Memo To Congress: It’s The Economy, Stupid
Today's job numbers make it clear that Congress has only one duty, and that is to do everything it can to stimulate real economic growth.
Over at National Review, Douglas Holtz-Eakin argues that today’s job numbers make it clear that Congress has only one task ahead of it at this point:
The main concern is that there were only 50,000 private-sector jobs created, not nearly enough to make a dent in the employment woes. And that was the bright spot. For blue-collar workers — “production and nonsupervisory employees” — aggregate hours fell, aggregate payrolls fell, average weekly hours fell, average hourly earnings fell, and average weekly earnings fell. In the household survey, employment actually declined.
(…)
But mostly this is an alarm bell for the lame-duck Congress. No more games — extend all the tax cuts for two years, patch the AMT, and turn to cutting spending and tax reform.
Going forward, Congress has lost the luxury of extended debate on boutique social issues. All focus should be on growth. Every policy should be evaluated for its impact on growth. Wake up.
On some level, the White House and the Republicans seem to get the message in that it appears to be fairly likely that all of the Bush tax cuts will be extended, at least temporarily. That alone could help the economy if only because it will end the uncertainty that the business community has been faced with on this issue. It’s not easy to make business decisions about what you might do in 2011 when you don’t yet know what your tax picture will be like so, when faced with that, the most rational course of action is to do nothing until the uncertainty is resolved. Getting the tax uncertainty out of the way could spur businesses to start investing.
But there’s more that Congress can do to help spur economic growth. They could start by repealing the absurd 1099 reporting requirements that were part of the Affordable Care Act. By some estimates, this one requirement could cost small businesses at least $ 6,000 per year in administrative costs just to make sure that they are complying with the requirements of the law. Republicans have made several efforts to repeal the reporting requirement, but they’ve been blocked so far. Once the 112th Congress convenes, though, the new Republican majority in the House would be in an excellent position to remedy this situation before it starts costing small businesses money.
Beyond that, though, the best thing that Congress and the Federal Government can do to spur economic growth is to get out of the way and let people invest their money as they see fit rather than using subsidies and tax credits to try to force them to invest in politically approved industries. They’ll be amazed at how much doing nothing can actually accomplish.
I would add a few things but all along the lines of get out of the way. A realistic energy policy that removes the obstacles for exploration and development of domestic natural gas and oil as well as nuclear energy. A moratorium on EPA rules and regulations. A pledge not to raise taxes whether it be income taxes or fuel taxes. Promises not to force a carbon scheme of any sort on American industry.
Business has been treated poorly in this country for years. While we employ all we ever hear about is not paying our fair share. Nonsense. If American business never paid another dime of income taxes we still pay property, employment, and various other taxes. We also do something the government can’t, create wealth and jobs.
Well, what can be done is not to have the tax cuts for the rich. That will save some 700 billion dollars. Raise a one percent tax on everyone else as the Bush tax cuts expire. This should not harm the economy that much, will probably save a trillion dollars. You take some of the savings in what would have been tax cuts and invest in the country, in the people, and in the future. You can also reduce the corporate tax. The private economy with tax cuts alone will not be enough, not when we lost 30% of our manufacturing. We saw it with Bush as he “stayed the course” and was “out of the way.” In the end, we lost the middle class jobs. We used to have a private/public partnership in our country and not ideology. We need to get back to the private/public partnership and fix our infrastructure in which we are behind some 2 trillion dollars.
Doug,
In fairness, the Democrats want to get rid of the 1099 requirements as well. They and the Republicans simply disagree on the details.
Also, the Republicans don’t have anything to offer other than tax cuts and deregulation. If the problem were one of markets not clearing due to government interference, I would go along with that, but it’s mostly due to mortgages being under water and families not wanting to eat the massive losses.
Also, the Republicans don’t seem to get that we are still in a liquidity trap; they’re opposed to every way which might increase aggregate demand — i.e. QE2 and additional fiscal stimulus.
I am looking forward to seeing what the House Republicans come up with for the economy.
Judging by the new unemployment figures they aren’t going to get much of a honeymoon.
The subject of this post is economic growth, not budget balancing. Under what theory of economic growth does raising taxes stimulate growth?
Just for the record I opposed the original Bush tax cuts and think they should be allowed to lapse now. But I also think that they should be replaced by cuts in the corporate tax and/or a payroll tax holiday.
