Tax Increases Not the Answer for Jobless Rate
With headlines dominated by the Democratic party’s single-minded determination to pass their unpopular health care plan, vital economic issues are getting short shrift. That’s fine for members of the Obama administration, who would probably just as soon the American people not learn the full extent of the damage their policies are inflicting on our national economy.
Each new assessment of the president’s fiscal policies paints an even bleaker picture than the last. The latest report comes from the non-partisan Congressional Budget Office (CBO), which released an evaluation of President Obama’s budget proposal earlier this month. According to CBO projections, this year’s budget would make the deficit $3.8 trillion worse than previously thought, resulting in anticipated deficits totaling $11.2 trillion over a 10-year period. If these budget polices are enacted, Americans will have experienced the 13 highest deficits in our history from 2008 – when liberal majorities in Congress passed their first budget – to 2020.
At those levels, the deficit will average 5.2 percent of GDP for the next decade – well above the 3 percent level that is considered sustainable by economic experts.
Faced with an economic catastrophe, the liberals in Congress are not taking meaningful action to either enact long-term spending reform or to address the more immediate crisis of the job shortage. Instead, Speaker Pelosi and her allies continue to push through legislation that is long on gimmicks and deficit spending but short on actual job creation.
The most noteworthy feature of the so-called “jobs” bill that passed in the House recently is a provision dubbed the “Jimmy Carter jobs tax credit,” which would offer taxpayer-funded subsidies to businesses that hire new workers. While this may sound good in theory, even some liberal organizations concede that the subsidy can easily be claimed by companies that would have hired anyway. History backs this up. According to the Wall Street Journal, Carter’s original attempt in 1977 “became a $20 billion free lunch as businesses claimed the handout for one of every three new employees.” Furthermore, the gimmick did nothing to change the economic conditions that led to lay-offs in the first place. The unemployment rate began to rise again when the subsidies ran out, ultimately reaching 7.2 percent in 1980 -- higher than the 7 percent jobless rate recorded before the program started. It's safe to say that failed Carter-era economic policies won't work any better now that we have a 9.7 percent unemployment rate than they did back then.
The Democrats' approach to job creation is fundamentally flawed because it relies on government spending that is invariably paired with tax increases while doing almost nothing to improve the overall economic climate. This cycle of spending and taxing makes it very difficult for employers to afford to recover from the recession, let alone expand. CBO's long-term budget projections make it clear that Democrats have no plans to stop their pattern of deficit spending and borrowing any time soon. We need policies that reduce costs for businesses -- such as across-the-board tax relief -- and initiatives to create opportunities, like infrastructure investment and energy innovation. Simply passing new spending programs and calling it "jobs legislation" is not the path to economic recovery. It’s time President Obama and his allies in Congress learn what the American people already know: We can’t spend, borrow and tax our way back to prosperity.
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