House Republican leaders late last week released a new plan to boost jobs and growth by reducing regulation and taxes. This plan is a rehash of the same unsuccessful plan that led our economy into the Great Recession during the Bush administration. The problem then and now with the top Republican goal of economic policy—to make the top income earners in our society even more incredibly wealthy—is that it undercuts our nation’s prospects for a prosperous future.
We’ve been down this road before and it didn’t end well.
Indeed, we’ve just lived through a decade of experimentation in deregulation and tax cuts for the wealthy. In the early 2000s President Bush cut taxes for most families, but those at the top of the income distribution received the bulk of the tax breaks. The argument then, like now, is that cutting taxes will spur economic growth. So what happened after the massive tax cuts in the early 2000s? The remainder of the decade saw the lowest pace of economic growth of any economic expansion in half a century. From 2000 to 2007 employment and incomes also grew slower than in any other economic expansion in half a century. Income growth was so weak that in 2007, at the end of the 2000s economic expansion, the typical household had income below what it had been in 2000.
The Republican plan to cut and cut taxes didn’t generate strong growth in the past decade, so why would it in this decade? What it will do instead is further strain the American middle class. Another bout of tax cuts for the wealthy will create the conditions for a less-stable economy moving forward and lead to the same slow pace of business investment. If we’ve learned anything from the economic crisis of the past few years, it should be that making the already wealthy even wealthier is not a recipe for stable economic growth.
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