Here’s my question. Do you remember when the stimulus was floated and proponents told us how many jobs it would create or save? People laughed at the phrasing, and at the math, but it was certainly a good exercise.
Do the Repubs have any models that tell us exactly how many jobs we get for the tax extension above $250K per year?
I don’t think so. I think they are going for the real propagandish approach, and just repeating “tax cut mean jobs” “tax cuts mean jobs” without any math at all.
Certainly those of us who were skeptical of these unfunded cuts wanted to see the jobs come years ago, and I don’t think they really did. If they did, we’d have jobs, not to mention numbers.
“The subject of this post is economic growth, not budget balancing. Under what theory of economic growth does raising taxes stimulate growth?”
To the extent that markets move by Animal Spirits, it matters what story you can build, as well as what taxes you take.
I don’t like high speed rail, but I can see why people try to hang a story off of it. If you can get enough people to believe in something like that as a national growth story, even with slightly higher tax, it can be.
(I’d go with high speed internet before high speed rail. I think the story is better. Of course we’d have to blow out some local monopolies to make it happen.)
If these ideas of tax cuts and deregulation are supposedly going to do so much to stimulate the economy, perhaps someone would care to explain how these measures failed to create so many jobs during the Bush years…
Dave Schuler,
A lot of people in the know have said not to extend the tax cuts to the rich. If we had the tax cuts to the rich all these years and we lost jobs, then I guess the tax cuts did not work. Adding to the deficit makes little sense, especially if it does not work. I would put that money to better use to fix our infrastructure (jobs), have massive retraining and vocational training (jobs), and invest in the future with public/private innovations (jobs).
We are trapped in a corner and any direction we go will be the wrong direction as we have little leeway of getting out of this mess. We had the tax cuts and it is spent money and does us little for today. We see the fed stimulating and it is doing little good. We are still sending jobs overseas. And those jobs have been going overseas for the past decade or two. Obviously, something is not working.
Again, I would put that tax money into better use than being eaten up by the rich with no results.
And I would like to ask, what jobs can we create when a product can be made anywhere. Even if tax cuts is an answer, short term, it is not a guarantee that jobs stay here like 30 years ago before globalization.
Also, how much competition can we have without cutting everyones throat? I mean, competition is good, but if you don’t have further industry and less upward movement, then competition can destroy jobs.
Putting money in the hands of a consumer may not have the same effect that it once did as half the products are foreign made.
And as long as jobs keep going overseas, I fail to see how we can create jobs, no matter what the tax rate is or what the fed does.
” it appears to be fairly likely that all of the Bush tax cuts will be extended, That alone could help the economy if only because it will end the uncertainty that the business community has been faced with on this issue.”
Doug, that is a straw man of the highest order. We can easily enuf remove any uncertainty by allowing them to lapse. No more uncertainty.
Let us put that particular shoe on the other foot. As IP so eloquently said: “If these ideas of tax cuts and deregulation are supposedly going to do so much to stimulate the economy, perhaps someone would care to explain how these measures failed to create so many jobs during the Bush years…”
You know, I’d have to agree with my husband on this one. Have a tech strategy so our country can be innovative and lead the world in true innovation, not in websites. Nothing against websites, I like my twitter. But he’s always mentioning a Project Socrates under President Reagan’s Administration that is the best way for our country to reduce debt, save jobs, and make this country competitive again.
Tax cuts are tax cuts. It keeps money in the private sector where it is put to use in a more efficient manner than what the government could ever do.
During the Bush years there were two major related factors that impeded economic growth. War and oil. 9/11 and the subsequent wars forced government spending up but not to rebuild infrastructure or improve school. Blame Bush if you want but the war happened and it also led to a new plateau in energy costs that has killed our economy.
One of the great failures post 9/11 was the failure to address energy on all fronts. Conservation, exploration, nuclear, and whatever else. I find it funny that the biggest event regarding energy in this country was almost accidental and is referred to as a ‘Black Swan”. The fracturing of shale formations leading to huge amounts of recoverable natural gas. The government didn’t initiate such an experiment and now even wants to discourage it (New York state passed a moratorium on ‘fracking’ without any basis). To move this economy forward an realistic energy policy must be formulated. That doesn’t mean green projects or environmentally sensitive projects but realistic plans that are achievable.
