Clarence Revote Budget : Tip of the Iceberg

Clarence overwhelmingly passed its revote budget last night. So did most other revote budget districts – Bemus Point passed its original, above-cap budget, but Wilson will be finding out about austerity next year.

In Clarence, 5,358 voted – less than May 21st’s record, but about double what the town usually sees for school vote turnout. On May 21st, 8,232 people voted, and the results were No: 4,801 Yes: 3,431

Last night, we had 3,541 yes votes and 1,817 voted no. That means we gained about 100 yes votes, and the no votes stayed home in droves. To the extent that the formerly warring factions came together last week to urge, in unison, a “yes” vote on this revote budget, we didn’t get a lot more “yes”, but at least the “no” weren’t energized enough to make the trip anymore.

A quality education is something to which every child is entitled (yes, entitled). There is a concerted effort underway in this country to dismantle the very things that helped lurch us from a frontier backwater into the superpower we are today. There is an organized and well-funded movement to fight a war on the middle class, protecting and comforting the very rich while punishing the poor and destroying the middle class that built this country.

On June 6th, serial entrepreneur Nick Hanauer testified before the Senate Committee on Banking, Housing & Urban Affairs. (Website here) I think that what he said is a fundamental truth that helps inform why providing equal opportunity for America’s middle class families to thrive, excel, and do better each day as compared to the last.

For 30 years, Americans on the right and left have accepted a particular explanation for the origins of Prosperity in capitalist economies. It is that rich business people like me are “Job Creators.” That if taxes go up on us or our companies, we will create fewer jobs. And that the lower our taxes are, the more jobs we will create and the more general prosperity we’ ll have.

Many of you in this room are certain that these claims are true. But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were certain, positive, that earth was at the center of the universe. It’s not, and anyone who doesn’t know that would have a very hard time doing astronomy.

My argument today is this: In the same way that it’s a fact that the sun, not earth is the center of the solar system, it’s also a fact that the middle class, not rich business people like me are the center of America’s economy.

I’ll argue here that prosperity in capitalist economies never trickles down from the top. Prosperity is built from the middle out. As an entrepreneur and investor, I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all would have failed and all those jobs would have evaporated.

That’s why I am so sure that rich business people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. That’s why the real job creators in America are middle-class consumers. The more money they have, and the more they can buy, the more people like me have to hire to meet demand.

So when businesspeople like me take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around. Anyone who’s ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do if and only if increasing customer demand requires it.

Further, that the goal of every business—profit– is largely a measure of our relative ability to not create jobs compared to our competitors. In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.

That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest 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 richest 1% of Americans has tripled while our effective tax rates have by approximately 50%. If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. If it was true that more profit for corporations or lower tax rates for corporations lead to more job creation, then it could not also be true that both corporate profits and unemployment are at 50 year highs.

There can never be enough super rich Americans like me to power a great economy. I earn 1000 times the median wage, but I do not buy 1000 times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally. 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 clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages. This is why the fast increasing inequality in our society is killing our economy. When most of the money in the economy ends up in just a few hands, it strangles consumption and creates a death spiral of falling demand.

Significant privileges have come to capitalists like me for being perceived as “job creators”at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from “job creator” to “The Creator.”

When someone like me calls himself a job creator, it sounds like we are describing how the economy works. What we are actually doing is making a claim on status, power and privileges.The extraordinary differential between the 15-20% tax rate on capital gains, dividends, and carried interest for capitalists, and the 39% top marginal rate on work for ordinary Americans is just one of those privileges. We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather, jobs are a consequence of an ecosystemic feedback loop animated by middle- class consumers, and when they thrive, businesses grow and hire, and owners profit in a virtuous cycle of increasing returns that benefits everyone.

I’d like to finish with a quick story.About 500 years ago, Copernicus and his pal Galileo came along and proved that the earth wasn’t the center of the solar system. A great achievement, but it didn’t go to well for them with the political leaders of the time. Remember that Galileo invented the telescope, so one could see, with one’s own eyes, the fact that he was right. You may recall, however, that the leaders of the time didn’t much care, because if earth wasn’t the center of the universe, then earth was diminished—and if earth was diminished, so were they. And that fact–their status and power–was the only fact they really cared about. So they told Galileo to stick his telescope where the sun didn’t shine and put him in jail for the rest of his life.

