[Editor’s Note: Not only is increased demand in the form of increased purchase orders the real spur to new hiring, it’s also important that the demand be targeted. Increasing demand for goods produced in China at Walmart, for example, will create jobs in China. But if we increase demand for domestic goods and services by building local infrastructure such as the ‘Smart Grid’ and other clean and green energy projects, then much of the demand will be for increased local labor and local goods.]
By RP Watkins
Beaver County Blue via Daily Kos
The popular notion of the so-called “Job Creator” is a myth. Yet the very idea of Job Creators represents the most basic argument in the Supply Side story, a concept which postulates that economic growth requires expanding the means of production. The term Job Creator has been repeated and spun so frequently on Capitol Hill and across America, almost exclusively from Conservatives, that it has become accepted wisdom that job growth is determined by the means of production, the supply-side of the economy. It is not.
The reason is so stunningly simple and basic that it’s almost entirely invisible by politicians and pundits alike. This is because contrary to the supply-side mantra, most businesses are unwilling to expand hiring unless the new jobs are justified by sufficient Market Demand. It is for this reason that the popular supply-side policies of tax cuts and credits have done little to stimulate domestic hiring. If anything businesses have converted the government largesse of lower taxes into enhanced profitability, with little in the way of new jobs materializing.
So who precisely are the real job creators? Simple, just visit the mall, or any place where goods and services are purchased. The real source of market demand is consumption, and it is the increase in demand, not supply, and that persuades businesses to hire. Yet for the past thirty years conservatives have had an ideological love affair with supply side economics. It entirely fits of course. Modern day conservatives are clearly the party of the top 1%, and so a policy of rewarding wealthy interests is perfectly aligned with their support base. And as everybody else would prefer lower taxes, it plays well to many voters, or at least those people who are unable or unwilling to recognize the vast wealth that is being surreptitiously funneled to the super rich.
Except that it doesn’t work, at least for the bottom 99%. So it is not surprising that since supply side went main stream wealth has gone almost entirely to the top, and real wages have been stagnant. Yet conservative politicians remain adamant that low taxes will fix the economy AND low spending will fix the deficit, completely ignoring that the only genuine solutions to balancing our public finances requires more revenues as well. Even business interests are coming around to acknowledge that President H. W. Bush was right all along, it really is Voodoo Economics.
So if businesses are unwilling to expand hiring on US soil until domestic demand warrants it, a pointedly Demand-Side requirement, then why does this ineffective ideology continue to wreck so much havoc on Washington’s ability to implement economically sensible policies? I contend that only when we figure that out will we be able to avoid artificially created Fiscal Cliffs.