When it comes to job creation both Democrats and Republicans reflexively trot out small business as the engine of growth. These flights of breathy admiration for plucky small business owners are part of our national myth, right up there with cowboys. There probably is some truth in this myth as long as you accept the other side of the equation which includes the fact that jobs in small businesses are lower paying and less stable than those in the middle and big size companies.
But to demonstrate the extent to which today’s political environment has lost any sense of consistency, we now have the Republicans saying that any tax increases on the wealthy and corporations are “job killers”.
Since when have wealthy individuals created jobs? They don’t start new entrepreneurial ventures. They do buy extra vacation homes and fly to Vermont and Colorado and Switzerland more frequently in their private jets for skiing and apres ski fun. Much of this extravagance also occurs outside of the US. It is well known that unlike poor and middle class people, wealthy people do not spend incremental income. They save a large portion of it. Poor and middle class must spend every dollar to keep up. I defy you to find data that supports the wealthy as a source of new job creation.
As for big corporations, they are sitting on huge pools of cash and not creating jobs now.
Companies had a record $ 1.91 trillion in cash and other liquid assets at the end of the first quarter, the report also showed, up from $ 1.86 trillion in the prior three months. Six consecutive quarters of profit growth helped fuel a 96 percent jump in the Standard & Poor’s 500 Index from its recession-low in March 2009 through March 2011. ((http://www.businessweek.com/news/2011-06-09/household-worth-in-u-s-increases-by-943-billion-fed-says.html))
There has been consternation that though corporate profits and productivity have soared since the 2008 meltdown, corporations are not investing in the US economy. To some extent this may merely be a symptom that big corporations are not beholden to any nation state. Just because IBM has headquarters in Armonk, NY does not mean that it is primarily US-centric in its business activities and future plans. IBM’s 2010 Annual Report reported sales as follows: Americas $42,044 billion; Europe/Middle East/Africa $31,866 billion; Asia Pacific $23,150 billion. The report further glows about the opportunities in the emerging boom economies of India and China. The US (not even reported separately, just as part of the “Americas”) is not a high growth region.
To satisfy you own curiosity about how widespread this global phenomenon is look up some recent annual reports for companies like GE, Walmart, Caterpillar, or just choose your favorite large company that has headquarters in the US.
Returning to wealthy individuals, it would not be surprising if one could look into their portfolios to discover that they reflect the same global thinking as found in the IBM example.
A final note must be made that during the 1950’s and into the 1960’s and again in the 1990’s Federal taxes on wealthy individuals and corporations were significantly higher than they are today. Yet, those periods are marked by higher than average job creation. George Bush’s huge tax give aways tot he wealthy (really a transfer of Chinese liquidity to the US wealthy through the Federal tax system) in the 2000’s coincided with the lowest job creation period in US history dating all the way back to Hervet Hoover.