburg, what went wrong. 

“As Henry Ford understood, the middle class is the greatest job creating machine the world has ever known,” Herzenberg said.  “That’s why our country grew most rapidly when middle-class incomes rose. If workers can’t afford to buy more, businesses don’t have enough customers and won’t invest.”

“We won’t continue to have the most powerful economy in the world unless we invest enough in research, infrastructure and the education of the 99 percent,” Herzenberg said. “Right now, we’re not investing in the future and one reason is that affluent families… are paying less of their income in taxes than many middle-class families.”

Keystone just released the “State of Working Pennsylvania 2012” report, which found: “For a four-person family, median income grew nearly twice as fast in the 1990s as it did in the 1980s, but it actually declined by $6,136 over the course of the ‘lost decade’— going from $82,818 in 2000 to $76,682 [in dollars adjusted for inflation] in 2010.

“This decline occurred despite growth in the Pennsylvania economy because the benefits of growth went disproportionately to the top 1 percent of earners. The 1 percent captured more than half of all income growth in Pennsylvania between 2002 and 2007. After a brief setback, top incomes were on the rise again in 2010, capturing three out of every four dollars in income growth in Pennsylvania in the first full year of the economic recovery.”

It’s not class warfare to say the wealthy should pay more taxes to invest in infrastructure, education, to help pay for entitlements like Medicare and Social Security, and pay down the federal deficit.

Yes, discovering new products and markets and starting your own business should be respected and rewarded. But so should picking the crops that feed America. So should building the roads and cleaning the bedpans in our nursing homes, picking up our garbage, serving Americans food and cleaning hotel rooms. With stagnating wages, such workers can’t afford to pay more.  

Henry Ford was a job creator but he recognized that so were his employees. That didn’t make him a socialist.

Crestor Januvia September 06, 2012 at 05:40 PM
Don't quote the bible, abortion defender.
Crestor Januvia September 06, 2012 at 05:45 PM
Democrats.... GET USED TO THIS.... we are now in a global economy. It is no longer viable to pay somebody $75/hr in pay and benefits to do unskilled labor, like putting nuts on the wheels of cars. American steel is gone, because of all the pay and benefits unions extorted out of companies for the brief 30 year period after WWII and before globalization. American auto manufacturing was NOT saved by Obama. Because they did NOT go through a bankruptcy reorg, they have all the same problems they had before, and the $20 stock price of GM proves it. GM will go bankrupt again, and will only survive after a true bankruptcy, where they can shed their absurd pension and health care costs that WERE NEVER SUSTAINABLE, and certainly are less so in a global environment. The NEW MIDDLE CLASS is a middle class of the WORLD. By world standards, our middle class is in great shape. No more huge house, boat, 3 cars, snow mobiles, pension, gold plated healthcare for unskilled labor. GO TO COLLEGE and study something of value like accounting or engineering. Then you can live like the middle class union wonks USED to live, and never will again.
Allan Bach September 06, 2012 at 09:26 PM
Jonathan, building Casinos would not be an issue if people would not visit them. How long will anyone (rich or poor) feed a machine 20 dollar bills until they realize they lose and the Casino wins? Weakness? Despair? Both are choices by those who are labeled as "minorities" or "poor" or "disadvantaged". They are not blind, though, and are able to see the stumbling block - thereby avoiding it. If an investor worships mammon and takes advantage of human weakness, he will receive his just reward, if not in this life then in the next. I agree about putting money in the hands of people. I don't think it should be money they haven't earned. Government is not God, though many worship it as such. Our rights are granted by the Creator and are unalienable - at least, until some elected officials believe otherwise. I think you and I have more in common than in disagreement. I wish you peace - I believe it is Shalom in your faith.
John September 07, 2012 at 12:57 AM
Jonathan, I follow your reasoning until you get to the point where the middle class spends money, pulling the string. Herein lies the difference....without jobs, where does the middle class get the money to spend to pull the string? Without money to buy products, there remains no need to manufacture. Your way is to have the government give the middle class money by taxing the rich. But if I took more money from you, it would stagnate your ability to grow....no matter the demand...the greate demand, the greater the need to tax. Give a man a fish, he eats for a day, teach him to fish, he eats for a lifetime. Giving in this case creates a society of takers, while at the same time stagnating the creators.
Amend September 07, 2012 at 01:25 AM
@John (not Jonathan)- it would be more accurate to discuss restoring the tax rate to a state it once was. Were it that giving tax breaks actually resulted in the creation of jobs, we would be seeing the results of those tax breaks in the number of jobs available. We would be seeing prosperity spreading like was promised when those tax breaks were enacted. That simply isn't the case. Trickle down is a farce at best, and elitism at its worst that has allowed wealth to polarize to a point where the middle class is nearly extinct. It's a farce that the GOP wants to keep feeding us.

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