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    « Does Mitt Romney Have What it Takes? | Main | Why do Romney’s Tax Returns Matter? »
    Sunday
    Jul292012

    Three Myths About Job Creation

     

    If anyone should ever sit down to write a history of early 21st-century political rhetoric, I imagine that an entire chapter will be devoted to one of the most fraught phrases of the period: job creator.

    Largely absent from our vocabulary until just a few years ago, the term is now part of the national psyche, a two-word gut twist that fulfills its promise to create emotion-laden, logic-lapsed responses.  Take a minute and think about the images you’ve come up with just while reading these opening sentences: Have you pictured a cynical Wall Street moneyman? The hard-working owner of your local dry cleaning business? Or, maybe, the smug grin of an Eric Cantor or—worse—Rush Limbaugh?

    The truth is that job creation—like nearly every other meaningful topic in politics—is far more complex than the left/right machinery wants us to believe.  Examine, if you will, just these three simple myths:

    1. Governments don’t create jobs.  Actually, they do.  As I’ve written previously, there are a number of ways that government creates jobs, and it happens every single day.  It’s not just that government can hire people—in fact, that’s probably the smallest part of it (despite the continued—and justifiable—cries for smaller government)—it’s that a significant part of our economy is generated by government wants and needs. Think of the entire defense industry, for example and the myriad companies fueled by defense department contracts. (A recent Deloitte study calculates more than 1.5 million private sector employees in the aerospace and defense industries, excluding commercial aviation.) Or, if you prefer to think more locally, think about how all those potholes get filled every year (which, despite the damage to many a front axle, actually happens most of the time.)
    2. Tax incentives for the wealthy don’t create jobs. Not so cut-and-dried, I’m afraid. While there are undoubtedly way too many loopholes in our tax code (most, it seems, favoring the wealthy), not all incentives are created equal.  The one’s that allow the Romney’s of the world to move money from one tax haven to the next are not ones that do any of us any good (except, I suspect, the eventual Romney heirs), but there are thousands and thousands of companies—and the jobs that go with them—that would not exist today if not for the venture capital (VC) markets. These markets, used to fund companies where the odds of success are always slim, would be much tighter were it not for the incentives and write-offs that allow VCs to hedge their generally risky investments.  Personally, I’ve spent my entire career in start-up companies, most of which returned something less than zero to the VCs who provided the money.  But the ones that worked created hundreds and hundreds of jobs, jobs that would never have existed if creative entrepreneurs hadn’t found the checkbooks needed to make those ideas a reality.
    3. The middle class bears the brunt of it all.  This last one is, for me, the most insidious because it’s factually accurate but disappointingly naive.  The truth is that members of the middle class are often hurt the most, living, as most historically have, in at least some measured comfort, but with little in the way of a safety net, either personal or social. And yet we rarely hear of the responsibility the middle class has when it comes to why these jobs were lost in the first place. We like things cheaply made and cheaply bought. We buy foreign-made goods from just about everywhere because they’re inexpensive. We look for the cereals and the produce and the meats with the lowest price tag, casually ignoring any of the hidden costs that went into their production. Our textile industry, for example, is gone at least in part because we want $3 tee-shirts from Old Navy, and our crafted furniture industry fails to compete with press-board from Ikea. We, subject to a sickening spiral of marketing meant to convince us that cheaper is better, contribute to our own demise, yet we rarely hear any cries of self-outrage.

    So what, then, are we to do about job creation? First: we must wait. There’s no option but to let time pass; jobs come with demand, and demand takes time to build. Even if the government spends—which they have, in the hundreds of billions—projects take time to plan and “shovel-ready” rarely means what we think it means.[1]

    Second: we must not, under any circumstances, depend wholly on our government to fix our economy. Whether you think we’ve spent too little or too much, we clearly haven’t spent the right amount, and no amount of partisan wrangling is likely to get us any closer. We will probably just need tighten our already tight middle class belts and ride things out, but when we do spend, we should spend our money as wisely as we can, favoring goods made in America (and by responsible companies) and not elsewhere; the logic is simple: someone needs to make what you buy, and if it’s made here, somebody is working here …

    And, finally: take solace. This isn’t the first time we’ve mistakenly declared the death of the middle class. (Thom Hartmann called it six years ago, and Katherine Newman seven years before that. And if we managed a comeback after the Great Depression, I expect it will happen yet again.) Without doubt individuals are suffering, wages are flat (or worse), and the rich are getting richer, but we’ve seen this movie before and, in the end, it’s the middle class that drives economies, local, national and global.  We will return.

     


    [1] Thoughtful deregulation might help in some cases, but that’s another essay….

     

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    Reader Comments (4)

    Some good points. My question, is there a list somewhere of merchandise being 'Made in USA'? And do you differentiate between parts 'Made in x' and assembled in USA, and those items that are completely made in USA? We could just simply look for the tag, but it's not always easy to find. If I knew that currently there aren't any t-shirt makers in the USA, then I'm not wasting my time there. Instead, I can concentrate on the areas where I know I can find MIU. (I'm not saying there aren't t-shirt manufacturers in the US, just using it as an example.)

    July 29, 2012 | Unregistered CommenterTraci Marcotte

    Traci: ABC News put together some info you might find useful: http://abcnews.go.com/Business/MadeInAmerica/made-america-resource-guide-find-american-companies/story?id=13057404#.UBV1z6PN25I

    July 29, 2012 | Registered CommenterMichael Charney

    I think you're a little naive with your comment "we managed a comeback after the Great Depression, I expect it will happen yet again.".... The ruling powers that gathered the wealth and control and created the excesses of the 1910's and 1920's and plunged the country into the Depression of the 1930's were mostly stripped of their wealth and power, and rules and regulations were put into place to prevent it from happening again.... But now they have managed to get most all of those rules and regulations removed, they've caused another near distaster, but this time they're were smarter, they control the regulators, their lobbyist control the government, and even though they created a disaster they've managed to remain in power AND benefit from the very disaster they created at the expense of the citizen. And now when the citizens are starting to wake up to the abuses of the ruling powers, we find that they also control the police.......


    So believing that "we will comeback again, like we did after the Great Depression", is probably just wishful thinking, and as long as our governement is run by and for the ruling powers, the middle class will only comeback when and as much as the ruling class will allow.

    July 29, 2012 | Unregistered CommenterMatt B

    You may be right, Matt, and conditions are certainly different now than they were then. But I'm a firm believer in the pendulum swinging both ways -- sooner or later-- and I'm a cautious optimist. That doesn't mean we bounce back automatically; it will take work and time. It's more about faith in the middle class than it is about facts, admittedly. Such projections for the future are guesses, at best.

    July 29, 2012 | Registered CommenterMichael Charney

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