Costco and the Business Case For Middle Class Living Standards

Moneybox
A blog about business and economics.
Nov. 30 2012 11:48 AM

Costco and the Business Case For Middle Class Living Standards

The Treasury Department has a braggy little list out of CEOs supporting the president's general approach to fiscal policy, which other issues aside is I think the right context in which to read Vice President Biden's stop by the new DC Costco yesterday.

The longer list of CEO supporters and quasi-supporters of the president's fiscal policy stance is basically about accounting and the case for deficit reduction qua deficit reduction. Jim Sinegal from Costco really went further in most respects to emphasize the idea that higher middle class incomes are more important to his business than the tax rate paid by his executives. Its a viewpoint you don't hear that much of in the corporate world but that really does make a lot of sense.

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In totally abstract charts-on-a-piece-of-paper sense it doesn't really matter to "the economy" how income is distributed. But just as the distribution of income matters a great deal to specific individuals, it matters a great deal to specific firms. Growth for the 1 percent is great for the manufacturers of luxury cars. Growth for the 0.01 percent is great for the manufacturers of yachts. Growth at the median is great for chain restaurants. But in general most big companies are basically focused on serving a mass market middle class clientel. Really rich people don't generally own seventeen cars or have giant stacks of toaster ovens in their garage. They hire servants and they purchase a lot of financial services. But your workaday "real economy" manufacuturers and retailers would almost certainly be better off if a larger share of national income were being shared more broadly.

And yet you don't see this perspective much. The Chamber of Commerce set tends to basically focus on class solidarity and say that a rich executive is a rich executive who should stand with rich people of all stripes in resisting higher taxes on the rich. It's nice to see that the fiscal cliff situation is causing some rethink of that viewpoint, but it'd be even better to see a more thorough rethinking of where the real business interests lie.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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