Removing barriers doesn’t always create jobs but putting up barriers like high taxes and regulations surely destroys them.
Today we have an administration that explicitly says it’s anti business. Tax rates are unstable going forward and some say unless something is done a sell off on Wall Street will occur shortly. Oil is going up despite high supplies and new reserves. Many in the left are calling for the EPA to exert it’s power over carbon. Deficits are high with no resulting stimulus and debt is so high we can’t even talk about our grand children paying it off. Why would any business feel confidant going forward? The climate for growth must be created quickly.
John Personna,
For writing sake and for short hand, I mention high speed rail. I think high speed rail should be less than what was projected. I would only have a limited rails to start off with and see if they work. The Northeast corridor is one possibility. I suppose the public transit system in Europe is subsidized, but it still creates jobs. Better than welfare. I am only trying to find a trick in how we are going to create jobs and jobs that stay here and not movable. High speed rail may or may not work on a grand scale. I don’t think anything is concrete with globalization. It is just throwing a thought out there whether it is high speed rail, internet, a new air traffic control system (being worked on), cell phone outages that happens here and not in China. I am for whatever can work and create jobs. But obviously I am very much aware that government can be so wasteful.
“A realistic energy policy that removes the obstacles for exploration and development of domestic natural gas and oil as well as nuclear energy. ”
Especially for hydraulic fracturing… how well is that working out?
” A moratorium on EPA rules and regulations. ”
Let us not only have the income distribution of a banana republic, give us the environment of one too!!! (hey Steve P… want to drink out of my well in a couple years?????)
“A pledge not to raise taxes whether it be income taxes or fuel taxes.”
Never mind the fact that our current “debt crises” BEGAN with tax cuts….
“Promises not to force a carbon scheme of any sort on American industry.”
The future of our children be damned!!!
“Business has been treated poorly in this country for years.”
Especially since Obama got in office (did not we just set a record for gross corporate profits?) and Bush and Clinton did EVERYTHING they could to impede business….
“While we employ all we ever hear about is not paying our fair share.”
Who? The Chinese? Philip[inos? Chileans?
“If American business never paid another dime of income taxes we still pay property, employment, and various other taxes”
So what??? Cry me a river. I pay other taxes AND income tax, but I don’t complain…
“We also do something the government can’t, create wealth and jobs.”
GAAAKKKKK AKKKKKK< GAAAAAKKKKKK…. Sorry I don't know how you were able to type that, it caught in my throat just reading it!
Let me ask you a question or 2:
Q #1: Just exactly who's wealth are you creating? (short answer: Your own. And you actually have the nerve to act as tho that is some great sacrifice?????)
Q #2: "Creating jobs"…. Tell me you would not eliminate a job quicker than you created it, if it increased your bottom line? Tell me you wouldn't…
In other words, quit whining about how badly you are treated (don't like it? Go away) and even more so, quit acting like you "create jobs" as tho it was some selfless act of crucifixion.
Here is a clue Steve P.: It ain't, and you are no Jesus C, so quit acting like you deserve to be treated as one.
“Beyond that, though, the best thing that Congress and the Federal Government can do to spur economic growth is to get out of the way and let people invest their money as they see fit”
Doug, on this you and I agree. A month or 2 before the big stock crash I told my wife to get her 401K out of the stock market and to put it in CDs or anything BUT the SM…
How naive I was to think that the Lords of Wall Street did not have that game rigged as well. She lost like I don’t know how much.
FTR: I have “defined benefit pension” which lost its ass in the crash as well, and until I got laid off last April I was contribituting $1 extra per hour to the pension to bring it back to the black. No big deal, the last time my paycheck actually increased was 3 yrs ago… every other raise over the past 5/6 went to HC.
Hi Gerry, I wasn’t trying to belabor the high speed rail, it was just an example that sprang to mind. My main point is that if the story really gets sold, it matters less what the story is.
“Blame Bush if you want but the war happened and it also led to a new plateau in energy costs that has killed our economy.”
Who else would you blame for the Iraq debacle, Jimmy Carter? That uneccessary war happened because Bush wanted it and that new plateau in energy costs was a direct result, so, yes, it is Bush’s fault that the economy has been killed, using your own logic…
> the Federal Government can do to spur economic growth is to get out of the way
You mean like when the Bush admin let inspections on oil rigs in the gulf turn into a joke?
