Banned TED Talk: Nick Hanauer "Rich people don't create jobs"

Summary

The speaker challenges the belief that taxing the rich less leads to more job creation, arguing it's a flawed concept akin to believing the Earth is the center of the universe. He asserts that jobs are created by consumer demand, not the wealthy, and criticizes the self-aggrandizing notion of 'job creators.' He calls for a reevaluation of tax policies, advocating for taxing the rich to invest in the middle class, which he identifies as the true job creators, benefiting all strata of society.

Takeaways

• 💡 The belief that higher taxes on the rich lead to less job creation is a common but potentially flawed notion.
• 🌟 The speaker argues that rich individuals and businesses are not the primary job creators; instead, it's the consumers' demand that drives job creation.
• 🚀 The speaker's personal experience in starting companies reinforces the idea that without consumers to buy products, businesses cannot sustain jobs.
• 🔄 The script suggests a feedback loop between consumers and businesses as the true engine of job creation, rather than the actions of the wealthy.
• 🤔 It challenges the idea that self-proclaimed 'job creators' are accurately describing their role in the economy, calling it disingenuous.
• 📉 The speaker points out the discrepancy between the belief in lower taxes for the rich and the actual outcomes, such as increased wealth disparity and persistent unemployment.
• 💸 The script highlights the disproportionate wealth accumulation among the top 1% and the reduction in their effective tax rates over the past decades.
• 🛍️ The speaker emphasizes that the rich cannot consume enough to replace the economic contributions of millions of middle-class consumers.
• 📊 The potential economic impact if the middle class retained its income share from the 1970s is presented as a powerful argument for income redistribution.
• 🏆 The script criticizes the special privileges and tax rates enjoyed by the wealthy, suggesting they are not justified and contribute to economic inequality.
• 🌱 The speaker concludes that taxing the rich to invest in the middle class is beneficial for all economic strata, positioning middle-class consumers as the real job creators.

Q & A

What is the central idea presented in the script?

The central idea is that the belief that higher taxes on the rich will lead to less job creation is a misconception. The speaker argues that jobs are created by consumer demand, not by the actions of the wealthy.

Why does the speaker compare the belief about taxes and job creation to the belief that the Earth was the center of the Universe?

The comparison is made to illustrate how deeply ingrained and long-held beliefs can be completely wrong. Just as the Earth-centric view was eventually replaced by the heliocentric model, the speaker suggests that the belief about taxes and job creation needs to be reevaluated.

What role does the speaker believe consumers play in job creation?

The speaker believes that consumers are the primary job creators. They argue that jobs are a consequence of a feedback loop between customers and businesses, where increased consumer demand leads to more hiring.

Why does the speaker say that businesses and the rich do not create jobs?

The speaker argues that businesses and the rich do not create jobs in the sense that they do not generate demand. They only hire more people when there is a need to meet rising consumer demand, which is driven by consumers, not the wealthy.

What is the speaker's view on the current tax policies that favor the rich?

The speaker criticizes current tax policies that provide the richest individuals with the lowest tax rates and the biggest tax exemptions. They argue that these policies have led to the rich getting richer while not effectively creating jobs.

How has the income distribution in the United States changed since 1980 according to the script?

Since 1980, the share of income for the top 1% of Americans has more than tripled, while effective tax rates for this group have gone down by fifty percent.

What is the speaker's argument against the idea that the rich can buy enough goods to stimulate the economy?

The speaker points out that even though they make hundreds or thousands of times more than the median American, they cannot buy hundreds or thousands of times more stuff. Their consumption does not compensate for the lack of purchasing power among the unemployed and underemployed.

What is the significance of the speaker's statement about the typical American family earning $45,000 more a year if they retained the same income share as in 1970?

This statement highlights the significant shift in income distribution over the past decades and suggests that if the middle class had more purchasing power, it could greatly benefit the economy by increasing demand and potentially leading to more job creation.

Why does the speaker believe that the language used to describe capitalists as 'job creators' is misleading?

The speaker argues that labeling capitalists as 'job creators' is not just a description of how the economy works but also a claim to status and privileges. This language elevates the role of the wealthy in the economy, which the speaker believes is undeserved.

What is the speaker's suggestion for a more effective economic policy?

The speaker suggests that taxing the rich to fund investments that benefit all is a smart move. They argue that in a capitalist economy, the true job creators are middle-class consumers, and policies should focus on supporting the middle class to stimulate economic growth.

