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House Republican Economic Strategy Reprises Bush Era Failures

House Republican Economic Strategy Reprises Bush Era Failures

House Republican leaders late last week released a new plan to boost jobs and growth by reducing regulation and taxes. This plan is a rehash of the same unsuccessful plan that led our economy into the Great Recession during the Bush administration. The problem then and now with the top Republican goal of economic policy — to make the top income earners in our society even more incredibly wealthy — is that it undercuts our nation’s prospects for a prosperous future.

We’ve been down this road before and it didn’t end well.

Indeed, we’ve just lived through a decade of experimentation in deregulation and tax cuts for the wealthy. In the early 2000s President Bush cut taxes for most families, but those at the top of the income distribution received the bulk of the tax breaks. The argument then, like now, is that cutting taxes will spur economic growth. “Just because we proposed it in the past doesn’t mean it was not a good idea,” said Speaker of the House John Boehner (R-OH) of the House Republican plan. “I think the package that we have represents a lot of traditional ideas and new ideas about how to let the private sector create jobs.”

So what happened after the massive tax cuts in the early 2000s? The remainder of the decade saw the lowest pace of economic growth of any economic expansion in half a century. From 2000 to 2007 employment and incomes also grew slower than in any other economic expansion in half a century. Income growth was so weak that in 2007, at the end of the 2000s economic expansion, the typical household had income below what it had been in 2000.

The Republican plan to cut and cut taxes didn’t generate strong growth in the past decade, so why would it in this decade? What it will do instead is further strain the American middle class. Another bout of tax cuts for the wealthy will create the conditions for a less-stable economy moving forward and lead to the same slow pace of business investment. If we’ve learned anything from the economic crisis of the past few years, it should be that making the already wealthy even wealthier is not a recipe for stable economic growth.

If the goal is job creation then Congress and the Obama administration need to focus on policies that will generate increased demand and sustain investment in productive endeavors. Businesses will not invest until they see more customers coming through their doors. Today small businesses continue to report that their single-largest concern is poor sales. Small business owners say this is more of a problem than regulations, taxes, inflation, or the cost of labor.

Yet instead of any plan to invest in our economy, House Republicans tout their jobs plan while seeking to gut financial regulation at the same time. Regulating Wall Street is imperative if we want to put our economy on a sounder footing moving forward. Insisting that finance should be free of government interference is what caused the Great Recession. It’s insane to take us down that road again.

The House Republican jobs plan also calls for Congress to pass the trade agreements with Columbia, Panama, and South Korea. Yet the Republicans are holding up these deals by refusing to vote on funding for the Trade Adjustment Assistance program that helps workers displaced by trade. This program provides much-needed assistance to workers who need to retrain or relocate because their job has been outsourced. It’s a cold-hearted Congress that would insist on passing trade deals without addressing the very real costs to workers and their families.

Adding insult to injury for workers, the House Republicans are also pushing legislation known as the JOBS Act, which will allow states to divert funds away from benefits for unemployed workers. The Republicans pulled the bill from the voting schedule last week, however, as freshman Republicans began balking at voting on a bill that takes funds away from the unemployed. Clearly, with 14 million people out of work, access to unemployment benefits is a concern for the unemployed and maybe even their representatives in Congress.

Helping our current economic recovery gain strength requires policymakers on both sides of the political aisle to build up the middle class and create jobs. Giving more tax cuts to the wealthy will not solve the jobs problem. We know that doesn’t work.

This post was originally published by the Center for American Progress.

 

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Photo from Beverly and Pack via flickr
Written by Heather Boushey, a senior economist at the Center for American Progress

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107 comments

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7:23PM PDT on Aug 12, 2011

I've never seen people revise history the way conservitives and tea party members do. First, check the records, Reagan did veto the bills. Second, Plenty of Repbulicans made a fortune as CEO's of companies. Third, trickle down econmics has been proven to be a failure, but conservitives refused to acknowledge 30 years of history.