What could possible go wrong?
> Today we have an administration that explicitly says it’s anti business.
That certainly explains a stock market boom and corporate profits of historic proportions. Thanks for explaining that to me.
Just for fun Steve, can you show us WHERE they explicitly said they are anti-business? There must be a you tube video you can link to of the press conference where Obama said “my administration is anti-business”. I eagerly await your support of this rather remarkable claim.
The root of most eceonomic problems has nothing to do with the collection of revenue and everything to do with out of control spending. Whether the ahem, “Bush” ax cuts stays or go isn’t going to make much difference compared to spending another $2T we do not have.
So much of this sounds like Field of Dreams. If you build it, they will come. As though if we just lower taxes and eliminate regulation and click our heels together we’ll see a boom unleashed.
A boom of what, precisely?
We have too many homes and offices as it is, are we going to suddenly start building more if rich people get a tax break? How does that work, exactly? Or are we going to launch another round of inventing bogus derivatives? How about internet start-ups, do we need some more of those? Restaurants? Roads? What?
What is it we need or even want that we don’t have and that we would suddenly have in abundance if he just “got out of the way?”
Name the thing that’s going to suddenly be manufactured.
Every time I go to the mall there is one store that is unfailingly busy: Apple. Now, somehow they don’t seem to have been crippled by taxes or regulations. They seem to be doing very, very well. Because they make something people want. But aside from a new Apple toy, what do people want that they can’t get because of the government?
” I find it funny that the biggest event regarding energy in this country was almost accidental and is referred to as a ‘Black Swan”. The fracturing of shale formations leading to huge amounts of recoverable natural gas. The government didn’t initiate such an experiment and now even wants to discourage it (New York state passed a moratorium on ‘fracking’ without any basis).:”
Tell us all Steve what you know about fracking? How have natural gas prices been affected by this new technology. And how have those who own leases been affected? What about the folks who can set their tap water on fire?
And finally, do you even have a clue where the best frack sand comes from? Have you ever seen a super bag?
@ Plunk
“Today we have an administration that explicitly says it’s anti business. ”
Will you puleeeeeze give us a cite for that? A specific url where we can all go and read the specific language that says, “We are antibusiness.” One that offsets this:
Obama pushes tax break plan for businesses
Steve you are so full of partisan-blinders bullshit, I sometimes wonder how you can even type in a comment.
Business has been treated poorly in this country for years.
That is nonsense. Profits in the third quarter were the highest ever reported.
The problem isn’t that business has been treated poorly or isn’t profitable, but that the working stiff has been treated poorly. Job outsourcing and the importation of millions of low wage workers from the south is what has hurt employment, not that the poor big businessman has been mistreated. Ross Perot was right about “that giant sucking sound”, only it has come from China and India, not Mexico.
Apple, mentioned above, is the perfect example. They chose to manufacture all those great products they sell exclusively in China and they employ millions of Chinese to do it. It should come as no surprise that there is a shortage of jobs in the U.S. during a time of record business profits.
“They chose to manufacture all those great products they sell exclusively in China and they employ millions of Chinese to do it.”
This gets to the heart of the problem with “free” trade…it’s all well and good that we want all these shiny new gizmos at the lowest possible price, but when they are all made somewhere else, we lose all those manufacturing jobs, and what is to replace those jobs? As others have mentioned, big business and the wealthy have done very well, but it seems like everyone else is getting screwed…no wonder we have so many angry people who want to be a part of a frenzied populist movement…terribly ironic, though, the big buisness links to that movement…
Anjin- san; read this for a mind expanding explanation of record profits: http://www.npr.org/blogs/money/2010/12/03/131779046/we-lost-8-million-jobs-only-1-million-came-back?ft=1&f=93559255
Sam, For gosh sakes Google Obama anti business and see what you get. Claiming Obama isn’t anti business is childish. And no I’m not something special but business is not treated in a civil manner these days.
anjin, Davebo, and whoever else wants to take some time to read about fracking just use that computer thingy you got there and do some research on your own. There is no scientific evidence of fracking danger for your wells. I’m sure the goat farming hippies will disagree.
