Tag Archives: ends and means

Listen To Nick Hanauer

Recently, I posted about the difference between tax cuts and tax reform, and why we need the latter but not the former. That argument was made–far more persuasively than I made it–by billionaire Nick Hanauer, in a recent post to Politico.

The Republican tax plan is a scam—a massive and destructive financial giveaway masquerading as pro-growth tax reform. Which is why our first response must be to demand not one penny of tax cuts for big corporations and rich guys like me. In fact, if I were Benevolent Dictator, I would substantially raise taxes on myself and my wealthy friends. Why? It is the only way to sustainably grow the economy, boost productivity, increase business opportunities, and create more and better jobs.

Hanauer takes aim at the central premise of GOP tax policy, what I have referred to as an “article of faith,” because when you take something on faith, it’s because you have no empirical evidence for its validity. In this case, as Hanauer points out, we have substantial evidence that the premise is fatally flawed.

There is is simply no empirical evidence nor plausible economic mechanism to support the claim that cutting top tax rates spurs economic growth. When President Bill Clinton hiked taxes, the economy boomed. When President George W. Bush slashed taxes, the economy ultimately collapsed. It wasn’t until after most of the Bush tax cuts expired during the Obama administration that the post-Great Recession recovery started to pick up steam—an ongoing recovery that, as uneven as it has been, has grown into one of the longest economic expansions in U.S. history.

And then, of course, there’s Kansas.

As we all know, and as Hanauer reminds us, Kansas dramatically “underperformed ” the rest of the country in economic growth and job creation after Sam Brownback, its “true believer” Governor, slashed taxes on individuals and corporations. And as he also reminds us, California, which horrified those true believers when it imposed the nation’s top income tax rate, has thrived.  By 2015, California had the fastest-growing economy in the nation. Kansas? Dead last.

For several years, Hanauer has been arguing that Republicans have the economic argument exactly backwards–that inequality, not high tax rates, retards economic growth and job creation.

But the Republicans’ problem is that they have economic cause and effect reversed: Low wages and rising inequality are not symptoms of slow growth, low wages and rising inequality are the disease that causes slow growth—and inequality cannot be cured by creating even more inequality. In reality, our modern technological economy is best understood as an evolutionary feedback loop between innovation and demand. Innovation is the process through which we evolve new solutions to human problems, while consumer demand is the mechanism through which the market selects and propagates successful innovations. And it is economic inclusion—the full participation of as many people as possible in as many ways as possible, as innovators, entrepreneurs, workers and robust consumers—that drives both innovation and demand. The more we invest in the American people—in our wages, our education, our health care and our infrastructure—the more dynamic that feedback loop, and thus the faster and more prosperous our economy grows.

As I tell my students, if you own a widget factory, and no one is buying your widgets, you are unlikely to hire more workers to increase widget production. When consumers lack disposable income with which to buy your widgets, you cut back–or stop making widgets entirely.

As Hanauer explains:

The real problem with our economy is that we are concentrating wealth in the hands of people who aren’t spending or investing it, while starving working- and middle-class Americans of the ability to invest in themselves—not to mention sapping the consumer spending power that accounts for 70 percent of GDP. We rich Americans may not all be idle, but these days, much of our money is—and you will not get it flowing back through the economy again by cutting our taxes even further. I already earn about 1,000 times more per hour than the average American, but I couldn’t possibly buy 1,000 times more stuff. I only own so many pairs of pants. My family and I can only eat three meals a day. We enjoy a luxurious lifestyle, but we already own several houses, a private jet and one too many yachts (turns out, the optimal number is two). Cutting our taxes will make us richer, but it won’t incentivize me or my venture capital partners to spend or invest more than we already do. What’s holding us back isn’t a shortage of cash, but rather a shortage of demand—from you.


Thank you to everyone who wished me a happy birthday yesterday. It was much appreciated!

Respect and Civility

I know it will come as a real shock to those who read this blog, but I have opinions. A point of view. And admittedly, a regrettable tendency toward snark. (A Republican colleague at the University regularly greets me with “Hi, Snarky!)

I know those things about myself. At my age, I should.

Nevertheless, I was taken aback by a recent email from a reader agreeing with a column I’d written for the Indianapolis Business Journal. He informed me that such agreement with me was rare, and chided me for what he perceived to be a lack of respect for those holding contrary positions.

I thought about that accusation, and I decided that he is half right. Although I hope that I “walk the talk” with respect to my frequent calls for greater civility, civility is not respect. It is possible to be perfectly polite–perfectly civil– to someone for whom you have no regard.

So, what about the “respect” allegation?

I do have respect–great respect–for people who clearly share a commitment to important social goals (equal treatment under law, amelioration of injustice, official accountability and the like) but who disagree, sometimes strongly, about way we define those goals, or the policies most likely to achieve them. They are well-intentioned people with a perspective that is contrary to mine–a perspective I try  (not always successfully) to understand.

But it is true that I do not have respect for people who are self-serving and intellectually dishonest, the self-aggrandizing and/or antagonistic types we all come across–the “look at me!” know-it-alls who clearly aren’t interested in leaving the world a bit better than they found it, or making things any easier for those having a hard time. They are the trolls, the race-baiters, the angry name-callers, the people who don’t engage with the specifics of any discussion but seem only to be looking for a fight. My lack of respect for them undoubtedly comes through, because I tend to simply ignore such people. There is no point in feeding animus.

In my own defense, I think respect has to be earned.

Everyone is entitled to be treated civilly. Not everyone is entitled to be respected.