Republican Jobs Program Give More Money To Rich People
The Republican job creation plan is to cut taxes on businesses. This would free up cash that would then be available for investment in expansion, purchasing of new equipment, and additional hiring. I just wrote that but I don’t believe it. Sounds like some archaic fiscal policy from the past that if applied to the current recession would be akin to spitting to put out the Dresden firestorm.
There are massive tax cuts in place from both the Reagan and Bush administrations. Yet we are still floundering in a great recession. How would more cuts make any difference? Even though these cuts were effective at the time of implementation, they would not work in the current circumstances and are mainly responsible for the debt crisis that could drive us into another great depression.
Only a lunatic would suggest that we increase our debt and budget deficits through business tax cuts at this time in history. Some are suggesting that the payroll taxes be suspeneded for a year. This would be a form of a second stimulus that would release cash to businesses and employees alike. This wouldn’t work since businesses have no incentive to increase production since the demand for their products wouldn’t increase. The increase to employee paychecks would be more than offset by this year’s increase in health insurance premiums.
Having worked as a corporate accountant for 30 years I know how this would play out. Businesses batten down the hatches during times like these and their only thought is to cut payroll costs to the bone until the storm passes. They know this storm is going to pass for at least a couple of years so they will use the additional cash to meet their primary obligation to prime executives (most likely through bonuses) and to investors via dividend payments. They also know that their health insurance costs are going to go up and they need to reserve for that eventuality.
What will never happen is an increase in hiring spurned by a business tax cut. Only increased demand will spurn hiring. This is a consumer driven economy. Until there is a recovery in the consumer’s ability to spend, we will be stuck in what now looks to be a permanent recession. Business tax cuts won’t lead to increasing wages or hiring. It will lead to higher deficits and more debt.
The Republican plan based on tax cuts would only put more cash in the hands of wealthy business owners and it’s not going to trickle down to workers. They will pad their bank accounts and that is hardly good economic policy.
In the end it all comes back to health care costs. As more and more wages are diverted to health insurers there is less and less money left to spend on anything else. That is the present and future state of consumer spending in our consumer based economy. Consumers were able to make purchases using their home equity loans but that source of cash has been cut off. Now we have to come face to face with the health insurance industry (and the pharmaceutical companies) and hammer out a solution that will make consumers viable economic entities again.
Obama understood this and made health care reform his top priority. Now that the Republicans killed that essential economic life saving measure, Obama is moving on to fiscal policy better known as government spending. His first stimulus package was watered down by republican need to have a percentage of the stimulus in the form of tax cuts. A lot of the rest of the money was wasted on pet projects that had no simulative effect. We can’t keep wasting hundreds of billions of dollars on job creation programs that are anemic. The next one will most likely be the last one so it has to produce.
The government has got to replace the recently deceased consumer. There is no way around this. This is the only hope we have left. If we let the Republicans turn a jobs program into business tax cuts we risk falling back into a depression that most of us will not live long enough to see come to an end.
