Everyone knows that there is an economic crisis right now — unemployment is high, consumption is down and families are hurting. President Obama has already unveiled a plan that would add more than a million jobs in a year, but Republicans keep on stalling it in Congress. Last night in their debate, the frontrunners for the Republican presidential nomination had the opportunity to unveil their economic plans — with middling results. Besides the usual deluge of misstatements and factually incorrect assertions, the ideas that these candidates proposed make very little sense and would do more harm than good.
A big fad among the candidates right now is the idea of a flat tax. Herman Cain called for a 9-9-9 plan, Rick Perry has proposed a flat tax, and Romney said last night that he would “like to see a flatter tax code.” What does a flat tax mean? It means that taxes go up for everyone… except for the super rich. Essentially, the poor and middle class subsidize tax cuts for the wealthy. So each time someone said they wanted a “flatter” tax code, what they’re really saying is that they want to raise almost everyone in the country’s taxes. Cain’s plan is actually regressive — meaning that it has higher tax rates on the poor than the rich — because sales taxes hurt poor people more than the rich. And this is somehow supposed to make more jobs and help struggling families.
Another centerpiece of every economic “plan” that Republican candidates put forward was getting rid of regulations and cutting taxes. Newt Gingrich said that the two most recent and biggest periods of growth — the early 1980s and the 1990s — were the result of those twin policies. The rest of the Republicans argued that right now is a time of high taxes and high regulations. Given that Newt doesn’t let anyone forget that he was a history professor, you’d think he’d have studied his subject a bit harder.
Firstly, there’s no correlation between tax cuts and economic growth, and today’s tax rates are actually the lowest that they’ve ever been. But what’s with all this talk of regulation? The Republican candidates seem to think that the Obama administration is passing so many new regulations that the economy can’t keep up. This is pure rubbish: Obama has actually enacted fewer regulations than George W. Bush, of all people. And his regulations aren’t especially costly — they’re only slightly costlier than those of Bill Clinton and they’re less expensive than those pushed by George H. W. Bush.
It also turns out that businesses and “job creators” don’t really mind regulations: when asked, they (for the first time in recent history) repeatedly rank it lower as a less important problem than other economic indicators. In case you were curious, international businesses rank the US as the fourth best country in the world to do business, specifically because of our low-tax and regulation climate. On top of that, of all of the layoffs that have occurred in the past few years, no more than 0.4% of them are due to regulations.
So what gives? The fact of the matter is that the Republican economic plans can’t actually do anything to upstart the economy because they aren’t addressing the fundamentals. What caused the crisis — rewarding Wall Street malfeasance and greed instead of hard work across all sectors — has yet to be addressed, and Republicans actually want to exacerbate these problems by deregulating banks even more. Instead of addressing income inequality and growing the economy by providing assistance to the 99%, the Republican candidates have doubled down on the 1%.
Photo credit: nmfbihop's Flickr stream.