Conservative Economics Doesn't Expand the Workforce

Conservative economic thought is based on a single simple premise, which just so happens to be wrong. The premise is that if you make sure businesses have as much money as possible, they'll hire more workers. One easy way to do that, they claim, is to lower their taxes.

If that were really the case, though, the economy would be in great shape. After all, corporate profits after taxes are at all-time highs (and the same is true even after accounting for inflation. So why aren't more businesses hiring?

The answer is, because supply-side economics is nonsense. In reality, the economy is driven by consumer demand.
Let's consider a hypothetical scenario. You own a company that manufactures widgets. You can manufacture 1,000 widgets a day, and demand is generally for between 900 and 1,000 a day, which you can sell for a profit of $5 per widget. So you keep up that pace, selling most of your widgets, and storing up the excess inventory for the holidays.

Now, consider two possible alternatives, and think about in which one you're likely to hire more workers.

First, what if the government cut your taxes, so you could make a profit of $6 per widget, but demand remained the same? Would you hire more workers? What would you do with them, without any additional widgets to make?

Second, what if the government raised your taxes, so your profits were reduced to $4 per widget, but demand increased beyond the 1,000 widgets you could make per day. Would you hire more workers, despite your lower profits? If you didn't, you would be forgoing additional revenue from new customers.

The point is, money in the bank doesn't translate into new jobs. Demand for your products does. Our current economy is proof of that. It's time for our policymakers to stop pursuing failed supply-side policies and pass another stimulus bill.

*Today's conservatives also tend to conflate "rich people" with "businesses," which is absolutely absurd. But that's also an entirely different topic, so I'll leave it alone for now.

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