Conservative Exceptionalism

"My corporations employ scores of people. They depend on me to do what I do so they can make a nice salary. If Barack Obama begins taxing me more than 50 percent, which is very possible, I don't know how much longer I'm going to do this. I like my job, but there comes a point when taxation becomes oppressive. Is the country really entitled to half a person's income?"'Bill O'Reilly

As we creep toward the oh-so-scary fiscal cliff and peek over the edge, expect far more whining of the sort O'Reilly delivered the last time there was some prospect of taxes increasing on the wealthiest Americans. Republicans have emphasized again and again that raising taxes on the wealthy will have a detrimental effect on the economy. That CEOs facing a tax increase will be less inclined to create new jobs. That the 1% will react to any attempt to collect more of their take by trimming back their companies, or even taking their cash to early retirement somewhere nice and sunny.

Bill's personal warning that if the president isn't nice to him, he might just take his ball and go home, is just one example of the idea at the heart of conservative economics'that the rest of us are utterly dependent on the wealthy; that people like O'Reilly aren't just making money for themselves, they're making money for everyone. That these are damn nice crumbs spilling off their table, and we'd better just shut up before they close down the feast.

There are enough problems with O'Reilly's particular statement that it's hard to take it seriously. No one is suggesting that the tax rate on the wealthiest individuals be moved anywhere near 50%. They probably should, as much higher rates were associated with some of the greatest growth and the most generally healthy economies in the nation's history. But they're not considering it. Instead, the end of the Bush tax cuts would move the tax rate (not surprisingly) back to where it was at the end of the Clinton administration, a time when the economy was strong, the budget was balanced, and the wealthiest paid up to 39.6% on income.

Secondly, O'Reilly's fame, like that of Limbaugh and Beck, came because he was at the center of a wave of talk radio consolidation. Stations that had long broadcast their own content found it much easier and cheaper to simply pipe in the feed from a syndicated broadcast. Easier and cheaper because it took far fewer people. Fewer engineers. Fewer producers. Fewer people working as local on-air talent. Far from providing an employment boom, O'Reilly's wealth was generated by a kind of broadcast black hole, sucking away the jobs of hundreds, even thousands, of local station employees and lining big Bill's pockets with a cut out of each salary saved. It was that ubiquitous right-wing exposure that allowed O'Reilly to make the jump to full time TV talking head where he could continue the same schtick. O'Reilly and his ilk are the Walmarts of broadcast punditry, reducing diversity and eliminating jobs as they funnel customers to a mass-produced product.

But the biggest problem with O'Reilly's threat'and the threat of every conservative who ever longed to go Galt'is that they forgot one thing. A kind of surprising thing. They forgot how capitalism works.  

Markets are moved by a little thing called supply and demand. If the market supports yet another talk show, then someone will probably air the show. And that show will hire construction workers and cameramen, caterers and chauffeurs. If the demand isn't there, the show won't be there. Neither will the jobs.

It's not always that simple. There are breakthroughs that create a market where it never existed before (see Pad, i), and there are industries where other constraints prevent a good synch between production and demand, but over the long term these exceptions tend to be exceptionally rare and very short lived. Behaving as if the employment levels are shaped by generosity and caprice rather than a pragmatic reaction to market demands, shows how badly the "party of business" is disconnected from the facts of business. For O'Reilly's threat to hold, you would have to believe he is uniquely capable of filling up air time, which Bill O himself clearly does believe, but which simply isn't true. Conservative exceptionalism, the kind that elevates the wealthy beyond the rules of the market, is not supported by real world data. Any executive adding and removing employees on a whim is unlikely to stay in business very long.

The same market rules apply whenever someone hints that, because of increasing personal taxes, he might not choose to create a new job. That's fine. He doesn't have to. Because if the demand is there, someone will. A company that refuses to expand in the face of rising demand will be supplanted by one that will. In the real world, jobs are not created or destroyed out of spite. They are created because they fill a need to create something, whether it's objects or information, that the market demands.

Even if you limit the scope of the argument to activity within a single company, the "taxes leads to less jobs" equation doesn't hold true. In fact, there's a counter narrative that has turned out to be a better fit with the data. When taxes are low on the wealthy, then they can directly pocket much more of the money coming in. That means there's less incentive to invest more in their company because they are able to meet their own desires by grabbing a higher portion of a smaller pie. When taxes go up, a wealthy business owner wanting to keep the same level of income has only one choice'grow the pie.

Instead of reducing jobs, higher taxes can actually stimulate the creation of jobs. They don't prevent the accumulation of great wealth, they just expand the base that's needed to support the narrow top of the pyramid. Without any direct "redistribution" in the form of the government taking dollars from one person and giving them to another, higher taxes still act to reduce the gap between rich and poor by providing incentive for real growth rather than simple concentration of wealth.

So as the clouds of Taxmageddon gather on the horizon, don't worry. Increasing taxes are sure to reduce the deficit and slow the widening gap in incomes. They won't reduce jobs. If they do end up cutting into Bill O's salary, or even convincing him to put down his microphone, just take that as a bonus.