Don, you really seem to have some trouble understanding that the seeds for the bank failures where planted by the ill-advised laxing of the rules when it comes to owning a home. There are simply people out there that can not own a home, and many were tricked into signing mortage agreements they could never apease.

I love how conservitives try to peg the stimlus a failure when it wasn't, but fail to mentuion Bush's $600 a person stimulus 6 years ago that was a major failure.

If I blame the dems for anything, it was de regulation of the media which allows one or two giants to own several different arms in the same market, minimizing staff.

I still say, want to grown the economy, switch to the metric system, which would allow the export business of this country to simply grow leaps and bounds.

6:15PM PDT on Aug 12, 2011

@ Cristopher M,
One last thing you might try doing is to check to see how many Republicans were or became CEO's, or executives at Fannie Mae or Freddie Mac while all the abuse of the housing and business loans was going on. There were NONE. They were all staunch Democrats who contributed greatly to the Democrat cause.

6:08PM PDT on Aug 12, 2011

@ Cristopher M, - Continued -
Each time, the Democrats in the Senate refused to allow the needed reforms to even come to a vote. That allowed banks and other lenders to continue creating the bad/risky loans, and Fannie Mae continued buying them.

When Obama[D] came into office, even knowing the problems the Democrat appointed Fannie Mae executives had caused, Obama appointed the ex head of Fannie Mae (Raines[D]) as part of his administration. Interestingly, Obama received over 500 times more money from Fannie Mae, for his election campaign than McCain did. That to me speaks volumes about why the Democrats and Obama have tried to divert the blame away from Fannie Mae and themselves. Even more telling is the fact that The Dodd/Frank Bill, supposedly created to return stiffer regulation and oversight to the lending and financial industries, exempts Fannie Mae and Freddie Mac from the legislation. I wonder why?.

As for your counter point against my "don't tax the companies" argument, what you would be proposing would turn out to be a wash because the more taxes a business has to pay, the more their products would cost the consumer. Businesses determine what profits they should make when selling their products. IF the cost to produce the products increases because of increased taxes, the price they charge when the products are sold, will increase accordingly to maintain their profit margins.

6:06PM PDT on Aug 12, 2011

@ Cristopher M, - Continued -
In 1996, and again in 1999, Bill Clinton[D] made changes to the CRA and Fannie Mae that allowed lending institutions to make very risky sub-prime loans to people and businesses that they know were bad or very risky. After those changes, the CRA REQUIRED mortgage lenders, THROUGH FORCE OF LAW, to meet GOVERNMENT MANDATED QUOTAS for handing out sub-prime loans, and loans that were known to be very bad and risky. If lenders fail to meet those quotas, they were facing severe penalties to be paid. The “penalties” often meant the lending institution would be forced out of business if they didn't do as required. Fannie Mae was also pressured to lower "the credit requirements on loans that it would purchase from banks and other lenders". Because of that, banks and other lenders could freely make any kind of loan they wanted (good or bad), .. collect the loan origination profits, .. and still be guaranteed Fannie Mae, Freddie Mac, or one of the other (to big to fail) entity would buy the bad loan from them. That, in essence, made the tax payers responsible for any losses incurred if the loans went bad. In the case of Fannie Mae, the excessive number of bad/risky loans they purchased were used to create huge bonuses for the Democrat appointed CEO and other officers.

During the George W Bush[R] Administration, the Republicans saw the housing mess coming and tried to stop it on numerous occasions. Each time, the Democrats in the Senate

6:05PM PDT on Aug 12, 2011

@ Cristopher M, - Continued -
Franklin Roosevelt[D], Jimmy Carter[D], and Bill Clinton[D] were the Presidents involved in creating and changing legislation that ultimately led to the meltdown, and Obama has done NOTHING to stop the reckless actions of Fannie Mae or Freddie Mac. He did however reward them with between $200 and $400 Billion in stimulus money to bail them out, then, excluded them from having to abide by regulations placed on other lending and investment firms.