And by so doing, put themselves on the wrong side of history forever. 500 years later, we are arguing about what or whom is at the center of the economic universe. A few rich guys like me, or the American Middle class. But as sure as the sun is the center of our solar system, the middle class is the center of our economy. If we care about building a fast growing economy that provides opportunity for every American, then we must enact policies that build it from the middle out, not the top down.

Tax the wealthy and corporations–as we once did in this country—and invest that money in the middle class as we once did in this country. Those polices won’ t just be great for the middle class, they’ll be great for the poor, for businesses large and small, and the rich.

17 comments

  • Ridgewaycynic2013

    Well, we can all see Mitt won’t be asking Mr. Hanauer for economic advice.

  • I agree with Hanauer, but your commentary on the budget revote…bilge…

  • Wait, when did “we” invest all that money we taxed from the wealthy in the middle class? When exactly the hell did gov’t taking lots of money from the Vanderbilts turn steel workers into middle class guys?

    Or is Alan somehow suggesting that if we tax Bill Gates and Warren Buffet that somehow he’ll be able to hire enough teachers that somehow a middle class boom will happen?

    We had a strong middle class because skilled labor was required to create the raw materials of our post industrial revolution. Building cars. Building computers. You know, all the shit that gets built by robots now.

    Having a “middle class” has not much to do with how much “we” tax the wealthiest…. and of course, has just about zip to do with Clarence schools, but Alan has to tie his threads together I guess. All he missed was another gratuitous shot at Esmonde.

    • You can build all the cars and computers you want, but if there’s no one there to buy it, what’s the point? Perhaps if we disincentivized offshore manufacturing and made it more advantageous to build tchotchkies in Sheboygan instead of Shenzhen, we’d be better off.

      Dismantling the middle class began with Reagan, and no one has halted it. Keep thinking that Bill Gates and Warren Buffett will “create jobs” because their personal income tax bills are dramatically lower than they would have been 10, 20, or 40 years ago. As Hanauer says, we should be swimming in jobs, but we aren’t.

      • You’re aiming your anger at the wrong target (and the wrong person). I didn’t suggest Gates and Buffet would create jobs – nice strawman.

        “Dismantling the middle class began with Reagan”. No it didn’t, it began with computerization and miniaturization (blame transistors if you want), and has resulted in *hundreds* of millions of people around the world being lifted out of abject poverty, at the cost of 10’s of millions of assembly-line type jobs in America. I’m okay with that tradeoff, abject poverty in the 3rd world sucks a lot worse than a Walmart job. And you know what, those 3rd worlders buy stuff.

        I have no problem with Hanauer’s argument that middle class demand stimulates the supply. But we spend more money now that ever before on schools, so I can ask the same question: where are the jobs?

        I also completely believe that education is the one way humans can continue to elevate the world and squeeze more wealth out of it. I completely disagree that forced Prussian-designed schooling designed to create docile industrial workers is in any way the best way to do that.

        • Michael Raleigh

          How long have you worked at walmart and what 3rd world country are you from?

          • Way to form a reasoned, well-thought out response! In fact, the impeccable logic of your post has made me completely change my mind!

            But pray tell – when did you start hating the browns and the yellows?

    • “We” invested that tax money in infrastructure, schools, libraries and a ton of other things we no longer do. All of which provided jobs.

  • We need to allow entrepreneurs to design schools that work. Their reward will come when the parents CHOOSE those schools.

    • Michael Raleigh

      Why dont we just let the for profit prison companies design the schools. There is a lot of overlap there.

      • Profit is simply the reward for a job well done. Unless, of course, the government screws with the market.

      • The fact that there is overlap between the prison system and the public school system should trigger something in your mind, but I guess you missed it.

    • disqus_g6fqjyhj09

      We already have this in place with for-profit collegiate institutions. The costs are astronomically higher and most students come out of them with skills that are already outdated and have very little chance of being hired. Student debt is a problem as well but shouldn’t be included in this conversation. Moving this model to K-12 education would only slide this country into an idiocracy even faster than it already is.

      • If you leveled the playing field, the result would be different. Private schools must compete with subsidized schools, that is patently unfair.

    • Parents choose Clarence schools. What’s your point?

      • I guess you were in obtuse mode when you wrote that comment. People live in Clarence for a variety of reasons, sometimes school is a factor. That still does not amount to choice.

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