You don’t have to be an economist or even be good at math and numbers to understand today’s economy. You just need to know a bit of American history.
First I need to dispel a couple of myths about job creation in America:
“Businesses create jobs.” If you have heard that phrase once you have probably heard it a hundred times. It sounds logical though, doesn’t it? The problem is that it isn’t true at all. Not one business in America has ever created even one job.
Let’s do a creative exercise to explain what I mean: A businessman decides he wants to open a business. He develops a business plan, goes to the bank for financing, finds a building for lease, fills it with inventory and then opens the doors. At first, he is getting a customer here and there. After a while, through advertising, word of mouth, or luck, more and more customers begin to show up. At some point, if the businessman is good at what he does, there will be too many customers for him to handle on his own. So he hires someone to help him out, and if the business continues to grow, it could be many people.
So it isn’t the businessman who created the job(s), it is the customers, spending their money in his store, who created the job.
“The American government cannot create jobs.” This is a favorite talking point of Republicans, and it is completely false. The fact is that the government is the only entity that can create a job out of nothing. The reasons are simple. The government doesn’t have a customer base in the traditional sense nor do they have to make a profit. The government can say: “Here is ten billion dollars, go build a bridge over that river.” And voila hundreds or thousands of jobs have now been created to build that bridge. The government can run deficits while businesses cannot; at least not for long.
In America over the past 80+ years we have had two different, and completely opposite, economic policies in this country: Keynesian Economics and Supply-side, or “trickle-down” economics.
Keynesian Economics is basically about giving money to the poor and middle class through lower taxes, better benefits, or a higher minimum wage. Keynesian Economics says by putting money into the hands of people who are going to spend it, that will stimulate economic activity.
Trickle-down Economics is basically about giving money to the very wealthy and large corporations through tax cuts. Trickle-down Economics says by putting more money into the hands of the wealthy and large corporations, AKA the “job creators” they will take that money and use it to create jobs.
America was under Keynesian Economics from 1932 until 1980, and under Trickle-down Economics from 1980 until the present. So let’s compare the two:
Starting in the early 30’s America began the greatest public works programs in history. We built things like the Grand Coulee Dam, Hoover Dam, the Golden State Bridge, and many, many other projects. FDR understood how to put people back to work.
Post WWII, the world’s first large middle class was born in America. During the 1950’s President Eisenhower began the construction of our Interstate highways, a 50 year commitment.
During Keynesian economic times, America went from the Great Depression to being the most prosperous nation in the world with the most prosperous people.
Under Trickle down economics what has America done? Well, our infrastructure, built under Keynesian economics is now crumbling down around our ears. The average wage since 1980 has flat-lined after going up for decades. However, it isn’t all bad news, the wealthy along with large corporations are making more and have more money now than they ever have. So there’s that.
From 1932 until 1961 the top marginal tax rate, (the highest tax a wealthy person will pay), was 91% - 94% on incomes over $400,000 per year. We virtually had a maximum wage in this country. And guess what? There were still rich people in America.
So as Trump rolls out his new “tax reform” plan that once again cuts taxes for the wealthy and large corporations Americans need to ask themselves this question: “Do you want to continue on with trickle down economics which has resulted in a few hundred American families becoming extremely wealthy while the wages for everyone else are flat? Or would you rather go back to Keynesian economics where everyone in this country prospered?
It is not a coincidence that the three worst economic downturns in the past 100 years occurred under Republican leadership, (Hoover – 1929, Reagan – 1987, and GW Bush – 2007). The sad fact is Republicans don’t have any desire to make the economy work for all Americans. They are only interested in amassing more power for themselves, and more power and wealth for their rich masters.
You just need to look at the difference between states run by Democrats and those run by Republicans. People in Democratic states tend to have higher wages, less poverty, and better benefits than do those in Republican states.
It's time for America to go back to Keynesian Economics so we can once again become the most prosperous nation with the most prosperous people. Tax the rich and large corporations and use that money to rebuild our infrastructure and help the American people.