In 1938, Franklin Roosevelt[D] created "Fannie Mae". Fannie Mae started out as program designed to help the banking industry by buying housing mortgages from the banks, so they could use the new money to create other loans, or invest in other areas.

In 1977, Jimmy Carter[D] passed the "Community Reinvestment Act" (CRA) that in later years would be the catalyst that led to our current financial problems. The CRA was designed to encourage banks and savings associations to meet the needs of borrowers in all segments of their communities, including low and moderate income neighborhoods.

In 1980, Carter signed two laws that removed many regulations controlling the banking and lending industry. The two laws were the "Depository Institutions Deregulation" and "Monetary Control Act of 1980". Needless to say, they got rid of regulations needed to oversee banking and lending activities.

In 1996, and again in 1999, Bill Clinton[D] made changes to the CRA and Fannie Mae that allowed lending insti

6:03PM PDT on Aug 12, 2011

@Cristopher M,
I don't need a refresher to know what happened. President Reagan didn't veto the bills you were referring to because they didn't pass the vote in Congress, and never got to his desk.

The jobs that were originally allowed to be outsourced were jobs that produced products in our country, that were to be sold in other countries. Allowing them to outsource the production of those products meant those companies could be more competitive in the world marketplace. The original intent of outsourcing was a very good idea, but expanding it to allow companies to outsource production of products that would be built in another country, then brought back and sold in American was not a good idea. Both Democrats and Republicans were at fault for coming up with NAFTA, which was signed into law by Bill Clinton[D]. NAFTA was another big mistake that caused even more job outsourcing.

If you or anyone else believes the Republicans and George Bush created or caused the housing and financial meltdown, you're very naive and very uneducated about what really happened. While job outsourcing is a big problem, it was not the cause of our countries current financial problems. The current crisis has more to do with the financial industries involved in the buildup, then bursting of the housing bubble. Franklin Roosevelt[D], Jimmy Carter[D], and Bill Clinton[D] were the Presidents involved in creating and changing legislation that ultimately led to the meltdown, and Obama has d

11:02AM PDT on Aug 12, 2011

@Nancy D,
You're the one who'e been drinking the Democrat "Kool-Aid". If you claim Obama has created 2.1 million jobs in his first two years in office, PLEASE tell everyone how unemployment grew from 5.7% under Bush to over 10% under Obama, and it's still over 9.2%, with no improvement in sight in the near future.

A majority of any jobs created by Obama were to our already bloated government workforce. Those jobs don't contribute much to the growth of our countries economy. They just eat up more tax dollars that could be more wisely spent elsewhere.

10:54AM PDT on Aug 9, 2011

If it didn't work the first time what makes them think it will work now.

4:20AM PDT on Jun 9, 2011

The rich are playing Monopoly with the national economy and they WANT IT THAT WAY.

5:27AM PDT on Jun 7, 2011

@ Don Isaken,

Do we really need a refresher in history. In 1983, 1984, and 1985, there was a democratic sponsored bill that would have levied fines against companies, like GM, like Kodak, for outsourcing jobs to places like Korea, Mexico, Tawain, etc. And Reagan vetoed the bills each time. In 1984, he explained that not outsourcing would damage America's reputation as a nation that helps other countires. Outsourcing twenty five years ago, had the bill been passed, would have resulted in a fine of $20,000 per job lost. Corporations are, by law, artifical people. So why can't these "people" who makes billions each year, pay more in taxes.
And to offer a counter point against the "don't tax the companies" arguement, let me pose this:
Do you not think that by taxing them more, and the average person less, that the average consumer would have more money to spend? hence these companies woulod do better business, create more tax revenue, and thus increase the countries over GNP?

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Lindsay Spangler Lindsay Spangler is a Web Editor and Producer for Care2 Causes. A recent UCLA graduate, she lives in... more
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