DO TAX CUTS CREATE JOBS?

Sunday, August 1, 2010 was a landmark day for the argument for tax cuts ARE NOT the answer to every economic question. First, David Stockman (former Ronald Reagan Office of Management and Budget Director and the brains behind “supply side economics”) wrote a lengthy Op-Ed in the New York Times arguing the Bush Administration Tax Cuts needed to expire. Then, in an appearance on NBC’s Meet the Press Alan Greenspan bluntly stated “tax cuts DO NOT pay for themselves.” Conservatives were dressed down by their own experts.

Let’s explore history and compare the tax increases enacted under the Clinton Administration in 1993 against the tax cuts enacted under the George W. Bush Administration in 2001. The score would be 23 million to 3 million. The Clinton Administration created 23 million jobs in 8 years after raising taxes while the Bush Administration created only 3 million jobs after cutting taxes in 8 years. So, never again should liberals give any credit to anyone who argues tax cuts are the engine of job growth while conceding that tax increases kill job growth.

The deficit growth we live with today is a direct result of the $4 trillion of tax cuts enacted under Dubya Bush’s ill conceived economic policy and, conclude those tax cuts for the wealthiest among us, the top 2% of wage earners, will expand that national debt by another $4 trillion. But, more to the point…the extension of the tax cuts to the wealthy will not increase job growth at all. The revenue from those tax cuts need to be used for reinvestment in our infrastructure, aid to the unemployed, training and retraining for a new workforce, and investment into cleaner energy, direct investments that will quickly work into the economy. Ezra Klein, of the Washington Post, states that the biggest bang for the buck for economic stimulus is food stamps. That’s right, food stamps creates $1.71 for every $1 invested…while tax cuts for the wealthy returns only $0.31 for every dollar invested. Why…because rich people don’t spend the tax cut benefits on goods and services…they invest them in the stock market and the trading of existing shares of stock doesn’t produce anything. While the purchase of a gallon of milk supports the grocer, the supplier and the producer. It’s difficult to explain to conservatives that the wealthy don’t spend as large a percentage of their income as do those at the bottom of the income ladder. If you’re rich…it cost you less of your income to eat than it does for those living under the poverty line. The same goes on housing expense, clothing expense, and even entertainment. Low wages earners have to spend 100% of their incomes to exist…while the wealthy have a far great income after expenses to save.

Conservative Republicans, if you really want to address the budget deficit get the unemployment rate back to 4% and the deficit goes away. So, HELLO stimulus! Stimulus for building roads, schools, public buildings of all sorts, high speed rail, and tax incentives for one thing and one thing only…for hiring new employees. Even if we spent another trillion dollars (which is what we should have done in the first place), it will be far less than the $4 trillion conservatives are more than willing to throw away on more tax cuts for the wealthy.