International Forecaster Weekly

The Most Important People

It was and always will be about the health of the middle class. That folks, is who creates jobs.

Bob Rinear | November 13, 2019

There’s a lot of thoughts, opinions and beliefs, that seem logical on the surface. But then, if you really put your thinking cap on and delve into the nitty-gritty, you find out that your original assumptions, simply don’t stand up.

There’s a myriad of reasons for this, from flawed research, to popular beliefs, to group-think, to you name it. But probably the most common reason for coming up with a faulty assumption is belief bias.

In logic, an argument can be invalid even if its conclusion is true, and an argument can be valid even if its conclusion is false. It’s a confusing concept, and people are easily fooled when an argument’s validity and believability don’t match up, especially in the case of invalid arguments with conclusions that are believable.

Think about the things you were told as you were growing up, that sounded fairly logical, but after some examination, was found to be completely wrong. “lightening never strikes twice in the same place” was a common one. Or “it takes years for swallowed gum to digest” was another.

We’ve all heard of the “three wise men from the east” but in the bible, there’s no mention that there was three. Likewise, we hear that Adam and Eve ate an apple in the Garden of Eden. Yet the Bible only mentions a “forbidden fruit.” We’ve all heard of someone being “blind as a bat” yet bats have excellent vision along with echolocation. I could go on and on.

Well, one of the things you’ve most probably heard concerning the economy and how things work is that “rich people create jobs.” The argument is supported by the next statement “I’ve never had a poor person give me a job.”

On the surface, this seems logical and the argument valid. But I will ask a question. Are the rich people creating jobs, OR are they reacting to a stimulus? Stick with me here.

If you have ever owned a business, or managed one, you know that employees are most often your biggest expense. Between payroll taxes, wages, unemployment insurance, etc, you have to be very careful about how many people you hire. Too many employees can bankrupt a company.

This is why of course that when economies turn lower, layoffs begin and soon the unemployment numbers go up. So, as an addendum to “rich people create jobs” we have to also include “rich people eliminate jobs” to the argument. But we still haven’t gotten to the crux of the question. Why do rich people create jobs?

Are there hoards of ultra rich people just hiring folks for no particular reason? Not that I’ve ever seen. So there must have been an empirical reason why they created a job in the first place. Well, there is. It’s called demand.

Rich people don’t create jobs. The people that create jobs are the MIDDLE CLASS, by demanding more products and services. The rich respond to the demand by expanding their business and hiring folks.

The single biggest driver of job growth is a strong middle class. A middle class with the means to buy their daughter a car, or remodel their house, or eat out at nice restaurants. It isn’t the rich that drives the economy, they don’t have the scope.

Let’s suggest that you were pretty rich. Maybe you’re Jay Leno type rich, and you have 32 cars. Do you think that him and folks like him have the effect on the economy that 150 million middle class folks have?? Well, they don’t. Last year GM made 2,950,000 vehicles. Ford sold 2,497,000. THAT is the power of the middle class.

When WWII ended and all those brave service men and women returned home, they sparked off the greatest wealth generating middle class the world had ever seen. In every metric, from housing to industry, to services, production, manufacturing, etc, the middle class was booming.

The baby boomers those returning vet’s gave birth to, continued to expand the middle class and by the 80’s, the middle class was the NORM. There were more people in the middle class than ever before. Demand for products of every description, exceeded the ability to produce them. Jobs were created to meet those demands.

The most important thing an economy can have is a thriving middle class. Unfortunately, our middle class has been having a rougher go of it lately. As of March of this year, consumer debt exceeded 4 TRILLION dollars for the first time ever. To continue to live the middle class lifestyle they knew in the 80’s, 90’s,and early 2000’s they’ve had to use ever increasing debt to do it.

Earlier this year, this headline was making the rounds: Delinquent car loans hit record highs. Seven million people are now 90+ days delinquent on their auto loan. This isn’t surprising considering that the inflation that the Fed’s say doesn’t exist, is killing people financially. The starting price for a Ford F150 pick up is 28,400. STARTING. Upgrade to the Lariat package and it starts at 42,000. For a truck.

But hey, there’s no inflation right? And all these jobs we supposedly have are real, right? And the middle class is thriving, right?? Unfortunately you know the answer. The fact is, when the US middle class finally taps out from lack of wage growth, soaring inflation, and too much debt, this economy is going to take a hit worse than the 2008/09 hit.

It was and always will be about the health of the middle class. That folks, is who creates jobs.