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. “Just because we proposed it in the past doesn’t mean it was not a good idea,” said Speaker of the House John Boehner (R-OH) of the House Republican plan. “I think the package that we have represents a lot of traditional ideas and new ideas about how to let the private sector create jobs.”
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.
If the goal is job creation then Congress and the Obama administration need to focus on policies that will generate increased demand and sustain investment in productive endeavors. Businesses will not invest until they see more customers coming through their doors. Today small businesses continue to report that their single-largest concern is poor sales. Small business owners say this is more of a problem than regulations, taxes, inflation, or the cost of labor.
Yet instead of any plan to invest in our economy, House Republicans tout their jobs plan while seeking to gut financial regulation at the same time. Regulating Wall Street is imperative if we want to put our economy on a sounder footing moving forward. Insisting that finance should be free of government interference is what caused the Great Recession. It’s insane to take us down that road again.
The House Republican jobs plan also calls for Congress to pass the trade agreements with Columbia, Panama, and South Korea. Yet the Republicans are holding up these deals by refusing to vote on funding for the Trade Adjustment Assistance program that helps workers displaced by trade. This program provides much-needed assistance to workers who need to retrain or relocate because their job has been outsourced. It’s a cold-hearted Congress that would insist on passing trade deals without addressing the very real costs to workers and their families.
Adding insult to injury for workers, the House Republicans are also pushing legislation known as the JOBS Act, which will allow states to divert funds away from benefits for unemployed workers. The Republicans pulled the bill from the voting schedule last week, however, as freshman Republicans began balking at voting on a bill that takes funds away from the unemployed. Clearly, with 14 million people out of work, access to unemployment benefits is a concern for the unemployed and maybe even their representatives in Congress.
Helping our current economic recovery gain strength requires policymakers on both sides of the political aisle to build up the middle class and create jobs. Giving more tax cuts to the wealthy will not solve the jobs problem. We know that doesn’t work.
Heather Boushey is a Senior Economist at the Center for American Progress.