George Rebane

We wake up every morning to National Progressive Radio.  Listening to NPR is one of the many outlets we monitor so as to avoid the echo chamber effect of having others just adding to our confirmation bias (q.v.).  In the last couple of weeks NPR seems to have turned the heat on the Republicans, being more blatantly biased than usual in how it supports the Administration and Democrats.  This morning its mission was to repeat the progressive line that increasing taxes on people who create jobs does not affect their efforts to create jobs – a line in tune with 0bama’s current campaign to maintain the payroll tax relief and ‘pay for it’ by more taxes on the 1% – a kind of consistent theme that ranges from the screams of the street idiots, across the congressional Democrats, all the way to the Oval Office.

So NPR wound up sticking its mike into the faces of three fat cat Democratic contributors who run businesses to ask them about the effect of increasing their taxes.  Each dutifully explained that their own marginal tax rates had no effect on whether they decided to hire or not.   You have to know something about businesses to have understood their answers.  You see, each of these worthies ran outfits that hired educated white collar workers to do intellectually demanding contract work for high end clients.  When they sold a contract, then they hired more people if the work load called for it.  Of course their own marginal income tax rate would not enter into the decision – the new work provided marginal revenues which paid for workers, handled the marginal overhead, and dropped more profits to the bottom line.  The risk of hiring for them was essentially zero.

What the country’s NPRs and other like-minded progressives never point out (or don’t even understand?) is that the interviewed fat cats don’t cover the waterfront of small business job creation.  In fact they are a small part of it.  The larger segment of such job creating businesses are the small retailers, motel and restaurant owners, small engine repair shops, boutique manufactories, etc who must hire in anticipation of business which must be serviced in short order or the customer goes elsewhere.  It is those people who run sole proprietorships and Sub-S businesses who must take the risk of 'staff up first and hope that the uptrend you detected actually turns out to materialize'.

When you’re repairing snow blowers, lawn mowers, and chain saws, and then tell a walk-in or call-in prospect that you’re backed up and their chain saw will be ready in three weeks, you can be sure you’ll see their backside as they disappear out your door.  In a small business you have to have the capacity to produce and/or service in place in order to capture the short-order business that is typical in your market.   Such businesses don’t have the luxury of working multi-month contracts for which they can staff up after the contract is inked.

The tens of thousands of JIT (just in time) businesses march to a totally different drummer, and must hire before the new business materializes.  And when you do that, how do you plan to pay the new worker while waiting for the new business to arrive?  The typical and, for most, the only way is through your savings or retained earnings.  That’s the stashed money that is left over after paying your taxes.  Raising taxes, raising minimum wages, guaranteeing jobs, and other state mandated benefits have never enabled such employment to increase – in fact, this ugly aspect of socialism destroys both wealth creation and jobs in tandem.  Nobody on the Left is connecting these dots – they don’t dare because their social justice arguments would disintegrate in even the most modest minds of their constituents.

Again our future’s harbinger is Europe.  Today’s EU crisis is directly linked to a small number of factors.  And unemployment is highest in countries that force employers to pay the highest wages and guarantee jobs while being taxed into oblivion.  Spain is the poster child with 22.8% unemployment caused laws that “guarantee lifetime employment with gold-plated contracts”.  This is particularly hard on entry-level young people (48.9% unemployed) who are forced to “shuffle endlessly between short-term, low-paying jobs” or not work at all.  Anybody picking up such similarities on this side of the pond?

Let’s look again at the 1% whose contribution to all federal income taxes has almost doubled to 40% from about 20% in the 1970s.  These high rollers are also big political contributors to both parties.  They own and operate businesses that benefit from all kinds of government guarantees and subsidies.  Stephen Moore and economist Walter Williams point out ('The Millionaire Subsidy Elimination Act' ) that there are now “more than $200B in annual income transfers every year to Americans whose incomes exceed $1M.”  None of this is pointed out by our “sanctimonious (and grateful) politicians”.

Moore and Williams conclude – “We can't think of a better way to disarm the class-warfare crowd in Washington than by calling for zeroing out all subsidies for the rich and famous. Are Republicans smart enough to embrace this idea? Probably not. Would Barack Obama and Nancy Pelosi oppose ending welfare to millionaires and billionaires? We'd love to see them try.”