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Shortly after President Obama came into office, Congress passed the American Recovery and Reinvestment Act of 2009, the $787 billion stimulus package of tax cuts and increased federal spending that bolstered the social safety net and led to critical job creation and economic growth amid rising unemployment in the face of the Great Recession. The economy at the time was on target to shed an astonishing 11 million jobs according to estimates by the nonpartisan Congressional Budget Office, but the CBO calculates that the Recovery Act saved or created about 3 million jobs since its enactment. The president’s stimulus package also provided tax cuts to more than 95 percent of American households, and kept millions of American families from falling into poverty.
Indeed, the Recovery Act and the other extraordinary steps the federal government took during the financial crisis helped avert a second Great Depression, according to a new study by Princeton Professor Alan Blinder and Mark Zandi, chief economist of Moody’s Economy.com and one of the top economic advisors to Sen. John McCain (R-AZ) during his 2008 presidential campaign.
So what do Republicans today think of this exceedingly timely rescue of the U.S. economy? They continually blast it as a failure, after all but three Republicans in Congress voted against the bill in 2009 (one of whom, Sen. Arlen Specter, later became a Democrat). And what is their alternative plan to restart the economy so that broad-based jobs growth can begin in earnest? When House Minority Whip Eric Cantor (R-VA) was asked in December to describe the Republicans’ “big idea” for creating jobs, all he could say was, “the big idea is to get, to get, to produce an environment where we can have job creation again.”
All Americans can agree on that point, of course, but Republicans have also put their plans on paper. The Economic Freedom Act of 2010—introduced by Rep. Jim Jordan (R-OH) and Rep. Jason Chaffetz (R-UT) and backed by the 116 member-strong House Republican Study Committee—makes it clear that their job-creation plan is to double down on the failed economic policy agenda of President George W. Bush. The bill calls for more deficit-funded tax cuts for the wealthy and deregulatory policies that allow corporations to do what they did under President Bush—act with almost complete disregard for consumers’ financial well-being, the environment, and worker safety.
After insulting the intelligence of the American people by presenting the same failed conservative economic policies that led to the Great Recession, they then advocate further ways to injure our economy with new budget-busting tax cuts for the wealthy and corporations. Such tax cuts led to the jobless economic recovery of 2001-2007, when jobs growth was an anemic 4.8 percent before the consequences of conservative economics over the next three years led to today’s nearly 10 percent unemployment rate.
We calculate that today’s recycled conservative economic policy prescriptions would cost about $10 trillion in new deficit spending over 10 years relative to the current Congressional Budget Office baseline, which is the CBO’s estimate of spending over 10 years figuring in no changes to current tax law and discretionary spending. This nearly $10 trillion surge in deficit spending would flow overwhelmingly to the rich and corporations, with the rest of us picking up the tab to pay the cost of borrowing these vast sums. The Economic Freedom Act alone would add about $6.9 trillion to the deficit relative to current law, while the rest comes from Republican refusal to allow any of the Bush tax cuts of 2001 and 2003 to expire.
What’s more, this spending would have considerably less “bang for the buck” than the provisions in the Recovery Act. The reason: the money would flow to a minority of Americans and corporations that would be least likely to spend or invest all of it in job-creating ways. (For a complete analysis of the Republicans’ economic policy program, see Appendix 1 and 3)
Republicans claim they will pay for their program by seizing any unspent Recovery Act funds alongside any remaining funds from the Troubled Asset Relief Program, the legislation passed in late 2008 to prevent the collapse of the U.S. and global financial system. But there is only $284 billion in unspent Recovery Act funding (much of which has already been allocated, including $50 billion dedicated to middle-class tax cuts this year), and another $180 billion of remaining TARP funds, $19 billion of which is being used to implement the recently passed Dodd-Frank Wall Street Reform Act to protect Americans from some of the predatory lending practices encouraged by Republican-led deregulation under President Bush.
So the money the Republicans would use to cover their new $10 trillion in deficit spending does not come close to covering the astronomical cost of their proposal. Even if Republicans could seize all the remaining stimulus money and TARP funds, it would amount to less than 5 percent of their $10 trillion in tax cuts.
What’s worse, this budget-busting plan would overwhelmingly benefit the same wealthy Americans who reaped the rewards of the last Republican-led tax cuts in 2001 and 2003, which of course set the U.S. government into a deficit-spending tailspin and sowed some of the seeds of the Great Recession. If the new Republican plans were to be enacted, the typical middle-income taxpayer earning an average of $40,000 per year would get a tax cut of $467 per year over 10 years, while the typical taxpayer in the richest 1 percent of the country (earning $1.4 million on average) would receive a tax cut of $157,500 per year over the same period according to an analysis of the Economic Freedom Act by Citizens for Tax Justice.
In 2011 alone, 42 percent of the tax benefits would go to the richest 5 percent of taxpayers. In 2012 that rises to 76.8 percent, with an astronomical 61.5 percent of those tax benefits going to the richest 1 percent of taxpayers. In effect, the plan is a massive redistribution of wealth up the income scale. This is not the way to create jobs.
In the pages that follow, we will unpack the Republicans sleight-of-hand economic policy program to demonstrate in detail its fiscal irresponsibility and blatant favoritism toward the most well off in our nation at the expense of everyone else. It’s a plan that deserves full public discussion in the coming months if the American people are to avoid a repeat of the Great Recession and quite possibly a second Great Depression.
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Pat Garofalo is an Economics Researcher and Blogger, Michael Linden is Associate Director for Tax and Budget Policy, and Ethan Berman is an intern at the Center for American Progress Action Fund.