Stimulus is now a dirty word, especially among Republicans in Congress. But it wasn’t always so. In January 2008 when the economic picture was far less dire and the unemployment rate was only 4.8 percent, 165 Republicans in the House of Representatives and 33 Republican senators voted to pass a stimulus package with an estimated cost of $152 billion. That package provided tax cuts of up to $600 for individuals or $1,200 for married couples, plus an additional $300 per child. The bill also contained a number of temporary tax breaks for businesses. And just in case you thought President George W. Bush’s stimulus bill was simply a bunch of tax cuts, it also included $40 billion in direct spending. The legislation was even called the Economic Stimulus Act of 2008.
President Bush lauded the Economic Stimulus Act of 2008 for providing “a booster shot for our economy … [putting] money back into the hands of American workers and businesses.” Reps. Eric Cantor (R-VA) and John Boehner (R-OH) as well as Sen. Mitch McConnell (R-KY) all seemed to agree, as did nearly 200 other Republican members of Congress that voted in support of the bill.
Today the case for job-creation measures is even stronger than it was in 2008. Despite 17 straight months of private-sector job growth, the unemployment rate remains stubbornly high at 9.1 percent. With previous measures that successfully boosted economic growth winding down and expiring, and with the Tea Party demanding huge cuts to vital public services, there is a real danger that things could get even worse.
President Barack Obama wants Congress to extend the temporary payroll tax cut that was enacted at the beginning of 2011. Many economists believe that failing to extend this tax cut could seriously damage the economy. The Economic Policy Institute, for instance, estimates that if the payroll tax cut is allowed to expire, it could cost more than 1 million jobs. Economists at Goldman Sachs Group Inc. recently listed the expiration of the payroll tax cut as one of the three biggest threats to the U.S. economy, and the chief economist at Moody’s Analytics urged Congress to extend the payroll tax cut or risk triggering a second recession.
The theory behind the payroll tax cut is essentially the same as that of the temporary tax cuts in President Bush’s stimulus package—to get more money into the hands of American households so demand for goods and services doesn’t dry up, resulting in even more job losses. Given the similarity, you’d expect no objections from the same conservative lawmakers who supported the 2008 version. Sadly, you’d be wrong.
Prominent congressional Republican and House Budget Committee Chairman Paul Ryan (R-WI) criticizes a payroll tax cut as “sugar-high economics.” Rep. Jeb Hensarling (R-TX), the fourth-ranking member of the Republican caucus, says it is not a very effective way to stimulate the economy. And a spokesman for Majority Leader Cantor says his boss “has never believed that this type of temporary tax relief is the best way to grow the economy.”
Needless to say, all three of these members voted in favor of the 2008 legislation, which included both temporary tax relief and additional spending. In fact, of the 134 current House Republicans that were also serving in 2008, 85 percent voted in favor of temporary tax cuts and additional spending as economic stimulus.
This sudden outbreak of Republican opposition to an idea they once supported just shows how far they will go to oppose any proposal supported by President Obama. How else to explain the sudden about-face? Unfortunately for American workers and businesses alike, their intransigence could result in a tax increase for nearly every working person and the loss of a million additional jobs.
Michael Linden is the Director for Tax and Budget Policy at the Center for American Progress. John Griffith is a Research Associate and Jordan Eizenga is a Policy Analyst with the Economic Policy team at the Center.