Obamanomics,
***It’s The Economy, Stupid!***
I wonder why both democrats and republicans don’t get it.
Plunk:
Google Obama Muslim and see what you get. Good lord, is that actually how you think?
“anjin, Davebo, and whoever else wants to take some time to read about fracking just use that computer thingy you got there and do some research on your own.”
I don’t need a computer thingy Plunker because, unlike you I make a living off of fracking. You seem to get your information from AM radio.
In other words, you’re as clueless in this area as most others you comment on.
And the answer you couldn’t come up with is China. I hear they are commies!
@Plunk
“Sam, For gosh sakes Google Obama anti business and see what you get. Claiming Obama isn’t anti business is childish. ”
Dude, for Christ’s sake, you wrote: “Today we have an administration that explicitly says it’s anti business.”
All we asked you is to supply us with a cite where the administration says explicity, etc. Don’t try to dodge via some bogus googlechase where folks like you are saying he’s antibusiness. You said the administration says explicity that it is antibusiness. Show us where. Put up or shut up, Ok?
>> This should not harm the economy that much, will probably save a trillion dollars. <<
I just love it when a trillion dollars taken out of the economy, shouldn't harm it. Don't you?
Sookie,
Either that or have deficits and still have our problems.
What I may have not conveyed correctly is that we have had the tax cuts and are on the tax cuts and we lost the jobs. So therefore, more tax cuts, just like the fed printing more money, is not doing much good as long as we ignore our problems. And our biggest problem is globalization and the loss of 4 to 8 million jobs (with or without tax cuts). A better use of our money is to invest in our country (everything from infrastructure to high speed internet), invest in our people (massive retraining and vocational training programs), and investing in our future (federal research grants and the like for future jobs).
That trillion dollars of government investment would do far more than the failed trickle down economics we had. For those politicians who believe in free trade and not doing anything about it, what is the real price of free trade? What number do you want to put on 4 to 8 million lost jobs and closed factories. What number do you put on cities and states struggling without a tax base. What number do you put on those without healthcare? What number do you put on small business that cannot start up because the big industry left town? What number do we put on failed ideologies and failed welfare programs like cash for clunkers and extension of unemployment benefits and states going to casinos as if that will solve the problem.
The realization is that we have to deal with 2 billion cheap laborers who want our jobs. And if we send our private sector jobs overseas, then I guess the only solution is for the government to step in big time. And that is what Tom Friedman, Andy Grove of Intel, and Donald Trump is saying. We need to fix our problems and our infrastructure and tax cuts alone is not doing the job.
Plunk,
You said
>Today we have an administration that explicitly says it’s anti business.
Several people have asked you to document this. We are not interested in you lame crap that we need to do some google work. No on is interested in what Glenn Beck or whatever right wing rant site you have apparently outsourced your thinking to has to say.
Show us where Obama or one of his staff said that, or admit that your are a fracking liar,
Steve Plunk: I can not help but notice that I replied to every point in your post but you come back with ZERO.
Guys, sometimes, instead of ganging on, it is better to see if he has anything substantive to say. And when he does not…
Steve, you NEVER answered my post, you NEVER even alluded to it. SOoooo, answer my questions…. or STFU
“The root of most eceonomic problems has nothing to do with the collection of revenue and everything to do with out of control spending. Whether the ahem, “Bush” ax cuts stays or go isn’t going to make much difference compared to spending another $2T we do not have.”
Charles, why do we not have those $2T or so? OK another who will not face the reality that when Clinton handed things over to Bush… WE HAD A SURPLUS!!!!!!!!!!!!!!!!!!!!!!
JC… you people are stupid
Davebo, I apologize, you know exactly what I am talking about.
Steve,
I Googled “Obama anti business” and saw no instances where Obama said he was anti-business. It was mostly assertions by conservative blogs and the WSJ. Oh yeah, Mortimer Zuckerman said it too. None of their opinions are dispositive.
Guess Plunk has “pulled a Palin” aka cut and run…
He went to FOX to join the other spinners.
> Clinton handed things over to Bush… WE HAD A SURPLUS!!!!!!!!!!!!!!!!!!!!!!
Ah yes. Peace and prosperity. Good times. After 8 years of Bush and now having to live in the wreckage of the Bush era now, it seems like another lifetime.