Nick Hanauer is a very successful entrepreneur, and here at The Cain we have nothing but respect for that. But that doesn't make him an expert on macroeconomics, despite the long-established determination of the left to use him for that purpose.
Hanauer is known for his TED talks and presentations in other venues in which he insists that corporate tax cuts don't result in growth or job growth. So it was no surprise that he would produce a video like this one just as those very things were happening, claiming the tax cut shouldn't go through because he doesn't need it:
That cutting taxes on the wealthy and corporations has no connection to growth and job creation
I'm sure Hanauer doesn't need the tax cut. He'll be super-rich either way. But here's what you can't afford to miss: The tax cut wasn't passed because anyone thinks rich people like Hanauer "need it." It's not to benefit him personally. It's re-allocate capital from the government back into the private sector for more productive growth-oriented uses.
Hanauer's own post-tax-cut behavior will prove the point. Will he turn around and simply cut a check to the government for the same amount he would have paid prior to the tax cut? Of course not. He'll do something with it that will further enhance his wealth, and that something will mean some sort of investment in something that's trying to grow.
That gets us into his other argument, of course: That cutting taxes on the wealthy and corporations has no connection to growth and job creation. An entire decade proves him wrong (see Vice, Miami), but what he's really making is the classic demand-side argument that liberals have been clinging to for generations. This argument says that businesses really make money when consumers have more cash on hand to buy their stuff, so the best economic strategy is to put more cash in the hands of lower-income people because they'll spend it, thus goosing demand, thus making it possible for corporations to produce more stuff profitably because they can sell it.
This is the age-old economic debate: What drives prosperity? Supply or demand? Do we grow because we're highly productive? Or because there are people clamoring to buy what we produce?
But the truth is it's not an either/or proposition. We need the producers to be productive, and we need the consumers to have the means to consume what's produced. The question is how do you best bring about that scenario? Liberals like Hanauer seem to think you do it by taking from the prosperity of the producers and spreading it across the rest of the population.
But there are several problems with that idea. First, producers put their capital at risk when they invest it in productivity. If you're going to limit their rewards because you want to redistribute what they earn, you're going to disincentivize the taking of that risk. Fewer will do it, and the risks will be more limited. There will be less capital actually put to use employing people and equipping them to produce, which means the very same people you keep saying should have the money will have a harder time getting it.
Liberals seem to think that capital is a zero-sum game
Second, productivity creates wealth. It turns crude raw materials into things people want. It adds value, which can be converted into cash, which can then be used to compensate everyone who was involved with creating it. That is a much better way of spreading wealth than simply confiscating it from some and giving it to others, because it requires the creation of wealth to precede the distribution of capital.
Liberals seem to think that capital is a zero-sum game, in which there is only so much wealth in the world and you just keep redistributing it. But history shows that's not true. New wealth can be created. New value can be added. One person can become rich without making other people poor. It's been happening ever since capitalism came into being.
Hanauer always gets a lot of his attention with his videos in which he reminds you how super-rich he is, and then virtue-signals about his not needing a tax cut. It's effective showboating but terrible economics. Like every other rich person who just got a tax cut, Hanauer is going to use the extra capital in ways that are more beneficial to the economy than writing a check to the Treasury. That's the point.
By the way, the average tax cut for the middle class is not peanuts. And envy is one of the seven deadly sins.
Nick Hanauer is a very successful entrepreneur, and here at The Cain we have nothing but respect for that. But that doesn't make him an expert on macroeconomics, despite the long-established determination of the left to use him for that purpose.
Hanauer is known for his TED talks and presentations in other venues in which he insists that corporate tax cuts don't result in growth or job growth. So it was no surprise that he would produce a video like this one just as those very things were happening, claiming the tax cut shouldn't go through because he doesn't need it:
