House Republicans have released their plan for "America's Job Creators," and it's underwhelming, to say the least. Clocking in at a whopping 10 pages, it begins by indicting Democrats for high unemployment, conveniently ignoring the last four years of extreme economic hardship, and blames "taxation," "regulation," and "government takeovers of the economy" for the current mess. What follows is eight pages of silly art, large text, and "solutions" that amount to the same failed Republican playbook of tax cuts, tax cuts, and more tax cuts. Indeed, this "plan" is so flimsy, there are only four quantifiable claims. Here they are, and here's why they are wrong.
1. Claim: "The Small Business Administration has reported that government regulations are estimated to cost our economy over $1.75 trillion a year. To make matters worse, in 2009, the Administration had, 'under various stages of consideration,' another 184 regulations that are estimated to cost the economy in excess of $100 million each, and likely to cause more Americans to lose jobs."
Real Talk: It's not hard to make a big number sound scary when you take away the context. "Of course regulations cost money," says Stanley Shapiro, a scholar at the Center for Progressive Reform (CPR), "that's by design. But it doesn't necessarily follow that it's bad for the economy. What the economic studies show is that this is a wash and that the cost of regulation is often balanced by the benefits of its effects." To use an example, cleaning up air pollution might initially cost jobs, but over time, it provides broad economic benefits, including new jobs generated by regulation-related spending (someone has to clean the air, after all).
As for the cited study, its methodology is suspect, to say the least. "More than 70 percent of the SBA figure is based on public-opinion polling about the regulatory climate in different countries," according to the CPR. These numbers were never meant to be used in guessing about the effect of regulation on the U.S. economy, and its conclusions are at odds with studies commissioned by the Office of Management and Budget and the Congressional Research Service.
2. Claim:"At a combined state and federal rate of just over 39 percent, the U.S. currently has the second-highest corporate tax rate among the developed nations of the world (those in the OECD). The U.S. federal rate of 35 percent is nearly 10 points higher than the average of our competitors."
Real Talk: The U.S. federal rate is higher than our international competitors, but we also have a large number of tax breaks and loopholes for corporations. According to a 2004 report from the Citizens for Tax Justice, the average effective rate for 275 Fortune 500 companies dropped from 21.4 percent in 2001 to 17.2 percent in 2002 and 2003. More recently, an August 2008 report by the Government Accountability Office estimated that the effective tax rate was 25.2 percent.
As for today's corporate tax rate? "The effective corporate tax rate is less than 15 percent, and might be 12," says Robert McIntire, director of the CTJ. He is preparing a second report on the effective tax rate paid by Fortune 500 companies, which he says will reiterate the extent to which corporations pay incredibly low taxes on their profits.
3. Claim: "Since President Obama has taken office, American energy production has been halted and the average national price of gasoline has doubled. The rising cost of gasoline and dependence on foreign oil mean less money for families struggling to make ends meet and for business owners who are trying to get our economy moving again."
Real Talk: There is good reason for the halt in American energy production: the BP spill of 2010, which released 4.9 million barrels of crude oil into the Gulf of Mexico and caused extensive damage to surrounding habitats. In response, the Obama administration placed a moratorium on deepwater drilling and since lifting it, has been careful in issuing permits.
As for the price of gasoline, that has little to do with President Obama and everything to do with broader economic circumstances. Gasoline prices dramatically fell following the economic collapse in 2008 and stayed low as the economy struggled to create demand. Current economic growth is modest but high enough to drive gasoline prices back to their pre-recession highs. The election of Barack Obama has absolutely nothing to do with it.
4. Claim: "President Obama and congressional Democrats have overseen the largest budget deficits in the history of the U.S. In the last two years, non-defense discretionary spending has increased by over 80 percent. They've maxed out our nation's credit cards and are asking us to increase their credit limit so they can spend more. To create jobs and save our country from national bankruptcy, we must stop spending money we don't have."
Real Talk: This comes at the end of the GOP jobs proposal, and if it's any indication, Republicans have clearly stopped believing in the previous decade. But just because they live in a fantasy world doesn't mean we have to.
The increase in non-defense discretionary spending has less to do with the Obama administration's proliferate spending and everything to do with an economic collapse that nearly plunged the United States into a second Great Depression. If GDP growth had continued at pre-recession rates, then -- as a percentage of GDP -- federal spending would have increased by 1.75 percent, instead of the current 4 percent. From 2007 to 2010, the largest spending increases were in Medicaid and other recession-related programs; for everything else, spending has declined since 2007.
More important, as the Center on Budget and Policy Priorities has pointed out on several occasions, our current deficits and long-term debt are overwhelmingly the result of policies pursued during the Bush administration. The Bush tax cuts, the wars in Iraq and Afghanistan, and Medicare Part D have contributed trillions of dollars to our current deficits and our long-term debt load. Ending those programs would do more for our fiscal health than anything proposed by the Republican Party.
Finally, the administration isn't asking Republicans to "increase its credit limit"; the administration is asking Republicans to honor their debt obligations and pay their bills. Refusing to do so wouldn't create jobs; it would plunge the country into an economic catastrophe, as creditors lost faith in the United States' ability to manage itself. Like a selfish child, Republicans are throwing a tantrum and endangering the rest of us in the process.
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