Outlines

00:00

💼 Myth of the Job Creators

The speaker challenges the widely accepted belief that taxing the wealthy more heavily would stifle job creation. They argue that it is not the rich who create jobs but rather the consumers, whose demand drives business growth. The speaker, having experience in starting companies, emphasizes that without consumers able to purchase goods and services, businesses would fail. They point out the irony of business owners taking credit for job creation, likening it to squirrels claiming responsibility for evolution. The speaker also criticizes the current economic policies that favor the wealthy, highlighting the increase in income inequality since the 1980s and the ineffectiveness of lower taxes for the rich in creating jobs. They conclude by asserting that the middle class, not the rich, is the true engine of job creation.

05:02

💼 Taxing the Rich for a Thriving Middle Class

The speaker proposes a paradigm shift in economic policy, advocating for the middle class as the primary job creators. They argue that taxing the rich to fund investments that benefit the middle class is a wise strategy for economic growth. The speaker contends that when the middle class thrives, businesses expand and hire more workers, which in turn benefits the rich. They suggest that the current tax system, with its preferential treatment of capital gains and dividends, is unjustifiable without an inflated view of the rich's role in society. The speaker calls for a reevaluation of the language and metaphors used to describe economic actors, urging a recognition of the middle class's essential role in driving the economy.

Keywords

💡Taxes on the rich

The concept of 'taxes on the rich' refers to the tax policies that specifically target higher income earners. In the video, it is suggested that this idea is a deeply held belief that higher taxes on the wealthy will negatively impact job creation. This belief is challenged as a misconception, illustrating the video's theme that conventional economic wisdom may not always hold true.

💡Job creation

Job creation is the process by which new jobs are generated, typically through the growth of businesses. The video argues that the common belief that the rich are the primary job creators is flawed, asserting that jobs are actually a result of consumer demand and the feedback loop between customers and businesses.

💡Economic landscape

The term 'economic landscape' encompasses the overall structure and dynamics of an economy. The video discusses how the belief that taxing the rich negatively affects job creation has significantly shaped the economic landscape, influencing policies and the distribution of wealth.

💡Consumer demand

Consumer demand refers to the desire and ability of consumers to purchase goods and services. The video posits that consumer demand is the primary driver of job creation, as businesses will only hire more employees if there is sufficient demand for their products or services from consumers.

💡Middle class

The 'middle class' is a social class that falls between the working class and the upper class. The video highlights the importance of the middle class in driving economic growth and job creation, arguing that a thriving middle class leads to business expansion and job opportunities.

💡Tax exemptions

Tax exemptions are provisions that allow individuals or entities to avoid paying certain taxes. The video criticizes existing policies that provide the richest individuals with tax exemptions, suggesting that these policies have contributed to wealth inequality without fostering job creation.

💡Wealth inequality

Wealth inequality refers to the disparity in the distribution of assets among different social classes or economic groups. The video discusses how wealth inequality has increased since 1980, with the top 1% of Americans receiving a larger share of income while facing lower tax rates.

💡Underemployment

Underemployment occurs when a worker is not fully utilized or employed in a job that matches their skills and qualifications. The video mentions underemployment alongside unemployment as indicators that the belief in lower taxes for the rich leading to job creation has not materialized into reality.

💡Carried interest

Carried interest is a share of the profits produced by an investment, paid to the investment manager as compensation. The video points out the disparity in tax rates between the 15% rate on carried interest and the 35% top marginal rate on ordinary income, suggesting a need for a more equitable tax system.

💡Status and privileges

Status and privileges refer to the social standing and special rights or advantages that individuals or groups may have. The video argues that the term 'job creator' has been used by the wealthy to claim status and privileges, which may not be deserved based on their actual contribution to job creation.

💡Investments

Investments in this context refer to the allocation of resources for the purpose of generating economic growth and social benefits. The video concludes by advocating for taxing the rich to fund investments that benefit the middle class, which in turn would stimulate job creation and economic prosperity.

Highlights

The idea that higher taxes on the rich lead to less job creation is a widely accepted belief among Republicans and Democrats.

This belief has significantly shaped the economic landscape.

The speaker challenges the notion that the rich are job creators.

The speaker argues that jobs are created by consumers, not the rich or businesses.

Consumers drive the cycle of demand and hiring, making them the true job creators.

Business people taking credit for job creation is likened to squirrels taking credit for evolution.

Hiring more people is a last resort for capitalists, driven by consumer demand.

The speaker criticizes the existing policies that benefit the rich under the guise of job creation.

The wealth gap has widened since 1980 with the top 1% of Americans seeing their income share triple.

Lower taxes for the rich have not led to increased job creation.

