"Businesses are job creators, so we can't [tax them more, regulate them to protect consumers or the environment, etc. etc. ad nauseum]"...



This is a self-serving post hoc rationalization by those who own or run businesses, and the legislators and public officials who depend on them for campaign contributions. It is reliably invoked every time the possibility is mentioned of raising taxes on these people, who by and large are the wealthiest among us, in order to scare the electorate into believing that this class of people makes its hiring decisions based upon how much they are taxed (they don’t). It is invoked no matter how much money businesses are already sitting on (collectively about $1.6T at the moment for corporate America, which is somewhat less than the Iraq and Afghanistan wars combined have cost us, to date). It is invoked no matter how low their tax rate already is (the lowest in about 60 years, they tell me). It is a post hoc rationalization, because it is invoked only after business owners have decided they simply don’t want to pay any more in taxes, and want to make sure that they have friends in high public places who will insure that they don’t have to. Therefore, they need an argument that will sway the opinions of those who don’t own or run businesses but who (a) vote and (b) need jobs.

Business is good for society. A healthy economy is known by a thriving business climate. Many, many positive things can be attributed to businesses, but there is one property that a business owner can never claim: businesses (and by extension those who own businesses) do not create jobs, and never have.

What businesses create are profits for their owners. That is their function, and there is nothing inherently wrong with that, so long as they are making an honest profit and not doing it by externalizing their costs for others to pay, or by exploiting workers or consumers. But businesses do not create jobs. Demand for what a business sells – that’s what creates jobs, or at least, it can. Only if there is unmet demand in the market for what a business sells will the business owner(s) contemplate hiring someone to help fill the demand, but that’s not the first thing they will try. This can be understood by reference to the fact that labor costs are nearly always the biggest drain on the bottom line profitability of a business. Indeed, all the incentives line up against hiring someone for a real, decent-paying, full-time position with adequate benefits unless all other options for meeting unmet demand have first been exhausted. And there are plenty of options for the business owner.

First, they will try to increase the productivity of their existing work force. Higher quotas, longer hours. Then they might turn to technology – automation, software, and such, to boost productivity. If that’s not sufficient and they need more actual human labor, they may try to outsource that labor abroad, where it costs much less. Failing that, they will take on temps, hire people as independent contractors, and/or hire only part-timers to avoid having to pay benefits. They will push out older, more experienced workers to offset the cost of younger new hires.

If, and only if, all of these options (and more I have not mentioned) have been exhausted, and there remains unmet demand in the market which the business can profitably satisfy, then a business owner might create a job or jobs. Real, full-time, living-wage jobs with benefits. And – surprise! – these jobs will last just as long as that demand does. And once demand fluctuates back downward (an inevitability of the business cycle), here come the layoff pink slips. This calculus and no other is responsible for job creation, and applies not only to entrepreneurs or existing businesses, but also those looking for investment opportunities in the business world. Indeed, hiring someone is less an act of “job creation” by business owners than an act of investment in the likelihood of future profitability.

To top it all off, if a given business is incorporated, the directors in fact are legally bound by a fiduciary duty to behave in exactly this way, if doing so is in the best interest of the company (which is defined as return on shareholder investment, i.e., profitability).

The argument is also absurd in terms of tax policy, which coincidentally is the primary forum where this myth rears its ugly head (the others being discussion of regulations on business). A business that has to pay more in taxes is by definition a business that is making more profits. By definition, it’s a good problem to have. Given all the ways that businesses can write off expenses, if after exhausting all of them a business owner still has a substantial tax liability on the profits, it can only mean that there are substantial profits being made in the first place. Continuing to complain about the tax burden in such circumstances, especially using such a disingenuous argument as the “job creator” myth, is evidence simply of greed and a contemptible aversion to giving something back for the upkeep and improvement of the societal structures and institutions that made that business owner’s success possible in the first place.

Psychologically, it’s also evidence of narcissism, specifically the portion of that character flaw that posits an inflated sense of self-importance. What I mean is, the “job-creator’ myth goes hand in hand with the “self-made man/woman” myth indulged in by those who amass fortunes in business that would not have been possible without the contributions of the society they live in - contributions that are paid for by everybody via taxes. Some examples of these might include roads, free public education, state-subsidized college, a stable currency, public safety officers, and a judicial system. All of these things and many more make it possible to operate a successful business in this country; without them businesses and the economy cannot possibly thrive (see Somalia for evidence of this). But there are those who are psychologically incapable of crediting the contributions of anyone but themselves for their success in business. This is one side of the famous Fundamental Attribution Error, a cognitive bias in reasoning and attribution that finds its ultimate expression in the detestable pseudo-philosophy of Ayn Rand so popular among Republican politicians and CEOs. There is no such thing as a self-made man. I have never yet failed to be able to demonstrate that this is true, no matter whose name is offered. Certainly, success in business requires the business owner to work hard, and I’d never say otherwise. The fallacy lies in the assumption that the hard work of the successful business owner is not only necessary to achieve success (it is), but by itself sufficient (it isn’t).

To recap: Businesses don’t create jobs. Demand creates jobs. Money in people’s pockets creates demand.

I know I’m preaching to the choir here, and the ideas I’m presenting are hardly original even on these pages. If you’re reading something in this diary that sounds like a regurgitation of something you wrote, or have read here before, you’re probably right, and I’ll gladly update link back to anyone’s work on this topic that predates this diary. What’s different this time is the urgency and salience of the topic. John Boehner is about a week and change away from crashing the full faith and credit of the United States of America, and probably the world economy along with it, and is justifying doing so by invoking this stupid, and demonstrably false argument, with a straight face no less. Folks, he’s getting away with it. This “job creators” rhetoric is crystallizing as the conventional wisdom, even among Democrats, at precisely the time when real, reality-based, job creation initiatives are desperately needed and being ignored. We can’t let that happen. It’s time for progressives, Democrats, and people with calculators to start pushing back on this argument aggressively every time and every place it is offered.



WOW. This is my first DK diary in years. I watched it scroll off the FP last night with 16 comments and figured, "well, that's that." I crawl out of bed today to find it on the rec list with my mojo mug overflowing. I'm humbled. Thanks, everyone, for stopping by to read, comment, and share.

GAH!!! There he goes again!!! Just today, when asked for comment on Mitch McConnell's plan to punt responsibility for raising the debt ceiling to President Obama, Boehner just couldn't resist the tempatation:

Michael Steel, spokesman for Boehner, confirmed that the House speaker is aware of McConnell's plan.

"The Speaker shares the Leader's frustration," he said in an email. "Republicans are unified in our commitment to ensuring that the debt limit is not used as leverage to saddle small businesses with increased taxes that destroy jobs

Source - HuffPo: http://www.huffingtonpost.com/...