The speaker points out the limited consumption capacity of the super rich compared to the masses.

The speaker argues that the middle class, not the rich, is essential for a thriving economy.

The speaker highlights the significant income disparity that has developed since 1970.

The speaker criticizes the language used to justify economic policies that favor the rich.

The speaker calls for a reevaluation of tax policies to benefit the middle class and the economy as a whole.

The speaker concludes that middle class consumers are the true job creators and that taxing the rich is beneficial for all.

Transcripts

It is astounding how significantly one idea can shape a society and its policies.

Consider this one:

If taxes on the rich go up, job creation will go down.

This idea is an article of faith for Republicans and seldom challenged by Democrats

and has indeed shaped much of the economic landscape.

But sometimes the ideas that we are certain are true

are dead wrong.

Consider that for thousands of years, humans believed that the Earth

was the center of the Universe.

It's not.

And an astronomer who still believes that it was

would do some pretty terrible astronomy.

Likewise, a policy maker who believes

that the rich are job creators and therefore should not be taxed

will do equally terrible policy.

I have started and helped start dozens of companies

and initially hired lots of people,

but if there was no-one around who could afford to buy what we have to sell,

all those companies and all those jobs would have evaporated.

That's why I can say with confidence that rich people don't create jobs.

Nor do businesses, large or small.

Jobs are a consequence

of a circle of lifelike feedback loop between customers and businesses.

And only consumers can set in motion this virtual cycle of increasing demand and

hiring.

In this sense, an ordinary consumer is more of a job creator than a capitalist like

me.

That's why, when business people take credit for creating jobs,

it's a little bit like squirrels taking credit for creating evolution.

It's actually the other way round.

Anyone who's ever run a business knows

that hiring more people is a course of last resort for capitalists.

This is what we do if, and only if rising consumer demand requires it.

And in this sense, calling ourselves job creators isn't just inaccurate: it's disingenuous.

That's why our existing policies are so upside down.

When the biggest tax exemptions and the lowest tax rates benefit the richest,

all in the name of job creation,

all that happens is that the rich get richer.

Since 1980, the share of income for the top 1% of Americans has more than tripled,

while our effective tax rates have gone down by fifty percent.

If it was true that lower taxes for the rich and

more wealth for the wealthy led to job creation,

today, we would be drowning in jobs.

(Laughter) (Applause) Thank you.

And yet, unemployment and underemployment is at record highs.

Another reason that this idea is so wrong-headed

is that there can never be enough super rich people to power a great economy.

Somebody like me makes 100s, or 1000s of times as much as the median American.

But I don't buy 100s or 1000s of times as much stuff.

My family owns three cars, not 3000.

I buy a few pairs of pants and shirts a year like most American men,

occasionally, we go out to eat with friends.

I can't buy enough of anything to make up for the fact

that millions of unemployed and underemployed Americans

can't buy any new cars, any clothes, or enjoy any meals out.

Nor can I make up for the falling consumption of the vast majority of middle-class families

that are barely squeaking by, hurried by spiraling costs,

and trapped by stagnant or declining wages.

Here's an incredible fact:

If the typical American family still retained the same share of income that they did in

1970,

they'd earn like 45,000 dollars more a year.

Imagine what our economy would be like if that were the case.

Significant privileges have come to people like me,

capitalists, for being perceived as job creators at the center of the economic universe,

and the language and metaphors we use

to defend the current economic and social arrangements is telling.

It's a small jump from "job creator" to "the creator".

(Laughter) (Applause)

This language obviously wasn't chosen by accident,

and it's only honest to admit that when somebody like me calls themselves a "job creator",

we're not just describing how the economy works,

but more particularly, we're making a claim on status and privileges that we deserve.

Speaking of special privileges,

the extraordinary differential between the 15% tax rate that capitalists pay

on carried interest, dividends, and capital gains,

and the 35% top marginal rate on work that ordinary Americans pay

is kind of hard to justify without a touch of deification.

We've had it backwards for the last 30 years.

Rich people like me don't create jobs.

Jobs are a consequence of an eco-systemic feedback loop between customers and businesses.

And when the middle class thrives, businesses grow and hire, and owners profit.

That's why taxing the rich to pay for investments that benefit all

is such a fantastic deal for the middle class and the rich.

So, ladies and gentlemen, here's an idea worth spreading:

In a capitalist economy, the true job creators are middle class consumers

and taxing the rich to make investments to make the middle class grow and thrive

is the single shrewdest thing we can do

for the middle class, for the poor, and for the rich.

Thank you.

(Applause)